Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] U.S. TREASURY INCOME FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary .......................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
How the Fund has performed
Fund Objective ........................................................... 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ................................................................ 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 9
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ...................................... 10
How the Fund Values its Shares ........................................... 15
How Distributions are Made; Tax Information .............................. 15
How the Fund distributes its earnings, and tax treatment
related to those earnings
Other Information Concerning the Fund ..................................... 16
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................... 19
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ................................... 21
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................ 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ............ None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ----------------------------------------
Investment Advisory Fee
(after estimated waiver) ** ........................ 0.17% 0.17%
12b-1 Fee*** ........................................ 0.25% 0.75%
Shareholder Servicing Fee
(after estimated waiver, where indicated) ........... 0.00%** 0.25%
Other Expenses ...................................... 0.48% 0.48%
---- ----
Total Fund Operating Expenses
(after waivers of fees) ** .......................... 0.90% 1.65%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------- ------- ------- ---------
Class A Share+ ..................... $54 $72 $ 93 $151
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ .... $68 $85 $113 $175
Assuming no redemptions+++ ........ $17 $52 $ 90 $175
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.30% for Class A and Class B
shares, the Shareholder Servicing Fee would be 0.25% for Class A shares,
and Total Fund Operating Expenses would be 1.28% and 1.78% for Class A
and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLES
SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
one Class A share and one Class B share for each period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1995, which is incorporated by reference into the SAI. The
financial statements and notes, as well as the financial information set
forth in the table below with respect to each of the five years in the period
ended October 31, 1995, have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is also included in the Annual
Report to Shareholders. Shareholders can obtain a copy of this Annual Report
by contacting the Fund or their Shareholder Servicing Agent.
(RESTUBBED TABLE)
<TABLE>
<CAPTION>
Vista U.S. Treasury Income Fund
--------------------------------------------------------------------------------------
Class A
Year Ended October 31,
--------------------------------------------------------------------------------------
9/8/87*
through
1995 1994 1993 1992 1991 1990 1989 1988 10/31/87
------- ------- ------- ------- ------- ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
- ------------------------------------
Net Asset Value, Beginning of Period $ 10.60 $ 12.10 $ 11.69 $ 11.53 $ 10.93 $ 11.21 $10.90 $10.69 $10.00
------- ------- ------- ------- ------- ------- ------ ------ ------
Income from Investment Operations
Net Investment Income ............. 0.699 0.646 0.666 0.786 0.883 0.882 0.885 0.842 0.052
Net Gains or (Losses) in
Securities (both realized
and unrealized) ................. 0.798 (1.297) 0.699 0.267 0.597 (0.284) 0.319 0.258 0.638
------- ------- ------- ------- ------- ------- ------ ------ ------
Total from Investment Operations .. 1.497 (0.651) 1.365 1.053 1.480 0.598 1.204 1.100 0.690
------- ------- ------- ------- ------- ------- ------ ------ ------
Less Distributions
Dividends from Net Investment
Income ........................... 0.697 0.646 0.667 0.786 0.882 0.882 0.888 0.890 0.000
Distributions from Capital Gains 0.000 0.203 0.287 0.111 0.000 0.000 0.004 0.000 0.000
------- ------- ------- ------- ------- ------- ------ ------ ------
Total Distributions ............... 0.697 0.849 0.954 0.897 0.882 0.882 0.892 0.890 0.000
------- ------- ------- ------- ------- ------- ------ ------ ------
Net Asset Value, End of Period ..... $ 11.40 $ 10.60 $ 12.10 $ 11.69 $ 11.53 $ 10.93 $11.21 $10.90 $10.69
======= ======= ======= ======= ======= ======= ====== ====== ======
Total Return (1) ................... 14.59% (5.58%) 12.35% 9.40% 14.07% 5.70% 11.64% 10.70% 46.64%
Ratios/Supplemental Data*:
Net Assets, End of Period (000
omitted) ......................... $99,109 $99,524 $93,039 $59,391 $15,131 $ 6,359 $3,725 $1,742 $ 107
Ratio of Expenses to Average Net
Assets ........................... 0.87% 0.76% 0.75% 0.38% 0.02% 0.08% 0.00% 0.00% 0.00%#
Ratio of Net Investment Income to
Average Net Assets .............. 6.37% 5.74% 5.61% 6.52% 7.81% 8.08% 8.12% 8.11% 6.29%#
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets .............. 1.40% 1.28% 1.14% 1.34% 2.89% 2.50% 2.50% 2.00% 2.00%#
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets .. 5.84% 5.22% 5.22% 5.56% 4.94% 5.66% 5.62% 6.11% 4.29%#
Portfolio Turnover Rate ............. 164% 163% 296% 514% 103% 15% 34% 3% 0%
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------
Year 11/4/93**
Ended through
10/31/95 10/31/94
-------- --------
<S> <C> <C>
Per Share Operating Performance
- -------------------------------
Net Asset Value, Beginning of Period $ 10.59 $ 11.98
-------- --------
Income from Investment Operations
Net Investment Income ................................ 0.621 0.592
Net Gains or (Losses) in
Securities (both realized
and unrealized) .................................... 0.797 (1.187)
-------- --------
Total from Investment Operations ..................... 1.418 (0.595)
-------- --------
Less Distributions
Dividends from Net Investment
Income .............................................. 0.638 0.592
Distributions from Capital Gains 0.000 0.203
-------- --------
Total Distributions .................................. 0.638 0.795
-------- --------
Net Asset Value, End of Period ........................ $ 11.37 $ 10.59
======== ========
Total Return (1) ...................................... 13.80% (5.18%)
Ratios/Supplemental Data*:
Net Assets, End of Period (000
omitted) ............................................ $ 10,652 $ 5,184
Ratio of Expenses to Average Net
Assets .............................................. 1.62% 1.50%#
Ratio of Net Investment Income to
Average Net Assets ................................. 5.53% 5.28%#
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets ................................. 1.89% 1.78%#
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets ..................... 5.26% 5.00%#
Portfolio Turnover Rate ................................ 164% 163%
</TABLE>
(END OF RESTUBBED TABLE)
- ---------------
(1) Total return figures do not include the effect of any sales load.
* Commencement of operations.
** Commencement of offering of shares.
# Annualized.
5
<PAGE>
FUND OBJECTIVE
Vista U.S. Treasury Income Fund seeks to provide shareholders with monthly
dividends and to protect the value of their investment. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to maximize current income available from debt obligations
of the U.S. Government and certain of its agencies and instrumentalities, and
utilizes futures contracts on fixed income securities or indices of fixed
income securities and options on such futures contracts for the purpose of
hedging the value of its portfolio. All of the Fund's assets will be invested
in obligations that are backed by the "full faith and credit" of the U.S.
Government or in repurchase agreements fully collateralized by U.S.
Government obligations, except that 5% of the Fund's assets may be invested
in futures contracts and options thereon based on U.S. Government
obligations, including any index of government obligations that may be
available for trading. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in U.S. Treasury obligations and
repurchase agreements thereon.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
The Fund is classified as a "non-diversified" fund under federal
securities law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same objective and policies as the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
6
<PAGE>
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date. These transactions involve some risk to the Fund if the
other party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
Zero Coupon Securities and STRIPS. The Fund may invest in zero coupon U.S.
Government securities. Zero coupon securities are debt securities that do not
pay regular interest payments, and instead are sold at substantial discounts
from their value at maturity. The Fund may also invest in separately traded
principal and interest components of securities backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS." The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities
with similar maturities. The risk is greater when the period to maturity is
longer.
Floating and Variable Rate Securities. The Fund may invest in floating
rate securities, whose interest rates adjust automatically whenever a
specified interest rate changes, and variable rate securities, whose interest
rates are periodically adjusted. Certain of these instruments permit the
holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. As a result
of the floating or variable rate nature of these investments, the Fund's
yield may decline and it may forego the opportunity for capital appreciation
during periods when interest rates decline; however, during periods when
interest rates increase, the Fund's yield may increase and it may have
reduced risk of capital depreciation. Demand features on certain floating or
variable rate securities may obligate the Fund to pay a "tender fee" to a
third party. Demand features provided by foreign banks involve certain risks
associated with foreign investments.
Mortgage-Related Securities. The Fund may invest in mortgage-related U.S.
Government securities. Mortgage pass-through securities are securities
representing interests in "pools" of mortgages in which payments of both
interest and principal on the securities are made monthly, in effect "passing
through" monthly payments made by the individual borrowers on the residential
mortgage loans which underlie the securities. Early repayment of principal on
mortgage pass-through securities held by the Fund (due to prepayments of
principal on the underlying mortgage loans) may result in a lower rate of
return when the Fund reinvests such principal. In addition, if the Fund
purchased the securities at a premium, early repayment would cause the value
of the premium to 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 the mortgage
pass-through securities (but not the market value of the securities
themselves) in which the Fund invests will be guaranteed by the U.S.
Government.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instru-
7
<PAGE>
ments, and changes in prepayment rates or assumptions may significantly
affect the expected average life and value of a particular class.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks. Some of
these instruments will be subject to asset segregation requirements to cover
the Fund's obligations. The Fund may (i) purchase, write and exercise call
and put options on securities and related securities indexes (including using
options in combination with securities, other options or derivative
instruments); (ii) enter into futures contracts and options on futures
contracts and (iii) employ forward interest rate contracts.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. There can be no assurance that a liquid market will
exist at a time when the Fund seeks to close out a derivatives position.
Activities of large traders in the futures and securities markets involving
arbitrage, "program trading," and other investment strategies may cause price
distortions in derivatives markets. In certain instances, particularly those
involving over-the-counter transactions or forward contracts, there is a
greater potential that a counterparty or broker may default. In the event of
a default, the Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. Among these restrictions, the Fund is prohibited from
investing more than 15% of its net assets in illiquid securities (which
include securities restricted as to resale unless they are determined to be
readily marketable in accordance with procedures established by the Board of
Trustees). A complete description of this and other investment policies is
included in the SAI. Except for the Fund's investment objective and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio.
8
<PAGE>
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which are
more sensitive to interest rate changes. There is no restriction on the maturity
of the Fund's portfolio or any individual portfolio security, and to the extent
the Fund invests in securities with longer maturities, the volatility of the
Fund in response to changes in interest rates can be expected to be greater than
if the Fund had invested in comparable securities with shorter maturities.
Guarantees of principal and interest on obligations that may be purchased by the
Fund are not guarantees of the market value of such obligations, nor do they
extend to the value of shares of the Fund.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.30% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.15% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Manager. Alex Powers, Vice President of Chase, has been
responsible for the day-to-day management of the Vista U.S. Treasury Income
Fund and fixed-income trading for the Vista Balanced Fund since November
1994. He is also a manager of the Vista U.S. Government Securities Fund,
Vista Short-Term Bond Fund and Vista Bond Fund, and manages various
individual and institutional accounts. Mr. Powers is part of a team
responsible for fixed-income strategy, research and trading with Chase. Prior
to joining Chase in 1988, he spent six years as Vice President and Portfolio
Manager at Liberty Capital, an institutional fixed-income advisory firm.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject
to any sales charges when they are redeemed. Certain purchases of Class A
shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and
Exchange Shares" and "Other Information Concerning the Fund."
9
<PAGE>
Class B shares. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have a higher combined
12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, at the beginning of the ninth year after purchase.
For more information about the conversion of Class B shares, see the SAI.
This discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a
number of factors, including the amount and intended length of the
investment. Investors making investments that qualify for reduced sales
charges might consider Class A shares. Investors who prefer not to pay an
initial sales charge might consider Class B shares. In almost all cases,
investors planning to purchase $250,000 or more of the Fund's shares will pay
lower aggregate charges and expenses by purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Fund's distributor by
calling the Vista Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Fund reserves the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the
10
<PAGE>
Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of: Amount of sales charge
-------------------- reallowed to dealers as a
Amount of transaction at Offering Net amount percentage of offering
offering price Price invested price
- ------------------------------- -------- --------- ------------------------
Under 100,000 ................ 4.50 4.71 4.00
100,000 but under 250,000 .... 3.75 3.90 3.25
250,000 but under 500,000 .... 2.50 2.56 2.25
500,000 but under 1,000,000 ... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 0.75% of the amount under
$2.5 million, 0.50% of the next $7.5 million, 0.25% of the next $40 million
and 0.15% thereafter. The Fund's distributor may withold such payments with
respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
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In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-Vista
mutual funds on which the investor paid a front-end or contingent deferred
sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value. These investments will also be included for purposes of the discount
privileges and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate
families), current and retired employees (and their immediate families) of
Chase, the Fund's distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and
their immediate families) of broker-dealers having selected dealer agreements
with the Fund's distributor, employees (and their immediate families) of
financial institutions having selected dealer agreements with the Fund's
distributor (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary exercising investment discretion, provided
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that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the Vista
Service Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with
no initial sales charge for as long as they continue to own Class A shares of
any Vista fund, provided there is no change in account registration.
Shareholders of record of any portfolio of The Hanover Funds, Inc. or The
Hanover Investment Funds, Inc. as of May 3, 1996 and certain related
investors may purchase Class A shares of the Fund with no initial sales
charge for as long as they continue to own shares of any Vista fund following
this date, provided there is no change in account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in
connection with certain withdrawals from IRA or other retirement plans. Up to
12% of the value of Class B shares subject to a systematic withdrawal plan
may also be redeemed each year without a CDSC, provided that the Class B
account had a minimum balance of $20,000 at the time the systematic
withdrawal plan was established. The SAI contains additional information
about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form, less
any applicable CDSC. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption
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<PAGE>
requests in excess of $25,000 will only be made by wire to a bank account on
record with the Fund. Unless an investor indicates otherwise on the account
application, the Fund will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any person claiming
to act as his or her representative, who can provide the Fund with his or her
account registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption. In the event the Fund redeems
Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of
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<PAGE>
the CDSC --and a subsequent purchase. Class B shares of any Vista non-money
market fund may be exchanged into the Class B shares of the Vista Prime Money
Market Fund in order to continue the aging of the initial purchase of such
shares.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains
at least annually. Distributions from capital gains are made after applying
any available capital loss carryover. Distributions paid by the Fund with
respect to Class A shares will generally be greater than those paid with
respect to Class B shares because expenses attributable to Class B shares
will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive
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<PAGE>
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long- term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Distributions may also be subject to state and local taxes. However, the
laws of most states and localities exempt some types of taxes distributions
such as those made by the Fund to the extent such distributions are
attributable to interest from obligations of the U.S. Government and certain
of its agencies and instrumentalities.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares
which provide that the Fund will pay distribution fees at annual rates of up
to 0.25% and 0.75% annually of the average daily net assets attributable to
Class A and Class B shares of the Fund, respectively. Payments under the
distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to
the amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or main-
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tenance commissions at an annual rate of up to 0.25% of the average daily net
asset value of Class A or Class B shares maintained in the Fund by customers
of these broker-dealers. Trail or maintenance commissions are paid to
broker-dealers beginning the 13th month following the purchase of shares by
their customers. Some activities intended to promote the sale of Class A and
Class B shares will be conducted generally by the Vista Family of Funds, and
activities intended to promote the Fund's Class A or Class B shares may also
benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging
and meals, in connection with attendance at training and educational meetings
within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain
17
<PAGE>
expenses incurred in connection with organizing new series of the Trust and
certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). Prior to May 6, 1996, the Fund was known as the Vista U.S.
Government Income Fund. The Trust has reserved the right to create and issue
additional series and classes. Each share of a series or class represents an
equal proportionate interest in that series or class with each other share of
that series or class. The shares of each series or class participate equally
in the earnings, dividends and assets of the particular series or class.
Shares have no 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 the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to
Class A and Class B shares of the Fund. The Fund may offer other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which would
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit
18
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matters for a shareholder vote. The Trustees will promptly call a meeting of
shareholders to remove a trustee(s) when requested to do so in writing by
record holders of not less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his account. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income calculated pursuant to federal rules per
share during a recent 30-day period by the maximum public offering price per
share of such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
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the Fund invested at the maximum public offering price (in the case of Class
A shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100
or more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you
to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value
next determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with
such redemption may purchase Class A shares with no initial sales charge (in
an amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
21
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VUSTI-1-596CX
[Vista Logo]
U.S. Treasury
Income Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] BALANCED FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Total Return
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
How the Fund has performed
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ................................................................ 10
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the
Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 11
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ...................................... 12
How the Fund Values its Shares ............................................ 17
How Distributions are Made; Tax Information ............................... 17
How the Fund distributes its earnings, and tax treatment related to
those earnings
Other Information Concerning the Fund ..................................... 18
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................... 21
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 22
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
-------- ---------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .................. 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ............. None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ----------------------------------------
Investment Advisory Fee (after estimated waiver) ** ... 0.15% 0.15%
12b-1 Fee*** ........................................... 0.25% 0.75%
Shareholder Servicing Fee
(after estimated waiver, where indicated) ............ 0.00%** 0.25%
Other Expenses ........................................ 0.85% 0.85%
---- ----
Total Fund Operating Expenses
(after waivers of fees)** ............................ 1.25% 2.00%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
Class A Shares+ .................... $57 $83 $111 $189
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ .... $72 $96 $131 $213
Assuming no redemptions+++ ........ $20 $63 $108 $213
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "Other Information Concerning the Fund."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.50% for Class A and Class B
shares, the Shareholder Servicing Fee would be 0.25% for Class A shares,
and Total Fund Operating Expenses would be 1.85% and 2.35% for Class A
and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLES
SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares outstanding for each period shown. This
information is supplemented by and should be read in conjunction with
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the fiscal year ended October 31, 1995, which is
incorporated by reference into the SAI. Shareholders can obtain a copy of
this Annual Report by contacting the Fund or their Shareholder Servicing
Agent. The financial statements and notes, as well as the financial
information set forth in the table below, have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders.
<TABLE>
<CAPTION>
Vista Balanced Fund
--------------------------------------------------------------
Class A Class B
----------------------------------- ------------------------
Year
Year Ended 11/4/92* Ended 11/4/93**
---------------------- through --------- through
10/31/95 10/31/94 10/31/93 10/31/95 10/31/94
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------
Net Asset Value, Beginning of Period ...................... $ 11.09 $ 11.38 $ 10.00 $11.03 $ 11.22
------- ------- ------- ------- -------
Income from Investment Operations: ......................
Net Investment Income .................................... 0.382 0.356 0.410 0.309 0.345
Net Gains or (Losses) in Securities (both realized and
unrealized) ............................................ 1.517 (0.187) 1.344 1.502 (0.117)
------- ------- ------- ------- -------
Total from Investment Operations ......................... 1.899 0.169 1.754 1.811 0.228
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ..................... 0.408 0.359 0.375 0.131 0.318
Distributions from Capital Gains ......................... 0.131 0.100 0.000 0.350 0.100
------- ------- ------- ------- -------
Total Distributions ....................................... 0.539 0.459 0.375 0.481 0.418
------- ------- ------- ------- -------
Net Asset Value, End of Period ........................... $ 12.45 $ 11.09 $ 11.38 $12.36 $ 11.03
------- ------- ------- ------- -------
Total Return (1) ......................................... 17.70% 1.56% 17.74% 16.93% 2.17%
Ratios/Supplemental Data:
- ------------------------
Net Assets, End of Period (000 omitted) ................. $33,733 $21,705 $13,920 $6,336 $ 3,543
Ratio of Expenses to Average Net Assets# ................ 1.06% 0.58% 0.00% 1.82% 1.50%
Ratio of Net Investment Income to Average Net Assets# .... 3.48% 3.21% 3.87% 2.68% 2.46%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# ....................... 2.20% 2.20% 3.07% 2.72% 2.69%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# ......... 2.34% 1.59% 0.80% 1.78% 1.24%
Porttfolio Turnover Rate .................................. 68% 77% 65% 68% 77%
</TABLE>
- ---------------
# Short periods have been annualized.
* Commencement of operations.
** Commencement of offering of shares.
(1) Total return figures do not include the effect of any sales load on Class
A shares or any contingent deferred sale charges on Class B shares.
5
<PAGE>
FUND OBJECTIVE
Vista Balanced Fund seeks to maximize total return through long-term
capital growth and current income. There is no assurance that the Fund will
achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund will invest in equity and debt securities. Under normal market
conditions, 35% to 70% of the Fund's total assets will be invested in equity
securities. The majority of the Fund's equity investments will be in
well-known, established companies with market capitalizations of at least
$200 million which are traded on established securities markets or
over-the-counter. The equity securities in which the Fund may invest include
common stocks, preferred stocks, securities convertible into common and
preferred stocks and warrants to purchase common stocks.
Under normal market conditions, at least 25% of the Fund's total assets
will be invested in investment grade fixed-income securities. The fixed
income securities in which the Fund may invest include non-convertible
corporate debt securities and U.S. Government obligations. Corporate debt
securities in which the Fund invests will be rated at the time of purchase in
the category Baa or higher by Moody's Investor Service, Inc. ("Moody's"), or
BBB or higher by Standard & Poor's Corporation ("S&P") or the equivalent by
another national rating organization, or, if unrated, determined by the
Fund's advisers to be of comparable quality.
The Fund's advisers may alter the relative portion of the Fund's assets
invested in equity and fixed income securities depending on their judgment as
to general market and economic conditions and trends, yields and interest
rates and changes in monetary policies. The average maturity of the Fund's
fixed income investments will vary based upon the advisers' assessment of the
relative yields available on securities of different maturities.
The Fund may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limitation in these
instruments. To the extent that the Fund departs from its investment policies
during temporary defensive periods, its investment objective may not be
achieved.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities
are normally denominated and traded in foreign currencies, the values of the
Fund's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies,
and they are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. The
securities of foreign companies may be less liquid and more volatile than the
securities of comparable U.S. companies. Foreign settlement procedures and
trade regulations may involve certain
6
<PAGE>
risks (such as delay in payment or delivery of securities or in the recovery
of the Fund's assets held abroad) and expenses. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Fund's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain countries or issuers and special tax considerations will apply to
foreign securities. The risks can increase if the Fund invests in securities
of issuers in emerging markets.
The Fund may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
Supranational and ECU Obligations. The Fund may invest in securities
issued by supranational organizations, which include organizations such as
The World Bank, the European Community, the European Coal and Steel Community
and the Asian Development Bank. The Fund may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts
of the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
U.S. Government Obligations. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund
7
<PAGE>
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Convertible Securities. The Fund may invest in convertible securities,
which are securities generally offering fixed interest or dividend yields
which may be converted either at a stated price or stated rate for common or
preferred stock. Although to a lesser extent than with fixed-income
securities generally, the market value of convertible securities tends to
decline as interest rates increase, and increase as interest rates decline.
Because of the conversion feature, the market value of convertible securities
also tends to vary with fluctuations in the market value of the underlying
common or preferred stock.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Fund may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at
substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped
obligations, which are separately traded principal and interest components of
an underlying obligation. The value of these instruments tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
Mortgage-Related Securities. The Fund may invest in mortgage-related
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on
the underlying mortgage loans) may result in a lower rate of return when the
Fund reinvests such principal. In addition, if the Fund purchased the
securities at a premium, early repayment would cause the value of the premium
to 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 U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to pur-
8
<PAGE>
chase the agency's obligations). Mortgage pass-through securities created by
nongovernmental issuers may be supported by various forms of insurance or
guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.
The Fund expects that governmental, government-related or private entities
may create other mortgage- related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; and (iv) purchase and sell structured products,
which are instruments designed to restructure or reflect the characteristics
of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly chang-
9
<PAGE>
ing market conditions. High portfolio turnover rates would generally result
in higher transaction costs, including brokerage commissions or dealer
mark-ups, and would make it more difficult for the Fund to qualify as a
registered investment company under federal tax law. See "How Distributions
are Made; Tax Information" and "Other Information Concerning the
Fund--Certain Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total asset in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with
equity and fixed income investing, as well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. The performance of the Fund will also depend on the
quality of its investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities
in which the Fund may invest, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
Some of the securities in which the Fund may invest may be of smaller
companies. The securities of smaller companies often trade less frequently
and in more limited volume, and may be subject to more abrupt or erratic
price movements, than securities of larger, more established companies. Such
companies may have limited product lines, markets or financial resources, or
may depend on a limited management group.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based
10
<PAGE>
at an annual rate equal to 0.50% of the Fund's average daily net assets.
Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.25% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Alex Powers and Greg Adams, Vice Presidents of Chase,
have been responsible for the day-to-day management of the Fund's portfolio
since November 1994 and its inception in 1993, respectively. Mr. Powers is
responsible for the fixed-income trading for the Fund, and is the manager of
the Vista U.S. Treasury Income Fund and a manager of the Vista U.S.
Government Securities Fund, Vista Short-Term Bond Fund and Vista Bond Fund.
He also manages various individual and institutional accounts. Mr. Powers is
part of a team responsible for fixed-income strategy, research and trading
with Chase. Prior to joining Chase in 1988, he spent six years as Vice
President and Portfolio Manager at Liberty Capital, an institutional
fixed-income advisory firm. Mr. Adams joined Chase in 1987 and oversees the
equity trading of the Fund, and is a manager of the Vista Large Cap Equity
Fund and the Vista Growth and Income Portfolio. In addition, Mr. Adams has
been responsible for overseeing the proprietary computer model program used
in the U.S. equity selection process.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject
to any sales charges when they are redeemed. Certain purchases of Class A
shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and
Exchange Shares" and "Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, at the beginning of the ninth year after purchase.
For more information about the conversion of Class B shares, see the SAI.
This discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a
number of factors, including the amount and intended length of the
investment. Investors making investments that qualify for reduced sales
charges might consider Class A shares. Investors who
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prefer not to pay an initial sales charge might consider Class B shares. In
almost all cases, investors planning to purchase $250,000 or more of the
Fund's shares will pay lower aggregate charges and expenses by purchasing
Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Fund's distributor by
calling the Vista Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Fund reserves the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
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broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of:
-------------------- Amount of sales charge
Net reallowed to dealers as a
Amount of transaction at Offering amount percentage of offering
offering price($) price invested price
- ---------------------------- -------- -------- -------------------------
Under 100,000 ................. 4.50 4.71 4.00
100,000 but under 250,000 ..... 3.75 3.90 3.25
250,000 but under 500,000 ..... 2.50 2.56 2.25
500,000 but under 1,000,000 ... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 0.75% of the amount under
$2.5 million, 0.50% of the next $7.5 million, 0.25% of the next $40 million
and 0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are calculated if you
exchange your shares, see "How to Exchange Your Shares." The Fund's
distributor pays broker-dealers a commission of 4.00% of the offering price
on sales of Class B shares, and the distributor receives the entire amount of
any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-Vista
mutual funds on which the investor paid a front-end or contingent deferred
sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value. These investments will also be included for purposes of the discount
privileges and programs described above.
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The Fund may sell Class A shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the Vista
Service Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with
no initial sales charge for as long as they continue to own Class A shares of
any Vista fund, provided there is no change in account registration.
Shareholders of record of any portfolio of The Hanover Funds, Inc. or The
Hanover Investment Funds, Inc. as of May 3, 1996 and certain related
investors may purchase Class A shares of the Fund with no initial sales
charge for as long as they continue to own shares of any Vista fund following
this date, provided there is no change in account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in
connection with certain withdrawals from IRA or other retirement plans. Up to
12% of the value of Class B shares subject to a systematic withdrawal plan
may also be redeemed each year without a CDSC, provided that the Class B
account had a minimum balance of $20,000 at the time the systematic
withdrawal plan was established. The SAI contains additional information
about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
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How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form, less
any applicable CDSC. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
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Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption. In the event the Fund redeems
Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
CDSC--and a subsequent purchase. Class B shares of any Vista non-money market
fund may be exchanged into the Class B shares of the Vista Prime Money Market
Fund in order to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
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accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any
net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
Distributions paid by the Fund with respect to Class A shares will generally
be greater than those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not
paid in cash or by ACH will be reinvested in shares of the class on which the
distributions are paid. You will receive a statement confirming reinvestment
of distributions in additional Fund shares promptly following the quarter in
which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long- term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
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Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares
which provide that the Fund will pay distribution fees at annual rates of up
to 0.25% and 0.75% of the average daily net assets attributable to Class A
and Class B shares of the Fund, respectively. Payments under the distribution
plans shall be used to compensate or reimburse the Fund's distributor and
broker-dealers for services provided and expenses incurred in connection with
the sale of Class A and Class B shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.25% of the
average daily net asset value of Class A or Class B shares maintained in the
Fund by customers of these broker-dealers. Trail or maintenance commissions
are paid to broker- dealers beginning the 13th month following the purchase
of shares by their customers. Some activities intended to promote the sale of
Class A and Class B shares will be conducted generally by the Vista Family of
Funds, and activities intended to promote the Fund's Class A or Class B
shares may also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging
and meals, in connection with attendance at training and educational meetings
within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they
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are already receiving other fees an amount not exceeding such other fees or
the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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
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each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury
of the Trust shall not be voted. Shares of each class of the Fund generally
vote together except when required under federal securities laws to vote
separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to
Class A and Class B shares of the Fund. The Fund may offer other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which would
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members
20
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of an underwriting syndicate in which Chase or an affiliate is a
non-principal member. This restriction may limit the amount or type of U.S.
Government obligations, municipal obligations or commercial paper available
to be purchased by the Fund. Chase has informed the Fund that in making its
investment decisions, it does not obtain or use material inside information
in the possession of any other division or department of Chase, including the
division that performs services for the Fund as custodian, or in the
possession of any affiliate of Chase. Shareholders of the Fund should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account. Transactions with affiliated broker-dealers will
only be executed on an agency basis in accordance with applicable federal
regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the maximum public offering price (in the case of Class
A shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
21
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with
such redemption may purchase Class A shares with no initial sales charge
(in an amount not in excess of their redemption proceeds) if the purchase
occurs within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
22
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VBF-1-596CX
[Vista Logo]
Balanced Fund
- -----------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] EQUITY INCOME FUND
Class A and Class B Shares
May 6, 1996
Investment Strategy: Income. Capital appreciation is a secondary
consideration.
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
How the Fund has performed
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ................................................................ 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 10
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ...................................... 10
How the Fund Values its Shares ............................................ 15
How Distributions are Made; Tax Information ............................... 16
How the Fund distributes its earnings, and tax treatment
related to those earnings
Other Information Concerning the Fund ..................................... 16
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................... 19
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 21
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
-------- --------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* None 5.00%
Annual Fund Operating Expenses (as a
percentage of average net assets)
- -------------------------------------
Investment Advisory Fee (after estimated waiver)** 0.00% 0.00%
12b-1 Fee*** 0.25% 0.75%
Shareholder Servicing Fee (after estimated
waiver, where indicated) 0.00%** 0.25%
Other Expenses (after estimated waiver)** 1.25% 1.25%
------ -------
Total Fund Operating Expenses (after waivers
of fees)** 1.50% 2.25%
====== =======
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 3 5 10
Year Years Years Years
---- ----- ----- -----
Class A Shares+ ............................. $60 $ 90 $123 $216
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ .......................... $74 $103 $143 $240
Assuming no redemptions+++ ................. $23 $ 70 $120 $240
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee and Other Expenses would be 0.40% and 1.35%,
respectively, for Class A and Class B shares, the Shareholder Servicing
Fee would be 0.25% for Class A shares, and Total Fund Operating Expenses
would be 2.25% and 2.75% for Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLES
SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an investment
in the Fund. The Fund understands that Shareholder Servicing Agents may credit
to the accounts of their customers from whom they are already receiving other
fees amounts not exceeding such other fees or the fees received by the
Shareholder Servicing Agent from the Fund with respect to those accounts. See
"Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for a
Class A share outstanding for each period shown. This information is
supplemented by and should be read in conjunction with the financial statements
and accompanying notes appearing in the Fund's Annual Report to Shareholders for
the fiscal year ended October 31, 1995, which is incorporated by reference into
the SAI. Shareholders may obtain a copy of this Annual Report by contacting the
Fund or their Shareholder Servicing Agent. The financial statements and notes,
as well as the financial information set forth in the table below, have been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
is also included in the Annual Report to Shareholders. No Class B shares were
publicly issued prior to the date hereof.
VISTA EQUITY INCOME FUND
--------------------------------
Class A
--------------------------------
Year Ended 07/15/93*
------------------- through
10/31/95 10/31/94 10/31/93
-------- -------- ---------
Per Share Operating Performance
-------------------------------
Net Asset Value, Beginning of Period ....... $ 12.12 $ 13.84 $ 13.14
------- ------- -------
Income From Investment Operations:
Net Investment Income .................... 0.347 0.290 0.078
Net Gains or (Losses) in Securities
(both realized and unrealized) .......... 1.698 (0.477) 0.700
------- ------- -------
Total from Investment Operations ........ 2.045 (0.187) 0.778
------- ------- -------
Less Distributions:
Dividends from Net Investment Income ..... 0.366 0.258 0.078
Distributions from Capital Gains ......... 0.410 1.275 0.000
------- ------- -------
Total distributions ...................... 0.776 1.533 0.078
------- ------- -------
Net Asset Value, End of Period ............. $ 13.39 $ 12.12 $ 13.84
======= ======= =======
Total Return (1) ........................... 17.97% (1.35%) 5.91%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ... $11,737 $11,409 $15,321
Ratio of Expenses to Average Net Assets# .. 1.50% 1.50% 1.50%
Ratio of Net Investment Income to Average
Net Assets# .............................. 2.81% 2.31% 1.72%
Ratio of Expenses without waivers and
assumption
of expenses to Average Net Assets# ...... 2.19% 2.02% 2.40%
Ratio of Net Investment Income without
waivers and assumption
of expenses to Average Net Assets# ...... 2.12% 1.79% 0.82%
Portfolio Turnover Rate .................... 91% 75% 54%
- ---------------
# Short periods have been annualized.
(1) Total return figures do not include the effect of any front-end sales
load.
* Commencement of operations.
5
<PAGE>
FUND OBJECTIVE
Vista Equity Income Fund seeks to obtain income. The Fund pursues this
objective primarily by investing in income-producing equity securities. The Fund
is not intended to be a complete investment program, and there is no assurance
it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 65% of its
total assets in income-producing equity securities. Capital appreciation is a
secondary consideration. The income-producing equity securities in which the
Fund invests include common stocks, preferred stocks and convertible securities.
The Fund attempts to achieve a yield which exceeds the composite yield on the
securities comprising the Standard and Poor's 500 Stock Price Index.
It is anticipated that the major portion of the Fund's assets will be
invested in common stocks traded on a national securities exchange or on NASDAQ.
A significant portion of the Fund's assets may be invested in convertible bonds
or convertible preferred stock.
The Fund may invest any portion of its assets not invested as described above
in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limitation in these
instruments, as well as investment grade debt securities. To the extent that the
Fund departs from its investment policies during temporary defensive periods,
its investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities law.
In lieu of investing directly, the Fund is authorized to seek to achieve its
objective by investing all of its investable assets in an investment company
having substantially the same investment objective and policies as the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities are
normally denominated and traded in foreign currencies, the values of the Fund's
foreign investments may be affected favorably or unfavorably by currency
exchange rates and exchange control regulations. There may be less information
publicly available about foreign companies than U.S. companies, and they are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. The securities of foreign companies
may be less liquid and more volatile than the securities of comparable U.S.
companies. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Fund's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain issuers or countries and special tax considerations will apply to
foreign securities. The risks can increase if the Fund invests in securities of
issuers in emerging markets.
6
<PAGE>
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global Depositary
Receipts or other similar securities representing securities of foreign issuers
(collectively, "Depositary Receipts"). The Fund treats Depositary Receipts as
interests in the underlying securities for purposes of its investment policies.
The Fund will limit its investment in Depositary Receipts not sponsored by the
issuer of the underlying securities to no more than 5% of the value of its net
assets (at the time of investment).
Supranational and ECU Obligations. The Portfolio may invest in securities
issued by supranational organizations, which include organizations such as The
World Bank, the European Community, the European Coal and Steel Community and
the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
Convertible Securities. The Fund may invest in convertible securities, which
are securities generally offering fixed interest or dividend yields which may be
converted either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Services, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow for leveraging
purposes. The Fund may also sell and simultaneously commit to repurchase a
portfolio security at an agreed-upon price and time, to avoid selling securities
during unfavorable market conditions in order to meet redemptions. Whenever the
Fund enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). The Fund would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
7
<PAGE>
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date. These transactions involve some risk to the Fund if the
other party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
Other Investment Companies. The Fund may invest up to 10% of its total assets
in shares of other investment companies, subject to applicable regulatory
limitations.
STRIPS. The Fund may invest up to 20% of its total assets in separately
traded principal and interest components of securities backed by the full faith
and credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency contracts; and (iv) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers to
forecast these factors correctly. Inaccurate forecasts could expose the Fund to
a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. The Fund is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Fund than
hedging strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Fund seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward contracts,
there is a greater potential that a counterparty or broker may default. In the
event of a default, the Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions will
vary from year to year. The Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and would
make it more difficult for the Fund to qualify as a registered investment
company under federal tax law. See "How Distributions are Made; Tax Information"
and "Other Information Concerning the Fund--Certain Regulatory Matters."
8
<PAGE>
Limiting Investment Risks
Investment restrictions help the Fund limit investment risks for its
shareholders. These restrictions prohibit the Fund from: (a) with respect to 75%
of its total assets, holding more than 10% of the voting securities of any
issuer or investing more than 5% of its total assets in the securities of any
one issuer (other than U.S. Government obligations); (b) investing more than 15%
of its net assets in illiquid securities (which include securities restricted as
to resale unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than 25%
of its total assets in any one industry. A complete description of these and
other investment policies is included in the SAI. Except for restriction (c)
above and investment policies designated as fundamental in the SAI, the Fund's
investment policies (including its investment objective) are not fundamental.
The Trustees may change any non-fundamental investment policy without
shareholder approval. However, in the event of a change in the Fund's investment
objective, shareholders will be given at least 30 days' prior written notice.
Risk Factors
The Fund does not constitute a balanced or complete investment program, and
the net asset value of the shares of the Fund can be expected to fluctuate based
on the value of the securities in the Fund's portfolio. The Fund is subject to
the general risks and considerations associated with equity investing, as well
as the risks discussed herein.
To the extent the Fund invests in convertible securities or other fixed
income securities, the performance of the Fund will depend in part on interest
rate changes. As interest rates increase, the value of fixed income securities
held by the Fund tends to decrease. To the extent the Fund invests in fixed
income securities with longer maturities, the volatility of the Fund in response
to changes in interest rates can be expected to be greater than if the Fund had
invested in comparable securities with shorter maturities. In addition, the
market value of convertible securities tends to vary with fluctuations in the
market value of the underlying common or preferred stock.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly based at an
annual rate equal to 0.40% of the Fund's average daily net assets. Chase is
located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary of
Chase. CAM makes investment decisions for the Fund on a day-to-day basis. For
these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.20% of the Fund's average daily net
assets. CAM was recently formed for the purpose of providing discretionary
invest-
9
<PAGE>
ment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
Portfolio Manager. Tony Gleason, Vice President of Chase, has been
responsible for the day-to-day management of the Fund's portfolio since
September 1995. Mr. Gleason is also a manager of the Vista Capital Growth
Portfolio. Mr. Gleason joined Chase in 1995 with 10 years of investment
experience.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales charge
at the time of purchase. As a result, Class A shares are not subject to any
sales charges when they are redeemed. Certain purchases of Class A shares
qualify for reduced sales charges. Class A shares have lower combined 12b-1 and
service fees than Class B shares. See "How to Buy, Sell and Exchange Your
Shares" and "Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. In almost all cases, investors planning to purchase $250,000 or
more of the Fund's shares will pay lower aggregate charges and expenses by
purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments at
any time with as little as $100. You can buy Fund shares three ways--through an
investment representative, through the Fund's distributor by calling the Vista
Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, credit cards and cash will not be accepted. The
Fund reserves the right to reject any purchase order or cease offering shares
for purchase at any time. When purchases are made by check, redemptions will not
be allowed until clearance of the purchase check, which may take 15 calendar
days or longer. In addition, the redemption of shares purchased through ACH will
not be allowed until clearance of your payment, which may take 7 business days
or longer.
10
<PAGE>
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular investments
of $100 or more per transaction through automatic periodic deduction from your
bank checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter with signature guarantee and a deposit slip or voided check to the
Vista Service Center. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price, the
Vista Service Center must receive your order before the close of regular trading
on the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
Sales charge as a
percentage of: Amount of sales
------------------ charge reallowed
Net to dealers as a
Amount of transaction at Offering amount percentage of
offering price Price invested offering price
--------------------------- -------- -------- ----------------
Under 100,000 .................... 4.50 4.71 4.00
100,000 but under 250,000 ........ 3.75 3.90 3.25
250,000 but under 500,000 ........ 2.50 2.56 2.25
500,000 but under 1,000,000 ...... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 0.75% of the amount under $2.5 million,
0.50% of the next $7.5 million, 0.25% of the next $40 million and 0.15%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
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Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be redeemed without
charge at any time: (i) shares acquired by reinvestment of distributions and
(ii) shares otherwise exempt from the CDSC, as described below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
A participant-directed employee benefit plan participating in a "multi-fund"
program approved by the Board of Trustees may include amounts invested in the
other mutual funds participating in such program for purposes of determining
whether the plan may purchase Class A shares at net asset value. These
investments will also be included for purposes of the discount privileges and
programs described above.
The Fund may sell Class A shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds, 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 Chase or an affiliate serves as trustee or
custodian of the plan or manages some portion of the plan's assets.
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Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee for
its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial planner,
provided arrangements are preapproved and purchases are placed through an
omnibus account with the Fund or (ii) by clients of such investment adviser or
financial planner who place trades for their own accounts, if such accounts are
linked to a master account of such investment adviser or financial planner on
the books and records of the broker or agent. Such purchases may be made for
retirement and deferred compensation plans and trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista fund as of November 30, 1990 and certain
immediate family members may purchase Class A shares of the Fund with no
initial sales charge for as long as they continue to own Class A shares of
any Vista fund, provided there is no change in account registration.
Shareholders of record of any portfolio of The Hanover Funds, Inc. or The
Hanover Investment Funds, Inc. as of May 3, 1996 and certain related
investors may purchase Class A shares of the Fund with no initial sales
charge for as long as they continue to own shares of any Vista fund following
this date, provided there is no change in account registration.
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company. The CDSC will be waived on redemption of
Class B shares arising out of death or disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the value of Class
B shares subject to a systematic withdrawal plan may also be redeemed each year
without a CDSC, provided that the Class B account had a minimum balance of
$20,000 at the time the systematic withdrawal plan was established. The SAI
contains additional information about purchasing the Fund's shares at reduced
sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset value calculated
after the Fund receives your request in proper form, less any applicable CDSC.
In order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
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<PAGE>
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected payment
of the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Fund. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal plan
for Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
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<PAGE>
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds other
than the Class B shares of the Vista Prime Money Market Fund will be treated as
a redemption--and therefore subject to the conditions of the CDSC --and a
subsequent purchase. Class B shares of any Vista non-money market fund may be
exchanged into the Class B shares of the Vista Prime Money Market Fund in order
to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding. Ask your investment representative or the Vista Service
Center for prospectuses of other Vista funds. Shares of certain Vista funds are
not available to residents of all states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described in
the SAI.
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<PAGE>
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. Distributions from capital gains are
made after applying any available capital loss carryovers. Distributions paid by
the Fund with respect to Class A shares will generally be greater than those
paid with respect to Class B shares because expenses attributable to Class B
shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a pre-established
bank account while reinvesting capital gains distributions in additional shares
without a sales charge; or (3) receive all distributions in cash or by ACH. You
can change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the class on which the distributions are paid.
You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Vista fund. If the Vista Service Center does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if correspondence
sent by the Fund or the Vista Service Center is returned as "undeliverable,"
distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares which
provide that the Fund will pay distribution fees at annual rates of up to 0.25%
and 0.75% of the average daily net assets
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<PAGE>
attributable to Class A and Class B shares of the Fund, respectively.
Payments under the distribution plans shall be used to compensate or
reimburse the Fund's distributor and broker-dealers for services provided and
expenses incurred in connection with the sale of Class A and Class B shares,
and are not tied to the amount of actual expenses incurred. Payments may be
used to compensate broker-dealers with trail or maintenance commissions at an
annual rate of up to 0.25% of the average daily net asset value of Class A or
Class B shares maintained in the Fund by customers of these broker-dealers.
Trail or maintenance commissions are paid to broker-dealers beginning the
13th month following the purchase of shares by their customers. Some
activities intended to promote the sale of Class A and Class B shares will be
conducted generally by the Vista Family of Funds, and activities intended to
promote the Fund's Class A or Class B shares may also benefit the Fund's
other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater or entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or B shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily net
assets of Class A and B shares of the Fund held by investors for whom the
shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal
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<PAGE>
to 0.05% of the Fund's average daily net assets. VFD has agreed to use a
portion of this fee to pay for certain expenses incurred in connection with
organizing new series of the Trust and certain other ongoing expenses of the
Trust. VFD is located at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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 the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to Class
A and Class B shares of the Fund. The Fund may offer other classes of shares in
addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which would affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings
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of shareholders of all series or classes when in the judgment of the Trustees
it is necessary or desirable to submit matters for a shareholder vote. The
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of the Fund,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of securities so purchased. Chase and its affiliates
deal, trade and invest for their own accounts in U.S. Government obligations,
municipal obligations and commercial paper and are among the leading dealers of
various types of U.S. Government obligations and municipal obligations. Chase
and its affiliates may sell U.S. Government obligations and municipal
obligations to, and purchase them from, other investment companies sponsored by
the Fund's distributor or affiliates of the distributor. Chase will not invest
the Fund's assets in any U.S. Government obligations, municipal obligations or
commercial paper purchased from itself or any affiliate, although under certain
circumstances such securities may be purchased from other members of an
underwriting syndicate in which Chase or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased by the Fund.
Chase has informed the Fund that in making its investment decisions, it does not
obtain or use material inside information in the possession of any other
division or department of Chase, including the division that performs services
for the Fund as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing the
annualized net investment income calculated pursuant to federal rules per share
during a recent 30-day period by the maximum public offering price per share of
such class on the last day of that period.
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"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
invested at the maximum public offering price (in the case of Class A shares) or
reflecting the deduction of any applicable contingent deferred sales charge (in
the case of Class B shares). Total return may also be presented for other
periods or without reflecting sales charges. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
20
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
21
<PAGE>
[Vista Logo]
Vista Service Center
P.O. BOX 419392
Kansas City, MO 64141-6392
- ------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VEQ-1-596CX
[Vista Logo]
Equity
Income Fund
- ------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] GROWTH AND INCOME FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Growth and Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Growth and Income Portfolio (the
"Portfolio"), an open-end management investment company with investment
objectives identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this investment
structure, see "Unique Characteristics of Master/Feeder Fund Structure" on page
19.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary .......................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ..................................................... 4
How the Fund has performed
Fund Objectives .......................................................... 6
Investment Policies ...................................................... 6
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ............................................................... 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment .................................................... 10
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ..................................... 10
How the Fund Values its Shares ........................................... 15
How Distributions are Made; Tax Information .............................. 16
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund .................................... 17
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information .................................................. 20
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ................................... 22
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .......... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ..... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee ........................ 0.40% 0.40%
12b-1 Fee ** ................................... 0.25% 0.75%
Shareholder Servicing Fee ...................... 0.25% 0.25%
Other Expenses ................................ 0.40% 0.40%
---- ----
Total Fund Operating Expenses ................. 1.30% 1.80%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ................. $60 $87 $115 $197
Class B Shares:
Assuming complete redemption at
the end of the period++ +++ .. $70 $90 $121 $198
Assuming no redemptions+++ ..... $18 $57 $ 97 $198
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR
RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares outstanding throughout each of the periods
shown. This information is supplemented by financial statements and accompanying
notes appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1995, which is incorporated by reference into the SAI.
Shareholders can obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below for each of the five
years in the period ended October 31, 1995, has been audited by Price Waterhouse
LLP, independent accountants, whose report thereon is also included in the
Annual Report to Shareholders.
<TABLE>
<CAPTION>
VISTA GROWTH AND INCOME FUND
-----------------------------------------------------------------------------------------------------
Class A
-----------------------------------------------------------------------------------------------------
Year Ended October 31, 9/8/87*
----------------------------------------------------------------------------------------- through
1995 1994 1993 1992 1991 1990 1989 1988 10/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
---------- ---------- -------- -------- ------- ------- ------ ------ --------
Per Share Operating Performance
- -------------------------------
Net Asset Value,
Beginning of Period ...... $ 30.26 $ 30.99 $ 26.60 $ 25.49 $ 16.49 $ 18.12 $14.08 $10.00 $10.00
---------- ---------- -------- -------- ------- ------- ------ ------ ------
Income from Investment Operations:
Net Investment Income ... 0.614 0.466 0.341 0.313 0.388 0.707 0.633 0.225 0.000
Net Gains or (Losses) in
Securities (both realized
and unrealized) ........ 4.710 (0.429) 5.007 2.702 9.521 (0.573) 5.033 4.050 0.000
---------- ---------- -------- -------- ------- ------- ------ ------ ------
Total from Investment
Operations ............... 5.324 0.037 5.348 3.015 9.909 0.134 5.666 4.275 0.000
---------- ---------- -------- -------- ------- ------- ------ ------ ------
Less Distributions:
Dividends from Net
Investment Income ...... 0.621 0.422 0.338 0.313 0.339 0.698 0.611 0.195 0.000
Distributions from Capital
Gains ................... -- 0.345 0.620 1.587 0.574 1.063 1.015 0.000 0.000
---------- ---------- -------- -------- ------- ------- ------ ------ ------
Total Distributions ...... 0.621 0.767 0.958 1.900 0.913 1.761 1.626 0.195 0.000
---------- ---------- -------- -------- ------- ------- ------ ------ ------
Net Asset Value,
End of Period ............ $34.96 $30.26 $30.99 $ 26.60 $ 25.49 $ 16.49 $18.12 $14.08 $10.00
========== ========== ======== ======== ======= ======= ====== ====== ======
Total Return (1) ........... 17.79% 0.15% 20.47% 12.34% 62.60% 0.05% 44.40% 42.87% 0.00%
Ratios/Supplemental Data#:
Net Assets, End of Period
(000 omitted) ............ $1,521,489 $1,413,899 $949,465 $149,506 $43,261 $17,994 $8,097 $1,197 $13
Ratio of Expenses to
Average Net Assets ...... 1.43% 1.40% 1.39% 1.43% 1.25% 1.09% 0.00% 0.00% 0.00%#
Ratio of Net Investment
Income to Average Net
Assets ................. 1.93% 1.60% 1.07% 1.19% 1.24% 3.65% 4.56% 2.64% 0.00%#
Ratio of Expenses
without waivers and assumption
of expenses to Average Net
Assets ................... 1.45% 1.40% 1.39% 1.46% 1.76% 2.06% 2.50% 2.00% 2.00%#
Ratio of Net Investment Income
without waivers and assumption
of expenses to Average Net
Assets ................... 1.91% 1.60% 1.07% 1.16% 0.73% 2.68% 2.06% 0.64% (2.00%)#
Portfolio Turnover Rate .... -- -- 41% 56% 103% 160% 319% 109% 0%
</TABLE>
- ---------------
* Commencement of operations.
(1) Total return figures are calculated before taking into account sales load
of 4.75% for Class A shares ,or any contingent deferred sale charges on
Class B shares.
# Annualized.
4
<PAGE>
Vista Growth and
Income Fund
--------------------
Class B
--------------------
Year 11/4/93**
Ended to
10/31/95 10/31/94
-------- --------
Per Share Operating Performance
- -------------------------------
Net Asset Value, Beginning of Period .................. $30.12 $30.39
-------- --------
Income from Investment Operations:
Net Investment Income ............................... 0.463 0.336
Net Gains or (Losses) in Securities (both
realized and unrealized) ........................... 4.700 0.109
-------- --------
Total from Investment Operations .................... 5.163 0.445
-------- --------
Less Distributions:
Dividends from Net Investment Income ................ 0.470 0.370
Distributions from Capital Gains .................... -- 0.345
-------- --------
Total Distributions ................................. 0.470 0.715
-------- --------
Net Asset Value, End of Period ....................... $34.81 $30.12
======== ========
Total Return (1) ..................................... 17.21% 1.55%
Ratios/Supplemental Data: Net Assets, End of Period
(000 omitted) ....................................... $273,685 $160,375
Ratio of Expenses to Average Net Assets ............. 1.93% 1.89%#
Ratio of Net Investment Income to Average Net
Assets ............................................. 1.38% 1.21%#
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets ..................... 1.94%1 .89%#
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets ....... 1.36% 1.21%#
Portfolio Turnover Rate ............................... -- --
- ---------------
** Commencement of offering of shares.
(1) Total return figures are calculated before taking into account sales load
of 4.75% for Class A shares ,or any contingent deferred sale charges on
Class B shares.
# Annualized.
5
<PAGE>
FUND OBJECTIVES
Vista Growth and Income Fund seeks to provide long-term capital
appreciation and dividend income. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objectives.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio invests in common stocks of issuers with
a broad range of market capitalizations. Under normal market conditions, the
Portfolio will invest at least 80% of its total assets in common stocks. In
addition, the Portfolio may invest up to 20% of its total assets in convertible
securities.
The Portfolio's advisers intend to utilize both quantitative and
fundamental research to identify undervalued stocks with a catalyst for positive
change. The advisers believe that the market risk involved in seeking capital
appreciation will be moderated to an extent by the anticipated dividend returns
on the stocks in which the Portfolio invests.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio were
diversified.
The Portfolio may invest any portion of its assets not invested as
described above in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Portfolio may invest without
limitation in these instruments as well as investment grade debt securities. To
the extent that the Portfolio departs from its investment policies during
temporary defensive periods, the Fund's investment objective may not be
achieved.
Fund Structure
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees determine
that it is in the best interest of the Fund to do so. Upon any such withdrawal,
the Trustees would consider what action might be taken, including investing all
of the Fund's investable assets in another pooled investment entity having
substantially the same objective and policies as the Fund or retaining an
investment adviser to manage the Fund's assets directly.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including Depositary Receipts. Since foreign securities
are normally denominated and traded in foreign currencies, the values of the
Portfolio's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies, and
they are not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the U.S. The securities of
foreign companies may be less liquid and more volatile than the securities of
comparable U.S. companies. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of the Portfolio's assets held abroad) and expenses. It is
possible that nationalization or expropriation of assets, imposition of currency
exchange
6
<PAGE>
controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Portfolio's investments
in certain foreign countries. Foreign laws may restrict the ability to invest
in certain countries or issuers and special tax considerations will apply to
foreign securities. The risks can increase if the Portfolio invests in
securities of issuers in emerging markets.
The Portfolio may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Portfolio treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Portfolio will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
Supranational and ECU Obligations. The Portfolio may invest in securities
issued by supranational organizations, which include organizations such as
The World Bank, the European Community, the European Coal and Steel Community
and the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts
of the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
Convertible Securities. The Portfolio may invest up to 20% of its net
assets in convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price or
stated rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
Money Market Instruments. The Portfolio may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Services, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend
portfolio securities in an amount equal to not more than 30% of its total
assets to generate additional income. These transactions must be fully
collateralized at all times. The Portfolio may purchase securities for
delivery at a future date, which may increase its overall investment exposure
and involves a risk of loss if the value of the securities declines prior to
the settlement date. These transactions involve some risk to the Portfolio if
the other party should default on its obligation and the Portfolio is delayed
or prevented from recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Portfolio may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Portfolio may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling secu-
7
<PAGE>
rities during unfavorable market conditions in order to meet redemptions.
Whenever the Portfolio enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Portfolio
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Portfolio if the other party should default on its obligation and
the Portfolio is delayed or prevented from recovering the collateral or
completing the transaction. Acquisition of puts will have the effect of
increasing the cost of the securities subject to the put and thereby reducing
the yields otherwise available from such securities.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable regulatory
limitations.
STRIPS. The Portfolio may invest up to 20% of its total assets in
separately traded principal and interest components of securities backed by the
full faith and credit of the U.S. Government, including instruments known as
"STRIPS". The value of these instruments tends to fluctuate more in response to
changes in interest rates than the value of ordinary interest-paying debt
securities with similar maturities. The risk is greater when the period to
maturity is longer.
Derivatives and Related Instruments. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Portfolio's advisers to forecast these factors correctly. Inaccurate
forecasts could expose the Portfolio to a risk of loss. There can be no
guarantee that there will be a correlation between price movements in a hedging
instrument and in the portfolio assets being hedged. The Portfolio is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in more risk to the Portfolio than hedging strategies using the same
instruments. There can be no assurance that a liquid market will exist at a time
when the Portfolio seeks to close out a derivatives position. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price distortions
in derivatives markets. In certain instances, particularly those involving
over-the-counter transactions or forward contracts, there is a greater potential
that a counterparty or broker may default. In the event of a default, the
Portfolio may experience a loss. For additional information concerning
derivatives, related instruments and the associated risks, see the SAI.
8
<PAGE>
Portfolio Turnover. The frequency of the Portfolio's portfolio transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund--Certain Regulatory
Matters."
Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio from: (a)
with respect to 50% of its total assets, holding more than 10% of the voting
securities of any issuer; (b) investing more than 15% of its net assets in
illiquid securities (which include securities restricted as to resale unless
they are determined to be readily marketable in accordance with procedures
established by the Board of Trustees); or (c) investing more than 25% of its
total assets in any one industry. A complete description of these and other
investment policies is included in the SAI. Except for restriction (c) above and
investment policies designated as fundamental in the SAI, the investment
policies (including their investment objective) of the Portfolio and the Fund
are not fundamental. Shareholder approval is not required to change any
non-fundamental investment policy. However, in the event of a change in the
Fund's or Portfolio's investment objective, shareholders will be given at least
30 days prior written notice.
Risk Factors
The net asset value of the shares of the Fund can be expected to fluctuate
based on the value of the securities held by the Portfolio. The Fund does not
constitute a balanced or complete investment program. The Fund is subject to the
general risks and considerations associated with equity investing.
Because the Portfolio is "non-diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Portfolio's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Portfolio pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Portfolio, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience. For its investment advisory
services to the Portfolio, Chase is entitled to receive an annual fee computed
daily and paid monthly based at an annual rate equal to 0.40% of the Portfolio's
average daily net assets. Chase is located at 270 Park Avenue, New York, New
York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Portfolio pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of Chase. CAM makes investment decisions for the Portfolio on a
day-to-day basis. For these services, CAM is entitled to receive a fee, payable
by Chase from its advisory fee, at an annual rate equal to 0.20% of the
Portfolio's average daily net assets. CAM was recently formed for the purpose of
providing dis-
9
<PAGE>
cretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management at
Chase, and Greg Adams, Director of U.S. Equity Research at Chase, have been
responsible for the day-to-day management of the Portfolio since March 1995. Mr.
Klassen joined Chase in March 1992 and, in addition to managing the Vista Growth
and Income Portfolio, is a manager of the Vista Small Cap Equity Fund and the
Vista Capital Growth Portfolio. Prior to joining Chase, Mr. Klassen was a vice
president and portfolio manager at Dean Witter Reynolds, responsible for
managing several mutual funds and other accounts. Mr. Adams joined Chase in 1987
and is also a manager of the Vista Balanced Fund and the Vista Large Cap Equity
Fund. In addition, Mr. Adams has been responsible for overseeing the proprietary
computer model program used in the U.S. equity selection process.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any sales charges when they are redeemed. Certain purchases of Class A shares
qualify for reduced sales charges. Class A shares have lower combined 12b-1 and
service fees than Class B shares. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. In almost all cases, investors planning to purchase $250,000 or
more of the Fund's shares will pay lower aggregate charges and expenses by
purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments at
any time with as little as $100. You can buy Fund shares three ways--through an
investment representative, through the Fund's distributor by calling the Vista
Service Center, or through the Systematic Investment Plan.
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All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be accepted.
The Fund reserves the right to reject any purchase order or cease offering
shares for purchase at any time. When purchases are made by check, redemptions
will not be allowed until clearance of the purchase check, which may take 15
calendar days or longer. In addition, the redemption of shares purchased through
ACH will not be allowed until clearance of your payment, which may take 7
business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic deduction
from your bank checking or savings account. Shareholders electing to start this
Systematic Investment Plan when opening an account should complete Section 8 of
the account application. Current shareholders may begin such a plan at any time
by sending a signed letter with signature guarantee and a deposit slip or voided
check to the Vista Service Center. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price, the
Vista Service Center must receive your order before the close of regular trading
on the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those shares
with a certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
Sales charge as a Amount of sales
percentage of: charge reallowed
---------------------- to dealers as a
Amount of transaction at Offering Net amount percentage of
offering price($) price invested offering price
- --------------------------------- -------- ---------- ----------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 ...... 3.75 3.90 3.25
250,000 but under 500,000 ...... 2.50 2.56 2.25
500,000 but under 1,000,000 ..... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 1.00% of the amount under
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$2.5 million, 0.75% of the next $7.5 million, 0.50% of the next $40 million
and 0.20% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after purchase,
as shown in the table below. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of distributions
and (ii) shares otherwise exempt from the CDSC, as described below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B Shares, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes of
determining whether the plan may purchase Class A shares at net asset value.
These investments will also be included for purposes of the discount privileges
and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds, any
qualified retirement plan with 50 or more participants, or an individual
participant in a tax-qualified plan
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making a tax-free rollover or transfer of assets from the plan in which Chase
or an affiliate serves as trustee or custodian of the plan or manages some
portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee for
its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial planner,
provided arrangements are preapproved and purchases are placed through an
omnibus account with the Fund or (ii) by clients of such investment adviser or
financial planner who place trades for their own accounts, if such accounts are
linked to a master account of such investment adviser or financial planner on
the books and records of the broker or agent. Such purchases may be made for
retirement and deferred compensation plans and trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with no
initial sales charge for as long as they continue to own Class A shares of any
Vista fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in connection
with certain withdrawals from IRA or other retirement plans. Up to 12% of the
value of Class B shares subject to a systematic withdrawal plan may also be
redeemed each year without a CDSC, provided that the Class B account had a
minimum balance of $20,000 at the time the systematic withdrawal plan was
established. The SAI contains additional information about purchasing the Fund's
shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset value calculated
after the Fund receives your request in proper form, less any applicable CDSC.
In order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
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If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required. The
Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected payment
of the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess of
$25,000 will only be made by wire to a bank account on record with the Fund.
Unless an investor indicates otherwise on the account application, the Fund will
be authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
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<PAGE>
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the CDSC
- --and a subsequent purchase. Class B shares of any Vista non-money market fund
may be exchanged into the Class B shares of the Vista Prime Money Market Fund in
order to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding. Ask your investment representative or the Vista Service
Center for prospectuses of other Vista funds. Shares of certain Vista funds are
not available to residents of all states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the
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Fund attributable to that class by the total number of outstanding shares of
that class. Values of assets held by the Fund (i.e., the value of its
investment in the Portfolio and its other assets) are determined on the basis
of their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any
net realized capital gains at least annually. Distributions from capital gains
are made after applying any available capital loss carryovers. Distributions
paid by the Fund with respect to Class A shares will generally be greater than
those paid with respect to Class B shares because expenses attributable to Class
B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a pre-established
bank account while reinvesting capital gains distributions in additional shares
without a sales charge; or (3) receive all distributions in cash or by ACH. You
can change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the class on which the distributions are paid.
You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund
or in another Vista fund. If the Vista Service Center does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
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OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares which
provide that the Fund will pay distribution fees at annual rates of up to 0.25%
and 0.75% of the average daily net assets attributable to Class A and Class B
shares of the Fund, respectively. Payments under the distribution plans shall be
used to compensate or reimburse the Fund's distributor and broker-dealers for
services provided and expenses incurred in connection with the sale of Class A
and Class B shares, and are not tied to the amount of actual expenses incurred.
Payments may be used to compensate broker-dealers with trail or maintenance
commissions at an annual rate of up to 0.20% of the average daily net asset
value of Class A shares, or 0.25% of the average daily net asset value of the
Class B shares maintained in the Fund by customers of these broker-dealers.
Trail or maintenance commissions are paid to broker-dealers beginning the 13th
month following the purchase of shares by their customers. Some activities
intended to promote the sale of Class A and Class B shares will be conducted
generally by the Vista Family of Funds, and activities intended to promote the
Fund's Class A or Class B shares may also benefit the Fund's other shares and
other Vista funds.
Class A shares are also permitted to pay an additional fee at an annual
rate of up to 0.05% of its average daily net asset value in anticipation of, or
as reimbursement for, expenses incurred in connection with print or electronic
media advertising in connection with the sale of Fund shares. When such expenses
are incurred, the maximum compensation paid by the Class A shares under the
Class A distribution plan would be at an annual rate of 0.25% of its average
daily net asset value.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own or Class A and Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of or Class A and Class B shares of the Fund held by investors
for whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
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Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator and Sub-Administrator
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed daily
and paid monthly at an annual rate equal to 0.05% of their respective average
daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment advisory
and administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
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
the Trust shall not be voted. Shares of each class of the Fund generally vote
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together except when required under federal securities laws to vote
separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of shares
in addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which will affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special meetings
of shareholders of all series or classes when in the judgment of the Trustees it
is necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Unique Characteristics of Master/Feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a shareholder's
interest in the Portfolio's securities is indirect. In addition to selling a
beneficial interest to the Fund, the Portfolio may sell beneficial interests to
other mutual funds or institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, other investors investing in the Portfolio
are not required to sell their shares at the same public offering prices as the
Fund, and may bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in the
Portfolio. Such differences in returns are also present in other mutual fund
structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. However, this
possibility also exists for traditionally structured funds which have large or
institutional investors. Funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Shares of the Fund for which no voting instructions have been received will be
voted in the same proportion as those shares for which voting instructions are
received. Certain changes in the Portfolio's objective, policies or restrictions
may require the Trust to withdraw the Fund's interest in the Portfolio. Any
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Fund could incur
brokerage fees or other transaction costs in con-
19
<PAGE>
verting such securities to cash. In addition, a distribution in kind may
result in a less diversified portfolio of investments or adversely affect the
liquidity of the Fund.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the disinterested
Trustees of the Trust reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Trustees
of the Trust, including a majority of the disinterested Trustees, have adopted
procedures they believe are reasonably appropriate to deal with any conflict of
interest up to and including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista Service
Center at 1-800-34-VISTA.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund's assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by the Fund. Chase has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the division
that performs services for the Fund as custodian, or in the possession of any
affiliate of Chase. Shareholders of the Fund should be aware that, subject to
applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholder and his
account. Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
20
<PAGE>
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of
a class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
invested at the maximum public offering price (in the case of Class A shares) or
reflecting the deduction of any applicable contingent deferred sales charge (in
the case of Class B shares). Total return may also be presented for other
periods or without reflecting sales charges. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a
systematic withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in the
same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not
in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares with no initial
sales charge (in an amount not in excess of their redemption
proceeds) if the purchase occurs within 90 days of the redemption of
the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
22
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VGI-1-596CX
[Vista Logo]
Growth and
Income Fund
- ------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
VISTA[SM] GROWTH AND INCOME FUND INSTITUTIONAL SHARES
PROSPECTUS -- May 6, 1996
Investment Strategy: Growth and Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-622-4273. The SAI has been filed with
the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Growth and Income Portfolio (the
"Portfolio"), an open-end management investment company with investment
objectives identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this investment
structure, see "Unique Characteristics of Master/ Feeder Fund Structure" on
page 13.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary .......................................................... 3
Fund Objectives .......................................................... 4
Investment Policies ...................................................... 4
Management ............................................................... 7
How to Purchase, Redeem and Exchange Shares .............................. 8
How the Fund Values its Shares ........................................... 10
How Distributions are Made; Tax Information .............................. 10
Other Information Concerning the Fund .................................... 11
Performance Information .................................................. 15
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------
Investment Advisory Fee ......................................... 0.40%
12b-1 Fee ....................................................... None
Shareholder Servicing Fee ....................................... 0.25%
Other Expenses .................................................. 0.35%
----
Total Fund Operating Expenses ................................... 1.00%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares .... $10 $32 $55 $122
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FUND OBJECTIVES
Vista Growth and Income Fund seeks to provide long-term capital
appreciation and dividend income. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objectives.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio invests in common stocks of issuers
with a broad range of market capitalizations. Under normal market conditions,
the Portfolio will invest at least 80% of its total assets in common stocks.
In addition, the Portfolio may invest up to 20% of its total assets in
convertible securities.
The Portfolio's advisers intend to utilize both quantitative and
fundamental research to identify undervalued stocks with a catalyst for
positive change. The advisers believe that the market risk involved in
seeking capital appreciation will be moderated to an extent by the
anticipated dividend returns on the stocks in which the Portfolio invests.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio
were diversified.
The Portfolio may invest any portion of its assets not invested as
described above in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Portfolio may invest
without limitation in these instruments as well as investment grade debt
securities. To the extent that the Portfolio departs from its investment
policies during temporary defensive periods, the Fund's investment objective
may not be achieved.
Fund Structure
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees
determine that it is in the best interest of the Fund to do so. Upon any such
withdrawal, the Trustees would consider what action might be taken, including
investing all of the Fund's investable assets in another pooled investment
entity having substantially the same objective and policies as the Fund or
retaining an investment adviser to manage the Fund's assets directly.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These
practices, and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including Depositary Receipts. Since foreign
securities are normally denominated and traded in foreign currencies, the
values of the Portfolio's foreign investments may be affected favorably or
unfavorably by currency exchange rates and exchange control regulations.
There may be less information publicly available about foreign companies than
U.S. companies, and they are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to those in the
U.S. The securities of foreign companies may be less liquid and more volatile
than the securities of comparable U.S. companies. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
4
<PAGE>
payment or delivery of securities or in the recovery of the Portfolio's
assets held abroad) and expenses. It is possible that nationalization or
expropriation of assets, imposition of currency exchange controls,
confiscatory taxation, political or financial instability and diplomatic
developments could affect the value of the Portfolio's investments in certain
foreign countries. Foreign laws may restrict the ability to invest in certain
countries or issuers and special tax considerations will apply to foreign
securities. The risks can increase if the Portfolio invests in securities of
issuers in emerging markets.
The Portfolio may invest its assets in securities of foreign issuers in
the form of American Depositary Receipts, European Depositary Receipts,
Global Depositary Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The
Portfolio treats Depositary Receipts as interests in the underlying
securities for purposes of its investment policies. The Portfolio will limit
its investment in Depositary Receipts not sponsored by the issuer of the
underlying securities to no more than 5% of the value of its net assets (at
the time of investment).
Supranational and ECU Obligations. The Portfolio may invest in securities
issued by supranational organizations, which include organizations such as
The World Bank, the European Community, the European Coal and Steel Community
and the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts
of the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
Convertible Securities. The Portfolio may invest up to 20% of its net
assets in convertible securities, which are securities generally offering
fixed interest or dividend yields which may be converted either at a stated
price or stated rate for common or preferred stock. Although to a lesser
extent than with fixed-income securities generally, the market value of
convertible securities tends to decline as interest rates increase, and
increase as interest rates decline. Because of the conversion feature, the
market value of convertible securities also tends to vary with fluctuations
in the market value of the underlying common or preferred stock.
Money Market Instruments. The Portfolio may invest in cash or
high-quality, short-term money market instruments. Such instruments may
include U.S. Government securities, commercial paper of domestic and foreign
issuers and obligations of domestic and foreign banks. Investments in foreign
money market instruments may involve certain risks associated with foreign
investment.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's
Corporation ("S&P"), or Baa or higher by Moody's Investors Services, Inc.
("Moody's") or the equivalent by another national rating organiztion, or, if
unrated, determined by the advisers to be of comparable quality.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend
portfolio securities in an amount equal to not more than 30% of its total
assets to generate additional income. These transactions must be fully
collateralized at all times. The Portfolio may purchase securities for
delivery at a future date, which may increase its overall investment exposure
and involves a risk of loss if the value of the securities declines prior to
the settlement date. These transactions involve some risk to the Portfolio if
the other party should default on its obligation and the Portfolio is delayed
or prevented from recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Portfolio may borrow
money from banks for temporary or short-term purposes, but will not borrow
for leveraging purposes. The Portfolio may
5
<PAGE>
also sell and simultaneously commit to repurchase a portfolio security at an
agreed-upon price and time, to avoid selling securities during unfavorable
market conditions in order to meet redemptions. Whenever the Portfolio enters
into a reverse repurchase agreement, it will establish a segregated account
in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). The
Portfolio would be required to pay interest on amounts obtained through
reverse repurchase agreements, which are considered borrowings under federal
securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Portfolio
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Portfolio if the other party should default on its obligation and
the Portfolio is delayed or prevented from recovering the collateral or
completing the transaction. Acquisition of puts will have the effect of
increasing the cost of the securities subject to the put and thereby reducing
the yields otherwise available from such securities.
Other Investment Companies. The Portfolio may invest up to 10% of its
total assets in shares of other investment companies, subject to applicable
regulatory limitations.
STRIPS. The Portfolio may invest up to 20% of its total assets in
separately traded principal and interest components of securities backed by
the full faith and credit of the U.S. Government, including instruments known
as "STRIPS". The value of these instruments tends to fluctuate more in
response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Derivatives and Related Instruments. The Portfolio may invest its assets
in derivative and related instruments to hedge various market risks or to
increase the Portfolio's income or gain. Some of these instruments will be
subject to asset segregation requirements to cover the Portfolio's
obligations. The Portfolio may (i) purchase, write and exercise call and put
options on securities and securities indexes (including using options in
combination with securities, other options or derivative instruments); (ii)
enter into swaps, futures contracts and options on futures contracts; (iii)
employ forward currency contracts; and (iv) purchase and sell structured
products, which are instruments designed to restructure or reflect the
characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Portfolio's advisers to forecast these factors correctly. Inaccurate
forecasts could expose the Portfolio to a risk of loss. There can be no
guarantee that there will be a correlation between price movements in a
hedging instrument and in the portfolio assets being hedged. The Portfolio is
not required to use any hedging strategies. Hedging strategies, while
reducing risk of loss, can also reduce the opportunity for gain. Derivatives
transactions not involving hedging may have speculative characteristics,
involve leverage and result in more risk to the Portfolio than hedging
strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Portfolio seeks to close out a
derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter
6
<PAGE>
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default. In the event of a default, the Portfolio
may experience a loss. For additional information concerning derivatives,
related instruments and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio
transactions will vary from year to year. The Portfolio's investment policies
may lead to frequent changes in investments, particularly in periods of
rapidly changing market conditions. High portfolio turnover rates would
generally result in higher transaction costs, including brokerage commissions
or dealer mark-ups, and would make it more difficult for the Portfolio to
qualify as a registered investment company under federal tax law. See "How
Distributions are Made; Tax Information" and "Other Information Concerning
the Fund--Certain Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio from:
(a) with respect to 50% of its total assets, holding more than 10% of the
voting securities of any issuer; (b) investing more than 15% of its net
assets in illiquid securities (which include securities restricted as to
resale unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than
25% of its total assets in any one industry. A complete description of these
and other investment policies is included in the SAI. Except for restriction
(c) above and investment policies designated as fundamental in the SAI, the
investment policies (including their investment objective) of the Portfolio
and the Fund are not fundamental. Shareholder approval is not required to
change any non-fundamental investment policy. However, in the event of a
change in the Fund's or Portfolio's investment objective, shareholders will
be given at least 30 days prior written notice.
Risk Factors
The net asset value of the shares of the Fund can be expected to fluctuate
based on the value of the securities held by the Portfolio. The Fund does not
constitute a balanced or complete investment program. The Fund is subject to
the general risks and considerations associated with equity investing.
Because the Portfolio is "non-diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Portfolio's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Portfolio pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Portfolio, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its
predecessors have over 100 years of money management experience. For its
investment advisory services to the Portfolio, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal
to 0.40% of the Portfolio's average daily net assets. Chase is located at 270
Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Portfolio pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase.
7
<PAGE>
CAM is a wholly-owned operating subsidiary of Chase. CAM makes investment
decisions for the Portfolio on a day-to-day basis. For these services, CAM is
entitled to receive a fee, payable by Chase from its advisory fee, at an
annual rate equal to 0.20% of the Portfolio's average daily net assets. CAM
was recently formed for the purpose of providing discretionary investment
advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located
at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management
at Chase, and Greg Adams, Director of U.S. Equity Research at Chase, have
been responsible for the day-to-day management of the Portfolio since March
1995. Mr. Klassen joined Chase in March 1992 and, in addition to managing the
Vista Growth and Income Portfolio, is a manager of the Vista Small Cap Equity
Fund and the Vista Capital Growth Portfolio. Prior to joining Chase, Mr.
Klassen was a vice president and portfolio manager at Dean Witter Reynolds,
responsible for managing several mutual funds and other accounts. Mr. Adams
joined Chase in 1987 and is also a manager of the Vista Balanced Fund and the
Vista Large Cap Equity Fund. In addition, Mr. Adams has been responsible for
overseeing the proprietary computer model program used in the U.S. equity
selection process.
HOW TO PURCHASE, REDEEM, AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are sold at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any
time at the net asset value next determined after a redemption request in
proper form is furnished by you to your Dealer and trans-
8
<PAGE>
mitted to and received by the Vista Service Center. A wire redemption may be
requested by telephone to the Vista Service Center. For telephone
redemptions, call the Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
The Fund generally sends you payment for your shares by wire in federal
funds on the business day after your request is received in proper form.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you
will receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer Institutional Shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
9
<PAGE>
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. The exchange privilege is subject to change or
termination. See the SAI to find out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any
net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment
10
<PAGE>
company for any taxable year or does not make such distributions, the Fund
will be subject to tax on all of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by the Fund may qualify
for the 70% dividends- received deduction for corporate shareholders.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attrib-
11
<PAGE>
utable to shares of the Fund held by customers of such selected dealers. Such
compensation does not represent an additional expense to the Fund or its
shareholders, since it will be paid by Chase.
Administrator
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets.
Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required
12
<PAGE>
under federal securities laws to vote separately on matters that only affect
a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Unique Characteristics of Master/Feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a
shareholder's interest in the Portfolio's securities is indirect. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, other
investors investing in the Portfolio are not required to sell their shares at
the same public offering prices as the Fund, and may bear different levels of
ongoing expenses than the Fund. Shareholders of the Fund should be aware that
these differences may result in differences in returns experienced in the
different funds that invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns. Additionally,
the Portfolio may become less diverse, resulting in increased portfolio risk.
However, this possibility also exists for traditionally structured funds
which have large or institutional investors. Funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Trust is requested to vote on
matters pertaining to the Portfolio, the Trust will hold a
13
<PAGE>
meeting of shareholders of the Fund and will cast all of its votes in the
same proportion as do the Fund's shareholders. Shares of the Fund for which
no voting instructions have been received will be voted in the same
proportion as those shares for which voting instructions are received.
Certain changes in the Portfolio's objective, policies or restrictions may
require the Trust to withdraw the Fund's interest in the Portfolio. Any
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Fund could incur
brokerage fees or other transaction costs in converting such securities to
cash. In addition, a distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the Fund.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the disinterested
Trustees of the Trust reasonably appropriate to deal with potential conflicts
of interest up to and including creating a separate Board of Trustees. The
Trustees of the Trust, including a majority of the disinterested Trustees,
have adopted procedures they believe are reasonably appropriate to deal with
any conflict of interest up to and including creating a separate Board of
Trustees.
Investors in the Fund may obtain information about whether an investment
in the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-622-4273.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase.
14
<PAGE>
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among
themselves certain information about the shareholder and his account.
Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the public offering price. Total return may also be
presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
15
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
York, NY 10036
INST-GI-1-596CX
[Vista Logo]
Growth and
Income Fund
Institutional Shares
- ----------------------------------------
Prospectus
and Application
May 6, 199
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] CAPITAL GROWTH FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Capital Growth Portfolio (the
"Portfolio"), an open-end management investment company with an investment
objective identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this investment
structure, see "Unique Characteristics of Master/Feeder Fund Structure" on page
19.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
How the Fund has performed
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests,
investment policies and techniques, and risks
Management ................................................................ 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 10
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ...................................... 10
How the Fund Values its Shares ............................................ 15
How Distributions are Made; Tax Information ............................... 15
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ..................................... 16
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization, master/feeder Fund structure
and regulatory matters
Performance Information ................................................... 20
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 22
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
-------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ........... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of
original purchase price
or redemption proceeds)* ...................... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee ......................... 0.40% 0.40%
12b-1 Fee** ..................................... 0.25% 0.75%
Shareholder Servicing Fee ....................... 0.25% 0.25%
Other Expenses .................................. 0.45% 0.45%
---- ----
Total Fund Operating Expenses ................... 1.35% 1.85%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ................ $61 $88 $118 $202
Class B Shares:
Assuming complete redemption
at the end of
the period++ +++ ............. $70 $91 $123 $204
Assuming no redemptions +++ ... $19 $58 $100 $204
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicabl
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLES
SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an investment
in the Fund. The Fund understands that Shareholder Servicing Agents may credit
to the accounts of their customers from whom they are already receiving other
fees amounts not exceeding such other fees or the fees received by the
Shareholder Servicing Agent from the Fund with respect to those accounts. See
"Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares outstanding for each of the periods shown. This
information is supplemented by and should be read in conjunction with financial
statements and accompanying notes appearing in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 1995, which is incorporated
by reference into the SAI. Shareholders can obtain a copy of this Annual Report
by contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below for each of the five years in the period ended October 31, 1995,
have been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is also included in the Annual Report to Shareholders.
<TABLE>
<CAPTION>
VISTA CAPITAL GROWTH FUND
---------------------------------------------------
Class A
Year ended October 31,
---------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------
Net Asset Value, Beginning of
Period .......................... $ 32.17 $ 32.01 $ 25.12 $ 22.02 $ 12.33
-------- -------- -------- -------- -------
Income from Investment
Operations:
Net Investment Income (Loss) .... 0.189 0.099@ 0.064 0.078 (0.011)
Net Gains or (Losses) in
Securities (both realized
and unrealized) ............... 4.160 0.719 7.173 3.044 9.805
-------- -------- -------- -------- -------
Total from Investment
Operations .................... 4.349 0.818 7.237 3.122 9.794
-------- -------- -------- -------- -------
Less Distributions:
Dividends from Net
Investment Income ............. 0.189 0.027 0.093 0.017 0.109
Distributions from
Capital Gains ................. 0.676 0.631 0.257 0.000 0.000
-------- -------- -------- -------- -------
Total Distributions. ............ 0.865 0.658 0.350 0.017 0.109
-------- -------- -------- -------- -------
Net Asset Value, End of Period .... $ 35.65 $ 32.17 $ 32.01 $ 25.12 $ 22.02
======== ======== ======== ======== =======
Total Return (1) 13.89% 2.62% 29.06% 14.16% 79.96%
Ratios/Supplemental Data (2):
Net Assets, End of Period
(000 omitted) .................. $747,575 $549,411 $225,235 $39,836 $ 9,334
Ratio of Expenses to Average
Net Assets ..................... 1.51% 1.49% 1.49% 1.40% 1.27%
Ratio of Net Investment Income
to Average Net Assets .......... 0.54% 0.33% 0.12% 0.32% (0.09%)
Ratio of Expenses without waivers
and assumption of expenses
to Average Net Assets .......... 1.53% 1.50% 1.49% 1.77% 3.44%
Ratio of Net Investment Income
without waivers and
assumption of expenses to
Average Net Assets ............. 0.52% 0.32% 0.12% (0.05%) (2.26%)
Portfolio Turnover Rate ........... -- -- 43% 67% 83%
</TABLE>
<TABLE>
<CAPTION>
Class A
Year ended October 31 Class B
------------------------------------- --------------------
9/8/87* Year 11/4/93**
to Ended through
1990 1989 1988 10/31/87 10/31/95 10/31/94
------- ------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
- ---------------------------------
Net Asset Value, Beginning of
Period .......................... $ 16.23 $ 11.56 $ 10.00 $ 10.00 $ 32.03 $ 31.38
------- ------- ------- ------- -------- --------
Income from Investment
Operations:
Net Investment Income (Loss) .... 0.436 0.500 0.117 0.000 0.044 0.011@
Net Gains or (Losses) in
Securities (both realized
and unrealized) ............... (3.141) 5.164 1.498 0.000 4.100 1.296
------- ------- ------- ------- -------- --------
Total from Investment
Operations .................... (2.705) 5.664 1.615 0.000 4.144 1.307
------- ------- ------- ------- -------- --------
Less Distributions:
Dividends from Net
Investment Income ............. 0.592 0.320 0.055 0.000 0.111 0.026
Distributions from
Capital Gains ................. 0.598 0.675 0.000 0.000 0.676 0.631
------- ------- ------- ------- -------- --------
Total Distributions. ............ 1.190 0.995 0.055 0.000 0.787 0.657
------- ------- ------- ------- -------- --------
Net Asset Value, End of Period .... $ 12.33 $ 16.23 $ 11.56 $10.00 $35.39 $ 32.03
======= ======= ======= ======= ======== ========
Total Return (1) .................. (18.11%) 52.12% 16.15% 0.00% 13.34% 4.19%
Ratios/Supplemental Data (2):
Net Assets, End of Period
(000 omitted) .................. $ 4,749 $ 4,652 $ 561 $13 $260,376 $124,223
Ratio of Expenses to Average
Net Assets ..................... 1.04% 0.00% 0.00% 0.00%# 2.01% 2.00%#
Ratio of Net Investment Income
to Average Net Assets .......... 2.82% 3.87% 1.55% 0.00%# 0.02% (0.09%)#
Ratio of Expenses without waivers
and assumption of expenses
to Average Net Assets .......... 2.50% 2.50% 2.00% 2.00%# 2.02% 2.02%#
Ratio of Net Investment Income
without waivers and
assumption of expenses to
Average Net Assets ............. 1.36% 1.37% (0.45%) (2.00%#) 0.01% (0.11%)#
Portfolio Turnover Rate ........... 139% 189% 229% 0% -- --
</TABLE>
- ---------------
# Annualized.
* Commencement of operations.
** Commencement of offering of classes of shares.
(2) Ratios include the Fund's share of portfolio income and expenses, as
appropriate.
@ Calculated based upon average shares outstanding.
(1) Total return figures are calculated before taking into account the effect
of any front-end sales load on Class A shares or any contingent deferred
sales charge on Class B shares.
5
<PAGE>
FUND OBJECTIVE
Vista Capital Growth Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it will
achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio will invest primarily in a broad
portfolio of common stocks. Under normal market conditions, the Portfolio will
invest at least 80% of its total assets in common stocks. The Portfolio will
seek to invest in stocks of companies with capitalizations of $750 million to
$4.0 billion. Current income, if any, is a consideration incidental to the
Portfolio's objective of long-term capital growth. The Portfolio's advisers
intend to utilize both quantitative and fundamental research to identify
undervalued stocks with a catalyst for positive change.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio were
diversified.
The Portfolio may invest any portion of its assets not invested in common
stocks in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Portfolio may invest without limitation in
these instruments. To the extent that the Portfolio departs from its investment
policies during temporary defensive periods, the Fund's investment objective may
not be achieved.
Fund Structure
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees determine
that it is in the best interest of the Fund to do so. Upon any such withdrawal,
the Trustees would consider what action might be taken, including investing all
of the Fund's investable assets in another pooled investment entity having
substantially the same objective and policies as the Fund or retaining an
investment adviser to manage the Fund's assets directly.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Portfolio may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities are
normally denominated and traded in foreign currencies, the values of the
Portfolio's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies, and
they are not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the U.S. The securities of
foreign companies may be less liquid and more volatile than the securities of
comparable U.S. companies. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of the Portfolio's assets held abroad) and expenses. It is
possible that nationalization or expropriation of assets, imposition of currency
exchange controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Portfolio's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain countries or issuers and special tax considerations will apply to
foreign securities. The risks can increase if the Portfolio invests in
securities of issuers in emerging markets.
6
<PAGE>
The Portfolio may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Portfolio treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Portfolio will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
Money Market Instruments. The Portfolio may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized at
all times. The Portfolio may purchase securities for delivery at a future date,
which may increase its overall investment exposure and involves a risk of loss
if the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
Borrowing and Reverse Repurchase Agreements. The Portfolio may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Portfolio may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Portfolio enters into a reverse repurchase agreement,
it will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowing
under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to money market instruments in its portfolio. In these transactions, the
Portfolio would acquire the right to sell a security at an agreed upon price
within a specified period prior to its maturity date. These transactions involve
some risk to the Portfolio if the other party should default on its obligation
and the Portfolio is delayed or prevented from recovering the collateral or
completing the transaction. Acquisition of puts will have the effect of
increasing the cost of the securities subject to the put and thereby reducing
the yields otherwise available from such securities.
Convertible Securities. The Portfolio may invest up to 20% of its net assets
in convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price or
stated rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable regulatory
limitations.
7
<PAGE>
STRIPS. The Portfolio may invest up to 20% of its total assets in separately
traded principal and interest components of securities backed by the full faith
and credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
Derivatives and Related Instruments. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Portfolio's advisers to forecast these factors correctly. Inaccurate
forecasts could expose the Portfolio to a risk of loss. There can be no
guarantee that there will be a correlation between price movements in a hedging
instrument and in the portfolio assets being hedged. The Portfolio is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in more risk to the Portfolio than hedging strategies using the same
instruments. There can be no assurance that a liquid market will exist at a time
when the Portfolio seeks to close out a derivatives position. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price distortions
in derivatives markets. In certain instances, particularly those involving
over-the-counter transactions or forward contracts, there is a greater potential
that a counterparty or broker may default. In the event of a default, the
Portfolio may experience a loss. For additional information concerning
derivatives, related instruments and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund--Certain Regulatory
Matters."
Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio from: (a)
with respect to 50% of its total assets, holding more than 10% of the voting
securities of any issuer; (b) investing more than 15% of its net assets in
illiquid securities (which include securities restricted as to resale unless
they are determined to be readily marketable in accordance with procedures
established by the Board of Trustees of the Portfolio); or (c) investing more
than 25% of its total assets in any
8
<PAGE>
one industry. A complete description of these and other investment policies
is included in the SAI. Except for restriction (c) above and investment
policies designated as fundamental in the SAI, the investment policies of the
Portfolio and the Fund (including their investment objective) are not
fundamental. Shareholder approval is not required to change any
non-fundamental investment policy. However, in the event of a change in the
Fund's or Portfolio's investment objective, shareholders will be given at
least 30 days' prior written notice.
Risk Factors
The Fund does not constitute a balanced or complete investment program, and
the net asset value of the shares of the Fund can be expected to fluctuate based
on the value of the securities held by the Portfolio. The Portfolio is subject
to the general risks and considerations associated with equity investing, as
well as the risks discussed herein.
Because the Portfolio is "non-diversified," the value of the Fund's shares is
more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Portfolio's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Portfolio pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Portfolio, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience. For its investment advisory
services to the Portfolio, Chase is entitled to receive an annual fee computed
daily and paid monthly based at an annual rate equal to 0.40% of the Portfolio's
average daily net assets. Chase is located at 270 Park Avenue, New York, New
York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to the Portfolio pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary of
Chase. CAM makes investment decisions for the Portfolio on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.20% of the Portfolio's average daily
net assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management at
Chase, and Tony Gleason, Vice President of Chase, have been responsible for the
day-to-day management of the Portfolio since September 1995. Mr. Klassen joined
Chase in March 1992 and, in addition to managing the Vista Capital Growth
Portfolio, is a manager of the Vista Small Cap Equity Fund and the Vista Growth
and Income Portfolio. Prior to joining Chase, Mr. Klassen was a vice president
and portfolio manager at Dean Witter Reynolds, responsible for managing several
mutual funds and other accounts. Mr. Gleason is also responsible for managing
the Vista Equity Income Fund. Mr. Gleason joined Chase in 1995 with 10 years of
investment experience.
9
<PAGE>
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales charge
at the time of purchase. As a result, Class A shares are not subject to any
sales charges when they are redeemed. Certain purchases of Class A shares
qualify for reduced sales charges. Class A shares have lower combined 12b-1 and
service fees than Class B shares. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. In almost all cases, investors planning to purchase $250,000 or
more of the Fund's shares will pay lower aggregate charges and expenses by
purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments at
any time with as little as $100. You can buy Fund shares three ways--through an
investment representative, through the Fund's distributor by calling the Vista
Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, credit cards and cash will not be accepted. The
Fund reserves the right to reject any purchase order or cease offering shares
for purchase at any time. When purchases are made by check, redemptions will not
be allowed until clearance of the purchase check, which may take 15 calendar
days or longer. In addition, the redemption of shares purchased through ACH will
not be allowed until clearance of your payment, which may take 7 business days
or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular investments
of $100 or more per transaction through automatic periodic deduction from your
bank checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
appli-
10
<PAGE>
cation. Current shareholders may begin such a plan at any time by sending a
signed letter with signature guarantee and a deposit slip or voided check to
the Vista Service Center. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price, the
Vista Service Center must receive your order before the close of regular trading
on the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
Sales charge as a
percentage of:
------------------
Net Amount of sales charge
Amount of transaction at Offering amount reallowed to dealers as a
offering price ($) Price invested percentage of offering price
- --------------------------- ------ -------- ----------------------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 1.00% of the amount under $2.5 million,
0.75% of the next $7.5 million, 0.50% of the next $40 million and 0.20%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be redeemed without
charge at any time: (i) shares acquired by reinvestment of distributions and
(ii) shares otherwise exempt from the CDSC, as described below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the purchase price of shares being redeemed.
11
<PAGE>
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B share, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
A participant-directed employee benefit plan participating in a "multi-fund"
program approved by the Board of Trustees may include amounts invested in the
other mutual funds participating in such program for purposes of determining
whether the plan may purchase Class A shares at net asset value. These
investments will also be included for purposes of the discount privileges and
programs described above.
The Fund may sell Class A shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds, 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 Chase or an affiliate serves as trustee or
custodian of the plan or manages some portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee for
its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial planner,
provided arrangements are preapproved and purchases are placed through an
omnibus account with the Fund or (ii) by clients of such investment adviser or
financial planner who place trades for their own accounts, if such accounts are
linked to a master account of such investment adviser or financial planner on
the books and records of the broker or agent. Such purchases may be made for
retirement and deferred compensation plans and trusts used to fund those plans.
12
<PAGE>
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista fund as of November 30, 1990 and certain
immediate family members may purchase Class A shares of the Fund with no initial
sales charge for as long as they continue to own Class A shares of any Vista
fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company. The CDSC will be waived on redemption of
Class B shares arising out of death or disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the value of Class
B shares subject to a systematic withdrawal plan may also be redeemed each year
without a CDSC, provided that the Class B account had a minimum balance of
$20,000 at the time the systematic withdrawal plan was established. The SAI
contains additional information about purchasing the Fund's shares at reduced
sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset value calculated
after the Fund receives your request in proper form, less any applicable CDSC.
In order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required. The
Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected payment
of the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
13
<PAGE>
You may use Vista's Telephone Redemption Privilege to redeem shares from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Fund. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal plan
for Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
14
<PAGE>
An exchange of Class B shares into any of the Vista money market funds other
than the Class B shares of the Vista Prime Money Market Fund will be treated as
a redemption--and therefore subject to the conditions of the CDSC--and a
subsequent purchase. Class B shares of any Vista non-money market fund may be
exchanged into the Class B shares of the Vista Prime Money Market Fund in order
to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding. Ask your investment representative or the Vista Service
Center for prospectuses of other Vista funds. Shares of certain Vista funds are
not available to residents of all states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in the
SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least semi-annually and any
net realized capital gains at least annually. Distributions from capital gains
are made after applying any available capital loss carryovers. Distributions
paid by the Fund with respect to Class A shares will generally be greater than
those paid with respect to Class B shares because expenses attributable to Class
B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a pre-established
bank account while reinvesting capital gains distributions in additional shares
without a sales charge; or (3) receive
15
<PAGE>
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Vista fund. If the Vista Service Center does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if correspondence
sent by the Fund or the Vista Service Center is returned as "undeliverable,"
distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares which
provide that the Fund will pay distribution fees at annual rates of up to 0.25%
and 0.75% of the average daily net assets attributable to Class A and Class B
shares of the Fund, respectively. Payments under the distribution plans shall be
used to compensate or reimburse the Fund's distributor and broker-dealers for
services provided and expenses incurred in connection with the sale of Class A
and Class B shares, and are not tied to the amount of actual expenses incurred.
Payments may be used to compensate broker-dealers with trail or maintenance
commissions at an annual rate of up to 0.20% of the average daily net asset
value of Class A shares, or 0.25% of the average daily net asset value of the
Class B shares maintained in the Fund by customers of these broker-dealers.
Trail or maintenance commissions are paid to broker-dealers beginning the 13th
month following the
16
<PAGE>
purchase of shares by their customers. Some activities intended to promote
the sale of Class A and Class B shares will be conducted generally by the
Vista Family of Funds, and activities intended to promote the Fund's Class A
or Class B shares may also benefit the Fund's other shares and other Vista
funds.
Class A shares are also permitted to pay an additional fee at an annual rate
of up to 0.05% of its average daily net asset value in anticipation of, or as
reimbursement for, expenses incurred in connection with print or electronic
media advertising in connection with the sale of Fund shares. When such expenses
are incurred, the maximum compensation paid by the Class A shares under the
Class A distribution plan would be at an annual rate of 0.25% of its average
daily net asset value.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater for entertainment for broker-dealers and their guests; and payment
for travel expenses, including lodging and meals, in connection with attendance
at training and educational meetings within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator and Sub-Administrator
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed daily
and paid monthly at an annual rate equal to 0.05% of their average daily net
assets.
17
<PAGE>
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
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
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of shares
in addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which will affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
18
<PAGE>
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of all series or classes when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Unique Characteristics of Master/Feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a shareholder's
interest in the Portfolio's securities is indirect. In addition to selling a
beneficial interest to the Fund, the Portfolio may sell beneficial interests to
other mutual funds or institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, other investors investing in the Portfolio
are not required to sell their shares at the same public offering prices as the
Fund, and may bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in the
Portfolio. Such differences in returns are also present in other mutual fund
structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. However, this
possibility also exists for traditionally structured funds which have large or
institutional investors. Funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Shares of the Fund for which no voting instructions have been received will be
voted in the same proportion as those shares for which voting instructions are
received. Certain changes in the Portfolio's objective, policies or restrictions
may require the Trust to withdraw the Fund's interest in the Portfolio. Any
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Fund could incur
brokerage fees or other transaction costs in converting such securities to cash.
In addition, a distribution in kind may result in a less diversified portfolio
of investments or adversely affect the liquidity of the Fund.
State securities regulations generally do not permit the same individuals who
are disinterested Trustees of the Trust to be Trustees of the Portfolio absent
the adoption of written procedures by a majority of the disinterested Trustees
of the Trust reasonably appropriate to deal with potential conflicts of interest
up to and including creating a separate Board of Trustees. The Trustees of the
Trust, including a majority of the disinterested Trustees, have adopted
procedures they believe are reasonably appropriate to deal with any conflict of
interest up to and including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista Service
Center at 1-800-34-VISTA.
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<PAGE>
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of the Fund,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of securities so purchased. Chase and its affiliates
deal, trade and invest for their own accounts in U.S. Government obligations,
municipal obligations and commercial paper and are among the leading dealers of
various types of U.S. Government obligations and municipal obligations. Chase
and its affiliates may sell U.S. Government obligations and municipal
obligations to, and purchase them from, other investment companies sponsored by
the Fund's distributor or affiliates of the distributor. Chase will not invest
the Fund's assets in any U.S. Government obligations, municipal obligations or
commercial paper purchased from itself or any affiliate, although under certain
circumstances such securities may be purchased from other members of an
underwriting syndicate in which Chase or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased by the Fund.
Chase has informed the Fund that in making its investment decisions, it does not
obtain or use material inside information in the possession of any other
division or department of Chase, including the division that performs services
for the Fund as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing the
annualized net investment income calculated pursuant to federal rules per share
during a recent 30-day period by the maximum public offering price per share of
such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
invested at the maximum public offering price (in the case of Class A shares) or
reflecting the deduction of any applicable contingent deferred sales charge (in
the case of Class B shares). Total return may also be presented for other
periods or without reflecting sales charges. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition
20
<PAGE>
of the Fund's portfolio, the Fund's operating expenses and which class of
shares you purchase. Investment performance also often reflects the risks
associated with the Fund's investment objectives and policies. These factors
should be considered when comparing the Fund's investment results to those of
other mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or seminannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VCG-1-596CX
[Vista Logo]
Capital
Growth Fund
- ------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
VISTA[SM] CAPITAL GROWTH FUND INSTITUTIONAL SHARES
PROSPECTUS -- May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
The Fund, unlike many other investment companies which directly acquire
and manage their own portfolios of securities, seeks its investment objective
by investing all of its investable assets in Capital Growth Portfolio (the
"Portfolio"), an open-end management investment company with an investment
objective identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this
investment structure, see "Unique Characteristics of Master/Feeder Fund
Structure" on page 13.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS
OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK OR ANY
OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED
BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
Fund Objective ............................................................ 4
Investment Policies ....................................................... 4
Management ................................................................ 7
How to Purchase, Redeem and Exchange Shares ............................... 8
How the Fund Values its Shares ............................................ 10
How Distributions are Made; Tax Information ............................... 10
Other Information Concerning the Fund ..................................... 11
Performance Information ................................................... 14
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------
Investment Advisory Fee .............................................. 0.40%
12b-1 Fee ............................................................ None
Shareholder Servicing Fee ............................................ 0.25%
Other Expenses ....................................................... 0.35%
----
Total Fund Operating Expenses ........................................ 1.00%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares ............. $10 $32 $55 $122
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FUND OBJECTIVE
Vista Capital Growth Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio will invest primarily in a broad
portfolio of common stocks. Under normal market conditions, the Portfolio
will invest at least 80% of its total assets in common stocks. The Portfolio
will seek to invest in stocks of companies with capitalizations of $750
million to $4.0 billion. Current income, if any, is a consideration
incidental to the Portfolio's objective of long-term capital growth. The
Portfolio's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio
were diversified.
The Portfolio may invest any portion of its assets not invested in common
stocks in high quality money market instruments and repurchase agreements, as
described below. For temporary defensive purposes, the Portfolio may invest
without limitation in these instruments. To the extent that the Portfolio
departs from its investment policies during temporary defensive periods, the
Fund's investment objective may not be achieved.
Fund Structure
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees
determine that it is in the best interest of the Fund to do so. Upon any such
withdrawal, the Trustees would consider what action might be taken, including
investing all of the Fund's investable assets in another pooled investment
entity having substantially the same objective and policies as the Fund or
retaining an investment adviser to manage the Fund's assets directly.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These
practices, and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Portfolio may invest up to 20% of its total assets
in foreign securities, including Depositary Receipts. Since foreign
securities are normally denominated and traded in foreign currencies, the
values of the Portfolio's foreign investments may be affected favorably or
unfavorably by currency exchange rates and exchange control regulations.
There may be less information publicly available about foreign companies than
U.S. companies, and they are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to those in the
U.S. The securities of foreign companies may be less liquid and more volatile
than the securities of comparable U.S. companies. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
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payment or delivery of securities or in the recovery of the Portfolio's
assets held abroad) and expenses. It is possible that nationalization or
expropriation of assets, imposition of currency exchange controls,
confiscatory taxation, political or financial instability and diplomatic
developments could affect the value of the Portfolio's investments in certain
foreign countries. Foreign laws may restrict the ability to invest in certain
countries or issuers and special tax considerations will apply to foreign
securities. The risks can increase if the Portfolio invests in securities of
issuers in emerging markets.
The Portfolio may invest its assets in securities of foreign issuers in
the form of American Depositary Receipts, European Depositary Receipts,
Global Depositary Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The
Portfolio treats Depositary Receipts as interests in the underlying
securities for purposes of its investment policies. The Portfolio will limit
its investment in Depositary Receipts not sponsored by the issuer of the
underlying securities to no more than 5% of the value of its net assets (at
the time of investment).
Money Market Instruments. The Portfolio may invest in cash or
high-quality, short-term money market instruments. Such instruments may
include U.S. Government securities, commercial paper of domestic and foreign
issuers and obligations of domestic and foreign banks. Investments in foreign
money market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend
portfolio securities in an amount equal to not more than 30% of its total
assets to generate additional income. These transactions must be fully
collateralized at all times. The Portfolio may purchase securities for
delivery at a future date, which may increase its overall investment exposure
and involves a risk of loss if the value of the securities declines prior to
the settlement date. These transactions involve some risk to the Portfolio if
the other party should default on its obligation and the Portfolio is delayed
or prevented from recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Portfolio may borrow
money from banks for temporary or short-term purposes, but will not borrow
for leveraging purposes. The Portfolio may also sell and simultaneously
commit to repurchase a portfolio security at an agreed-upon price and time,
to avoid selling securities during unfavorable market conditions in order to
meet redemptions. Whenever the Portfolio enters into a reverse repurchase
agreement, it will establish a segregated account in which it will maintain
liquid assets on a daily basis in an amount at least equal to the repurchase
price (including accrued interest). The Portfolio would be required to pay
interest on amounts obtained through reverse repurchase agreements, which are
considered borrowings under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to money market instruments in its portfolio. In these transactions,
the Portfolio would acquire the right to sell a security at an agreed upon
price within a specified period prior to its maturity date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction. Acquisition of puts
will have the effect of increasing the cost of the securities subject to the
put and thereby reducing the yields otherwise available from such securities.
Convertible Securities. The Portfolio may invest up to 20% of its net
assets in convertible securities, which are securities generally offering
fixed interest or dividend yields which may be converted either at a stated
price or stated rate for common or preferred stock. Although to a lesser
extent than with fixed-income securities generally, the market value of
convertible securities tends to decline as interest
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rates increase, and increase as interest rates decline. Because of the
conversion feature, the market value of convertible securities also tends to
vary with fluctuations in the market value of the underlying common or
preferred stock.
Other Investment Companies. The Portfolio may invest up to 10% of its
total assets in shares of other investment companies, subject to applicable
regulatory limitations.
STRIPS. The Portfolio may invest up to 20% of its total assets in
separately traded principal and interest components of securities backed by
the full faith and credit of the U.S. Government, including instruments known
as "STRIPS". The value of these instruments tends to fluctuate more in
response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Derivatives and Related Instruments. The Portfolio may invest its assets
in derivative and related instruments to hedge various market risks or to
increase the Portfolio's income or gain. Some of these instruments will be
subject to asset segregation requirements to cover the Portfolio's
obligations. The Portfolio may (i) purchase, write and exercise call and put
options on securities and securities indexes (including using options in
combination with securities, other options or derivative instruments); (ii)
enter into swaps, futures contracts and options on futures contracts; (iii)
employ forward currency contracts; and (iv) purchase and sell structured
products, which are instruments designed to restructure or reflect the
characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Portfolio's advisers to forecast these factors correctly. Inaccurate
forecasts could expose the Portfolio to a risk of loss. There can be no
guarantee that there will be a correlation between price movements in a
hedging instrument and in the portfolio assets being hedged. The Portfolio is
not required to use any hedging strategies. Hedging strategies, while
reducing risk of loss, can also reduce the opportunity for gain. Derivatives
transactions not involving hedging may have speculative characteristics,
involve leverage and result in more risk to the Portfolio than hedging
strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Portfolio seeks to close out a
derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Portfolio may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio
transactions will vary from year to year. The Portfolio's investment policies
may lead to frequent changes in investments, particularly in periods of
rapidly changing market conditions. High portfolio turnover rates would
generally result in higher transaction costs, including brokerage commissions
or dealer mark-ups, and would make it more difficult for the Portfolio to
qualify as a registered investment company under federal tax law. See "How
Distributions are Made; Tax Information" and "Other Information Concerning
the Fund--Certain Regulatory Matters."
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Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio from:
(a) with respect to 50% of its total assets, holding more than 10% of the
voting securities of any issuer; (b) investing more than 15% of its net
assets in illiquid securities (which include securities restricted as to
resale unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees of the Portfolio); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the investment policies of the Portfolio and the Fund
(including their investment objective) are not fundamental. Shareholder
approval is not required to change any non- fundamental investment policy.
However, in the event of a change in the Fund's or Portfolio's investment
objective, shareholders will be given at least 30 days' prior written notice.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the next asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities held by the Portfolio. The
Portfolio is subject to the general risks and considerations associated with
equity investing, as well as the risks discussed herein.
Because the Fund is "non-diversified," the value of the Fund's shares is
more susceptible to developments affecting issuers in which the Fund invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Portfolio's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Portfolio pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Portfolio, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its
predecessors have over 100 years of money management experience. For its
investment advisory services to the Portfolio, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal
to 0.40% of the Portfolio's average daily net assets. Chase is located at 270
Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Portfolio pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of Chase. CAM makes investment decisions for the Portfolio on a
day-to-day basis. For these services, CAM is entitled to receive a fee,
payable by Chase from its advisory fee, at an annual rate equal to 0.20% of
the Portfolio's average daily net assets. CAM was recently formed for the
purpose of providing discretionary investment advisory services to
institutional clients and to consolidate Chase's investment management
function. The same individuals who serve as portfolio managers for Chase also
serve as portfolio managers for CAM. CAM is located at 1211 Avenue of the
Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management
at Chase, and Tony Gleason, Vice President of Chase, have been responsible
for the day-to-day management of the Portfolio since September 1995. Mr.
Klassen joined Chase in March 1992 and, in addition to managing the Vista
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Capital Growth Portfolio, is a manager of the Vista Small Cap Equity Fund and
the Vista Growth and Income Portfolio. Prior to joining Chase, Mr. Klassen
was a vice president and portfolio manager at Dean Witter Reynolds,
responsible for managing several mutual funds and other accounts. Mr. Gleason
is also responsible for managing the Vista Equity Income Fund. Mr. Gleason
joined Chase in 1995 with 10 years of investment experience.
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are sold at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any
time at the net asset value next determined after a redemption request in
proper form is furnished by you to your Dealer and transmitted to and
received by the Vista Service Center. A wire redemption may be requested by
telephone to the Vista Service Center. For telephone redemptions, call the
Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
The Fund generally sends you payment for your shares by wire in federal
funds on the business day after your request is received in proper form.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities law.
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You may use Vista's Telephone Redemption Privilege to redeem shares from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Fund. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you
will receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer Institutional Shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service
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Center before requesting an exchange. The exchange privilege is subject to
change or termination. See the SAI to find out more about the exchange
privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m, Eastern time), on each Fund Business Day, by dividing
the net assets of the Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Fund (i.e.,
the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least semi-annually and
any net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by the Fund may qualify
for the 70% dividends- received deduction for corporate shareholders.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
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Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets.
Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the
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Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes
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of shares of the Fund that are offered. Any person entitled to receive
compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Unique Characteristics of Master/Feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a
shareholder's interest in the Portfolio's securities is indirect. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, other
investors investing in the Portfolio are not required to sell their shares at
the same public offering prices as the Fund, and may bear different levels of
ongoing expenses than the Fund. Shareholders of the Fund should be aware that
these differences may result in differences in returns experienced in the
different funds that invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns. Additionally,
the Portfolio may become less diverse, resulting in increased portfolio risk.
However, this possibility also exists for traditionally structured funds
which have large or institutional investors. Funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Trust is requested to vote on
matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same
proportion as do the Fund's shareholders. Shares of the Fund for which no
voting instructions have been received will be voted in the same proportion
as those shares for which voting instructions are received. Certain changes
in the Portfolio's objective, policies or restrictions may require the Trust
to withdraw the Fund's interest in the Portfolio. Any withdrawal could result
in a distribution in kind of portfolio securities (as opposed to a cash
distribution from the Portfolio). The Fund could incur brokerage fees or
other transaction costs in converting such securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the disinterested
Trustees of the Trust reasonably appropriate to deal with potential conflicts
of interest up to and including creating a separate Board of Trustees. The
Trustees of the Trust, including
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a majority of the disinterested Trustees, have adopted procedures they
believe are reasonably appropriate to deal with any conflict of interest up
to and including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment
in the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-622-4273.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his account. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an invest-
14
<PAGE>
ment of $1,000 in the Fund invested at the public offering price. Total
return may also be presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
15
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
INST-CG-1-596CX
[Vista Logo]
Capital
Growth Fund
Institutional Shares
- ----------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] LARGE CAP EQUITY FUND
Class A and B shares
May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................ 3
The expenses you might pay on your Fund investment, including examples
Fund Objective ............................................................. 5
Investment Policies ........................................................ 5
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ................................................................ 8
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 8
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ...................................... 9
How the Fund Values its Shares ............................................. 14
How Distributions are Made; Tax Information ................................ 14
How the Fund distributes its earnings, and tax treatment related to those
earnings
Other Information Concerning the Fund ..................................... 15
Distribution plans, shareholder servicing agents, administration, custodian,
expenses, organization and regulatory matters
Performance Information ................................................... 18
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 19
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ...................... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* .................. None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee (after estimated waiver)** ......... 0.00% 0.00%
12b-1 Fee*** ............................................... 0.25% 0.75%
Shareholder Servicing Fee .................................. 0.25% 0.25%
Other Expenses ............................................ 0.88% 0.88%
---- ----
Total Fund Operating Expenses (after waiver of fee)** ..... 1.38% 1.88%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ........................ $61 $89 $119 $205
Class B Shares:
Assuming complete redemption at the
end of the period++ +++ ................ $71 $92 $125 $207
Assuming no redemptions+++ ............ $19 $59 $102 $207
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waiver,
the Investment Advisory Fee would be 0.40% for Class A and Class B shares
and Total Fund Operating Expenses would be 1.78% and 2.28% for Class A
and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLES
SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FUND OBJECTIVE
Vista Large Cap Equity Fund seeks long-term capital growth. The Fund is
not intended to be a complete investment program, and there is no assurance
it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of established companies with market capitalizations in
excess of $1 billion. Such companies typically have a large number of
publicly held shares and high trading volume, resulting in a high degree of
liquidity.
The Fund's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Fund's advisers will evaluate companies by assessing the strongest
sectors of the market over the economic cycle, identifying those companies
with favorable earnings prospects, and then selecting the most attractive
values. The Fund's advisers will consider industry diversification as an
important factor and will try to maintain representation in a variety of
market sectors, although sector emphasis will shift as a result of changes in
the outlook for earnings among market sectors.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. To the extent that the Fund departs from its
investment policies during temporary defensive periods, its investment
objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities
are normally denominated and traded in foreign currencies, the values of the
Fund's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies,
and they are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. The
securities of foreign companies may be less liquid and more volatile than the
securities of comparable U.S. companies. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in payment or
delivery of securities or in the recovery of the Fund's assets held abroad)
and expenses. It is possible that nationalization or expropriation of assets,
imposition of currency exchange controls, confiscatory taxation, political or
financial instability and diplomatic developments could affect the value of
the Fund's investments in certain foreign countries. Foreign laws may
restrict the ability to invest in certain countries or issuers and special
tax considerations will apply to foreign securities. The risks can increase
if the Fund invests in securities of issuers in emerging markets.
5
<PAGE>
The Fund may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
money market instruments in its portfolio. In these transactions, the Fund
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Convertible Securities. The Fund may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price
or stated rate for common or preferred stock. Although to a lesser extent
than with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase, and increase as
interest rates decline. Because of the conversion feature, the market value
of convertible securities also tends to vary with fluctuations in the market
value of the underlying common or preferred stock.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
6
<PAGE>
STRIPS. The Fund may invest up to 20% of its total assets in separately
traded principal and interest components of securities backed by the full faith
and credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency
contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default.In the event of a default, the Fund may experience a loss.
For additional information concerning derivatives, related instruments and
the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment
7
<PAGE>
policies (including its investment objective) designated as fundamental in
the SAI, the Fund's investment policies are not fundamental. The Trustees may
change any non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with
equity investing.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.40% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.20% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Greg Adams and Karen L. Shapiro, Vice Presidents of
Chase, have been responsible for the day-to-day management of the Fund's
portfolio since May 1996. Mr. Adams joined Chase in 1987 and is also a
manager of the Vista Balanced Fund and the Vista Growth and Income Portfolio.
In addition, Mr. Adams has been responsible for overseeing the proprietary
computer model program used in the U.S. equity selection process. Ms. Shapiro
joined Chase in May 1996. Prior to joining Chase, Ms. Shapiro managed The
Hanover Blue Chip Growth Fund and was a vice president and senior portfolio
manager at The Portfolio Group, Inc. and a member of its investment
committee. Prior to joining The Portfolio Group, Inc., Ms. Shapiro was a
portfolio manager in the personal investment consulting department at
Manufacturers Hanover Trust Company.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject
to any sales charges when they are redeemed. Certain purchases of Class A
shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and
Exchange Shares" and "Other Information Concerning the Fund."
8
<PAGE>
Class B shares. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, at the beginning of the ninth year after purchase.
For more information about the conversion of Class B shares, see the SAI.
This discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a
number of factors, including the amount and intended length of the
investment. Investors making investments that qualify for reduced sales
charges might consider Class A shares. Investors who prefer not to pay an
initial sales charge might consider Class B shares. In almost all cases,
investors planning to purchase $250,000 or more of the Fund's shares will pay
lower aggregate charges and expenses by purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Fund's distributor by
calling the Vista Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Fund reserves the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the
9
<PAGE>
close of regular trading on the New York Stock Exchange to receive that day's
public offering price. Orders for shares are accepted by the Fund after funds
are converted to federal funds. Orders paid by check and received by 2:00
p.m., Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of:
-------------------- Amount of sales charge
Net reallowed to dealers as a
Amount of transaction Offering amount percentage of offering
at offering price($) price invested price
- ------------------------------- -------- -------- -------------------------
Under 100,000 ................. 4.75 4.99 4.00
100,000 but under 250,000 ..... 3.75 3.90 3.25
250,000 but under 500,000 ..... 2.50 2.56 2.25
500,000 but under 1,000,000 ... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 1.00% of the amount under
$2.5 million, 0.75% of the next $7.5 million, 0.50% of the next $40 million
and 0.20% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value
10
<PAGE>
is redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are calculated if you
exchange your shares, see "How to Exchange Your Shares." The Fund's
distributor pays broker-dealers a commission of 4.00% of the offering price
on sales of Class B shares, and the distributor receives the entire amount of
any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-Vista
mutual funds on which the investor paid a front-end or contingent deferred
sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value. These investments will also be included for purposes of the discount
privileges and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate
families), current and retired employees (and their immediate families) of
Chase, the Fund's distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and
their immediate families) of broker-dealers having selected dealer agreements
with the Fund's distributor, employees (and their immediate families) of
financial institutions having selected dealer agreements with the Fund's
distributor (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the Vista
Service Center.
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Shareholders of record of any Vista fund as of November 30, 1990 and certain
immediate family members may purchase Class A shares of the Fund with no initial
sales charge for as long as they continue to own Class A shares of any Vista
fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in
connection with certain withdrawals from IRA or other retirement plans. Up to
12% of the value of Class B shares subject to a systematic withdrawal plan
may also be redeemed each year without a CDSC, provided that the Class B
account had a minimum balance of $20,000 at the time the systematic
withdrawal plan was established. The SAI contains additional information
about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form, less
any applicable CDSC. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an
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investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or ($100
for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption. In the event the Fund redeems
Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the CDSC
- --and a subsequent purchase. Class B shares of any Vista non-money market
fund may be exchanged
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into the Class B shares of the Vista Prime Money Market Fund in order to
continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any
net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
Distributions paid by the Fund with respect to Class A shares will generally
be greater than those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All
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distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long- term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares
which provide that the Fund will pay distribution fees at annual rates of up
to 0.25% and 0.75% of the average daily net assets attributable to Class A
and Class B shares of the Fund, respectively. Payments under the distribution
plans shall be used to compensate or reimburse the Fund's distributor and
broker-dealers for services provided and expenses incurred in connection with
the sale of Class A and Class B shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.25% of the
average daily net asset value of Class A or Class B shares maintained in the
Fund by customers of these broker-dealers. Trail or maintenance commissions
are paid to broker- dealers beginning the 13th month following the purchase
of shares by their customers. Some activities intended to promote the sale of
Class A and Class B shares will be conducted generally by the Vista Family of
Funds, and activities intended to promote the Fund's Class A or Class B
shares may also benefit the Fund's other shares and other Vista funds.
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VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging
and meals, in connection with attendance at training and educational meetings
within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A or Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
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Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). Prior to May 6, 1996, the Fund was known as the Vista Equity Fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or
class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Shares have
no 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 the Trust shall not be voted. Shares of each class of the Fund
generally vote together except when required under federal securities laws to
vote separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
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Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his account. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the maximum public offering price (in the case of Class
A shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition
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of the Fund's portfolio, the Fund's operating expenses and which class of
shares you purchase. Investment performance also often reflects the risks
associated with the Fund's investment objectives and policies. These factors
should be considered when comparing the Fund's investment results to those of
other mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100
or more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you
to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value
next determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with
such redemption may purchase Class A shares with no initial sales charge
(in an amount not in excess of their redemption proceeds) if the purchase
occurs within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VLC-1-596CX
[Vista Logo]
Large Cap
Equity Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
VISTA[SM] LARGE CAP EQUITY FUND INSTITUTIONAL SHARES
PROSPECTUS -- May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary .......................................................... 3
Financial Highlights ...................................................... 4
Fund Objective ........................................................... 5
Investment Policies ....................................................... 5
Management ................................................................ 8
How to Purchase, Redeem and Exchange Shares ............................... 9
How the Fund Values its Shares ............................................ 11
How Distributions are Made; Tax Information ............................... 11
Other Information Concerning the Fund .................................... 12
Performance Information ................................................... 15
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee (after estimated waiver)* ................ 0.00%
12b-1 Fee ........................................................ None
Shareholder Servicing Fee ......................................... 0.25%
Other Expenses .................................................... 0.35%
----
Total Fund Operating Expenses (after waiver of fee)* .............. 0.60%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares ....... $6 $19 $33 $75
- ---------------
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waiver, the
Investment Advisory Fee would be 0.40% and Total Fund Operating Expenses
would be 1.00%. Chase has agreed voluntarily to waive fees payable to it
and/or reimburse expenses for a period of at least one year to the extent
necessary to prevent Total Fund Operating Expenses of Institutional Shares
of the Fund for such period from exceeding the amount indicated in the
table.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information on selected per share data and ratios with
respect to each of the four fiscal periods commencing after June 30, 1992,
and the related financial statements, have been audited by Price Waterhouse
LLP, independent accountants, whose report 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 following information
should be read in conjunction with the financial statements and notes thereto
appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1995, which is incorporated by reference into the SAI.
<TABLE>
<CAPTION>
Vista Large Cap Equity Fund
Institutional Shares
-----------------------------------------------------------------
Year Ended 7/1/92** Year 11/30/90*
------------------------------ through Ended through
10/31/95 10/31/94 10/31/93 10/31/92 6/30/92 6/30/91
-------- -------- ----------- -------- ------- ----------
<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 Gain in 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>
- ---------------
* Commencement of operations.
# Short periods have been annualized.
** In 1992, the Fund's fiscal year-end was changed from June 30 to October 31.
4
<PAGE>
FUND OBJECTIVE
Vista Large Cap Equity Fund seeks long-term capital growth. The Fund is
not intended to be a complete investment program, and there is no assurance
it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of established companies with market capitalizations in
excess of $1 billion. Such companies typically have a large number of
publicly held shares and high trading volume, resulting in a high degree of
liquidity.
The Fund's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Fund's advisers will evaluate companies by assessing the strongest
sectors of the market over the economic cycle, identifying those companies
with favorable earnings prospects, and then selecting the most attractive
values. The Fund's advisers will consider industry diversification as an
important factor and will try to maintain representation in a variety of
market sectors, although sector emphasis will shift as a result of changes in
the outlook for earnings among market sectors.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. To the extent that the Fund departs from its
investment policies during temporary defensive periods, its investment
objective may not be achieved.
The Fund is clasified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities
are normally denominated and traded in foreign currencies, the values of the
Fund's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies,
and they are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. The
securities of foreign companies may be less liquid and more volatile than the
securities of comparable U.S. companies. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in payment or
delivery of securities or in the recovery of the Fund's assets held abroad)
and expenses. It is possible that nationalization or expropriation of assets,
imposition of currency exchange controls, confiscatory taxation, political or
financial instability and diplomatic developments could affect the value of
the Fund's investments in certain foreign countries. Foreign laws may
restrict the ability to invest in certain countries or
5
<PAGE>
issuers and special tax considerations will apply to foreign securities. The
risks can increase if the Fund invests in securities of issuers in emerging
markets.
The Fund may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
money market instruments in its portfolio. In these transactions, the Fund
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Convertible Securities. The Fund may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price
or stated rate for common or preferred stock. Although to a lesser extent
than with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase, and increase as
interest rates decline. Because of the conversion feature, the market value
of convertible securities also tends to vary with fluctuations in the market
value of the underlying common or preferred stock.
6
<PAGE>
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
STRIPS. The Fund may invest up to 20% of its total assets in separately
traded principal and interest components of securities backed by the full
faith and credit of the U.S. Government, including instruments known as
"STRIPS". The value of these instruments tends to fluctuate more in response
to changes in interest rates than the value of ordinary interest-paying debt
securities with similar maturities. The risk is greater when the period to
maturity is longer.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency
contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portoflio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other
7
<PAGE>
than U.S. Government obligations); (b) investing more than 15% of its net
assets in illiquid securities (which include securities restricted as to
resale unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than
25% of its total assets in any one industry. A complete description of these
and other investment policies is included in the SAI. Except for restriction
(c) above and investment policies designated as fundamental in the SAI, the
Fund's investment policies (including its investment objective) are not
fundamental. The Trustees may change any non- fundamental investment policy
without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with
equity investing.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.40% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at annual rate equal to 0.20% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Greg Adams and Karen L. Shapiro, Vice Presidents of
Chase, have been responsible for the day-to-day management of the Fund's
portfolio since May 1996. Mr. Adams joined Chase in 1987 and is also a
manager of the Vista Balanced Fund and the Vista Growth and Income Portfolio.
In addition, Mr. Adams has been responsible for overseeing the proprietary
computer model program used in the U.S. equity selection process. Ms. Shapiro
joined Chase in May 1996. Prior to joining Chase, Ms. Shapiro managed The
Hanover Blue Chip Growth Fund and was a vice president and senior portfolio
manager at The Portfolio Group, Inc. and a member of its investment
committee. Prior to joining The Portfolio Group, Inc., Ms. Shapiro was a
portfolio manager in the personal investment consulting department at
Manufacturers Hanover Trust Company.
8
<PAGE>
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are sold at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any
time at the net asset value next determined after a redemption request in
proper form is furnished by you to your Dealer and transmitted to and
received by the Vista Service Center. A wire redemption may be requested by
telephone to the Vista Service Center. For telephone redemptions, call the
Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
The Fund generally sends you payment for your shares by wire in federal
funds on the business day after your request is received in proper form.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person
9
<PAGE>
claiming to act as his or her representative, who can provide the Fund with
his or her account registration and address as it appears on the Fund's
records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you
will receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer Institutional Shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. The exchange privilege is subject to change or
termination. See the SAI to find out more about the exchange privilege.
10
<PAGE>
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any
net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by the Fund may qualify
for the 70% dividends- received deduction for corporate shareholders.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
11
<PAGE>
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
12
<PAGE>
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). Prior to May 6, 1996, the Fund was known as the Vista Equity Fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or
class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Shares have
no pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one
vote for each whole share held, and each fractional share shall be entitled
to a proportionate fractional vote, except that Trust shares held in the
treasury of the Trust shall not be voted. Shares of each class of the Fund
generally vote together except when required under federal securities laws to
vote separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
13
<PAGE>
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of all series or classes when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his account. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
14
<PAGE>
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the public offering price. Total return may also be
presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies.
These factors should be considered when comparing the Fund's investment
results to those of other mutual funds and other investment vehicles.
Quotation of investment performance for any period when a fee waiver or
expense limitation was in effect will be greater than if the waiver or
limitation had not been in effect. The Fund's performance may be compared to
other mutual funds, relevant indices and rankings prepared by independent
services. See the SAI.
15
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
INST-LC-1-596CX
[Vista Logo]
Large Cap
Equity Fund
Institutional Shares
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] BOND FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Fund Objective ............................................................ 5
Investment Policies ........................................................ 5
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ................................................................. 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ...................................................... 10
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ....................................... 10
How the Fund Values its Shares ............................................ 15
How Distributions are Made; Tax Information ............................... 16
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ...................................... 16
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information .................................................... 19
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 21
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ...................... 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower
of original purchase price or redemption proceeds)* ...... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee (after estimated waiver) ............. 0.00%** 0.00%
12b-1 Fee*** ................................................. 0.25% 0.75%
Shareholder Servicing Fee
(after estimated waiver, where indicated) ................. 0.00%** 0.25%
Other Expenses .............................................. 0.65% 0.65%
---- ----
Total Fund Operating Expenses
(after waivers of fees)** .................................. 0.90% 1.65%
==== ====
Examples
- ----------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ..................... $ 54 $ 72 $ 93 $151
Class B Shares:
Assuming complete redemption at
the end of the period++ +++ ....... $ 68 $ 85 $113 $175
Assuming no redemptions +++ ........ $ 17 $ 52 $ 90 $175
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.30% for Class A and Class B
shares, the Shareholder Servicing Fee would be 0.25% for Class A shares,
and Total Fund Operating Expenses would be 1.45% and 1.95% for Class A
and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
3
<PAGE>
Charges and credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FUND OBJECTIVE
Vista Bond Fund seeks as high a level of income as is consistent with
reasonable risk. The Fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund invests primarily in a broad range of investment-grade corporate
bonds as well as other fixed- income securities. Under normal market
conditions, the Fund invests at least 65% of its total assets in debt
obligations of the U.S. Government, its agencies and instrumentalities, and
investment-grade fixed income securities. Investment-grade fixed income
securities are securities rated in the category Baa or higher by Moody's
Investors Service, Inc. ("Moody's"), or BBB or higher by Standard & Poor's
Corporation ("S&P") or the equivalent by another national rating
organization, and unrated securities determined by the Fund's advisers to be
of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of debt securities based upon their appraisal
of changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage- backed securities, asset-backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments.
The Fund will ordinarily hold up to 10% of its net assets in very short-term
obligations (obligations with remaining maturities of 12 months or less),
such as money market instruments, repurchase agreements and short-term
corporate obligations. For temporary defensive purposes, the Fund may invest
without limitation in high quality money market instruments and repurchase
agreements, which generally carry lower yields.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
5
<PAGE>
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire
the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to
the Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Fund may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at
substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped
obligations, which are separately traded principal and interest components of
an underlying obligation. The value of these instruments tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The
Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
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. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand
6
<PAGE>
features on certain floating or variable rate securities may obligate the
Fund to pay a "tender fee" to a third party. Demand features provided by
foreign banks involve certain risks associated with foreign investments.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
Mortgage-Related Securities. The Fund may invest in mortgage-related
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on
the underlying mortgage loans) may result in a lower rate of return when the
Fund reinvests such principal. In addition, if the Fund purchased the
securities at a premium, early repayment would cause the value of the premium
to 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 U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Mortgage pass-through securities created by nongovernmental issuers may be
supported by various forms of insurance or guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.
The Fund expects that governmental, government-related or private entities
may create other mortgage- related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
7
<PAGE>
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward interest
rate contracts; (iv) purchase and sell mortgage-backed and asset-backed
securities; and (v) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the Fund's investment policies (including its
investment objectives) are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
8
<PAGE>
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with the
types of investments it may make, as described above, as well as the risks
discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities
in which the Fund may invest, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.30% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.15% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Alex Powers, Vice President of Chase, and Mark
Buonaugurio, Second Vice President of Chase, have been responsible for the
day-to-day management of the Fund's portfolio since May 1996 and February
1992, respectively. Mr. Powers is also the manager of the Vista U.S. Treasury
Income Fund and a manager of the Vista Balanced Fund, Vista U.S. Government
Securities Fund and Vista Short-Term Bond Fund. He also
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manages various individual and institutional accounts. Mr. Powers is part of
a team responsible for fixed-income strategy, research and trading with
Chase. Prior to joining Chase in 1988, he spent six years as Vice President
and Portfolio Manager at Liberty Capital, an institutional fixed-income
advisory firm. Mr. Buonaugurio is also a manager of the Vista Short-Term Bond
Fund. For the four years prior to managing the Fund, he managed fixed-income
commingled trust funds and provided credit research services for Chase.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject
to any sales charges when they are redeemed. Certain purchases of Class A
shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and
Exchange Shares" and "Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, at the beginning of the ninth year after purchase.
For more information about the conversion of Class B shares, see the SAI.
This discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a
number of factors, including the amount and intended length of the
investment. Investors making investments that qualify for reduced sales
charges might consider class A shares. Investors who prefer not to pay an
initial sales charge might consider Class B shares. In almost all cases,
investors planning to purchase $250,000 or more of the Fund's shares will pay
lower aggregate charges and expenses by purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways-through an investment representative, through the Fund's distributor by
calling the Vista Service Center or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Fund reserves the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which
may take the 15 calendar days or longer. In addition, the redemption of
shares purchased through ACH will not be allowed until clearance of your
payment, which may take 7 business days or longer.
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Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as
a percentage of: Amount of sales charge
-------------------- reallowed to dealers as a
Amount of transaction at Offering Net amount percentage of offering
offering price($) Price invested price
- ------------------------------- -------- ---------- -------------------------
Under 100,000 ................ 4.50 4.71 4.00
100,000 but under 250,000 ..... 3.75 3.90 3.25
250,000 but under 500,000 ..... 2.50 2.56 2.25
500,000 but under 1,000,000 .. 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commission on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 0.75% of the amount under
$2.5 million, 0.50% of the next $7.5 million, 0.25% of the next $40 million
and 0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
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Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are calculated if you
exchange your shares, see "How to Exchange Your Shares." The Fund's
distributor pays broker-dealers a commission of 4.00% of the offering price
on sales of Class B shares, and the distributor receives the entire amount of
any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-Vista
mutual funds on which the investor paid a front-end or contingent deferred
sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value. These investments will also be included for purposes of the discount
privileges and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate
families), current and retired employees (and their immediate families) of
Chase, the Fund's distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and
their immediate families) of broker-dealers having selected dealer agreements
with the Fund's distributor, employees (and their immediate families) of
financial institutions having selected dealer agreements with the Fund's
distributor (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Fund may be made
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with no initial sales charge (i) by an investment adviser, broker or
financial planner, provided arrangements are preapproved and purchases are
placed through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the Vista
Service Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with
no initial sales charge for as long as they continue to own Class A shares of
any Vista fund, provided there is no change in account registration.
Shareholders of record of any portfolio of The Hanover Funds, Inc. or The
Hanover Investment Funds, Inc. as of May 3, 1996 and certain related
investors may purchase Class A shares of the Fund with no initial sales
charge for as long as they continue to own shares of any Vista fund following
this date, provided there is no change in account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in
connection with certain withdrawals from IRA or other retirement plans. Up to
12% of the value of Class B shares subject to a systematic withdrawal plan
may also be redeemed each year without a CDSC, provided that the Class B
account had a minimum balance of $20,000 at the time the systematic
withdrawal plan was established. The SAI contains additional information
about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form, less
any applicable CDSC. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares
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by a corporation, partnership, agent or fiduciary, or a surviving joint
owner. Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption. In the event the Fund redeems
Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund
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into which shares are being exchanged should be read carefully and retained
for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the CDSC
- --and a subsequent purchase. Class B shares of any Vista non-money market
fund may be exchanged into the Class B shares of the Vista Prime Money Market
Fund in order to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
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HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains
at least annually. Distributions from capital gains are made after applying
any available capital loss carryovers. Distributions paid by the Fund with
respect to Class A shares will generally be greater than those paid with
respect to Class B shares because expenses attributable to Class B shares
will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not
paid in cash or by ACH will be reinvested in shares of the class on which the
distributions are paid. You will receive a statement confirming reinvestment
of distributions in additional Fund shares promptly following the quarter in
which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long- term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class
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B shares which provide that the Fund will pay distribution fees at annual
rates of up to 0.25% and 0.75% of the average daily net assets attributable
to Class A and Class B shares of the Fund, respectively. Payments under the
distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to
the amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or maintenance commissions at an annual rate of up
to 0.25% of the average daily net asset value of Class A or Class B shares
maintained in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker- dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended
to promote the sale of Class A and Class B shares will be conducted generally
by the Vista Family of Funds, and activities intended to promote the Fund's
Class A or Class B shares may also benefit the Fund's other shares and other
Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging
and meals, in connection with attendance at training and educational meetings
within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
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VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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 the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
18
<PAGE>
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of all series or classes when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his account. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
19
<PAGE>
the annualized net investment income calculated pursuant to federal rules per
share during a recent 30-day period by the maximum public offering price per
share of such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the maximum public offering price (in the case of Class
A shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
20
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100
or more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you
to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value
next determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption). Class B shareholders who have redeemed their shares and paid
a CDSC with such redemption may purchase Class A shares with no initial
sales charge (in an amount not in excess of their redemption proceeds) if
the purchase occurs within 90 days of the redemption of the Class B
shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
21
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VDF-1-596CX
[Vista Logo]
Bond Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
VISTA[SM] BOND FUND INSTITUTIONAL SHARES
PROSPECTUS -- May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-662-4273. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
Financial Highlights ...................................................... 4
Fund Objective ............................................................ 5
Investment Policies ....................................................... 5
Management ................................................................ 9
How to Purchase, Redeem and Exchange Shares ............................... 10
How the Fund Values its Shares ............................................ 12
How Distributions are Made; Tax Information ............................... 12
Other Information Concerning the Fund ..................................... 13
Performance Information ................................................... 16
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ----------------------------------------
Investment Advisory Fee (after estimated waiver)* .................. 0.00%
12b-1 Fee .......................................................... None
Shareholder Servicing Fee (after estimated waiver)* ................ 0.00%
Other Expenses ..................................................... 0.60%
----
Total Fund Operating Expenses (after waivers of fees)* ............. 0.60%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares ............. $6 $19 $33 $75
- ---------------
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers,
the Investment Advisory Fee and Shareholder Servicing Fee would be 0.30%
and 0.25%, respectively, and Total Fund Operating Expenses would be 1.15%.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information on selected per share data and ratios with
respect to each of the four fiscal periods commencing after June 30, 1992,
and the related financial statements, have been audited by Price Waterhouse
LLP, independent accountants, whose report 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, has been audited by other independent accountants, whose
report expressed an unqualified opinion thereon. The following information
should be read in conjunction with the financial statements and notes thereto
appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1995, which is incorporated by reference into the SAI.
<TABLE>
<CAPTION>
Vista Bond Fund
Institutional Shares
-------------------------------------------------------------------------
Year Ended 7/1/92** Year 11/1/90*
------------------------------------- through Ended through
10/31/95 10/31/94 10/31/93 10/31/92 6/30/92 6/30/91
-------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------
Net Asset Value, Beginning of Period ............ $ 10.08 $ 11.30 $ 10.76 $ 10.70 $ 10.14 $ 10.00
-------- -------- -------- -------- ------- -------
Income from Investment Operations:
Net Investment Income ........................ 0.687 0.667 0.622 0.240 0.760 0.410
Net gain or (Losses) in Securities
(both realized and unrealized) .............. 0.854 (1.140) 0.629 0.110 0.570 0.080
-------- -------- -------- -------- ------- -------
Total from Investment Operations .............. 1.541 (0.473) 1.251 0.350 1.330 0.490
-------- -------- -------- -------- ------- -------
Less Distributions: Dividends from
Net Investment Income ........................ 0.687 0.667 0.684 0.240 0.760 0.350
Distributions from Capital Gains .............. 0.024 0.081 0.026 0.050 0.010 0.000
-------- -------- -------- -------- ------- -------
Total Distributions: ........................... 0.711 0.748 0.710 0.290 0.770 0.350
-------- -------- -------- -------- ------- -------
Net Asset Value, End of Period ................ $ 10.91 $ 10.08 $ 11.30 $ 10.76 $ 10.70 $ 10.14
-------- -------- -------- -------- ------- -------
Total Return .................................... 15.83% (4.30%) 12.63% 3.36% 13.67% 4.82%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) ................................. $ 57,285 $52,439 $61,155 $45,401 $41,321 $36,791
Ratio of Expenses to Average Net Assets ...... 0.31% 0.31% 0.31% 0.30%# 0.30% 0.29%#
Ratio of Net Investment Income to Average Net
Assets ........................................ 6.56% 6.27% 6.15% 6.74%# 7.20% 7.30%#
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets .................................... 0.87% 0.92% 0.82% 0.73%# 1.03% 1.04%#
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets ........................... 6.00% 5.66% 5.64% 6.31%# 6.47% 6.55%#
Portfolio Turnover Rate ........................ 30% 17% 20% 3% 31% 35%
</TABLE>
- ---------------
# Annualized.
* Commencement of operations.
** In 1992, the fund's fiscal year-end was changed from June 30 to October
31.
4
<PAGE>
FUND OBJECTIVE
Vista Bond Fund seeks as high a level of income as is consistent with
reasonable risk. The Fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund invests primarily in a broad range of investment-grade corporate
bonds as well as other fixed-income securities. Under normal market
conditions, the Fund invests at least 65% of its total assets in debt
obligations of the U.S. Government, its agencies and instrumentalities, and
investment-grade fixed income securities. Investment-grade fixed income
securities are securities rated in the category Baa or higher by Moody's
Investors Service, Inc. ("Moody's"), or BBB or higher by Standard & Poor's
Corporation ("S&P") or the equivalent by another national rating
organization, and unrated securities determined by the Fund's advisers to be
of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of debt securities based upon their appraisal
of changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage- backed securities, asset-backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments.
The Fund will ordinarily hold up to 10% of its net assets in very short-term
obligations (obligations with remaining maturities of 12 months or less),
such as money market instruments, repurchase agreements and short-term
corporate obligations. For temporary defensive purposes, the Fund may invest
without limitation in high quality money market instruments and repurchase
agreements, which generally carry lower yields.
The Fund is classified as a "diversified" fund under the federal
securities law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
5
<PAGE>
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire
the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to
the Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Fund may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at
substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped
obligations, which are separately traded principal and interest components of
an underlying obligation. The value of these instruments tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The
Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
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. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on
6
<PAGE>
certain floating or variable rate securities may obligate the Fund to pay a
"tender fee" to a third party. Demand features provided by foreign banks
involve certain risks associated with foreign investments.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
Mortgage-Related Securities. The Fund may invest in mortgage-related
securities. Mortgage pass- through securities are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on
the underlying mortgage loans) may result in a lower rate of return when the
Fund reinvests such principal. In addition, if the Fund purchased the
securities at a premium, early repayment would cause the value of the premium
to 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 U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Mortgage pass-through securities created by nongovernmental issuers may be
supported by various forms of insurance or guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.
The Fund expects that governmental, government-related or private entities
may create other mortgage- related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
7
<PAGE>
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the Fund's investment policies (including its
investment objective) are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
8
<PAGE>
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with the
types of investments it may make, as described above, as well as the risks
discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the values of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities
in which the Fund may invest, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.30% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.15% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Alex Powers, Vice President of Chase, and Mark
Buonaugurio, Second Vice President of Chase, have been responsible for the
day-to-day management of the Fund's portfolio since May 1996 and February
1992, respectively. Mr. Powers is also the manager of the Vista U.S. Treasury
Income Fund and a manager of the Vista Balanced Fund, Vista U.S. Government
Securities Fund and
9
<PAGE>
Vista Short-Term Bond Fund. He also manages various individual and
institutional accounts. Mr. Powers is part of a team responsible for
fixed-income strategy, research and trading with Chase. Prior to joining
Chase in 1988, he spent six years as Vice President and Portfolio Manager at
Liberty Capital, an institutional fixed-income advisory firm. Mr. Buonaugurio
is also a manager of the Vista Short-Term Bond Fund. For the four years prior
to managing the Fund, he managed fixed-income commingled trust funds and
provided credit research services for Chase.
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are sold at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any
time at the net asset value next determined after a redemption request in
proper form is furnished by you to your Dealer and transmitted to and
received by the Vista Service Center. A wire redemption may be requested by
telephone to the Vista Service Center. For telephone redemptions, call the
Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
10
<PAGE>
The Fund generally sends you payment for your shares by wire in federal funds
on the business day after your request is received in proper form. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
Redemption of accounts of less than $1,000,000. The Fund may involuntarily
redeem your shares if at such time the aggregate net asset value of the
shares in your account is less than $1,000,000. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer Institutional Shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or
11
<PAGE>
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 the Fund in a year or three in a calendar
quarter will be charged a $5.00 administration fee for each such exchange.
Shareholders would be notified of any such action to the extent required by
law. Consult the Vista Service Center before requesting an exchange. The
exchange privilege is subject to change or termination. See the SAI to find
out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains
at least annually. Distributions from capital gains are made after applying
any available capital loss carryover.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
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<PAGE>
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
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<PAGE>
Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of inves-
14
<PAGE>
tors that are eligible to purchase shares may differ for each class of Fund
shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service
fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call
1-800-622-4273 to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including
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<PAGE>
the division that performs services for the Fund as custodian, or in the
possession of any affiliate of Chase. Shareholders of the Fund should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account. Transactions with affiliated broker-dealers will
only be executed on an agency basis in accordance with applicable federal
regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the public offering price. Total return may also be
presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
16
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
INST-DF-1-596CX
[Vista Logo]
Bond Fund
Institutional Shares
- ----------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] SHORT-TERM BOND FUND
Class A Shares
May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Fund Objective ............................................................ 4
Investment Policies ....................................................... 4
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ................................................................ 8
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the
Fund's sub-adviser, and the individuals who manage the Fund
How to Buy, Sell and Exchange Shares ...................................... 8
How the Fund Values its Shares ............................................ 12
How Distributions are Made; Tax Information ............................... 13
How the Fund distributes its earnings, and tax treatment related to
those earnings
Other Information Concerning the Fund ..................................... 14
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................... 17
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 18
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................................ 1.50%
Maximum Deferred Sales Charge
(as a percentage of the lower of
original purchase price or redemption proceeds) .................... None
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ---------------------------------------
Investment Advisory Fee (after estimated waiver)* .................... 0.00%
12b-1 Fee (after estimated waiver) * ** .............................. 0.08%
Shareholder Servicing Fee ............................................ 0.25%
Other Expenses (after estimated waiver)* ............................. 0.42%
----
Total Fund Operating Expenses (after waivers of fees)* ............... 0.75%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------- -------- -------- ---------
Class A Shares+ ..... $23 $39 $56 $107
- ---------------
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers,
the Investment Advisory Fee, 12b-1 Fee, and Other Expenses would be 0.25%,
0.25% and 0.50%, respectively, and Total Fund Operating Expenses would be
1.25%. Chase has agreed voluntarily to waive fees payable to it and/or
reimburse expenses for a period of at least one year to the extent
necessary to prevent Total Fund Operating Expenses of Class A shares of
the Fund for such period from exceeding the amount indicated in the table.
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FUND OBJECTIVE
Vista Short Term Bond Fund seeks a high level of current income,
consistent with preservation of capital. The Fund is not intended to be a
complete investment program, and there is no assurance it will achieve its
objective.
INVESTMENT POLICIES
Investment Approach
The Fund will invest at least 65% of its total net assets in bonds which
have a maturity of less than three years, and the dollar weighted average
maturity of its portfolio will not exceed three years. The Fund normally will
invest substantially all of its assets in investment-grade fixed-income
securities of all types. The maturity of the securities with put features
will be measured based on the next put date, and the maturity of mortgage-
and asset-backed securities will be measured based upon their weighted
average lives. Investment-grade fixed-income securities are securities rated
in the category Baa or higher by Moody's Investors Service, Inc. ("Moody's"),
or BBB or higher by Standard & Poor's Corporation ("S&P") or the equivalent
by another national rating organization, and unrated securities determined by
the Fund's advisers to be of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of securities based upon their appraisal of
changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage- backed securities, asset-backed
securities, government and government agency obligations, zero coupon
securities, convertible securities and money market instruments, as discussed
below.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
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Borrowings and Reverse Repurchase Agreements. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow for leveraging
purposes. The Fund may also sell and simultaneously commit to repurchase a
portfolio security at an agreed-upon price and time, to avoid selling securities
during unfavorable market conditions in order to meet redemptions. Whenever the
Fund enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). The Fund would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire
the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to
the Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Fund may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at
substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped
obligations, which are separately traded principal and interest components of
an underlying obligation. The value of these instruments tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The
Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
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. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate the Fund to pay a "tender fee" to a third party.
Demand features provided by foreign banks involve certain risks associated
with foreign investments.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
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Mortgage-Related Securities. The Fund may invest in mortgage-related
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on the
underlying mortgage loans) may result in a lower rate of return when the Fund
reinvests such principal. In addition, if the Fund purchased the securities at a
premium, early repayment would cause the value of the premium to 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 U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Mortgage pass-through securities created by nongovernmental issuers may be
supported by various forms of insurance or guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.
The Fund expects that governmental, government-related or private entities
may create other mortgage- related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward interest
rate contracts; (iv) purchase and sell mortgage-backed and asset-backed
securities; and (v) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
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Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with the
types of investments it may make, as described above, as well as the risks
discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. Although the Fund invests at
least 65% of its assets in bonds which have a maturity of less than three
years, to the extent the Fund invests in securities with longer maturities,
the volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The
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performance of the Fund will also depend on the quality of its investments.
While U.S. Government securities generally are of high quality, government
securities that are not backed by the full faith and credit of the U.S.
Treasury may be affected by changes in the creditworthiness of the agency
that issued them and the non-U.S. Government securities held by the Fund,
while of investment-grade quality, may be of lesser credit quality.
Securities rated in the category Baa by Moody's or BBB by S&P lack certain
investment characteristics and may have speculative characteristics.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.25% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.10% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Alex Powers, Vice President of Chase, and Mark
Buonaugurio, Second Vice President of Chase, have been responsible for the
day-to-day management of the Fund's portfolio since May 1996. Mr. Powers is
also the manager of the Vista U.S. Treasury Income Fund and a manager of the
Vista Balanced Fund, Vista U.S. Government Securities Fund and Vista Bond
Fund. He also manages various individual and institutional accounts. Mr.
Powers is part of a team responsible for fixed-income strategy, research and
trading with Chase. Prior to joining Chase in 1988, he spent six years as
Vice President and Portfolio Manager at Liberty Capital, an institutional
fixed-income advisory firm. Mr. Buonaugurio has also been a manager of the
Vista Bond Fund since February 1992, and managed fixed-income commingled
trust funds and provided credit research services for Chase for the four
prior years.
HOW TO BUY, SELL, AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Fund's distributor,
or through the Systematic Investment Plan.
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All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be accepted.
The Fund reserves the right to reject any purchase order or cease offering
shares for purchase at any time. When purchases are made by check, redemptions
will not be allowed until clearance of the purchase check, which may take 15
calendar days or longer. In addition, the redemption of shares purchased through
ACH will not be allowed until clearance of your payment, which may take 7
business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
Offering Price
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of: Amount of sales charge
---------------------- reallowed to dealers as a
Amount of transaction at Offering Net amount percentage of offering
offering price($) price invested price
- ------------------------------ ---------- ---------- -------------------------
100,000 ...................... 1.50 1.52 1.00
100,000 but under 250,000 ... 1.00 1.00 0.50
250,000 but under 500,000 ... 0.50 0.50 0.25
500,000 but under 1,000,000 .. 0.25 0.25 0.25
There is no initial sales charge on purchases of Class A shares of $1
million or more.
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General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-Vista
mutual funds on which the investor paid a front-end or contingent deferred
sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value. These investments will also be included for purposes of the discount
privileges and programs described above.
The Fund may sell Class A at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker-dealers having selected dealer agreements with the Fund's
distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the Vista
Service Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with
no initial sales charge for as long as they continue to own Class A shares of
any Vista fund, provided there is no change in account registration.
Shareholders of record of any portfolio of The Hanover Funds, Inc. or The
Hanover Investment Funds, Inc. as of May 3, 1996 and certain related
investors may purchase Class A shares of the Fund with no initial sales
charge for as long as they continue to own shares of any Vista fund following
this date, provided there is no change in account registration.
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The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The SAI contains additional
information about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York
Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available
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<PAGE>
if you were issued certificates for shares that remain outstanding. The
Telephone Redemption Privilege may be modified or terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan. Call the Vista Service
Center at 1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however,
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<PAGE>
options are priced at 4:15 p.m., Eastern time), on each business day of the
Fund, by dividing the net assets of the Fund attributable to that class by
the total number of outstanding shares of that class. Values of assets held
by the Fund are determined on the basis of their market or other fair value,
as described in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains
at least annually. Distributions from capital gains are made after applying
any available capital loss carryover.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not
paid in cash or by ACH will be reinvested in shares of the class on which the
distributions are paid. You will receive a statement confirming reinvestment
of distributions in additional Fund shares promptly following the quarter in
which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long- term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
13
<PAGE>
OTHER INFORMATION CONCERNING THE FUND
Distribution Plan
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plan for Class A shares which provides
that the Fund will pay distribution fees at annual rates of up to 0.25% of
the average daily net assets attributable to Class A shares of the Fund.
Payments under the distribution plans shall be used to compensate or
reimburse the Fund's distributor and broker-dealers for services provided and
expenses incurred in connection with the sale of Class A shares, and are not
tied to the amount of actual expenses incurred. Payments may be used to
compensate broker-dealers with trail or maintenance commissions at an annual
rate of up to 0.25% of the average daily net asset value of Class A shares
maintained in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended
to promote the sale of Class A shares will be conducted generally by the
Vista Family of Funds, and activities intended to promote the Fund's Class A
shares may also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging
and meals, in connection with attendance at training and educational meetings
within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to
14
<PAGE>
shares of the Fund held by customers of such selected dealers. Such
compensation does not represent an additional expense to the Fund or its
shareholders, since it will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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 the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
15
<PAGE>
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of shares
in addition to this class. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which will affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the
16
<PAGE>
division that performs services for the Fund as custodian, or in the
possession of any affiliate of Chase. Shareholders of the Fund should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account. Transactions with affiliated broker-dealers will
only be executed on an agency basis in accordance with applicable federal
regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income calculated pursuant to federal rules per
share during a recent 30- day period by the maximum public offering price per
share of such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the maximum public offering price (in the case of Class
A shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
17
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in the
same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
18
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VST-1-596CX
[Vista Logo]
Short-Term
Bond Fund
- ----------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
VISTA[SM] SHORT-TERM BOND FUND INSTITUTIONAL SHARES
PROSPECTUS -- May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-622-4273. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
Financial Highlights ...................................................... 4
Fund Objective ............................................................ 5
Investment Policies ....................................................... 5
Management ................................................................ 9
How to Purchase, Redeem and Exchange Shares ............................... 10
How the Fund Values its Shares ............................................ 12
How Distributions are Made; Tax Information ............................... 12
Other Information Concerning the Fund ..................................... 13
Performance Information ................................................... 15
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee (after estimated waiver)* ................ 0.00%
12b-1 Fee ........................................................ None
Shareholder Servicing Fee (after estimated waiver)* .............. 0.00%
Other Expenses (after estimated waiver)* ......................... 0.42%
----
Total Fund Operating Expenses (after waivers of fees)* ........... 0.42%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares ........... $4 $13 $24 $53
- --------------
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers,
the Investment Advisory Fee, Shareholder Servicing Fee and Other Expenses
would be 0.25%, 0.25% and 0.50%, respectively, and Total Fund Operating
Expenses would be 1.00%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges and credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information on selected per share data and ratios with respect
to each of the four fiscal periods commencing after June 30, 1992, and the
related financial statements, have been audited by Price Waterhouse LLP,
independent accountants, whose report 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 following information should be read in
conjunction with the financial statements and notes thereto appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended October 31, 1995,
which is incorporated by reference into the SAI.
<TABLE>
<CAPTION>
Vista Short-Term Bond Fund
Institutional Shares
----------------------------------------------------------------
Year Ended 7/1/92** Year 11/30/90*
------------------------------ through Ended through
10/31/95 10/31/94 10/31/93 10/31/92 6/30/92 6/30/91
-------- -------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------
Net asset value, beginning of period .......$ 9.91 $ 10.14 $ 10.26 $ 10.28 $ 10.13 $ 10.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income ................... 0.542 0.465 0.489 0.190 0.600 0.370
Net Gains or (Losses) in securities
(both realized and unrealized) .......... 0.168 (0.230) (0.073) (0.010) 0.190 0.070
------- ------- ------- ------- ------- -------
Total from Investment Operations: ........ 0.710 0.235 0.416 0.180 0.790 0.440
------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ...... 0.542 0.465 0.536 0.200 0.630 0.310
Distributions from Capital Gains ......... 0.000 0.000 0.000 0.000 0.010 0.000
------- ------- ------- ------- ------- -------
Total Distributions:....................... 0.542 0.465 0.536 0.200 0.640 0.310
------- ------- ------- ------- ------- -------
Net Asset Value, End of Period .............$ 10.08 $ 9.91 $ 10.14 $ 10.26 $ 10.28 $ 10.13
======= ======= ======= ======= ======= =======
Total Return ............................... 7.37% 2.38% 4.73% 1.67% 8.07% 4.39%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ...$36,246 $35,987 $70,693 $81,327 $70,960 $70,745
Ratio of Expenses to Average Net Assets# ... 0.32% 0.31% 0.31% 0.30% 0.30% 0.29%
Ratio of Net Investment Income to
Average Net Assets# ...................... 5.41% 4.59% 5.25% 5.66% 6.12% 6.56%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets# .............................. 0.90% 0.86% 0.76% 0.66% 0.94% 0.99%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# ...................... 4.83% 4.05% 4.80% 5.30% 5.48% 5.86%
Portfolio Turnover Rate ..................... 62% 44% 17% 0% 29% 1%
</TABLE>
- --------------
* Commencement of operations.
# Short periods have been annualized.
** In 1992 the Fund's fiscal year-end was changed from June 30 to October 31.
4
<PAGE>
FUND OBJECTIVE
Vista Short Term Bond Fund seeks a high level of current income, consistent
with preservation of capital. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund will invest at least 65% of its total assets in bonds which have a
maturity of less than three years, and the dollar weighted average maturity of
its portfolio will not exceed three years. The Fund normally will invest
substantially all of its assets in investment-grade fixed-income securities of
all types. The maturity of securities with put features will be measured based
on the next put date, and the maturity of mortgage- and asset-backed securities
will be measured based upon their weighted average lives. Investment-grade
fixed-income securities are securities rated in the category Baa or higher by
Moody's Investors Service, Inc. ("Moody's"), or BBB or higher by Standard &
Poor's Corporation ("S&P") or the equivalent by another national rating
organization, and unrated securities determined by the Fund's advisers to be of
comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of securities based upon their appraisal of
changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset-backed securities,
government and government agency obligations, zero coupon securities,
convertible securities and money market instruments, as discussed below.
The Fund is classified as a "diversified" fund under the federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve its
objective by investing all of its investable assets in an investment company
having substantially the same investment objective and policies as the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to
5
<PAGE>
generate additional income. These transactions must be fully collateralized
at all times. The Fund may purchase securities for delivery at a future date,
which may increase its overall investment exposure and involves a risk of
loss if the value of the securities declines prior to the settlement date.
These transactions involve some risk to the Fund if the other party should
default on its obligation and the Fund is delayed or prevented from
recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow for leveraging
purposes. The Fund may also sell and simultaneously commit to repurchase a
portfolio security at an agreed-upon price and time, to avoid selling securities
during unfavorable market conditions in order to meet redemptions. Whenever the
Fund enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). The Fund would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date. These transactions involve some risk to the Fund if the
other party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped Obligations.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. Payment-in-kind obligations are obligations on which the
interest is payable in additional securities rather than cash. The Fund may also
invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The Fund
may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include participation
certificates and certificates of indebtedness or safekeeping. 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. As a result of the floating or variable
rate nature of these investments, the Fund's yield may decline and it may forego
the opportunity for capital appreciation during periods when interest rates
decline; however, during periods when interest rates increase, the Fund's yield
may increase and it may have reduced risk of capital depreciation. Demand
features on certain floating or variable rate securities may obligate the Fund
to pay a "tender fee" to a third party. Demand features provided by foreign
banks involve certain risks associated with foreign investments.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship
6
<PAGE>
to the interest rate on another security or the value of an index, and their
price may be considerably more volatile than a fixed-rate security. Interest
rate caps are financial instruments under which payments occur if an interest
rate index exceeds a certain predetermined interest rate level, known as the
cap rate, which is tied to a specific index. These financial products will be
more volatile in price than securities which do not include such a structure.
Mortgage-Related Securities. The Fund may invest in mortgage-related
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on the
underlying mortgage loans) may result in a lower rate of return when the Fund
reinvests such principal. In addition, if the Fund purchased the securities at a
premium, early repayment would cause the value of the premium to 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
U.S. Government, or by agencies or instrumentalities of the U.S. Government
(which guarantees are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by nongovernmental issuers may be supported by various forms
of insurance or guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, monthly. CMOs
may be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
the U.S. Government or its agencies or instrumentalities. CMOs are structured
into multiple classes, with each class having a different expected average life
and/or stated maturity. Monthly payments of principal, including prepayments,
are allocated to different classes in accordance with the terms of the
instruments,and changes in prepayment rates or assumptions may significantly
affect the expected average life and value of a particular class.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered to
investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a stream
of payments generated by particular assets, most often a pool of assets similar
to one another, such as motor vehicle receivables or credit card receivables.
Other Investment Companies. The Fund may invest up to 10% of its total assets
in shares of other investment companies, subject to applicable regulatory
limitations.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may
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(i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward interest
rate contracts; (iv) purchase and sell mortgage-backed and asset-backed
securities; and (v) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers to
forecast these factors correctly. Inaccurate forecasts could expose the Fund to
a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. The Fund is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Fund than
hedging strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Fund seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward contracts,
there is a greater potential that a counterparty or broker may default. In the
event of a default, the Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions will
vary from year to year. The Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and would
make it more difficult for the Fund to qualify as a registered investment
company under federal tax law. See "How Distributions are Made; Tax Information"
and "Other Information Concerning the Fund--Certain Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for its
shareholders. These restrictions prohibit the Fund from: (a) with respect to 75%
of its total assets, holding more than 10% of the voting securities of any
issuer or investing more than 5% of its total assets in the securities of any
one issuer (other than U.S. Government obligations); (b) investing more than 15%
of its net assets in illiquid securities (which include securities restricted as
to resale unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than 25%
of its total assets in any one industry. A complete description of these and
other investment policies is included in the SAI. Except for the Fund's
investment objective, restriction (c) above and investment policies designated
as fundamental in the SAI, the Fund's investment policies are not fundamental.
The Trustees may change any non-fundamental investment policy without
shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program, and
the net asset value of the shares of the Fund can be expected to fluctuate based
on the value of the securities in the Fund's
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portfolio. The Fund is subject to the general risks and considerations
associated with the types of investments it may make, as described above, as
well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which are
more sensitive to interest rate changes. Although the Fund invests at least 65%
of its assets in bonds which have a maturity of less than three years, to the
extent the Fund invests in securities with longer maturities, the volatility of
the Fund in response to changes in interest rates can be expected to be greater
than if the Fund had invested in comparable securities with shorter maturities.
The performance of the Fund will also depend on the quality of its investments.
While U.S. Government securities generally are of high quality, government
securities that are not backed by the full faith and credit of the U.S. Treasury
may be affected by changes in the creditworthiness of the agency that issued
them and the non-U.S. Government securities held by the Fund, while of
investment-grade quality, may be of lesser credit quality. Securities rated in
the category Baa by Moody's or BBB by S&P lack certain investment
characteristics and may have speculative characteristics.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly based at an
annual rate equal to 0.25% of the Fund's average daily net assets. Chase is
located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary of
Chase. CAM makes investment decisions for the Fund on a day-to-day basis. For
these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.10% of the Fund's average daily net
assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Alex Powers, Vice President of Chase, and Mark
Buonaugurio, Second Vice President of Chase, have been responsible for the
day-to-day management of the Fund's portfolio since May 1996. Mr. Powers is also
the manager of the Vista U.S. Treasury Income Fund and a manager of the Vista
Balanced Fund, Vista U.S. Government Securities Fund and Vista Bond Fund. He
also manages various individual and institutional accounts. Mr. Powers is part
of a team responsible for fixed-income strategy, research and trading with
Chase. Prior to joining Chase in 1988, he spent six years as Vice President and
Portfolio Manager at Liberty Capital, an institutional fixed-income advisory
firm. Mr.
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Buonaugurio has also been a manager of the Vista Bond Fund since February
1992, and managed fixed-income commingled trust funds and provided credit
research services for Chase for the four prior years.
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with the Fund's distributor on each business day
during which the New York Stock Exchange is open for trading ("Fund Business
Day"). Qualified investors are defined as institutions, trusts, partnerships,
corporations, qualified and other retirement plans and fiduciary accounts opened
by a bank, trust company or thrift institution which exercises investment
authority over such accounts. The Fund reserves the right to reject any purchase
order or cease offering shares for purchase at any time.
Institutional Shares are sold at their public offering price, which is their
next determined net asset value. Orders received by Dealers in proper form prior
to the New York Stock Exchange closing time are confirmed at that day's net
asset value, provided the order is received by the Vista Service Center prior to
its close of business. Dealers are responsible for forwarding orders for the
purchase of shares on a timely basis. Institutional Shares will be maintained in
book entry form and share certificates will not be issued. Management reserves
the right to refuse to sell shares of the Fund to any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money market
Vista funds may be aggregated with purchases of Institutional Shares of the Fund
to meet the $1,000,000 minimum initial investment amount requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper form
is furnished by you to your Dealer and transmitted to and received by the Vista
Service Center. A wire redemption may be requested by telephone to the Vista
Service Center. For telephone redemptions, call the Vista Service Center at
1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will receive
is the next net asset value calculated after the Fund receives your request in
proper form. In order to receive that day's net asset value, the Vista Service
Center must receive your request before the close of regular trading on the New
York Stock Exchange.
The Fund generally sends you payment for your shares by wire in federal funds
on the business day after your request is received in proper form. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with
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the Fund. Unless an investor indicates otherwise on the account application,
the Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his of her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request or contact your
Dealer. The Telephone Redemption Privilege may be modified or terminated without
notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing all
necessary documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista funds
offer Institutional Shares. The prospectus of the other Vista fund into which
shares are being exchanged should be read carefully prior to any exchange and
retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
The exchange privilege is subject to change or termination. See the SAI to find
out more about the exchange privilege.
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HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each Fund Business Day, by dividing the
net assets of the Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Fund are
determined on the basis of their market or other fair value, as described in the
SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at least
annually. Distributions from capital gains are made after applying any available
capital loss carryover.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive all
distributions in cash or by ACH. You can change your distribution option by
notifying the Vista Service Center in writing. If you do not select an option
when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Vista fund. If the Vista Service Center does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if correspondence
sent by the Fund or the Vista Service Center is returned as "undeliverable,"
distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by the Fund may qualify for
the 70% dividends-received deduction for corporate shareholders.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
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The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily net
assets of Institutional shares of the Fund held by investors for whom the
shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets.
Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD is
entitled to receive a fee from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee to
pay for certain expenses incurred in connection with organizing new series of
the Trust and certain other ongoing expenses of the Trust. VFD is located at 101
Park Avenue, New York, New York 10178.
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Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make an
initial investment of $1,000,000 or more. "Qualified investors" are defined as
institutions, trusts, partnerships, corporations, qualified and other retirement
plans and fiduciary accounts opened by a bank, trust company or thrift
institution which exercises investment authority over such accounts. The Fund
offers other classes of shares in addition to these classes. The categories of
investors that are eligible to purchase shares may differ for each class of Fund
shares. In addition, other classes of Fund shares may be subject to differences
in sales charge arrangements, ongoing distribution and service fee levels, and
levels of certain other expenses, which will affect the relative performance of
the different classes. Investors may call 1-800-622-4273 to obtain additional
information about other classes of shares of the Fund that are offered. Any
person entitled to receive compensation for selling or servicing shares of the
Fund may receive different levels of compensation with respect to one class of
shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold
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special meetings of shareholders of all series or classes when in the
judgment of the Trustees it is necessary or desirable to submit matters for a
shareholder vote. The Trustees will promptly call a meeting of shareholders
to remove a trustee(s) when requested to do so in writing by record holders
of not less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of the Fund,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of securities so purchased. Chase and its affiliates
deal, trade and invest for their own accounts in U.S. Government obligations,
municipal obligations and commercial paper and are among the leading dealers of
various types of U.S. Government obligations and municipal obligations. Chase
and its affiliates may sell U.S. Government obligations and municipal
obligations to, and purchase them from, other investment companies sponsored by
the Fund's distributor or affiliates of the distributor. Chase will not invest
the Fund's assets in any U.S. Government obligations, municipal obligations or
commercial paper purchased from itself or any affiliate, although under certain
circumstances such securities may be purchased from other members of an
underwriting syndicate in which Chase or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased by the Fund.
Chase has informed the Fund that in making its investment decisions, it does not
obtain or use material inside information in the possession of any other
division or department of Chase, including the division that performs services
for the Fund as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is
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<PAGE>
calculated by dividing the annualized net investment income per share during
a recent 30-day period by the maximum public offering price per share of such
class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
invested at the public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase.
Investment performance also often reflects the risks associated with the
Fund's investment objectives and policies. These factors should be considered
when comparing the Fund's investment results to those of other mutual funds and
other investment vehicles. Quotation of investment performance for any period
when a fee waiver or expense limitation was in effect will be greater than if
the waiver or limitation had not been in effect. The Fund's performance may be
compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
INST-ST-1-596CX
[Vista Logo]
Short-Term
Bond Fund
Institutional Shares
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] GLOBAL FIXED INCOME FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Total Return
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Global Fixed Income Portfolio (the
"Portfolio"), an open-end management investment company with investment
objectives identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this investment
structure, see "Unique Characteristics of Master/Feeder Fund Structure" on page
22.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ......................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ..................................................... 5
How the Fund has performed
Fund Objective .......................................................... 6
Investment Policies ...................................................... 6
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ............................................................... 12
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment .................................................... 13
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ..................................... 14
How the Fund Values its Shares .......................................... 19
How Distributions are Made; Tax Information ............................. 19
How the Fund distributes its earnings, and tax treatment
related to those earnings
Other Information Concerning the Fund .................................... 20
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information .................................................. 24
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ................................... 25
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................. 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of
original purchase price or
redemption proceeds)* ............................... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee
(after estimated waiver)** ......................... 0.00% 0.00%
12b-1 Fee*** .......................................... 0.25% 0.75%
Shareholder Servicing Fee (after
estimated waiver, where indicated) .................. 0.11%** 0.25%
Other Expenses (after estimated
waiver and reimbursement)** ......................... 1.50% 1.50%
---- ----
Total Fund Operating Expenses
(after waivers of fees and
expense reimbursement)** ............................ 1.86% 2.50%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ .................. $63 $101 $141 $253
Class B Shares:
Assuming complete redemption at
the end of the period++ +++ .... $77 $110 $156 $268
Assuming no redemptions+++ ....... $25 $ 78 $133 $268
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current fee waiver and expense reimbursement arrangements to
maintain Total Fund Operating Expenses at the levels indicated in the
table above. Absent such arrangements, the Investment Advisory Fee and
Other Expenses would be 0.75% and 3.65%, respectively, for Class A and
Class B shares, the Shareholder Servicing Fee would be 0.25% for Class A
shares, and Total Fund Operating Expenses would be 4.90% and 5.40% for
Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR
RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
3
<PAGE>
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares for each of the periods shown. This information
is supplemented by and should be read in conjunction with financial statements
and accompanying notes appearing in the Fund's Annual Report to Shareholders for
the fiscal year ended October 31, 1995, which is incorporated by reference into
the SAI. The financial statements and notes, as well as the financial
information set forth in the table below, have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon is also included in the
Annual Report to Shareholders. Shareholders can obtain a copy of this Annual
Report by contacting the Fund or their Shareholder Servicing Agent.
<TABLE>
<CAPTION>
Vista Global Fixed Income Fund
-------------------------------------------------------
Class A Class B
----------------------------- ------------------------
Year Ended 12/31/92+ Year 11/4/93++
------------------- through Ended through
10/31/95 10/31/94 10/31/93 10/31/95 10/31/94
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance
- -------------------------------
Net asset value, beginning of period ........ $10.21 $10.52 $10.00 $10.20 $10.48
------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss)* 0.353 0.464 0.300 0.298 0.339
Net Gains or (Losses) in Securities
(both realized and unrealized) ........... 0.610 (0.495) 0.550 0.590 (0.382)
------ ------ ------ ------ ------
Total from Investment Operations ........... 0.963 (0.031) 0.850 0.888 (0.043)
------ ------ ------ ------ ------
Less Distributions:
From Net Investment Income ................ 0.523 0.279 0.300 0.463 0.237
From Paid In Capital ...................... 0.000 0.000 0.030 0.000 0.000
------ ------ ------ ------ ------
Total Distributions ........................ 0.523 0.279 0.330 0.463 0.237
------ ------ ------ ------ ------
Net asset value, end of period ............... $10.65 $10.21 $10.52 $10.63 $10.20
====== ====== ====== ====== ======
Total return (1)* ........................... 9.54% (0.66%) 10.42% 8.82% (0.51%)
Ratios/Supplemental Data**
Net Assets, end of period (in 000's) ....... $1,515 $1,365 $2,361 $409 $282
Ratio of Expenses to Average Net Assets .... 1.86% 1.86% 1.88%* 2.50%* 2.50%*
Ratio of Net Investment
Income to Average Net Assets .............. 4.58% 3.83% 3.29%* 3.92% 3.79%*
Ratio of Expenses without waivers
and assumption of expenses to Average Net
Assets# .................................. 2.86% 2.86% 2.86%* 3.36% 3.36%*
Ratio of Net Investment Income
without
waivers and assumption of
expenses
to Average Net Assets ..................... 3.58% 2.83% (.09%)* 3.06% 2.93%*
</TABLE>
- ---------------
+ Commencement of operations.
++ Commencement of offering of shares.
** Includes the Fund's share of Portfolio income and expenses, as
appropriate.
* Annualized.
(1) Total return figures do not include the effect of any sales load.
# Not to exceed the maximum statutory expense.
5
<PAGE>
FUND OBJECTIVE
Vista Global Fixed Income Fund seeks a high total return through current
income and capital appreciation. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio invests primarily in investment grade
fixed income securities of U.S. and foreign issuers and engages in foreign
currency and interest rate transactions to enhance returns and hedge its
portfolio. Under normal market conditions, at least 65% of the Portfolio's total
assets will be invested in investment grade fixed income securities, and will be
invested in at least three countries. Although the Portfolio primarily invests
in investment grade fixed income securities, up to 25% of its total assets may
be invested in high yield, high risk non-investment grade debt securities
primarily issued by issuers based in developing countries.
The Portfolio's advisers will allocate the Portfolio's investments among
securities denominated in the U.S. dollar and currencies of foreign countries.
The advisers may adjust the Portfolio's exposure to each currency based on their
perception of the most favorable markets and issuers. The percentage of the
Portfolio's assets invested in securities of a particular country or denominated
in a particular currency will vary in accordance with the advisers' assessment
of the relative yield and appreciation potential of such securities and the
current and anticipated relationship of a country's currency to the U.S. dollar.
Fundamental economic strength, earnings growth, quality of management, industry
growth, credit quality and interest rate trends are some of the principal
factors which may be considered by the Portfolio's advisers in determining
whether to increase or decrease the emphasis placed upon a particular type of
security, industry sector, country or currency within the Portfolio's investment
portfolio. In selecting countries and currencies for investment, the advisers
will also consider factors such as interest and inflation rates, monetary and
fiscal policies, taxation and political climate. Securities purchased by the
Portfolio may be denominated in a currency other than that of the country in
which the issuer is domiciled.
The Portfolio intends to invest in fixed income securities of issuers
located in the U.S., Australia, Austria, the United Kingdom, Canada, France,
Germany, Holland, Japan, New Zealand, Spain, Sweden and Switzerland, and such
other countries as the Portfolio's advisers may determine from time to time.
Investments may also be made in issuers in developing countries. The Portfolio
will not invest more than 25% of its net assets in debt securities of issuers
located in a single country or denominated in a single currency, other than
issuers located in or debt securities denominated in the currencies of the U.S.,
Canada, France, Germany, Japan or the United Kingdom. The Portfolio will not
invest more than 25% of its net assets in debt securities issued by a single
foreign government or supranational organization.
There is no restriction on the maturity of the Portfolio's portfolio or any
individual portfolio security. The Portfolio's advisers may adjust the average
maturity of the Portfolio's portfolio based upon their assessment of the
relative yields available on securities of different maturities and their
expectations of future changes in interest rates.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio were
diversified.
The Portfolio may invest any portion of its assets not invested as
described above in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Portfolio may invest with-
6
<PAGE>
out limitation in these instruments. To the extent that the Portfolio departs
from its investment policies during temporary defensive periods, the Fund's
investment objective may not be achieved.
Fund Structure
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees determine
that it is in the best interest of the Fund to do so. Upon any such withdrawal,
the Trustees would consider what action might be taken, including investing all
of the Fund's investable assets in another pooled investment entity having
substantially the same objective and policies as the Fund or retaining an
investment adviser to manage the Fund's assets directly.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Interest Rate and Currency Transactions. The Portfolio will actively employ
currency and interest rate management techniques, including transactions in
options (including yield curve options), futures, options on futures, forward
foreign currency exchange contracts, currency options and futures and currency
and interest rate swaps. The aggregate amount of the Portfolio's net currency
exposure will not exceed the total net asset value of its portfolio. However, to
the extent that the Portfolio is fully invested in fixed income securities while
also maintaining currency positions, it may be exposed to greater combined risk.
The Portfolio will only enter into interest rate and currency swaps on a
net basis, i.e., the two payment streams are netted out, with the Portfolio
receiving or paying, as the case may be, only the net amount of the two
payments. Interest rate and currency swaps do not involve the delivery of
securities, the underlying currency, other underlying assets or principal.
Accordingly, the risk of loss with respect to interest rate and currency swaps
is limited to the net amount of interest or currency payments that the Portfolio
is contractually obligated to make. If the other party to an interest rate or
currency swap defaults, the Portfolio's risk of loss consists of the net amount
of interest or currency payments that the Portfolio is contractually entitled to
receive. Since interest rate and currency swaps are individually negotiated, the
Portfolio expects to achieve an acceptable degree of correlation between its
portfolio investments and its interest rate or currency swap positions.
The Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
The Portfolio may purchase or sell without limitation forward foreign
currency exchange contracts when the Portfolio's advisers anticipate that the
foreign currency will appreciate or depreciate in value, but securities
denominated in that currency do not present attractive investment opportunities
and are not held by the Portfolio. In addition, the Portfolio may enter into
forward foreign currency exchange contracts in order to protect against adverse
changes in future foreign currency exchange rates. The Portfolio may engage in
cross-hedging by using forward contracts in one currency to hedge against
fluctuations in the value of securities denominated in a different currency if
the advisers believe that there is a pattern of correlation between the two
currencies.
The Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. The Portfolio will typically use
interest rate swaps to shorten the effective duration of its portfolio. Interest
rate swaps involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, such as an exchange of fixed
rate payments for floating rate payments. Currency swaps involve the exchange of
their respective commitments to make or receive payments in specified
currencies.
7
<PAGE>
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Services, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
High Yield, High Risk Debt Securities. The Portfolio may invest up to 25%
of its total assets in high yield, high risk non-investment grade debt
securities primarily issued by issuers based in developing countries. The
Portfolio will not invest in securities rated, at the time of purchase, lower
than BB by S&P or Ba by Moody's or determined by the advisers to be of
comparable quality. Securities rated BB by S&P or Ba by Moody's have speculative
elements and uncertainties or major risk exposures to adverse conditions. The
Portfolio will not necessarily dispose of a security when its rating is reduced
below its rating at the time of purchase, although the advisers will monitor the
investment to determine whether continued investment in the security will assist
in meeting the Portfolio's investment objective.
Money Market Instruments. The Portfolio may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Supranational, ECU and Multicurrency Obligations. The Portfolio may invest
in securities issued by supranational organizations, which include organizations
such as The World Bank, the European Community, the European Coal and Steel
Community and the Asian Development Bank. The Portfolio may also invest in
securities denominated in the ECU, which is a "basket" consisting of specified
amounts of the currencies of certain member states of the European Community.
These securities are typically issued by European governments and supranational
organizations. In addition, the Portfolio may invest in securities denominated
in other currency "baskets." Currency "baskets" in which the Portfolio invests
will be of comparable quality to other debt securities purchased by the
Portfolio as determined by its advisers.
Indexed Investments. The Portfolio may invest in instruments which are
indexed to certain specific foreign currency exchange rates. The terms of such
instruments may provide that their principal amounts or just their coupon
interest rates are adjusted upwards or downwards (but not below zero) at
maturity or on established coupon payment dates to reflect changes in the
exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal risk,
but offer the potential for realizing gains as a result of changes in foreign
currency exchange rates.
Inverse Floaters and Interest Rate Caps. The Portfolio may invest in
inverse floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized at
all times. The Portfolio may purchase securities for deliv-
8
<PAGE>
ery at a future date, which may increase its overall investment exposure and
involves a risk of loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk to the Portfolio if the
other party should default on its obligation and the Portfolio is delayed or
prevented from recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Portfolio may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Portfolio may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Portfolio enters into a reverse repurchase agreement,
it will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Portfolio
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Portfolio if the other party should default on its obligation and
the Portfolio is delayed or prevented from recovering the collateral or
completing the transaction. Acquisition of puts will have the effect of
increasing the cost of the securities subject to the put and thereby reducing
the yields otherwise available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Portfolio may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at substantial
discounts from their value at maturity. Payment-in-kind obligations are
obligations on which the interest is payable in additional securities rather
than cash. The Portfolio may also invest in stripped obligations, which are
separately traded principal and interest components of an underlying obligation.
The value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The
Portfolio may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Portfolio may invest include
participation certificates and certificates of indebtedness or safekeeping.
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. As a result of the floating or
variable rate nature of these investments, the Portfolio's yield may decline and
it may forego the opportunity for capital appreciation during periods when
interest rates decline; however, during periods when interest rates increase,
the Portfolio's yield may increase and it may have reduced risk of capital
depreciation. Demand features on certain floating or variable rate securities
may obligate the Portfolio to pay a "tender fee" to a third party. Demand
features provided by foreign banks involve certain risks associated with foreign
investments.
Mortgage-Related Securities. The Portfolio may invest in mortgage-related
securities. Mortgage pass-through securities are securities representing
interests in "pools" of mortgages in which payments of both interest
9
<PAGE>
and principal on the securities are made monthly, in effect "passing through"
monthly payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Portfolio (due to prepayments of
principal on the underlying mortgage loans) may result in a lower rate of
return when the Portfolio reinvests such principal. In addition, if the
Portfolio purchased the securities at a premium, early repayment would cause
the value of the premium to 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
U.S. Government, or by agencies or instrumentalities of the U.S. Government
(which guarantees are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by nongovernmental issuers may be supported by various forms
of insurance or guarantees.
The Portfolio 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
the U.S. Government or its agencies or instrumentalities. CMOs are structured
into multiple classes, with each class having a different expected average life
and/or stated maturity. Monthly payments of principal, including prepayments,
are allocated to different classes in accordance with the terms of the
instruments, and changes in prepayment rates or assumptions may significantly
affect the expected average life and value of a particular class.
The Portfolio expects that governmental, government-related or private
entities may create other mortgage-related securities in addition to those
described above. As new types of mortgage-related securities are developed and
offered to investors, the Portfolio will consider making investments in such
securities.
Asset-Backed Securities. The Portfolio may invest in asset-backed
securities, which represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit card
receivables.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable regulatory
limitations.
Derivatives and Related Instruments. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency and interest rate contracts; (iv) purchase and sell mortgage-backed and
asset-backed securities; and (v) purchase and sell structured products, which
are instruments designed to restructure or reflect the characteristics of
certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The
10
<PAGE>
ability of the Portfolio to successfully utilize these instruments may depend
in part upon the ability of the Portfolio's advisers to forecast these
factors correctly. Inaccurate forecasts could expose the Portfolio to a risk
of loss. There can be no guarantee that there will be a correlation between
price movements in a hedging instrument and in the portfolio assets being
hedged. The Portfolio is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Portfolio
than hedging strategies using the same instruments. There can be no assurance
that a liquid market will exist at a time when the Portfolio seeks to close
out a derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Portfolio may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund--Certain Regulatory
Matters."
Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio from: (a)
with respect to 50% of its total assets, holding more than 10% of the voting
securities of any issuer; (b) investing more than 15% of its net assets in
illiquid securities (which include securities restricted as to resale unless
they are determined to be readily marketable in accordance with procedures
established by the Board of Trustees); or (c) investing more than 25% of its
total assets in any one industry. A complete description of these and other
investment policies is included in the SAI. Except for the Fund's investment
objective, restriction (c) above and investment policies designated as
fundamental in the SAI, the investment policies of the Portfolio and the Fund
are not fundamental. Shareholder approval is not required to change any
non-fundamental investment policy. However, in the event of a change in the
Portfolio's investment objective, shareholders will be given at least 30 days
prior written notice and the Board of Trustees will consider what action may be
appropriate.
Risk Factors
The net asset value of the shares of the Fund can be expected to fluctuate
based on the value of the securities held by the Portfolio. The Portfolio is
aggressively managed and, as it invests in both U.S. and foreign fixed income
securities, the value of the Fund's shares is subject to greater fluctuation and
an investment in its shares involves a higher degree of risk than an investment
in a fund investing entirely in U.S. investment grade fixed income securities.
An investment in the Fund should not be considered a complete investment program
and may not be appropriate for all investors.
The performance of the Portfolio depends in part on interest rate changes.
As interest rates increase, the value of the fixed income securities held by the
Portfolio tends to decrease. This effect will be more pronounced with respect to
investments by the Portfolio in mortgage-related securities, the value of which
are more sensitive to
11
<PAGE>
interest rate changes. There is no restriction on the maturity of the
Portfolio's portfolio or any individual portfolio security, and to the extent
the Portfolio invests in securities with longer maturities, the volatility of
the Portfolio in response to changes in interest rates can be expected to be
greater than if the Portfolio had invested in comparable securities with
shorter maturities.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio's foreign investments may be affected
favorably or unfavorably by currency exchange rates and exchange control
regulations. There may be less information publicly available about foreign
companies than U.S. companies, and they are not generally subject to accounting,
auditing and financial reporting standards and practices comparable to those in
the U.S. The securities of foreign companies may be less liquid and more
volatile than the securities of comparable U.S. companies. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Portfolio's assets
held abroad) and expenses. It is possible that nationalization or expropriation
of assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability and diplomatic developments could affect the
value of the Portfolio's investments in certain foreign countries. Foreign laws
may restrict the ability to invest in certain issuers or countries and special
tax considerations will apply to foreign securities.
Investments in securities of issuers based in developing countries entails
certain additional risks, including greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and
economic stability. The small size of markets for securities of issuers based
in such countries and the low or non-existent volume of trading may result in
a lack of liquidity and in price volatility. Certain national policies may
restrict the investment opportunities, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests. There
may be an absence of developed legal structures governing private or foreign
investment and private property.
The Portfolio may invest in both higher-rated and lower-rated fixed-income
securities. The values of lower-rated securities generally fluctuate more than
those of higher-rated securities. In addition, the lower rating reflects a
greater possibility that the financial condition of the issuer, adverse changes
in economic conditions, or both may impair the ability of an issuer to make
payments of income and principal. Securities rated BB by S&P or Ba by Moody's
have speculative elements and uncertainties or major risk exposures to adverse
conditions. The rating services' descriptions of securities in the various
rating categories, including the speculative characteristics of securities in
the lower rating categories, are set forth in the SAI. Investors should
carefully consider their ability to assume the risks of owning shares of the
Fund in light of the Portfolio's ability to invest a portion of its assets in
securities in certain of the lower rating categories.
Because the Portfolio is "non-diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Portfolio's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Portfolio pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Portfolio, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank
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holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Portfolio,
Chase is entitled to receive an annual fee computed daily and paid monthly
based at an annual rate equal to 0.75% of the Portfolio's average daily net
assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Portfolio pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of Chase. CAM makes investment decisions for the Portfolio on a
day-to-day basis. For these services, CAM is entitled to receive a fee, payable
by Chase from its advisory fee, at an annual rate equal to 0.35% of the
Portfolio's average daily net assets. CAM was recently formed for the purpose of
providing discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function. The same individuals
who serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Manager. Gordon Ross has been responsible for the day-to-day
management of the Portfolio since he joined Chase in June 1994. Mr. Ross is Vice
President and head of global fixed income management for Chase. Before joining
Chase, Mr. Ross was Director of Investments at Lombard Odier & Co. Ltd., where
he managed institutional global portfolios and was co-chairman of global
strategy. Previously, Mr. Ross spent four years as a proprietary trader at J.P.
Morgan Inc. and Manufacturers Hanover Ltd., both in London.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any sales charges when they are redeemed. Certain purchases of Class A shares
qualify for reduced sales charges. Class A shares have lower combined 12b-1 and
service fees than Class B shares. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. In almost all cases, investors planning to purchase $250,000 or
more of the Fund's shares will pay lower aggregate charges and expenses by
purchasing Class A shares.
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HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments at
any time with as little as $100. You can buy Fund shares three ways--through an
investment representative, through the Fund's distributor by calling the Vista
Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be accepted.
The Fund reserves the right to reject any purchase order or cease offering
shares for purchase at any time. When purchases are made by check, redemptions
will not be allowed until clearance of the purchase check, which may take 15
calendar days or longer. In addition, the redemption of shares purchased through
ACH will not be allowed until clearance of your payment, which may take 7
business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic deduction
from your bank checking or savings account. Shareholders electing to start this
Systematic Investment Plan when opening an account should complete Section 8 of
the account application. Current shareholders may begin such a plan at any time
by sending a signed letter with signature guarantee and a deposit slip or voided
check to the Vista Service Center. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price, the
Vista Service Center must receive your order before the close of regular trading
on the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those shares
with a certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
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Amount of sales
Sales charge as a charge
percentage of: reallowable to
------------------------ dealers as a
Amount of transaction at Offering Net amount percentage of
offering price ($) price invested offering price
- ------------------------------- --------- ----------- ----------------
Under 100,000 ................... 4.50 4.71 4.00
100,000 but under 250,000 ....... 3.75 3.90 3.25
250,000 but under 500,000 ....... 2.50 2.56 2.25
500,000 but under 1,000,000 ...... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 0.75% of the amount under
$2.5 million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withhold such payments with respect
to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after purchase,
as shown in the table below. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of distributions
and (ii) shares otherwise exempt from the CDSC, as described below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes of
determining whether the plan may purchase Class A shares at net asset value.
These investments will also be included for purposes of the discount privileges
and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase,
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the Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker-dealers having selected dealer agreements with the Fund's
distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds, 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 Chase or an affiliate serves as trustee or
custodian of the plan or manages some portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee for
its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial planner,
provided arrangements are preapproved and purchases are placed through an
omnibus account with the Fund or (ii) by clients of such investment adviser or
financial planner who place trades for their own accounts, if such accounts are
linked to a master account of such investment adviser or financial planner on
the books and records of the broker or agent. Such purchases may be made for
retirement and deferred compensation plans and trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with no
initial sales charge for as long as they continue to own Class A shares of any
Vista fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in connection
with certain withdrawals from IRA or other retirement plans. Up to 12% of the
value of Class B shares subject to a systematic withdrawal plan may also be
redeemed each year without a CDSC, provided that the Class B account had a
minimum balance of $20,000 at the time the systematic withdrawal plan was
established. The SAI contains additional information about purchasing the Fund's
shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
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How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset value calculated
after the Fund receives your request in proper form, less any applicable CDSC.
In order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required. The
Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected payment
of the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess of
$25,000 will only be made by wire to a bank account on record with the Fund.
Unless an investor indicates otherwise on the account application, the Fund will
be authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a
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<PAGE>
systematic withdrawal plan for Class A accounts. Call the Vista Service
Center at 1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the CDSC
- --and a subsequent purchase. Class B shares of any Vista non-money market fund
may be exchanged into the Class B shares of the Vista Prime Money Market Fund in
order to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding. Ask your investment representative or the Vista Service
Center for prospectuses of other Vista funds. Shares of certain Vista funds are
not available to residents of all states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
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<PAGE>
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in the
SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least monthly and any net
realized capital gains at least annually. Distributions from capital gains are
made after applying any available capital loss carryovers. Distributions paid by
the Fund with respect to Class A shares will generally be greater than those
paid with respect to Class B shares because expenses attributable to Class B
shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a pre-established
bank account while reinvesting capital gains distributions in additional shares
without a sales charge; or (3) receive all distributions in cash or by ACH. You
can change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the class on which the distributions are paid.
You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund
or in another Vista fund. If the Vista Service Center does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
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Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares which
provide that the Fund will pay distribution fees at annual rates of up to 0.25%
and 0.75% of the average daily net assets attributable to Class A and Class B
shares of the Fund, respectively. Payments under the distribution plans shall be
used to compensate or reimburse the Fund's distributor and broker-dealers for
services provided and expenses incurred in connection with the sale of Class A
and Class B shares, and are not tied to the amount of actual expenses incurred.
Payments may be used to compensate broker-dealers with trail or maintenance
commissions at an annual rate of up to 0.25% of the average daily net asset
value of Class A or Class B shares maintained in the Fund by customers of these
broker-dealers. Trail or maintenance commissions are paid to broker-dealers
beginning the 13th month following the purchase of shares by their customers.
Some activities intended to promote the sale of Class A and Class B shares will
be conducted generally by the Vista Family of Funds, and activities intended to
promote the Fund's Class A or Class B shares may also benefit the Fund's other
shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
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Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator for the Fund and the Portfolio and
is entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment advisory
and administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
21
<PAGE>
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
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
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to
Class A and Class B shares of the Fund. The Fund may offer other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ for
each class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which would affect the
relative performance of the different classes. Investors may call 1-800-34-VISTA
to obtain additional information about other classes of shares of the Fund that
are offered. Any person entitled to receive compensation for selling or
servicing shares of the Fund may receive different levels of compensation with
respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special meetings
of shareholders of all series or classes when in the judgment of the Trustees it
is necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Unique Characteristics of Master/Feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a shareholder's
interest in the Portfolio's securities is indirect. In addition to selling a
beneficial interest to the Fund, the Portfolio may sell beneficial interests to
other mutual funds or institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, other investors investing in the Portfolio
are not required to sell their shares at the same public offering prices as the
Fund, and may bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in the
Portfolio. Such differences in returns are also present in other mutual fund
structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less
22
<PAGE>
diverse, resulting in increased portfolio risk. However, this possibility
also exists for traditionally structured funds which have large or
institutional investors. Funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to
the Portfolio, the Trust will hold a meeting of shareholders of the Fund and
will cast all of its votes in the same proportion as do the Fund's
shareholders. Shares of the Fund for which no voting instructions have been
received will be voted in the same proportion as those shares for which
voting instructions are received. Certain changes in the Portfolio's
objective, policies or restrictions may require the Trust to withdraw the
Fund's interest in the Portfolio. Any withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution from the Portfolio). The Fund could incur brokerage fees or
other transaction costs in converting such securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the disinterested
Trustees of the Trust reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Trustees
of the Trust, including a majority of the disinterested Trustees, have adopted
procedures they believe are reasonably appropriate to deal with any conflict of
interest up to and including creating a separate Board of Trustees. Investors in
the Fund may obtain information about whether an investment in the Portfolio may
be available through other funds by calling the Vista Service Center at
1-800-34-VISTA.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund's assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by the Fund. Chase has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the
23
<PAGE>
division that performs services for the Fund as custodian, or in the
possession of any affiliate of Chase. Shareholders of the Fund should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account. Transactions with affiliated broker-dealers will
only be executed on an agency basis in accordance with applicable federal
regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing the
annualized net investment income calculated pursuant to federal rules per share
during a recent 30-day period by the maximum public offering price per share of
such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of
a class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
invested at the maximum public offering price (in the case of Class A shares) or
reflecting the deduction of any applicable contingent deferred sales charge (in
the case of Class B shares). Total return may also be presented for other
periods or without reflecting sales charges. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
24
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
25
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VGF-1-596CX
[Vista Logo]
Global Fixed
Income Fund
- ------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] INTERNATIONAL EQUITY FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Total Return
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in International Equity Portfolio (the
"Portfolio"), an open-end management investment company with an investment
objective identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this investment
structure, see "Unique Characteristics of Master/Feeder Fund Structure" on page
20.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................ 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights .................................................... 5
How the Fund has performed
Fund Objective ......................................................... 6
Investment Policies ..................................................... 6
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management .............................................................. 10
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ................................................... 11
Alternative sales arrangements
How to Buy, Sell and Exchange Shares .................................... 11
How the Fund Values its Shares ......................................... 16
How Distributions are Made; Tax Information ............................ 17
How the Fund distributes its earnings, and tax treatment
related to those earnings
Other Information Concerning the Fund ................................... 18
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization, master/feeder Fund structure
and regulatory matters
Performance Information ................................................. 21
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................. 23
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
------- ------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ............... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ........... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------
Investment Advisory Fee (after
estimated waiver)** ............................... 0.00% 0.00%
12b-1 Fee*** ......................................... 0.25% 0.75%
Shareholder Servicing Fee ............................ 0.25% 0.25%
Other Expenses ...................................... 1.50% 1.50%
------ -----
Total Fund Operating Expenses
(after waiver of fee)** ............................ 2.00% 2.50%
====== =====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ .................... $67 $107 $150 $269
Class B Shares:
Assuming complete redemption at
the end of the period++ +++ ..... $77 $110 $156 $271
Assuming no redemptions+++ ........ $25 $ 78 $133 $271
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waiver,
the Investment Advisory Fee would be 1.00% for Class A and Class B
shares, and Total Fund Operating Expenses would be 3.00% and 3.50% for
Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR
RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares for the periods shown. This information is
supplemented by and should be read in conjunction with financial statements and
accompanying notes appearing in the Fund's Annual Report to Shareholders for the
fiscal year ended October 31, 1995, which is incorporated by reference into the
SAI. The financial statements and notes, as well as the financial information
set forth in the table below, have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is also included in the Annual
Report to Shareholders. Shareholders can obtain a copy of this Annual Report by
contacting the Fund or their Shareholder Servicing Agent.
<TABLE>
<CAPTION>
Vista International Equity Fund
-------------------------------------------------------
Class A Class B
------------------------------ --------------------
Year Ended 12/31/92+ Year 11/4/93++
------------------- through Ended through
10/31/95 10/31/94 10/31/93 10/31/95 10/31/94
------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
- --------------------------------
Net asset value, beginning of period ........ $ 12.31 $ 11.82 $ 10.00 $12.23 $11.69
------- ------- ------- ------ ------
Income from Investment Operations:
Net Investment Income (Loss)* .............. 0.039 (0.022) (0.010) (0.026) (0.053)
Net Gains or (Losses) in Securities
(both realized and unrealized) ............ (0.190) 0.566 1.830 (0.180) 0.647
------- ------- ------- ------ ------
Total from Investment Operations ........... (0.151) 0.544 1.820 (0.206) 0.594
------- ------- ------- ------ ------
Less Distributions:
Distribution from Capital Gains ........... 0.137 0.054 0.000 0.137 0.054
------- ------- ------- ------ ------
Net Asset Value, End of Period ............... $ 12.02 $ 12.31 $ 11.82 $11.89 $12.23
======= ======= ======= ====== ======
Total Return (1) ............................. (1.19%) 4.61% 22.23% (1.61% ) 5.09%
Ratios/Supplemental Data**
Net Assets, end of period (in 000's) ........ $26,287 $37,926 $14,290 $6,759 $7,182
Ratio of Expenses to Average Net Assets* ... 2.01% 2.00% 2.13% 2.50% 2.50%
Ratio of Net Investment Income (Loss)
to Average Net Assets* (2) ................. (0.10%) (0.27%) (0.14%) (0.53% ) (0.94%)
Ratio of Expenses without waivers
and assumption of expenses to Average Net
Assets* ................................... 2.86% 2.46% 2.86% 3.36% 3.36%
Ratio of Net Investment (Loss) Income
without waivers and assumption of
expenses to Average Net Assets* ............ (0.96%) (0.73%) (2.11%) (1.40% ) (1.80%)
</TABLE>
- ---------------
+ Commencement of operations.
++ Commencement of offering of shares.
** Includes the Fund's share of Portfolio income and expenses, as
appropriate.
* Short periods have been Annualized.
(1) Total return figures do not include the effect of any front-end sales
load.
(2) Not to exceed maximum statutory expense ratio.
5
<PAGE>
FUND OBJECTIVE
Vista International Equity Fund seeks total return from long-term capital
growth and income. The Fund is not intended to be a complete investment program,
and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio will invest principally in a broad
portfolio of marketable equity securities of established foreign companies
organized in countries other than the U.S, and foreign subsidiaries of U.S.
companies participating in foreign economies. Under normal market conditions,
the Portfolio will invest at least 65% of its total assets in equity securities,
including common stocks, preferred stocks, securities convertible into common
stocks, and warrants to purchase common stocks.
The Portfolio's advisers seek to identify those countries and industries
where economic and political factors, including currency movements, are likely
to produce above-average growth rates. The Portfolio's advisers attempt to
identify those companies in such countries and industries that are best
positioned and managed to take advantage of these economic and political
factors. The Portfolio will seek to diversify investments broadly among issuers
in various countries and normally to have represented in the Portfolio business
activities of not less than three different countries other than the U.S. The
Portfolio may invest a substantial portion of its assets in one or more of such
countries.
The Portfolio intends to invest in companies based in (or governments
located in) the Far East (Japan, Hong Kong, Singapore and Malaysia), Western
Europe (United Kingdom, Germany, Netherlands, France, Switzerland), Australia,
Canada and such other areas and countries as the Portfolio's advisers may
determine from time to time. However, investments may be made from time to time
in companies in, or governments of, developing countries as well as developed
countries.
The Portfolio's advisers will allocate the Portfolio's investments among
securities denominated in the U.S. dollar and currencies of foreign countries.
The advisers may adjust the Portfolio's exposure to each currency based on their
perception of the most favorable markets and issuers. The percentage of the
Portfolio's assets invested in securities of a particular country or denominated
in a particular currency will vary in accordance with the advisers' assessment
of the relative yield and appreciation potential of such securities and the
current and anticipated relationship of a country's currency to the U.S. dollar.
Fundamental economic strength, earnings growth, quality of management, industry
growth, credit quality and interest rate trends are some of the principal
factors which may be considered by the Portfolio's advisers in determining
whether to increase or decrease the emphasis placed upon a particular type of
security, industry sector, country or currency within the Portfolio's investment
portfolio. Securities purchased by the Portfolio may be denominated in a
currency other than that of the country in which the issuer is domiciled.
Primary emphasis will be placed on equity securities and securities with
equity features. However, the Portfolio may invest in any type of investment
grade debt security including, but not limited to, other convertible securities,
bonds, notes and other debt securities of foreign governmental and private
issuers, and various derivative securities.
The Portfolio will neither invest more than 25% of its net assets in debt
securities denominated in a single currency other than the U.S. dollar, nor
invest more than 25% of its net assets in debt securities issued by a single
foreign government or supranational organization.
6
<PAGE>
The Portfolio may invest in securities of companies of various sizes,
including smaller companies whose securities may be more volatile and less
liquid than securities of larger companies. With respect to certain countries in
which capital markets are either less developed or not easily accessed,
investments by the Portfolio may be made through investment in closed-end
investment companies that in turn are authorized to invest in the securities of
such countries.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio were
diversified.
The Portfolio may invest any portion of its assets not invested as
described above in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Portfolio may invest without
limitation in these instruments. To the extent that the Portfolio departs from
its investment policies during temporary defensive periods, the Fund's
investment objective may not be achieved.
Fund Structure
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees determine
that it is in the best interest of the Fund to do so. Upon any such withdrawal,
the Trustees would consider what action might be taken, including investing all
of the Fund's investable assets in another pooled investment entity having
substantially the same objective and policies as the Fund or retaining an
investment adviser to manage the Fund's assets directly.
Other Investment Practices
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Depositary Receipts. The Portfolio may invest its assets in securities of
foreign issuers in the form of American Depositary Receipts, European Depositary
Receipts, Global Depository Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The
Portfolio treats Depositary Receipts as interests in the underlying securities
for purposes of its investment policies. The Portfolio will limit its investment
in Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of investment).
Money Market Instruments. The Portfolio may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Services, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
Supranational and ECU Obligations. The Portfolio may invest in securities
issued by supranational organizations, which include organizations such as The
World Bank, the European Community, the European Coal and Steel Community and
the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
7
<PAGE>
Indexed Investments. The Portfolio may invest in instruments which are
indexed to certain specific foreign currency exchange rates. The terms of such
instruments may provide that their principal amounts or just their coupon
interest rates are adjusted upwards or downwards (but not below zero) at
maturity or on established coupon payment dates to reflect changes in the
exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal risk,
but offer the potential for realizing gains as a result of changes in foreign
currency exchange rates.
Repurchase Agreements, Securities Loans and Forward Commitments. The
Portfolio may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Portfolio also has the ability to lend portfolio
securities in an amount equal to not more than 30% of its total assets to
generate additional income. These transactions must be fully collateralized at
all times. The Portfolio may purchase securities for delivery at a future date,
which may increase its overall investment exposure and involves a risk of loss
if the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Portfolio may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Portfolio may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Portfolio enters into a reverse repurchase agreement,
it will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
Stand-By Commitments. The Portfolio may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Portfolio
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Portfolio if the other party should default on its obligation and
the Portfolio is delayed or prevented from recovering the collateral or
completing the transaction. Acquisition of puts will have the effect of
increasing the cost of the securities subject to the put and thereby reducing
the yields otherwise available from such securities.
Convertible Securities. The Portfolio may invest in convertible securities,
which are securities generally offering fixed interest or dividend yields which
may be converted either at a stated price or stated rate for common or preferred
stock. Although to a lesser extent than with fixed-income securities generally,
the market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
Other Investment Companies. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable regulatory
limitations.
Derivatives and Related Instruments. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination
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with securities, other options or derivative instruments); (ii) enter into
swaps, futures contracts and options on futures contracts; (iii) employ
forward currency and interest rate contracts; and (iv) purchase and sell
structured products, which are instruments designed to restructure or reflect
the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
the Portfolio's advisers to forecast these factors correctly. Inaccurate
forecasts could expose the Portfolio to a risk of loss. There can be no
guarantee that there will be a correlation between price movements in a hedging
instrument and in the portfolio assets being hedged. The Portfolio is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in more risk to the Portfolio than hedging strategies using the same
instruments. There can be no assurance that a liquid market will exist at a time
when the Portfolio seeks to close out a derivatives position. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price distortions
in derivatives markets. In certain instances, particularly those involving
over-the-counter transactions or forward contracts, there is a greater potential
that a counterparty or broker may default. In the event of a default, the
Portfolio may experience a loss. For additional information concerning
derivatives, related instruments and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund--Certain Regulatory
Matters."
Limiting Investment Risks
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio from: (a)
with respect to 50% of its total assets, holding more than 10% of the voting
securities of any issuer; (b) investing more than 15% of its net assets in
illiquid securities (which include securities restricted as to resale unless
they are determined to be readily marketable in accordance with procedures
established by the Board of Trustees of the Portfolio); or (c) investing more
than 25% of its total assets in any one industry. A complete description of
these and other investment policies is included in the SAI. Except for the
Fund's investment objective, restriction (c) above and investment policies
designated as fundamental in the SAI, the investment policies of the Portfolio
and the Fund are not fundamental. Shareholder approval is not required to change
any non-fundamental investment policy.
Risk Factors
The net asset value of the shares of the Fund can be expected to fluctuate
based on the value of the securities held by the Portfolio. As the Portfolio
invests primarily in equity securities of companies outside the U.S., an
investment in the Fund's shares involves a higher degree of risk than an
investment in a U.S. equity fund. An investment in the Fund should not be
considered a complete investment program and may not be appropriate for all
investors.
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Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio's foreign investments may be affected
favorably or unfavorably by currency exchange rates and exchange control
regulations. There may be less information publicly available about foreign
companies than U.S. companies, and they are not generally subject to accounting,
auditing and financial reporting standards and practices comparable to those in
the U.S. The securities of foreign companies may be less liquid and more
volatile than the securities of comparable U.S. companies. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Portfolio's assets
held abroad) and expenses. It is possible that nationalization or expropriation
of assets, imposition of currency exchange controls, confiscatory taxation,
political or financial instability and diplomatic developments could affect the
value of the Portfolio's investments in certain foreign countries. Foreign laws
may restrict the ability to invest in certain countries or issuers and special
tax considerations will apply to foreign securities. Investments in securities
of issuers based in developing countries entails certain additional risks,
including greater risks of expropriation, confiscatory taxation,
nationalization, and less social, political and economic stability.
The small size of markets for securities of issuers based in such countries
and the low or non-existent volume of trading may result in a lack of liquidity
and in price volatility. Certain national policies may restrict the investment
opportunities, including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests. There may be an absence of
developed legal structures governing private or foreign investment and private
property.
Some of the securities in which the Portfolio may invest may be of smaller
companies. The securities of smaller companies, whether foreign or domestic,
often trade less frequently and in more limited volume, and may be subject to
more abrupt or erratic price movements, than securities of larger, more
established companies. Such companies may have limited product lines, markets or
financial resources, or may depend on a limited management group.
Securities rated in the category Baa by Moody's or BBB by S&P lack certain
investment characteristics and may have speculative characteristics.
Because the Portfolio is "non-diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Portfolio's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Portfolio pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of the Portfolio, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience. For its investment advisory
services to the Portfolio, Chase is entitled to receive an annual fee computed
daily and paid monthly based at an annual rate equal to 1.00% of the Portfolio's
average daily net assets. Chase is located at 270 Park Avenue, New York, New
York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Portfolio pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of Chase. CAM makes investment decisions for the Portfolio on a
day-to-day basis.
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For these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.50% of the Portfolio's average daily
net assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
Portfolio Manager. Joe DeSantis, Vice President of Chase, is responsible
for the day-to-day management of the Portfolio, and has managed the Portfolio
since its inception. Mr. DeSantis joined Chase in 1990 with responsibility for
research and compilation of international equity recommendations, among other
things. Mr. DeSantis was formerly a director at Strategic Research
International, Inc., and Institutional Research Services, Carl Marks & Company;
a founding partner of Strategic Research International, Inc.; and a credit
analyst at Moody's Investors Services, Municipal Research Department.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject to
any sales charges when they are redeemed. Certain purchases of Class A shares
qualify for reduced sales charges. Class A shares have lower combined 12b-1 and
service fees than Class B shares. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. In almost all cases, investors planning to purchase $250,000 or
more of the Fund's shares will pay lower aggregate charges and expenses by
purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments at
any time with as little as $100. You can buy Fund shares three ways--through an
investment representative, through the Fund's distributor by calling the Vista
Service Center, or through the Systematic Investment Plan.
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All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be accepted.
The Fund reserves the right to reject any purchase order or cease offering
shares for purchase at any time. When purchases are made by check, redemptions
will not be allowed until clearance of the purchase check, which may take 15
calendar days or longer. In addition, the redemption of shares purchased through
ACH will not be allowed until clearance of your payment, which may take 7
business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic deduction
from your bank checking or savings account. Shareholders electing to start this
Systematic Investment Plan when opening an account should complete Section 8 of
the account application. Current shareholders may begin such a plan at any time
by sending a signed letter with signature guarantee and a deposit slip or voided
check to the Vista Service Center. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price, the
Vista Service Center must receive your order before the close of regular trading
on the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those shares
with a certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
Sales charge as
a percentage of: Amount of sales
------------------- charge reallowed to
Net dealers as a
Amount of transaction at Offering Amount percentage of
offering price ($) Price Invested offering price
- ------------------------------- -------- -------- -------------------
Under 100,000 ..................... 4.75 4.99 4.00
100,000 but under 250,000 ......... 3.75 3.90 3.25
250,000 but under 500,000 ......... 2.50 2.56 2.25
500,000 but under 1,000,000 ...... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
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The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 1.00% of the amount under
$2.5 million, 0.75% of the next $7.5 million, 0.50% of the next $40 million and
0.20% thereafter. The Fund's distributor may withhold such payments with respect
to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after purchase,
as shown in the table below. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of distributions
and (ii) shares otherwise exempt from the CDSC, as described below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes of
determining whether the plan may purchase Class A shares at net asset value.
These investments will also be included for purposes of the discount privileges
and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds,
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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 Chase or an affiliate serves as trustee or
custodian of the plan or manages some portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee for
its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial planner,
provided arrangements are preapproved and purchases are placed through an
omnibus account with the Fund or (ii) by clients of such investment adviser or
financial planner who place trades for their own accounts, if such accounts are
linked to a master account of such investment adviser or financial planner on
the books and records of the broker or agent. Such purchases may be made for
retirement and deferred compensation plans and trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with no
initial sales charge for as long as they continue to own Class A shares of any
Vista fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in connection
with certain withdrawals from IRA or other retirement plans. Up to 12% of the
value of Class B shares subject to a systematic withdrawal plan may also be
redeemed each year without a CDSC, provided that the Class B account had a
minimum balance of $20,000 at the time the systematic withdrawal plan was
established. The SAI contains additional information about purchasing the Fund's
shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset value calculated
after the Fund receives your request in proper form, less any applicable CDSC.
In order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
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If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required. The
Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected payment
of the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess of
$25,000 will only be made by wire to a bank account on record with the Fund.
Unless an investor indicates otherwise on the account application, the Fund will
be authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund
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<PAGE>
into which shares are being exchanged should be read carefully and retained
for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
CDSC--and a subsequent purchase. Class B shares of any Vista non-money market
fund may be exchanged into the Class B shares of the Vista Prime Money Market
Fund in order to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding. Ask your investment representative or the Vista Service
Center for prospectuses of other Vista funds. Shares of certain Vista funds are
not available to residents of all states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in the
SAI.
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HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least semi-annually and
any net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
Distributions paid by the Fund with respect to Class A shares will generally be
greater than those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a pre-established
bank account while reinvesting capital gains distributions in additional shares
without a sales charge; or (3) receive all distributions in cash or by ACH. You
can change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the class on which the distributions are paid.
You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund
or in another Vista fund. If the Vista Service Center does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Investment income received by the Fund from sources within foreign
countries may be subject to foreign taxes withheld at the source. Since more
than 50% of the value of the total assets of the Fund at the close of the Fund's
taxable year is anticipated to be stock or securities of foreign corporations,
the Fund may elect to "pass through" to its shareholders the amount of foreign
taxes paid by the Fund.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
17
<PAGE>
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares which
provide that the Fund will pay distribution fees at annual rates of up to 0.25%
and 0.75% of the average daily net assets attributable to Class A and Class B
shares of the Fund, respectively. Payments under the distribution plans shall be
used to compensate or reimburse the Fund's distributor and broker-dealers for
services provided and expenses incurred in connection with the sale of Class A
and Class B shares, and are not tied to the amount of actual expenses incurred.
Payments may be used to compensate broker-dealers with trail or maintenance
commissions at an annual rate of up to 0.25% of the average daily net asset
value of Class A or Class B shares maintained in the Fund by customers of these
broker-dealers. Trail or maintenance commissions are paid to broker-dealers
beginning the 13th month following the purchase of shares by their customers.
Some activities intended to promote the sale of Class A and Class B shares will
be conducted generally by the Vista Family of Funds, and activities intended to
promote the Fund's Class A or Class B shares may also benefit the Fund's other
shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to
18
<PAGE>
shares of the Fund held by customers of such selected dealers. Such
compensation does not represent an additional expense to the Fund or its
shareholders, since it will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed daily
and paid monthly at an annual rate equal to 0.05% of their respective average
daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to
its distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee to
pay for certain expenses incurred in connection with organizing new series of
the Trust and certain other ongoing expenses of the Trust. VFD is located at 101
Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment advisory
and administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
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
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to
Class A and Class B shares of the Fund. The Fund may offer other classes of
shares in addition to these classes. The categories of investors that are
eligible
19
<PAGE>
to purchase shares and minimum investment requirements may differ for each
class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which would affect
the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special meetings
of shareholders of all series or classes when in the judgment of the Trustees it
is necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Unique Characteristics of Master/Feeder Fund Structure
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a shareholder's
interest in the Portfolio's securities is indirect. In addition to selling a
beneficial interest to the Fund, the Portfolio may sell beneficial interests to
other mutual funds or institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, other investors investing in the Portfolio
are not required to sell their shares at the same public offering prices as the
Fund, and may bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in the
Portfolio. Such differences in returns are also present in other mutual fund
structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. However, this
possibility also exists for traditionally structured funds which have large or
institutional investors. Funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Shares of the Fund for which no voting instructions have been received will be
voted in the same proportion as those shares for which voting instructions are
received. Certain changes in the Portfolio's objective, policies or restrictions
may require the Trust to withdraw the Fund's interest in the Portfolio. Any
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Fund could incur
brokerage fees or other transaction costs in converting such securities to cash.
In addition, a distribution in kind may result in a less diversified portfolio
of investments or adversely affect the liquidity of the Fund.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the disinterested
20
<PAGE>
Trustees of the Trust reasonably appropriate to deal with potential conflicts
of interest up to and including creating a separate Board of Trustees. The
Trustees of the Trust, including a majority of the disinterested Trustees,
have adopted procedures they believe are reasonably appropriate to deal with
any conflict of interest up to and including creating a separate Board of
Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista Service
Center at 1-800-34-VISTA.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund's assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by the Fund. Chase has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the division
that performs services for the Fund as custodian, or in the possession of any
affiliate of Chase. Shareholders of the Fund should be aware that, subject to
applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholder and his
account. Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing the
annualized net investment income per share during a recent 30-day period by the
maximum public offering price per share of such class on the last day of that
period.
"Total return" for the one-, five- and ten-year periods (or for the life of
a class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in
21
<PAGE>
the Fund invested at the maximum public offering price (in the case of Class
A shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B shares). Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
22
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
23
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VIE-1-596CX
[Vista Logo]
International
Equity Fund
- ------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] SMALL CAP EQUITY FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this Prospectus by
reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................ 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights .................................................... 5
How the Fund has performed
Fund Objective ......................................................... 6
Investment Policies ..................................................... 6
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management .............................................................. 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the
Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment .................................................. 10
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ................................... 10
How the Fund Values its Shares ........................................ 15
How Distributions are Made; Tax Information ........................... 15
How the Fund distributes its earnings, and tax treatment related to
those earnings
Other Information Concerning the Fund .................................. 16
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................ 19
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ................................ 21
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
--------- ---------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ........ 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* .... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ------------------------------------------
Investment Advisory Fee ....................... 0.65% 0.65%
12b-1 Fee** ................................... 0.25% 0.75%
Shareholder Servicing Fee ..................... None 0.25%
Other Expenses ............................... 0.60% 0.60%
----- -----
Total Fund Operating Expense ................. 1.50%*** 2.25%
===== =====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ .......... $62 $ 93 $125 $218
Class B Shares:
Assuming complete
redemption at the end of
the period++ +++ ........ $74 $103 $143 $240
Assuming no
redemptions+++ .......... $23 $ 70 $120 $240
- --------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the 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.
*** Chase has agreed voluntarily to waive fees payable to it and/or reimburse
expenses for a period of at least one year to the extent necessary to
prevent Total Fund Operating Expenses of Class A shares of the Fund for
such period from exceeding the amount indicated in the table.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. THE EXAMPLES
SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES OR RETURNS;
ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an investment
in the Fund. The Fund understands that Shareholder Servicing Agents may credit
to the accounts of their customers from whom they are already receiving other
fees amounts not exceeding such other fees or the fees received by the
Shareholder Servicing Agent from the Fund with respect to those accounts. See
"Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares. The information has been audited by Price
Waterhouse LLP, the Fund's independent accountants, whose report on the
financial statements which include this information and the financial statements
are incorporated by reference into the SAI. The Fund's Annual Report for the
fiscal year ended October 31, 1995, which is incorporated by reference into the
SAI, includes these financial statements and is available without charge upon
request.
Vista Small Cap Equity Fund
Class A Class B
------- --------
12/20/94* 3/28/95**
through through
10/31/95 10/31/95+
------- --------
Per Share Operating Performance:
- -------------------------------
Net Asset Value, Beginning of Period ................ $10.00 $11.39
------ ------
Income from Investment Operations:
Net Investment Income (Loss) ...................... 0.060 (0.018)
Net Gains or (Losses) in Securities
(both realized and unrealized) ................... 5.056 3.669
------ ------
Total from Investment Operations ................... 5.116 3.651
------ ------
Less Distributions:
Dividends from Net Investment Income .............. 0.042 0.027
Distributions from Capital Gains ................... 0.004 0.004
------ ------
Total Distributions ................................ 0.046 0.031
------ ------
Net Asset Value, End of Period ...................... $15.07 $15.01
====== ======
Total Return (1) .................................... 51.25% 32.09%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ............ $43,739 $21,624
Ratio of Expenses to Average Net Assets# ........... 1.51% 2.24%
Ratio of Net Investment Income to Average Net Assets# 0.52% (0.25%)
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# ................. 2.67% 3.23%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average Net Assets# . (0.64%) (1.24%)
Portfolio Turnover Rate ............ ................. 75% 75%
- ---------------
# Short periods have been annualized.
* Commencement of operations.
** Commencement of offering shares.
(1) Total rates of return are calculated before taking into account any sales
load for Class A shares or any contingent deferred sales charge for
Class B shares.
+ Calculated based upon weighted average shares outstanding during the
period.
5
<PAGE>
FUND OBJECTIVE
Vista Small Cap Equity Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it will
achieve its objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at leastb 65% of its total assets in
equity securities of smaller companies (i.e., those with market capitalizations
of $750 million or less at the time of purchase). The Fund's advisers intend to
utilize both quantitative and fundamental research to identify undervalued
stocks with a catalyst for positive change. Current income is an incidental
consideration to the Fund's objective. You should be aware that an investment in
smaller companies may be more volatile than investments in companies with
greater capitalization, as described under "Risk Factors" below.
The Fund is classified as a "non-diversified" fund under federal securities
law. The Fund's assets may be more concentrated in the securities of any single
issuer or group of issuers than if the Fund were diversified.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase agreements.
For temporary defensive purposes, the Fund may invest without limitation in
these instruments. To the extent that the Fund departs from its investment
policies during temporary defensive periods, its investment objective may not be
achieved.
In lieu of investing directly, the Fund is authorized to seek to achieve its
objective by investing all of its investable assets in an investment company
having substantially the same investment objective and policies as the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities are
normally denominated and traded in foreign currencies, the values of the Fund's
foreign investments may be affected favorably or unfavorably by currency
exchange rates and exchange control regulations. There may be less information
publicly available about foreign companies than U.S. companies, and they are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. The securities of foreign companies
may be less liquid and more volatile than the securities of comparable U.S.
companies. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Fund's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain issuers and special tax considerations will apply to foreign securities.
The risks can increase if the Fund invests in securities of issuers in emerging
markets.
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts or other similar
securities representing securities of foreign issuers (collectively, "Depositary
Receipts"). The Fund treats Depositary Receipts, Global Depositary Receipts as
interests in the under-
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lying securities for purposes of its investment policies. The Fund will limit
its investment in Depositary Receipts not sponsored by the issuer of the
underlying securities to no more than 5% of the value of its net assets (at
the time of investment).
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow for leveraging
purposes. The Fund may also sell and simultaneously commit to repurchase a
portfolio security at an agreed-upon price and time, to avoid selling securities
during unfavorable market conditions in order to meet redemptions. Whenever the
Fund enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). The Fund would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
money market instruments in its portfolio. In these transactions, the Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to the
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
Convertible Securities. The Fund may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed interest
or dividend yields which may be converted either at a stated price or stated
rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
Other Investment Companies. The Fund may invest up to 10% of its total assets
in shares of other investment companies, subject to applicable regulatory
limitations.
STRIPS. The Fund may invest up to 20% of its total assets in separately
traded principal and interest components of securities backed by the full faith
and credit of the U.S. Government, including instruments known
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as "STRIPS". The value of these instruments tends to fluctuate more in
response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency contracts; and (iv) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers to
forecast these factors correctly. Inaccurate forecasts could expose the Fund to
a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. The Fund is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Fund than
hedging strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Fund seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward contracts,
there is a greater potential that a counterparty or broker may default. In the
event of a default, the Fund may experience a loss. For additional information,
concerning derivatives, related instruments and the associated risks, see the
SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund--Certain Regulatory
Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for its
shareholders. These restrictions prohibit the Fund from: (a) with respect to 50%
of its total assets, holding more than 10% of the voting securities of any
issuer; (b) investing more than 15% of its net assets in illiquid securities
(which include securities restricted as to resale unless they are determined to
be readily marketable in accordance with procedures established by the Board of
Trustees); or (c) investing more than 25% of its total assets in any one
industry. A complete description of these and other investment policies is
included in the SAI. Except for the Fund's investment objective, restriction (c)
and investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental policy without shareholder approval.
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Risk Factors
The net asset value of the shares of the Fund can be expected to fluctuate
based on the value of the securities in the Fund's portfolio. The Fund is
aggressively managed and, therefore, the value of its shares is subject to
greater fluctuation and an investment in its shares involves a higher degree of
risk than an investment in a conservative equity fund or a growth fund investing
entirely in proven growth equities. An investment in the Fund should not be
considered a complete investment program and may not be appropriate for all
investors.
The securities of smaller companies often trade less frequently and in more
limited volume, and may be subject to more abrupt or erratic price movements,
than securities of larger, more established companies. Such companies may have
limited product lines, markets or financial resources, or may depend on a
limited management group. Because the Fund is "non-diversified," the value of
the its shares more susceptible to developments affecting issuers in which the
Fund invests.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly based at an
annual rate equal to 0.65% of the Fund's average daily net assets. Chase is
located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary of
Chase. CAM makes investment decisions for the Fund on a day-to-day basis. For
these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.30% of the Fund's average daily net
assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management at
Chase, Jill Greenwald, Vice President of Chase, and Medha Vora, a Senior
Portfolio Manager at Chase, are responsible for the day-to-day management of the
Fund's portfolio. Mr. Klassen and Ms. Greenwald have had such responsibility
since the Fund's inception, and Ms. Vora joined the Fund's portfolio management
team in May 1996. Mr. Klassen joined Chase in March 1992 and, in addition to
managing the Fund, is a manager of the Vista Growth and Income Portfolio and the
Vista Capital Growth Portfolio. Prior to joining Chase, Mr. Klassen was a vice
president and portfolio manager at Dean Witter Reynolds, responsible for
managing several mutual funds and other accounts. Ms. Greenwald joined Chase in
1993, specializing in small cap issues. Prior to joining Chase, Ms. Greenwald
was a Director
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for Prudential Equity Investors and a Senior Analyst for Fred Alger
Management, Inc. Ms. Vora joined Chase in 1996. Prior to joining Chase, Ms.
Vora was a Senior Vice President and Associate Portfolio Manager at Trust
Company of the West, specializing in small and mid cap issues.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales charge
at the time of purchase. As a result, Class A shares are not subject to any
sales charges when they are redeemed. Certain purchases of Class A shares
qualify for reduced sales charges. Class A shares have lower combined 12b-1 and
service fees than Class B shares. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales charge, but
are subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of shares
provides a more suitable investment for an investor depends on a number of
factors, including the amount and intended length of the investment. Investors
making investments that qualify for reduced sales charges might consider Class A
shares. Investors who prefer not to pay an initial sales charge might consider
Class B shares. In almost all cases, investors planning to purchase $250,000 or
more of the Fund's shares will pay lower aggregate charges and expenses by
purchasing Class A shares.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments at
any time with as little as $100. You can buy Fund shares three ways--through an
investment representative, through the Fund's distributor by calling the Vista
Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, credit cards and cash will not be accepted. The
Fund reserves the right to reject any purchase order or cease offering shares
for purchase at any time. When purchases are made by check, redemptions will not
be allowed until clearance of the purchase check, which may take 15 calendar
days or longer. In addition, the redemption of shares purchased through ACH will
not be allowed until clearance of your payment, which may take 7 business days
or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
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Buying shares through systematic investing. You can make regular investments
of $100 or more per transaction through automatic periodic deduction from your
bank checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter with signature guarantee and a deposit slip or voided check to the
Vista Service Center. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price, the
Vista Service Center must receive your order before the close of regular trading
on the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
Sales charge as a Amount of sales charge
percentage of: reallowed to
--------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price($) price invested offering price
- ------------------------------- -------- --------- -----------------------
Under 100,000 ................. 4.75 4.99 4.00
100,000 but under 250,000 .... 3.75 3.90 3.25
250,000 but under 500,000 .... 2.50 2.56 2.25
500,000 but under 1,000,000 ... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 1.00% of the amount under $2.5 million,
0.75% of the next $7.5 million, 0.50% of the next $40 million and 0.20%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be
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redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
A participant-directed employee benefit plan participating in a "multi-fund"
program approved by the Board of Trustees may include amounts invested in the
other mutual funds participating in such program for purposes of determining
whether the plan may purchase Class A shares at net asset value. These
investments will also be included for purposes of the discount privileges and
programs described above.
The Fund may sell Class A shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds, 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 Chase or an affiliate serves as trustee or
custodian of the plan or manages some portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee for
its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial planner,
provided arrangements are preapproved and purchases are placed through an
omnibus account with the Fund or (ii) by clients of such invest-
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<PAGE>
ment adviser or financial planner who place trades for their own accounts, if
such accounts are linked to a master account of such investment adviser or
financial planner on the books and records of the broker or agent. Such
purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista fund as of November 30, 1990 and certain
immediate family members may purchase Class A shares of the Fund with no initial
sales charge for as long as they continue to own Class A shares of any Vista
fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company. The CDSC will be waived on redemption of
Class B shares arising out of death or disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the value of Class
B shares subject to a systematic withdrawal plan may also be redeemed each year
without a CDSC, provided that the Class B account had a minimum balance of
$20,000 at the time the systematic withdrawal plan was established. The SAI
contains additional information about purchasing the Fund's shares at reduced
sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset value calculated
after the Fund receives your request in proper form, less any applicable CDSC.
In order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required. The
Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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<PAGE>
The Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected payment
of the purchase price of your shares. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Fund. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal plan
for Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to a CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares
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<PAGE>
acquired through the exchange, the redemption may be subject to the CDSC,
depending upon when you originally purchased the shares. The CDSC will be
computed using the schedule of any fund into or from which you have exchanged
your shares that would result in your paying the highest CDSC applicable to
your class of shares. In computing the CDSC, the length of time you have
owned your shares will be measured from the date of original purchase and
will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds other
than the Class B shares of the Vista Prime Money Market Fund will be treated as
a redemption--and therefore subject to the conditions of the CDSC--and a
subsequent purchase. Class B shares of any Vista non-money market fund may be
exchanged into the Class B shares of the Vista Prime Money Market Fund in order
to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding. Ask your investment representative or the Vista Service
Center for prospectuses of other Vista funds. Shares of certain Vista funds are
not available to residents of all states.
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 in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time, however, options are
priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least semi-annually and any
net realized capital gains at least annually. Distributions from capital gains
are made after applying any available capital loss carryovers. Dis-
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<PAGE>
tributions paid by the Fund with respect to Class A shares will generally be
greater than those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a pre-established
bank account while reinvesting capital gains distributions in additional shares
without a sales charge; or (3) receive all distributions in cash or by ACH. You
can change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the class on which the distributions are paid.
You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Vista fund. If the Vista Service Center does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if correspondence
sent by the Fund or the Vista Service Center is returned as "undeliverable,"
distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
All Fund distributions will be taxable to you as ordinary income, except that
any distributions of net long-term capital gains will be taxable as such,
regardless of how long you have held the shares. Distributions will be taxable
as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares which
provide that the Fund will pay distribution fees at annual rates of up to 0.25%
and 0.75% of the average daily net assets attributable to Class A and Class B
shares of the Fund, respectively. Payments under the
16
<PAGE>
distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to
the amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or maintenance commissions at an annual rate of up
to 0.25% of the average daily net asset value of Class A or Class B shares
maintained in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended
to promote the sale of Class A and Class B shares will be conducted generally
by the Vista Family of Funds, and activities intended to promote the Fund's
Class A or Class B shares may also benefit the Fund's other shares and other
Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater or entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class B shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily net
assets of Class B shares of the Fund held by investors for whom the shareholder
servicing agent maintains a servicing relationship. Shareholder servicing agents
may subcontract with other parties for the provision of shareholder support
services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets.
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<PAGE>
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may be
held by sub-custodian banks if such arrangements are reviewed and approved by
the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
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
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of shares
in addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which will affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
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<PAGE>
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of all series or classes when in the judgment of the Trustees it is
necessary or desirable to submit matters for a shareholder vote. The Trustees
will promptly call a meeting of shareholders to remove a trustee(s) when
requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial banking
relationships with the issuers of securities purchased on behalf of the Fund,
including outstanding loans to such issuers which may be repaid in whole or in
part with the proceeds of securities so purchased. Chase and its affiliates
deal, trade and invest for their own accounts in U.S. Government obligations,
municipal obligations and commercial paper and are among the leading dealers of
various types of U.S. Government obligations and municipal obligations. Chase
and its affiliates may sell U.S. Government obligations and municipal
obligations to, and purchase them from, other investment companies sponsored by
the Fund's distributor or affiliates of the distributor. Chase will not invest
the Fund's assets in any U.S. Government obligations, municipal obligations or
commercial paper purchased from itself or any affiliate, although under certain
circumstances such securities may be purchased from other members of an
underwriting syndicate in which Chase or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased by the Fund.
Chase has informed the Fund that in making its investment decisions, it does not
obtain or use material inside information in the possession of any other
division or department of Chase, including the division that performs services
for the Fund as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
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<PAGE>
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life of a
class, if shorter) through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of $1,000 in the Fund
invested at the maximum public offering price (in the case of Class A shares) or
reflecting the deduction of any applicable contingent deferred sales charge (in
the case of Class B shares). Total return may also be presented for other
periods or without reflecting sales charges. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
INST-SC-1-596CX
[Vista Logo]
Small Cap
Equity Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
VISTA[SM] SMALL CAP EQUITY FUND INSTITUTIONAL SHARES
PROSPECTUS -- May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
Fund Objective ............................................................ 4
Investment Policies ....................................................... 4
Management ................................................................ 7
How to Purchase, Redeem and Exchange Shares ............................... 8
How the Fund Values its Shares ............................................ 10
How Distributions are Made; Tax Information ............................... 10
Other Information Concerning the Fund ..................................... 11
Performance Information ................................................... 14
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------
Investment Advisory Fee ............................................... 0.65%
12b-1 Fee ............................................................. None
Shareholder Servicing Fee (after estimated waiver)* ................... 0.00%
Other Expenses ........................................................ 0.45%
----
Total Fund Operating Expenses (after waiver of fee)* .................. 1.10%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares ........... $11 $35 $61 $134
- ---------------
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waiver, the
Shareholder Servicing Fee would be 0.25% and Total Fund Operating Expenses
would be 1.35%. Chase has agreed voluntarily to waive fees payable to it
and/or reimburse expenses for a period of at least one year to the extent
necessary to prevent Total Fund Operating Expenses of Institutional Shares
of the Fund for such period from exceeding the amount indicated in the
table. In addition, Chase has agreed to waive fees payable to it and/or
reimburse expenses for a two year period to the extent necessary to prevent
Total Fund Operating Expenses of Institutional Share of the Fund from
exceeding 1.22% during such period.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FUND OBJECTIVE
Vista Small Cap Equity Fund seeks long-term capital growth. The Fund is
not intended to be a complete investment program, and there is no assurance
it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of smaller companies (i.e., those with market
capitalizations of $750 million or less at the time of purchase). The Fund's
advisers intend to utilize both quantitative and fundamental research to
identify undervalued stocks with a catalyst for positive change. Current
income is an incidental consideration to the Fund's objective. You should be
aware that an investment in smaller companies may be more volatile than
investments in companies with greater capitalization, as described under
"Risk Factors" below.
The Fund is classified as a "non-diversified" fund under federal
securities law. The Fund's assets may be more concentrated in the securities
of any single issuer or group of issuers than if the Fund were diversified.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. To the extent that the Fund departs from its
investment policies during temporary defensive periods, its investment
objective may not be achieved.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts. Since foreign securities
are normally denominated and traded in foreign currencies, the values of the
Fund's foreign investments may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign companies than U.S. companies,
and they are not generally subject to accounting, auditing and financial
reporting standards and practices comparable to those in the U.S. The
securities of foreign companies may be less liquid and more volatile than the
securities of comparable U.S. companies. Foreign settlement procedures and
trade regulations may involve certain risks (such as delay in payment or
delivery of securities or in the recovery of the Fund's assets held abroad)
and expenses. It is possible that nationalization or expropriation of assets,
imposition of currency exchange controls, confiscatory taxation, political or
financial instability and diplomatic developments could affect the value of
the Fund's investments in certain foreign countries. Foreign laws may
restrict the ability to invest in certain issuers and special tax
considerations will apply to foreign securities. The risks can increase if
the Fund invests in securities of issuers in emerging markets.
4
<PAGE>
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global Depositary
Receipts or other similar securities representing securities of foreign issuers
(collectively, "Depositary Receipts"). The Fund treats Depositary Receipts as
interests in the underlying securities for purposes of its investment policies.
The Fund will limit its investment in Depositary Receipts not sponsored by the
issuer of the underlying securities to no more than 5% of the value of its net
assets (at the time of investment).
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
money market instruments in its portfolio. In these transactions, the Fund
would acquire the right to sell a security at an agreed upon price within a
specified period prior to its maturity date. These transactions involve some
risk to the Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the cost
of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
Convertible Securities. The Fund may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price
or stated rate for common or preferred stock. Although to a lesser extent
than with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase, and increase as
interest rates decline. Because of the conversion feature, the market value
of convertible securities also tends to vary with fluctuations in the market
value of the underlying common or preferred stock.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
5
<PAGE>
STRIPS. The Fund may invest up to 20% of its total assets in separately
traded principal and interest components of securities backed by the full faith
and credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency
contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Portfolio's portfolio
transactions will vary from year to year. The Portfolio's investment policies
may lead to frequent changes in investments, particularly in periods of
rapidly changing market conditions. High portfolio turnover rates would
generally result in higher transaction costs, including brokerage commissions
or dealer mark-ups, and would make it more difficult for the Portfolio to
qualify as a registered investment company under federal tax law. See "How
Distributions are Made; Tax Information" and "Other Information Concerning
the Fund--Certain Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 50% of its total assets, holding more than 10% of the voting securities of
any issuer; (b) investing more than 15% of its net assets in illiquid
securities (which include securities restricted as to resale unless they are
determined to be readily marketable in
6
<PAGE>
accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) and investment
policies designated as fundamental in the SAI, the Fund's investment policies
are not fundamental. The Trustees may change any non-fundamental policy
without shareholder approval.
Risk Factors
The net asset value of the shares of the Fund can be expected to fluctuate
based on the value of the securities in the Fund's portfolio. The Fund is
aggressively managed and, therefore, the value of its shares is subject to
greater fluctuation and an investment in its shares involves a higher degree
of risk than an investment in a conservative equity fund or a growth fund
investing entirely in proven growth equities. An investment in the Fund
should not be considered a complete investment program and may not be
appropriate for all investors.
The securities of smaller companies often trade less frequently and in
more limited volume, and may be subject to more abrupt or erratic price
movements, than securities of larger, more established companies. Such
companies may have limited product lines, markets or financial resources, or
may depend on a limited management group. Because the Fund is
"non-diversified," the value of the its shares more susceptible to
developments affecting issuers in which the Fund invests.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.65% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.30% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. Dave Klassen, Director of Domestic Equity Management
at Chase, Jill Greenwald, Vice President of Chase, and Medha Vora, a Senior
Portfolio Manager at Chase, are responsible for the day-to-day management of
the Fund's portfolio. Mr. Klassen and Ms. Greenwald have had such
7
<PAGE>
responsibility since the Fund's inception, and Ms. Vora joined the Fund's
portfolio management team in May 1996. Mr. Klassen joined Chase in March 1992
and, in addition to managing the Fund, is a manager of the Vista Growth and
Income Portfolio and the Vista Capital Growth Portfolio. Prior to joining
Chase, Mr. Klassen was a vice president and portfolio manager at Dean Witter
Reynolds, responsible for managing several mutual funds and other accounts.
Ms. Greenwald joined Chase in 1993, specializing in small cap issues. Prior
to joining Chase, Ms. Greenwald was a Director for Prudential Equity
Investors and a Senior Analyst for Fred Alger Management, Inc. Ms. Vora
joined Chase in 1996. Prior to joining Chase, Ms. Vora was a Senior Vice
President and Associate Portfolio Manager at Trust Company of the West,
specializing in small and mid cap issues.
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are sold at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any
time at the net asset value next determined after a redemption request in
proper form is furnished by you to your Dealer and transmitted to and
received by the Vista Service Center. A wire redemption may be requested by
telephone to the Vista Service Center. For telephone redemptions, call the
Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
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<PAGE>
The Fund generally sends you payment for your shares by wire in federal
funds on the business day after your request is received in proper form. Under
unusual circumstances, the Fund may suspend redemptions, or postpone payment for
more than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her
representative, who can provide the fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you
will receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer Institutional Shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In
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<PAGE>
addition, any shareholder who makes more than ten exchanges of shares
involving the Fund in a year or three in a calendar quarter will be charged a
$5.00 administration fee for each such exchange. Shareholders would be
notified of any such action to the extent required by law. Consult the Vista
Service Center before requesting an exchange. The exchange privilege is
subject to change or termination. See the SAI to find out more about the
exchange privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least semi-annually and
any net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by the Fund may qualify
for the 70% dividends- received deduction for corporate shareholders.
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<PAGE>
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date of
such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
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Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of inves-
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tors that are eligible to purchase shares may differ for each class of Fund
shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service
fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call
1-800-622-4273 to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or
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use material inside information in the possession of any other division or
department of Chase, including the division that performs services for the
Fund as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among
themselves certain information about the shareholder and his account.
Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the public offering price. Total return may also be
presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- ----------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VSC-1-596CX
[Vista Logo]
Small Cap
Equity Fund
Institutional Shares
- ----------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] U.S. GOVERNMENT SECURITIES FUND
Class A Shares
May 6, 1996
Investment Strategy: Total Return
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary .......................................................... 3
The expenses you might pay on your Fund investment, including examples
Fund Objective ........................................................... 4
Investment Policies ....................................................... 4
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ................................................................ 9
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
How to Buy, Sell and Exchange Shares ...................................... 9
How the Fund Values its Shares ........................................... 14
How Distributions are Made; Tax Information .............................. 14
How the Fund distributes its earnings, and tax treatment
related to those earnings
Other Information Concerning the Fund ..................................... 15
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................... 18
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ................................... 19
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................................ 4.50%
Maximum Deferred Sales Charge
(as a percentage of the lower of
original purchase price or
redemption proceeds) ............................................... None
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------
Investment Advisory Fee ............................................. 0.30%
12b-1 Fee* ........................................................... 0.25%
Shareholder Servicing Fee (after estimated waiver)** ................ 0.15%
Other Expenses ...................................................... 0.35%
Total Fund Operating Expenses (after waiver of fee)** ............... 1.05%
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years
------ -------
Class A Shares+..................................... $55 $77
- ---------------
* Long-term shareholders in mutual funds with 12b-1 fees, such as Class
A shareholders of the 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.
** Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waiver,
the Shareholder Servicing Fee would be 0.25% and Total Fund Operating
Expenses would be 1.15%.
+ Assumes deduction at the time of purchase of the maximum sales charge.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FUND OBJECTIVE
Vista U.S. Government Securities Fund seeks as high a level of total
return as is consistent with the preservation of capital. Total return
consists of income and capital appreciation. The Fund is not intended to be a
complete investment program, and there is no assurance it will achieve its
objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 65% of its
total assets in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and related repurchase agreements. There is no
restriction on the maturity of the Fund's portfolio or any individual
portfolio security, and the Fund's advisers are free to take advantage of the
entire range of maturities of securities eligible for the Fund's portfolio.
The Fund may invest extensively in mortgage-backed securities issued or
guaranteed by certain agencies of the U.S. Government, as described below.
The Fund's advisers may adjust the average maturity of the Fund's
portfolio based upon their assessment of the relative yields available on
securities of different maturities and their expectations of future changes
in interest rates. Since the Fund invests extensively in U.S. Government
securities, certain of which have less credit risk than that associated with
other securities, the level of income achieved by the Fund may not be as high
as that of other funds which invest in lower quality securities.
The Fund may invest the portion of its assets not invested in U.S.
Government securities and related repurchase agreements in nonconvertible
corporate debt securities of domestic and foreign issuers, such as bonds and
debentures. These securities must be rated, at the time of investment, at
least in the category A or the equivalent by Moody's Investors Service, Inc.,
or Standard & Poor's Corporation, or Fitch Investor's Service Inc., or
another national rating organization, or if unrated, of comparable quality as
determined by the Fund's advisers.
The Fund may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limitation in these
instruments. To the extent that the Fund departs from its investment policies
during temporary defensive periods, its investment objective may not be
achieved.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
U.S. Government Securities. The Fund may invest in U.S. Treasury
obligations, which are bills, notes and bonds backed by the full faith and
credit of the U.S. Government as to payment of principal and interest which
generally differ only in their interest rates and maturities. The Fund also
may invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities, including obligations that are supported by the full faith
and credit of the U.S. Treasury, the limited authority of the issuer or
guarantor to borrow from the U.S.
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Treasury, or only the credit of the issuer or guarantor. 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.
Foreign Securities. The Fund may invest in foreign obligations issued or
guaranteed by foreign governments and supranational entities, and in
non-convertible corporate debt securities of foreign issuers. Supranational
entities include organizations such as The World Bank, the European
Community, the European Coal and Steel Community and the Asian Development
Bank. Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Fund's foreign investments may be affected
favorably or unfavorably by currency exchange rates and exchange control
regulations. There may be less information publicly available about foreign
issuers than U.S. issuers, and they are not generally subject to accounting,
auditing and financial reporting standards and practices comparable to those
in the U.S. The securities of foreign issuers may be less liquid and more
volatile than the securities of comparable U.S. issuers. Foreign settlement
procedures and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the Fund's assets
held abroad) and expenses. It is possible that nationalization or
expropriation of assets, imposition of currency exchange controls,
confiscatory taxation, political or financial instability and diplomatic
developments could affect the value of the Fund's investments in certain
foreign countries. Foreign laws may restrict the ability to invest in certain
countries or issuers and special tax considerations will apply to foreign
securities. The risks can increase if the Fund invests in securities of
issuers in emerging markets.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, the Fund would acquire
the right to sell a security at an agreed upon price within a specified
period prior to its maturity
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date. These transactions involve some risk to the Fund if the other party
should default on its obligation and the Fund is delayed or prevented from
recovering the collateral or completing the transaction. Acquisition of puts
will have the effect of increasing the cost of the securities subject to the
put and thereby reducing the yields otherwise available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Fund may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at
substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped
obligations, which are separately traded principal and interest components of
an underlying obligation. The value of these instruments tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The
Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
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. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate the Fund to pay a "tender fee" to a third party.
Demand features provided by foreign banks involve certain risks associated
with foreign investments.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
Mortgage-Related Securities. The Fund may invest extensively in
mortgage-related securities issued or guaranteed by certain agencies of the
U.S. Government. The Fund will not invest in principal-only or interest-only
stripped mortgage-backed securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments
of both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities. Early repayment of
principal on mortgage pass-through securities held by the Fund (due to
prepayments of principal on the underlying mortgage loans) may result in a
lower rate of return when the Fund reinvests such principal. In addition, if
the Fund purchased the securities at a premium, early repayment would cause
the value of the premium to 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.
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Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
U.S. Government, or by agencies or instrumentalities of the U.S. Government
(which guarantees are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by nongovernmental issuers may be supported by various forms
of insurance or guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to a
bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; (iv) purchase and sell mortgage-backed and
asset-backed securities; and (v) purchase and sell structured products, which
are instruments designed to restructure or reflect the characteristics of
certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks
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<PAGE>
to close out a derivatives position. Activities of large traders in the
futures and securities markets involving arbitrage, "program trading," and
other investment strategies may cause price distortions in derivatives
markets. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default. In the event of a default, the Fund may
experience a loss. For additional information concerning derivatives, related
instruments and the associated risks, see the SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its assets, holding more than 10% of the voting securities of any
issuer or investing more than 5% of its net assets in the securities of any
one issuer (other than U.S. Government obligations); (b) investing more than
15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with the
types of investments it may make, as described above, as well as the risks
discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While U.S. Government securities generally are of
high quality, government securities that are not backed by the full faith and
credit of the U.S. Treasury may be affected by changes in the
creditworthiness of the agency that issued them. Guarantees of principal and
interest on obligations that may be purchased by the Fund are not guarantees
of the market value of such obligations, nor do they extend to the value of
shares of the Fund. Other fixed-income securities in which the Fund may
invest, while of investment-grade quality, may be of lesser credit quality
than U.S. Government securities.
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For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.30% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.15% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. John Schmucker and Alex Powers, Vice Presidents of
Chase, have been responsible for the day-to-day management of the Fund's
portfolio since its inception in May 1996. Prior to joining Chase in May
1996, Mr. Schmucker was responsible for the day-to-day management of The
Hanover U.S. Government Securities Fund, the Fund's predecessor, as a vice
president and portfolio manager at The Portfolio Group, Inc. Prior to joining
The Portfolio Group, Inc. 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. Mr. Powers is also the
manager of the Vista U.S. Treasury Income Fund and a manager of the Vista
Balanced Fund, Vista Short-Term Bond Fund and Vista Bond Fund. He also
manages various individual and institutional accounts. Mr. Powers is part of
a team responsible for fixed-income strategy, research and trading with
Chase. Prior to joining Chase in 1988, he spent six years as Vice President
and Portfolio Manager at Liberty Capital, an institutional fixed-income
advisory firm.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Fund's distributor by
calling the Vista Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Fund reserves the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until
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clearance of the purchase check, which may take 15 calendar days or longer.
In addition, the redemption of shares purchased through ACH will not be
allowed until clearance of your payment, which may take 7 business days or
longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
Offering Price
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of: Amount of sales charge
--------------------- reallowed to dealers as a
Amount of transaction at Offering Net amount percentage of offering
offering price Price invested price
- ------------------------------ --------- ---------- -------------------------
Under 100,000 ............... 4.50 4.71 4.00
100,000 but under 250,000 ... 3.75 3.90 3.25
250,000 but under 500,000 ... 2.5 2.56 2.25
500,000 but under 1,000,000 .. 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Fund's distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases. Such commissions are paid at the rate of 0.75% of the amount under
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$2.5 million, 0.50% of the next $7.5 million, 0.25% of the next $40 million
and 0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-Vista
mutual funds on which the investor paid a front-end or contingent deferred
sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value. These investments will also be included for purposes of the discount
privileges and programs described above.
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their families),
current and retired employees (and their families) of Chase, the Fund's
distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their families) of financial institutions having selected
dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to
sales of Vista fund shares), financial institution trust departments
investing an aggregate of $1 million or more in the Vista Family of Funds and
clients of certain administrators of tax-qualified plans when proceeds from
repayments of loans to participants are invested (or reinvested) in the Vista
Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the Vista
Service Center.
Shareholders of record of any Vista Fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with
no initial sales charge for as long as they continue to own Class A shares of
any Vista fund, provided there is no change in account registration.
Shareholders of record of any
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portfolio of The Hanover Funds, Inc. or The Hanover Investment Funds, Inc. as
of May 3, 1996 and certain related investors may purchase Class A shares of
the Fund with no initial sales charge for as long as they continue to own
shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The SAI contains additional
information about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Fund at net
asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York
Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
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<PAGE>
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan. Call the Vista Service
Center at 1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
13
<PAGE>
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains
at least annually. Distributions from capital gains are made after applying
any available capital loss carryover.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not
paid in cash or by ACH will be reinvested in shares of the class on which the
distributions are paid. You will receive a statement confirming reinvestment
of distributions in additional Fund shares promptly following the quarter in
which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long- term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Distributions may also be subject to state and local taxes. However, the
laws of most states and localities except from some types of taxes
distributions such as those made by the Fund to the extent such distributions
are attributable to interest from obligations of the U.S. Government and
certain of its agencies and instrumentalities.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
14
<PAGE>
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted a Rule 12b-1 distribution plan which provides that the Fund will
pay distribution fees at annual rates of up to 0.25% of the average daily net
assets attributable to Class A shares of the Fund. Payments under the
distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.25% of the
average daily net asset value of Class A shares maintained in the Fund by
customers of these broker-dealers. Trail or maintenance commissions are paid
to broker-dealers beginning the 13th month following the purchase of shares
by their customers. Some activities intended to promote the sale of Class A
shares will be conducted generally by the Vista Family of Funds, and
activities intended to promote the Fund's Class A shares may also benefit the
Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging
and meals, in connection with attendance at training and educational meetings
within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
15
<PAGE>
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
Administrator and Sub-Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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 the Trust shall not be voted. Shares of each class of the
Fund generally vote
16
<PAGE>
together except when required under federal securities laws to vote
separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Class A shares of the Fund. The Fund offers other classes of shares in
addition to this class. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class
of Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service
fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be
17
<PAGE>
purchased by the Fund. Chase has informed the Fund that in making its
investment decisions, it does not obtain or use material inside information
in the possession of any other division or department of Chase, including the
division that performs services for the Fund as custodian, or in the
possession of any affiliate of Chase. Shareholders of the Fund should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account. Transactions with affiliated broker-dealers will
only be executed on an agency basis in accordance with applicable federal
regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income calculated pursuant to federal rules per
share during a recent 30-day period by the maximum public offering price per
share of such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the maximum public offering price and reflects the
deduction of the maximum initial sales charge. Total return may also be
presented for other periods or without reflecting sales charges. Any
quotation of investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if such sales
charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses. Investment performance also
often reflects the risks associated with the Fund's investment objectives and
policies. These factors should be considered when comparing the Fund's
investment results to those of other mutual funds and other investment
vehicles. Quotation of investment performance for any period when a fee
waiver or expense limitation was in effect will be greater than if the waiver
or limitation had not been in effect. The Fund's performance may be compared
to other mutual funds, relevant indices and rankings prepared by independent
services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100
or more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you
to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value
next determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VUSGS-1-596CX
[Vista Logo]
U.S. Government
Securities Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] U.S. GOVERNMENT SECURITIES FUND
Institutional Shares
May 6, 1996
Investment Strategy: Total Return
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................ 3
Financial Highlights .................................................... 4
Fund Objective ......................................................... 5
Investment Policies ..................................................... 5
Management .............................................................. 10
How to Purchase, Redeem and Exchange Shares ............................ 10
How the Fund Values its Shares ......................................... 12
How Distributions are Made; Tax Information ............................ 13
Other Information Concerning the Fund ................................... 14
Performance Information ................................................. 17
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Annual Fund Operating Expenses
- ------------------------------
(as a percentage of average net assets)
Investment Advisory Fee ....................................... 0.30%
12b-1 Fee ..................................................... None
Shareholder Servicing Fee (after estimated waiver)* ............ 0.20%
Other Expenses ................................................. 0.35%
------
Total Fund Operating Expenses (after waiver of fee)* ........... 0.85%
======
Example
- -----------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years
------ -------
Institutional Shares ............... $ 9 $ 27
- ---------------
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waiver, the
Shareholder Servicing Fee would be 0.25% and Total Fund Operating Expenses
would be 0.90%. Chase has agreed voluntarily to waive fees payable to it
and/or reimburse expenses for a period of at least one year to the extent
necessary to prevent Total Fund Operating Expenses of Institutional Shares
of the Fund for such period from exceeding the amount indicated in the
table.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
On May 3, 1996, The Hanover U.S. Government Securities Fund (the
"Predecessor Fund") merged into Vista U.S. Government Securities Fund, which
was created to be the successor to the Predecessor Fund. The table set forth
below provides selected per share data and ratios for one Share of the
Predecessor Fund for each period shown. This information is supplemented by
financial statements and accompanying notes appearing in the Predecessor
Fund's Annual Report to Shareholders for the fiscal year ended November 30,
1995, which is incorporated by reference into the SAI. The financial
statements and notes, as well as the financial information set forth in the
table below, unless otherwise indicated, have been audited by KPMG Peat
Marwick LLP, independent accountants, whose report thereon is also included
in the Predecessor Fund's Annual Report to Shareholders. Shareholders can
obtain a copy of this Annual Report by contacting the Fund.
Vista U.S. Government Securities Fund
<TABLE>
<CAPTION>
Years ended Period Ended
November 30, November 30,
1995 1994 1993* 1995**
------- ------------ ------- --------------
Investor Shares Advisor Shares
Per Share Operating Performance
- -------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ............ $ 9.23 $ 10.27 $ 10.00 $ 9.59
Income From Investment Operations Net
Investment Income ............................ 0.56 0.50 0.34 0.30
Net gain (loss) on securities
(both realized and unrealized) ................ 0.95 (0.94) 0.27 0.61
------- ------- -------- -------
Total from Investment Operations ................ 1.51 (0.44) 0.61 0.91
------- ------- -------- -------
Less Distributions:
Dividends from net investment income ........... (0.56) (0.50) (0.34) (0.32)
Distributions from capital gains ............... -- (0.10) -- --
------- ------- -------- -------
Total Distributions ............................ (0.56) (0.60) (0.34) (0.32)
------- ------- -------- -------
Net Asset Value, End of Period ................. $ 10.18 $ 9.23 $ 10.27 $ 10.18
======= ======= ======== =======
Total Return*** ................................ 16.82% (4.41%) 6.16% 9.57%
Ratios/Supplemental Data Net Assets, End of
Period (000 omitted) ......................... $83,304 $83,649 $86,089 $ 28
Ratio of Expenses to Average Net Assets# ....... 0.85% 0.85% 0.85% 0.83%
Ratio of Net Investment Income to Average Net
Assets# ...................................... 5.78% 5.15% 4.26% 5.43%
Ratio of expenses without waivers and
assumption of expenses to Average Net
Assets# ...................................... 1.11% 1.04% 1.04% 6.65%
Ratio of net investment income without waivers
and assumption of expenses to Average Net
Assets (unaudited)# .......................... 5.52% 4.96% 4.07% (0.39%)
Portfolio Turnover Rate ......................... 220.12% 134.29% 37.45% 220.12%
</TABLE>
# Short periods have been annualized.
* Fund commenced operations on February 19, 1993.
** Sales of Advisor Shares began on May 3, 1995.
*** Total return figures do not include the effect of any sales load.
4
<PAGE>
FUND OBJECTIVE
Vista U.S. Government Securities Fund seeks as high a level of total
return as is consistent with the preservation of capital. Total return
consists of income and capital appreciation. The Fund is not intended to be a
complete investment program, and there is no assurance it will achieve its
objective.
INVESTMENT POLICIES
Investment Approach
Under normal market conditions, the Fund will invest at least 65% of its
total assets in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and related repurchase agreements. There is no
restriction on the maturity of the Fund's portfolio or any individual
portfolio security, and the Fund's advisers are free to take advantage of the
entire range of maturities of securities eligible for the Fund's portfolio.
The Fund may invest extensively in mortgage-backed securities issued or
guaranteed by certain agencies of the U.S. Government, as described below.
The Fund's advisers may adjust the average maturity of the Fund's
portfolio based upon their assessment of the relative yields available on
securities of different maturities and their expectations of future changes
in interest rates. Since the Fund invests extensively in U.S. Government
securities, certain of which have less credit risk than that associated with
other securities, the level of income achieved by the Fund may not be as high
as that of other funds which invest in lower quality securities.
The Fund may invest the portion of its assets not invested in U.S.
Government securities and related repurchase agreements in nonconvertible
corporate debt securities of domestic and foreign issuers, such as bonds and
debentures. These securities must be rated, at the time of investment, at
least in the category A or the equivalent by Moody's Investors Service, Inc.,
or Standard & Poor's Corporation, or Fitch Investor's Service Inc., or
another national rating organization, or if unrated, of comparable quality as
determined by the Fund's advisers.
The Fund may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limitation in these
instruments. To the extent that the Fund departs from its investment policies
during temporary defensive periods, its investment objective may not be
achieved.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
U.S. Government Securities. The Fund may invest in U.S. Treasury
obligations, which are bills, notes and bonds backed by the full faith and
credit of the U.S. Government as to payment of principal and interest which
generally differ only in their interest rates and maturities. The Fund also
may invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities, including obli-
5
<PAGE>
gations that are supported by the full faith and credit of the U.S. Treasury,
the limited authority of the issuer or guarantor to borrow from the U.S.
Treasury, or only the credit of the issuer or guarantor. 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.
Foreign Securities. The Fund may invest in foreign obligations issued or
guaranteed by foreign governments and supranational entities, and in
non-convertible corporate debt securities of foreign issuers.
Supranational entities include organizations such as The World Bank, the
European Community, the European Coal and Steel Community and the Asian
Development Bank. Since foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's foreign investments
may be affected favorably or unfavorably by currency exchange rates and
exchange control regulations. There may be less information publicly
available about foreign issuers than U.S. issuers, and they are not generally
subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. The securities of foreign issuers
may be less liquid and more volatile than the securities of comparable U.S.
issuers. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Fund's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain countries or issuers and special tax considerations will apply to
foreign securities. The risks can increase if the Fund invests in securities
of issuers in emerging markets.
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these trans-
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actions, the Fund would acquire the right to sell a security at an agreed
upon price within a specified period prior to its maturity date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction. Acquisition of puts will have the
effect of increasing the cost of the securities subject to the put and
thereby reducing the yields otherwise available from such securities.
Zero Coupon Securities, Payment-in-Kind Obligations and Stripped
Obligations. The Fund may invest in zero coupon securities issued by
governmental and private issuers. Zero coupon securities are debt securities
that do not pay regular interest payments, and instead are sold at
substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped
obligations, which are separately traded principal and interest components of
an underlying obligation. The value of these instruments tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. The
Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
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. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate the Fund to pay a "tender fee" to a third party.
Demand features provided by foreign banks involve certain risks associated
with foreign investments.
Inverse Floaters and Interest Rate Caps. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate security. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, know as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than securities which do not include such a structure.
Mortgage-Related Securities. The Fund may invest extensively in
mortgage-related securities issued or guaranteed by certain agencies of the
U.S. Government. The Fund will not invest in principal- only or interest-only
stripped mortgage-backed securities. Mortgage pass-through securities are
securities representing interests in "pools" of mortgages in which payments
of both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities. Early repayment of
principal on mortgage pass-through securities held by the Fund (due to
prepayments of principal on the underlying mortgage loans) may result in a
lower rate of return when the Fund reinvests such principal. In addition, if
the Fund purchased the securities at a premium, early repayment would cause
the value of the premium
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to 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 U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Mortgage pass-through securities created by nongovernmental issuers may be
supported by various forms of insurance or guarantees.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole mortgage loans but are more
typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs
are structured into multiple classes, with each class having a different
expected average life and/or stated maturity. Monthly payments of principal,
including prepayments, are allocated to different classes in accordance with
the terms of the instruments, and changes in prepayment rates or assumptions
may significantly affect the expected average life and value of a particular
class.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
Asset-Backed Securities. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
Derivatives and Related Instruments. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; (iv) purchase and sell mortgage-backed and
asset-backed securities; and (v) purchase and sell structured products, which
are instruments designed to restructure or reflect the characteristics of
certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required
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to use any hedging strategies. Hedging strategies, while reducing risk of
loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in more risk to the Fund than hedging strategies using the same
instruments. There can be no assurance that a liquid market will exist at a
time when the Fund seeks to close out a derivatives position. Activities of
large traders in the futures and securities markets involving arbitrage,
"program trading," and other investment strategies may cause price
distortions in derivatives markets. In certain instances, particularly those
involving over-the-counter transactions or forward contracts, there is a
greater potential that a counterparty or broker may default. In the event of
a default, the Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
Portfolio Turnover. The frequency of the Fund's portfolio transactions
will vary from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portoflio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with the
types of investments it may make, as described above, as well as the risks
discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While U.S. Government securities generally are of
high quality, government securities that are not backed by the full faith and
credit of the U.S. Treasury
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may be affected by changes in the creditworthiness of the agency that issued
them. Guarantees of principal and interest on obligations that may be
purchased by the Fund are not guarantees of the market value of such
obligations, nor do they extend to the value of shares of the Fund. Other
fixed-income securities in which the Fund may invest, while of
investment-grade quality, may be of lesser credit quality than U.S.
Government securities.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.30% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis.
For these services, CAM is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.15% of the Fund's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Portfolio Managers. John Schmucker and Alex Powers, Vice Presidents of
Chase, have been responsible for the day-to-day management of the Fund's
portfolio since its inception in May 1996. Prior to joining Chase in May
1996, Mr. Schmucker was responsible for the day-to-day management of The
Hanover U.S. Government Securities Fund, the Fund's predecessor, as a vice
president and portfolio manager at The Portfolio Group, Inc. Prior to joining
The Portfolio Group, Inc. 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. Mr. Powers is also the
manager of the Vista U.S. Treasury Income Fund and a manager of the Vista
Balanced Fund, Vista Short-Term Bond Fund and Vista Bond Fund. He also
manages various individual and institutional accounts. Mr. Powers is part of
a team responsible for fixed-income strategy, research and trading with
Chase. Prior to joining Chase in 1988, he spent six years as Vice President
and Portfolio Manager at Liberty Capital, an institutional fixed-income
advisory firm.
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
How to Purchase Shares
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor
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on each business day during which the New York Stock Exchange is open for
trading ("Fund Business Day"). Qualified investors are defined as
institutions, trusts, partnerships, corporations, qualified and other
retirement plans and fiduciary accounts opened by a bank, trust company or
thrift institution which exercises investment authority over such accounts.
The Fund reserves the right to reject any purchase order or cease offering
shares for purchase at any time.
Institutional Shares are sold at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Minimum Investments
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
How to Redeem Shares
You may redeem all or any portion of the shares in your account at any
time at the net asset value next determined after a redemption request in
proper form is furnished by you to your Dealer and transmitted to and
received by the Vista Service Center. A wire redemption may be requested by
telephone to the Vista Service Center. For telephone redemptions, call the
Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
The Fund generally sends you payment for your shares by wire in federal
funds on the business day after your request is received in proper form.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with 2the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may
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be liable for any losses due to unauthorized or fraudulent instructions. An
investor agrees, however, that to the extent permitted by applicable law,
neither the Fund nor its agents will be liable for any loss, liability, cost
or expense arising out of any redemption request, including any fraudulent or
unauthorized request. For information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
Selling shares through your Dealer. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you
will receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer Institutional Shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. The exchange privilege is subject to change or
termination. See the SAI to find out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
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HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains
at least annually. Distributions from capital gains are made after applying
any available capital loss carryover.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares; (2) receive distributions from net
investment income in cash or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares; or (3) receive
all distributions in cash or by ACH. You can change your distribution option
by notifying the Vista Service Center in writing. If you do not select an
option when you open your account, all distributions will be reinvested. All
distributions not paid in cash or by ACH will be reinvested in shares of the
class on which the distributions are paid. You will receive a statement
confirming reinvestment of distributions in additional Fund shares promptly
following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
A portion of the ordinary income dividends paid by the Fund may qualify
for the 70% dividends-received deduction for corporate shareholders.
Distributions may also be subject to state and local taxes. However, the
laws of most states and localities exempt from some types of taxes
distributions such as those made by the Fund to the extent such distributions
are attributable to interest from obligations of the U.S. Government and
certain of its agencies and instrumentalities.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your
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particular tax situation (including possible liability for state and local
taxes and, for foreign shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
Sub-Administrator and Distributor
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 101 Park Avenue, New York, New York 10178.
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Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Shareholder servicing and distribution fees
are allocated to specific classes of the Fund. In addition, the Fund may
allocate transfer agency and certain other expenses by class. Service
providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing
15
<PAGE>
shares of the Fund may receive different levels of compensation with respect
to one class of shares over another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his
16
<PAGE>
account. Transactions with affiliated broker-dealers will only be executed on
an agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the public offering price. Total return may also be
presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
17
<PAGE>
[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
[Vista Logo]
U.S. Government
Securities Fund
Institutional Shares
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] AMERICAN VALUE FUND
May 6, 1996
Investment Strategy: Total Return
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 4
How the Fund has performed
Fund Objective ............................................................ 5
Investment Policies ....................................................... 5
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ................................................................ 8
Chase Manhattan Bank, the Fund's adviser; Van Deventer & Hoch, the
Fund's sub-adviser, and the individuals who manage the Fund
How to Buy, Sell and Exchange Shares ...................................... 9
How the Fund Values its Shares ............................................ 11
How Distributions are Made; Tax Information ............................... 12
How the Fund distributes its earnings, and tax treatment related to
those earnings
Other Information Concerning the Fund ..................................... 12
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information ................................................... 15
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 16
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
estimated expenses for the current fiscal year. The example shows the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .............................. None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds) .......................... None
Annual Fund Operating Expenses
(as a percentage of average net assets)
- -----------------------------------------
Investment Advisory Fee (after estimated waiver)* .................. 0.00%
12b-1 Fee (after estimated waiver)* ** ............................. 0.00%
Shareholder Servicing Fee (after estimated waiver)* ................ 0.12%
Other Expenses (after estimated waiver)* ........................... 1.20%
----
Total Fund Operating Expenses (after waivers of fees)* ............. 1.32%
====
Example
- -------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years
------ -------
Shares .......................................... $13 $42
- ---------------
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers,
the Investment Advisory Fee, 12b-1 Fee, Shareholder Servicing Fee and
Other Expenses would be 0.70%, 0.25%, 0.25% and 1.30%, respectively, and
Total Fund Operating Expenses would be 2.50%. Chase has agreed voluntarily
to waive fees payable to it and/or reimburse expenses for a period of at
least one year to the extent necessary to prevent Total Fund Operating
Expenses for such period from exceeding the amount indicated in the table.
In addition, Chase has agreed to waive fees payable to it and/or reimburse
expenses for a two year period to the extent necessary to prevent Total
Fund Operating Expenses from exceeding 2.18% of average net assets during
such period.
** Long-term shareholders in mutual funds with 12b-1 fees, such as
shareholders of the 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.
The table is provided to help you understand the expenses of investing in
the Fund and your share of the operating expenses that the Fund incurs. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
On May 3, 1996, The Hanover American Value Fund (the "Predecessor Fund")
merged into Vista American Value Fund, which was created to be the successor
to the Predecessor Fund. The table set forth below provides selected per
share data and ratios for one Investor Share of the Predecessor Fund for the
period shown. This information is supplemented by financial statements and
accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended November 30, 1995, which is
incorporated by reference into the SAI. The financial statements and notes,
as well as the financial information set forth in the table below, unless
otherwise indicated, have been audited by KPMG Peat Marwick LLP, independent
accountants, whose report thereon is also included in the Predecessor Fund's
Annual Report to Shareholders. Shareholders can obtain a copy of this Annual
Report by contacting the Fund or their Shareholder Servicing Agent.
Vista American Value Fund
Period End November
30, 1995*
-------------------
Per Share Operating Performance
- -------------------------------
Net Asset Value, Beginning of Period ........................ $10.000
-------
Income from Investment Operations:
Net Investment Income ..................................... 0.180
Net Gain on Securities
(both realized and unrealized) .......................... 2.000
-------
Total from Investment Operations .......................... 2.180
-------
Less Distributions:
Dividends from Net Investment Income ...................... (0.070)
Distributions from Capital Gains .......................... --
-------
Total Distributions ....................................... (0.070)
-------
Net Asset Value, End of Period .............................. $12.110
=======
Total Return*** ............................................. 21.80%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) .................... $ 8,399
Ratio of Expenses to Average Net Assets# ................... 1.23%
Ratio of Net Investment Income to Average Net Assets# ...... 1.97%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# .............. 2.03%
Ratio of Net Investment Income without
waivers and assumption of expenses to Average
Net Assets (unaudited)# ..................................... 1.17%
Portfolio Turnover Rate ..................................... 11.28%
- ---------------
# Short periods have been annualized.
* Fund commenced operations on February 3, 1995.
*** Total Return figures do not include the effect of any sales load.
4
<PAGE>
FUND OBJECTIVE
Vista American Value Fund seeks 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 the Fund's advisers, are undervalued by the market. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The equity securities in which the Fund invests generally consist of
common stock, preferred stock and securities convertible into or exchangeable
for common or preferred stock. Under normal market conditions, at least 65%
of the value of the Fund's total assets will be invested in the equity
securities of U.S. companies. The Fund may invest in companies without regard
to market capitalization, although it generally does not expect to invest in
companies with market capitalizations of less than $200 million. The
securities in which the Fund invests are expected to be either listed on an
exchange or traded in an over-the-counter market.
In selecting investments for the Fund, its advisers generally seek
companies which they believe exhibit characteristics of financial soundness
and are undervalued by the market. In seeking to identify financially sound
companies, the Fund's advisers look for companies with strongly capitalized
balance sheets, an ability to generate substantial cash flow, relatively low
levels of leverage, an ability to meet debt service requirements and a
history of paying dividends. In seeking to identify undervalued companies,
the advisers look for companies with substantial tangible assets such as
land, timber, oil and other natural resources, or important brand names,
patents, franchises or other intangible assets which may have greater value
than what is reflected in the company's financial statements. The Fund's
advisers will often select investments for the Fund which are considered to
be unattractive by other investors or are unpopular with the financial press.
Although the Fund invests primarily in equity securities, it may invest up
to 25% of the value of its total assets in high quality, short-term money
market instruments, repurchase agreements and cash. In addition, the Fund may
make substantial temporary investments in investment grade U.S. debt
securities and invest without limit in money market instruments when the
Fund's advisers believe a defensive posture is warranted. To the extent that
the Fund departs from its investment policies during temporary defensive
periods, its investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities
law.
In lieu of investing directly, the Fund is authorized to seek to achieve
its objective by investing all of its investable asets in an investment
company having substantially the same investment objective and policies as
the Fund.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Foreign Securities. The Fund may invest up to 20% of its total assets in
foreign securities, including American Depositary Receipts. The Fund expects
that its 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
5
<PAGE>
exchanges. Since foreign securities are normally denominated and traded in
foreign currencies, the values of the Fund's foreign investments may be
affected favorably or unfavorably by currency exchange rates and exchange
control regulations. There may be less information publicly available about
foreign companies than U.S. companies, and they are not generally subject to
accounting, auditing and financial reporting standards and practices
comparable to those in the U.S. The securities of foreign companies may be
less liquid and more volatile than the securities of comparable U.S.
companies. Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities or in the
recovery of the Fund's assets held abroad) and expenses. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial instability and
diplomatic developments could affect the value of the Fund's investments in
certain foreign countries. Foreign laws may restrict the ability to invest in
certain issuers or countries and special tax considerations will apply to
foreign securities. The risks can increase if the Fund invests in securities
of issuers in emerging markets.
The Fund may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, which are securities representing
securities of foreign issuers. The Fund treats American Depositary Receipts
as interests in the underlying securities for purposes of its investment
policies. The Fund will limit its investment in American Depositary Receipts
not sponsored by the issuer of the underlying securities to no more than 5%
of the value of its net assets (at the time of investment).
Money Market Instruments. The Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic issuers and obligations
of domestic banks.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's
Corporation ("S&P"), or Baa or higher by Moody's Investors Services, Inc.
("Moody's") or the equivalent by another national rating organization, or, if
unrated, determined by the advisers to be of comparable quality.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
6
<PAGE>
Convertible Securities. The Fund may invest in convertible securities, which
are securities generally offering fixed interest or dividend yields which may be
converted either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
Corporate Reorganizations. The Fund may invest in securities for which a
tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or similar
reorganization proposal has been announced if, in the judgment of its
advisers, 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 investment, in which case, unless such
offers or proposals are replaced by equivalent or increased offers or
proposals which are consummated, the Fund may sustain a loss.
Warrants. The Fund may invest up to 5% of the value of its total assets
(at the time of investment) in warrants or rights (other than those acquired
in units or attached to other securities) which entitle the holder to buy
equity securities at a specific price during or at the end of a specific
period of time. The Fund will not invest more than 2% of the value of its
total assets in warrants or rights which are not listed on the New York or
American Stock Exchanges.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
Derivatives and Related Instruments. The Fund has no current intention to
invest in derivative and related instruments, but the Fund is authorized to
utilize these instruments to hedge various market risks or to increase the
Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; and (iii) employ forward
contracts.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers
to forecast these factors correctly. Inaccurate forecasts could expose the
Fund to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Fund is not required to use any hedging
strategies. Hedging strategies, while reducing risk of loss, can also reduce
the opportunity for gain. Derivatives transactions not involving hedging may
have speculative characteristics, involve leverage and result in more risk to
the Fund than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
7
<PAGE>
Portfolio Turnover. The frequency of the Fund's portfolio transactions will
vary from year to year. The Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and would
make it more difficult for the Fund to qualify as a registered investment
company under federal tax law. See "How Distributions are Made; Tax Information"
and "Other Information Concerning the Fund--Certain Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment risks for
its shareholders. These restrictions prohibit the Fund from: (a) with respect
to 75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program,
and the net asset value of the shares of the Fund can be expected to
fluctuate based on the value of the securities in the Fund's portfolio. The
Fund is subject to the general risks and considerations associated with
equity investing, as well as the risks discussed herein.
Some of the securities in which the Fund may invest may be of smaller
companies. The securities of smaller companies often trade less frequently
and in more limited volume, and may be subject to more abrupt or erratic
price movements, than securities of larger, more established companies. Such
companies may have limited product lines, markets or financial resources, or
may depend on a limited management group.
For a discussion of certain other risks associated with the Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Fund
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Fund, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 0.70% of the Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Van Deventer & Hoch ("VDH"), a registered investment adviser, is the
sub-investment adviser to the Fund pursuant to a Sub-Investment Advisory
Agreement between VDH and Chase. VDH is a 50% owned indirect subsidiary of
The Chase Manhattan Corporation. VDH makes investment decisions for the Fund
on a day-to-day
8
<PAGE>
basis. For these services, VDH is entitled to receive a fee, payable by Chase
from its advisory fee, at an annual rate equal to 0.35% of the Fund's average
daily net assets. VDH is located at 800 North Brand Boulevard, Suite 300,
Glendale, California 91203.
Portfolio Manager. Richard Trautwein, Executive Vice President of VDH, has
been responsible for the day- to-day management of the Fund's portfolio since
the Fund's inception, and prior thereto was responsible for the day-to-day
management of The Hanover American Value Fund, the Fund's predecessor. Mr.
Trautwein joined VDH in 1972, heads the firm's portfolio group and is a
member of the firm's investment policy committee.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Fund's distributor by
calling the Vista Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Fund reserves the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
Buying shares through the Fund's distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
9
<PAGE>
Offering Price
The public offering price of Fund shares is net asset value. The Fund
receives the net asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will forward redemption payments on redeem shares for which it has collected
payment of the purchase price.
Selling shares directly to the Fund. Send a signed letter of instruction
to the Vista Service Center, along with any certificates that represent
shares you want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper form. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York
Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business day
after your request is received in proper form, assuming the Fund has
collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Fund with his or her account
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, the Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither the Fund nor its
agents will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
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<PAGE>
Systematic withdrawal. You can make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan. Call the Vista Service
Center at 1-800-34-VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Class A shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer all classes of shares. The prospectus of the other Vista fund
into which shares are being exchanged should be read carefully and retained
for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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 in other circumstances where Vista management or the
Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or terminate the exchange privilege, limit
the amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
Reinstatement privilege. Shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
HOW THE FUND VALUES ITS SHARES
The net asset value of the Fund's shares is determined once daily based
upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced
at 4:15 p.m., Eastern time), on each business day of the Fund, by dividing
the net assets of the Fund by the total number of outstanding shares. Values
of assets held by the Fund are determined on the basis of their market or
other fair value, as described in the SAI.
11
<PAGE>
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least annually and any
net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not
paid in cash or by ACH will be reinvested in shares of the Fund. You will
receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in another Vista fund. If the Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all
of its ordinary income and capital gain net income on a current basis. If the
Fund does not qualify as a regulated investment company for any taxable year
or does not make such distributions, the Fund will be subject to tax on all
of its income and gains.
All Fund distributions will be taxable to you as ordinary income, except
that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
taxable as described above whether received in cash or in shares through the
reinvestment of distributions.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted a Rule 12b-1 distribution plan for the Fund's shares which
provides that the Fund will pay distribution fees at annual rates of up to
0.25% of the average daily net assets attributable to the shares of the Fund.
Payments under the distribution plans shall be used to compensate
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<PAGE>
or reimburse the Fund's distributor and broker-dealers for services provided
and expenses incurred in connection with the sale of the Fund's shares, and
are not tied to the amount of actual expenses incurred. Payments may be used
to compensate broker-dealers with trail or maintenance commissions at an
annual rate of up to 0.25% of the average daily net asset value of shares
maintained in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended
to promote the sale of the Fund's shares will be conducted generally by the
Vista Family of Funds, and activities intended to promote the Fund's shares
may also benefit other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater or entertainment for broker-deals and their
guests; and payment or reimbursement for their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the
U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own shares of the Fund. These services include
assisting with purchase and redemption transactions, maintaining shareholder
accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily
net assets of shares of the Fund held by investors for whom the shareholder
servicing agent maintains a servicing relationship. Shareholder servicing
agents may subcontract with other parties for the provision of shareholder
support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub- administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal
13
<PAGE>
to 0.05% of the Fund's average daily net assets. VFD has agreed to use a
portion of this fee to pay for certain expenses incurred in connection with
organizing new series of the Trust and certain other ongoing expenses of the
Trust. VFD is located at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Fund and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Fund, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Fund. Service providers to the Fund may, from time
to time, voluntarily waive all or a portion of any fees to which they are
entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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 the Trust shall not be voted.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks
14
<PAGE>
or their affiliates from acting as investment adviser, administrator or
custodian to mutual funds or from purchasing mutual fund shares as agent for
a customer. Chase and the Trust believe that Chase (including its affiliates)
may perform the services to be performed by it as described in this
Prospectus without violating such laws. If future changes in these laws or
interpretations required Chase to alter or discontinue any of these services,
it is expected that the Board of Trustees would recommend alternative
arrangements and that investors would not suffer adverse financial
consequences. State securities laws may differ from the interpretations of
banking law described above and banks may be required to register as dealers
pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Fund's distributor or affiliates of the
distributor. Chase will not invest the Fund's assets in any U.S. Government
obligations, municipal obligations or commercial paper purchased from itself
or any affiliate, although under certain circumstances such securities may be
purchased from other members of an underwriting syndicate in which Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Fund. Chase has informed the Fund that
in making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of Chase,
including the division that performs services for the Fund as custodian, or
in the possession of any affiliate of Chase. Shareholders of the Fund should
be aware that, subject to applicable legal or regulatory restrictions, Chase
and its affiliates may exchange among themselves certain information about
the shareholder and his account. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included in
advertisements about the Fund. "Yield" for the shares is calculated by
dividing the annualized net investment income per share during a recent
30-day period by the maximum public offering price per share of such class on
the last day of the period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in
the Fund invested at the maximum public offering price. Total return may also
be presented for other periods. Any quotation of investment performance not
reflecting the maximum initial sales charge or contingent deferred sales
charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio and the Fund's operating expenses. Investment performance
also often reflects the risks associated with the Fund's investment
objectives and policies. These factors should be considered when comparing
the Fund's investment results to those of other mutual funds and other
investment vehicles. Quotation of investment performance for any period when
a fee waiver or expense limitation was in effect will be greater than if the
waiver or limitation had not been in effect. The Fund's performance may be
compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Shareholders have a one time privilege
of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VAMV-1-596CX
[Vista Logo]
American
Value Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
PROSPECTUS
VISTA[SM] SOUTHEAST ASIAN FUND
VISTA[SM] JAPAN FUND
VISTA[SM] EUROPEAN FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Capital Growth
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Funds in their May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been
filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................ 3
The expenses you might pay on your Fund investment, including examples
Fund Objectives ............................................................ 5
Investment Approaches ..................................................... 5
The kinds of securities in which the Vista Southeast Asian Fund,
the Vista Japan Fund and the Vista European Fund invest
Common Investment Policies ................................................. 5
The common investment policies of the Funds
Other Investment Practices ................................................. 7
The investment techniques and risks of the Funds
Management ................................................................. 10
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management,
the Funds' sub-adviser, and the individuals who manage the Funds
About Your Investment ..................................................... 11
Alternative sales arrangements
How to Buy, Sell and Exchange Shares ....................................... 12
How the Funds Value their Shares .......................................... 17
How Distributions are Made; Tax Information ............................... 17
How the Funds distribute their earnings, and the taxes
related to those earnings
Other Information Concerning the Funds ..................................... 18
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information .................................................... 21
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ..................................... 23
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in each of the Funds
based on estimated expenses for the current fiscal year. The examples show
the cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B
Shares Shares
------- -------
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .................. 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original purchase
price or redemption proceeds)* ....................... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
- ----------------------------------------
Investment Advisory Fee (after estimated waivers)** ..... 0.00% 0.00%
12b-1 Fee*** ............................................ 0.25% 0.75%
Shareholder Servicing Fee ............................... None 0.25%
Other Expenses
(after estimated waivers and reimbursements)** ........ 1.50% 1.50%
---- ----
Total Fund Operating Expenses
(after waivers of fees and expense reimbursements)** .. 1.75% 2.50%
==== ====
Examples
- --------
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 Year 3 Years
------ -------
Class A Shares+ ......................................... $64 $100
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ ...................................... $77 $110
Assuming no redemptions+++ ............................. $25 $ 78
- ---------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Reflects current fee waiver and expense reimbursement arrangements to
maintain Total Fund Operating Expenses at the levels indicated in the
table above. Absent such arrangements, the Investment Advisory Fee and
Other Expenses would be 1.00%, and 2.60%, respectively, for Class A and
Class B shares, and Total Fund Operating Expenses would be 3.85% and
4.60% for Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the Funds, 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares
at the beginning of the ninth year after purchase. See "How to Buy, Sell
and Exchange Shares."
3
<PAGE>
The table is provided to help you understand the expenses of investing in
the Funds and your share of the operating expenses that a Fund incurs. THE
EXAMPLES SHOULD NOT BE CONSIDERED REPRESENTATIONS OF PAST OR FUTURE EXPENSES
OR RETURNS; ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN SHOWN.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
investments in the Funds. The Funds understand that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Funds with respect
to those accounts. See "Other Information Concerning the Funds."
4
<PAGE>
FUND OBJECTIVES
Each Fund seeks total return from long-term capital growth. No Fund is
intended to be a complete investment program, and there is no assurance that
a Fund will achieve its objective.
INVESTMENT APPROACHES
Vista Southeast Asian Fund
The Fund will invest principally in a broad portfolio of equity securities
of foreign companies located in countries throughout the Pacific and Far East
regions, with the exception of Japan. Under normal market conditions, the
Fund will invest at least 65% of its total assets in equity securities of
Southeast Asian issuers.
The Fund's advisers seek to identify those countries and industries
throughout the Pacific and Far East region (other than Japan) where economic
and political factors are likely to produce above-average growth rates. The
Fund's advisers attempt to identify those companies in such countries and
industries that are best positioned and managed to take advantage of these
economic and political factors. Emphasis will be placed on companies in
Singapore, Malaysia, Thailand, the Philippines and Indonesia, but the Fund
will also invest in companies in other countries in the Pacific and Far East
region (other than Japan), including Hong Kong, Australia, New Zealand,
Taiwan and Korea.
Vista Japan Fund
The Fund will invest principally in equity securities of foreign companies
located in countries throughout the Pacific and Far East regions. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of Japanese issuers. Investments by the Fund may,
from time to time, also be made in securities traded in other securities
markets of the Pacific and Far East regions as determined by the Fund's
advisers. Under current market conditions, the Fund's advisers anticipate
that the major portion of the Fund's assets will be invested in securities
traded in the securities markets of Japan.
Vista European Fund
The Fund will invest principally in equity securities of companies with
principal business activities in countries located throughout Western Europe.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities of European issuers.
The Fund's advisers seek to identify those Western European countries and
industries where economic and political factors are likely to produce
above-average growth rates. The Fund's advisers attempt to identify those
companies in such countries and industries that are best positioned and
managed to take advantage of these economic and political factors. Western
European countries in which the Fund may invest include Austria, Belgium,
Denmark, Germany, Finland, France, Greece, Ireland, Italy, Luxembourg,
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United
Kingdom, as well as other Western European countries that the Fund's advisers
deem to be of investment grade. The Fund's advisers anticipate that the Fund
generally will be invested in a number of different Western European
countries, although it may at times invest most or all of its assets in a
single country.
COMMON INVESTMENT POLICIES
In lieu of investing directly, each Fund is authorized to seek to achieve
its objective by investing all of its investable assets in an investment
company having substantially the same investment objective and policies as
such Fund.
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The equity securities in which the Funds may invest include common stocks,
preferred stocks, securities convertible into common stocks and warrants to
purchase common stocks. Investments will be selected based on their potential
for capital growth.
For purposes of the investment policies described above, a security is
deemed to be issued by an issuer of one of the countries or regions indicated
above if (i) the principal trading market for the security is in one of those
countries or regions, (ii) the issuer is organized under the laws of a
jurisdiction of one of those countries or regions or (iii) the issuer derives
at least fifty percent of its revenues or profits from those countries or
regions or has at least 50 percent of its assets situated in those countries
or regions.
The Funds' advisers will allocate each Fund's investments among securities
denominated in the U.S. dollar, other major reserve currencies and currencies
of countries referred to above in which that Fund is permitted to invest. The
advisers may adjust a Fund's exposure to each such currency based on their
perception of the most favorable markets and issuers. The percentage of a
Fund's assets invested in securities of a particular country or denominated
in a particular currency will vary in accordance with the advisers'
assessment of the relative yield and appreciation potential of such
securities and the current and anticipated relationship of a country's
currency to the U.S. dollar. Fundamental economic strength, earnings growth,
quality of management, industry growth, credit quality and interest rate
trends are some of the principal factors which may be considered by the
Funds' advisers in determining whether to increase or decrease the emphasis
placed upon a particular type of security, industry sector, country or
currency within a Fund's investment portfolio. Securities purchased by a Fund
may be denominated in a currency other than that of the country in which the
issuer is domiciled. No Fund is limited as to the amount of its assets that
may be invested in any one country. However, each Fund will attempt to
allocate investments among a wide range of industries and companies. Each
Fund will place primary emphasis on equity securities and securities with
equity features. However, each Fund may also invest in any type of investment
grade debt security and various derivative securities if the advisers believe
that doing so may result in capital growth. The Vista Southeast Asian Fund
and the Vista European Fund will not invest more than 25% of their respective
net assets in debt securities denominated in a single currency other than the
U.S. dollar, or invest more than 25% of their respective net assets in debt
securities issued by a single foreign government or supranational
organization.
The Funds' advisers will review economic and political events in the
countries in which the Funds are invested on an ongoing basis.
The Funds may invest in securities of companies of various sizes,
including smaller companies whose securities may be more volatile and less
liquid than securities of larger companies. With respect to certain countries
in which capital markets are either less developed or not easily accessed,
investments by the Funds may be made through investment in closed-end
investment companies that in turn are authorized to invest in the securities
of such countries.
Each Fund is classified as a "non-diversified" fund under federal
securities law. Each Fund's assets may be more concentrated in the securities
of any single issuer or group of issuers than if such Fund were diversified.
Each Fund may, for defensive purposes and in periods in which it is felt
that investment returns may be greater or volatility may be less, invest less
than 65% of its net assets in the equity securities in which it normally
invests by investing in debt securities issued in various currencies by
companies, governments and supranational entities located in countries in
which the Fund is permitted to invest. For temporary
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defensive purposes, a Fund's assets may be invested in short-term debt
instruments, including high quality money market instruments and securities
issued or guaranteed by the government of any member country of the
Organization for Economic Cooperation and Development or its agencies or
instrumentalities. To the extent that a Fund departs from its investment
policies during such periods, its investment objective may not be achieved.
For a discussion of certain risks associated with an investment in the
Funds, see "Risk Factors" and "Other Investment Practices" below.
OTHER INVESTMENT PRACTICES
Each Fund may also engage in the following investment practices, when
consistent with such Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
Money Market Instruments. Each Fund may invest in cash or high-quality,
short-term money market instruments. Such instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
Investment Grade Debt Securities. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's
Corporation ("S&P"), or Baa or higher by Moody's Investors Services, Inc.
("Moody's") or the equivalent by another national rating organization, or, if
unrated, determined by the advisers to be of comparable quality.
Depositary Receipts. Each Fund may invest its assets in securities of
foreign issuers in the form of American Depositary Receipts, European
Depositary Receipts, Global Depositary Receipts or other similar securities
representing securities of foreign issuers (collectively, "Depositary
Receipts"). The Funds treat Depositary Receipts as interests in the
underlying securities for purposes of their investment policies. Each Fund
will limit its investment in Depositary Receipts not sponsored by the issuer
of the underlying securities to no more than 5% of the value of its net
assets (at the time of investment).
Supranational and ECU Obligations. Each Fund may invest in securities
issued by supranational organizations, which include organizations such as
The World Bank, the European Community, the European Coal and Steel Community
and the Asian Development Bank. Vista European Fund may also invest in
securities denominated in the ECU, which is a "basket" consisting of
specified amounts of the currencies of certain member states of the European
Community. These securities are typically issued by European governments and
supranational organizations.
Indexed Investments. Each Fund may invest in instruments which are indexed
to certain specific foreign currency exchange rates. The terms of such
instruments may provide that their pincipal amounts or just their coupon
interest rates are adjusted upwards or downwards (but not below zero) at
maturity or on established coupon payment dates to reflect changes in the
exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal
risk, but offer the potential for realizing gains as a result of changes in
foreign currency exchange rates.
Repurchase Agreements, Securities Loans and Forward Commitments. Each Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. Each Fund also has the ability to lend portfolio securities
in an amount equal to not more than 30% of its total assets to
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generate additional income. These transactions must be fully collateralized
at all times. Each Fund may purchase securities for delivery at a future
date, which may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the settlement date.
These transactions involve some risk to a Fund if the other party should
default on its obligation and such Fund is delayed or prevented from
recovering the collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. Each Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Funds may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever a Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). A Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
Stand-By Commitments. Each Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, a Fund would acquire the
right to sell a security at an agreed upon price within a specified period
prior to its maturity date. These transactions involve some risk to a Fund if
the other party should default on its obligation and such Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
Convertible Securities. Each Fund may invest in convertible securities,
which are securities generally offering fixed interest or dividend yields
which may be converted either at a stated price or stated rate for common or
preferred stock. Although to a lesser extent than with fixed-income
securities generally, the market value of convertible securities tends to
decline as interest rates increase, and increase as interest rates decline.
Because of the conversion feature, the market value of convertible securities
also tends to vary with fluctuations in the market value of the underlying
common or preferred stock.
Other Investment Companies. Each Fund may invest up to 10% of its total
assets in shares of other investment companies, subject to applicable
regulatory limitations.
Derivatives and Related Instruments. Each Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase its income or gain. Some of these instruments will be subject to
asset segregation requirements to cover a Fund's obligations. Each Fund may
(i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; and (iv) purchase and sell structured products,
which are instruments designed to restructure or reflect the characteristics
of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which a
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Funds to successfully utilize
these instruments may depend in part upon the ability of the Funds' advisers
to forecast these factors correctly. Inaccurate forecasts could expose a Fund
to a risk of loss. There can be no guarantee that there will be a correlation
between price move-
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ments in a hedging instrument and in the portfolio assets being hedged. The
Funds are not required to use any hedging strategies. Hedging strategies,
while reducing risk of loss, can also reduce the opportunity for gain.
Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to a Fund than
hedging strategies using the same instruments. There can be no assurance that
a liquid market will exist at a time when a Fund seeks to close out a
derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, a Fund may experience a loss.
For additional information concerning derivatives, related instruments and
the associated risks, see the SAI.
Portfolio Turnover. The frequency of each Fund's portfolio transactions
will vary from year to year. A Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for a Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Funds--Certain
Regulatory Matters."
Limiting Investment Risks
Specific investment restrictions help each Fund limit investment risks for
its shareholders. These restrictions prohibit each Fund from: (a) with
respect to 50% of its total assets, holding more than 10% of the voting
securities of any issuer; (b) investing more than 15% of its net assets in
illiquid securities (which include securities restricted as to resale unless
they are determined to be readily marketable in accordance with procedures
established by the Board of Trustees); or (c) investing more than 25% of its
total assets in any one industry. A complete description of these and other
investment policies is included in the SAI. Except for each Fund's investment
objective, restriction (c) above and investment policies designated as
fundamental in the SAI, the Funds' investment policies are not fundamental.
The Trustees may change any non-fundamental investment policy without
shareholder approval.
Risk Factors
The net asset value of the shares of each Fund can be expected to
fluctuate based on the value of the securities in such Fund's portfolio. As
each Fund invests primarily in equity securities of companies outside the
U.S., an investment in its shares involves a higher degree of risk than an
investment in a U.S. equity fund. An investment in any of the Funds should
not be considered a complete investment program and may not be appropriate
for all investors.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of a Fund's foreign investments may be affected
favorably or unfavorably by currency exchange rates and exchange control
regulations. There may be less information publicly available about foreign
companies than U.S. companies, and they are not generally subject to
accounting, auditing and financial reporting standards and practices
comparable to those in the U.S. The securities of foreign companies may be
less liquid and more volatile than the securities of comparable U.S.
companies.
Foreign settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in the recovery
of a Fund's assets held abroad) and expenses. In particular, settlement
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procedures in Korea are somewhat less developed and reliable than those in
the U.S. and in other developed securities markets, and the Vista Southeast
Asian Fund may experience settlement delays or other material difficulties
and be subject to significant delays or limitations on the volume of trading
during any particular period as a result of these factors. The foregoing
factors could impede the ability of a Fund to effect portfolio transactions
on a timely basis and could have an adverse impact on the net asset value of
a Fund's shares.
It is possible that nationalization or expropriation of assets, imposition
of currency exchange controls, confiscatory taxation, political or financial
instability and diplomatic developments could affect the value of a Fund's
investments in certain foreign countries. Foreign laws may restrict the
ability to invest in certain countries or issuers and special tax
considerations will apply to foreign securities.
Investments in securities of issuers based in developing countries entails
certain additional risks, including greater risks of expropriation,
confiscatory taxation, nationalization, and less social, political and
economic stability. The small size of markets for securities of issuers based
in such countries and the low or non-existent volume of trading may result in
a lack of liquidity and in price volatility. Certain national policies may
restrict the investment opportunities, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests. There
may be an absence of developed legal structures governing private or foreign
investment and private property.
In addition, some of the foreign equity securities in which the Funds may
invest may be of smaller foreign companies. The securities of smaller
companies, whether foreign or domestic, often trade less frequently and in
more limited volume, and may be subject to more abrupt or erratic price
movements, than securities of larger, more established companies. Such
companies may have limited product lines, markets or financial resources, or
may depend on a limited management group.
Securities rated in the category Baa by Moody's or BBB by S&P lack certain
investment characteristics and may have speculative characteristics.
Because each Fund is "non-diversified," the value of its shares is more
susceptible to developments affecting issuers in which such Fund invests.
For a discussion of certain other risks associated with each Fund's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the Funds
pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Funds, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience. For its investment advisory services to
the Funds, Chase is entitled to receive an annual fee computed daily and paid
monthly based at an annual rate equal to 1.00% of each Fund's average daily
net assets. Chase is located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to the Funds pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary
of Chase. CAM makes investment decisions for the Funds on a
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day-to-day basis. For these services, CAM is entitled to receive a fee,
payable by Chase from its advisory fee, at an annual rate equal to 0.50% of
each Fund's average daily net assets. CAM was recently formed for the purpose
of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York,
New York 10036.
Portfolio Managers. David Webb, Vice President of Chase, has been
responsible for the day-to- day management of the Vista Southeast Asian Fund
and the Vista Japan Fund since their inception. Mr. Webb was previously with
Hambros Bank Limited based in London and was responsible for the asset
allocation and portfolio management of international funds invested in Asia.
Michael Browne, Vice President of Chase, has been responsible for the
day-to-day management of the Vista European Fund since its inception. Mr.
Browne is head of the Vista European Fund's management and research. Prior to
joining Chase, Mr. Browne was Assistant Director of Continental European
Equities for BZW Investment Management, the investment arm of Barclays Bank
PLC, London, where he was responsible for stock selection for external
clients.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a sales
charge at the time of purchase. As a result, Class A shares are not subject
to any sales charges when they are redeemed. Certain purchases of Class A
shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and
Exchange Shares" and "Other Information Concerning the Funds."
Class B shares. Class B shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, at the beginning of the ninth year after purchase.
For more information about the conversion of Class B shares, see the SAI.
This discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Funds."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a
number of factors, including the amount and intended length of the
investment. Investors making investments that qualify for reduced sales
charges might consider Class A shares. Investors who prefer not to pay an
initial sales charge might consider Class B shares. In almost all cases,
investors planning to purchase $250,000 or more of a Fund's shares will pay
lower aggregate charges and expenses by purchasing Class A shares.
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HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a Fund account with as little as $2,500 ($1,000 for IRAs,
SEP-IRAs and the Systematic Investment Plan) and make additional investments
at any time with as little as $100. You can buy Fund shares three
ways--through an investment representative, through the Funds' distributor by
calling the Vista Service Center, or through the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Funds reserve the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
Buying shares through the Funds' distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per transaction through automatic periodic
deduction from your bank checking or savings account. Shareholders electing
to start this Systematic Investment Plan when opening an account should
complete Section 8 of the account application. Current shareholders may begin
such a plan at any time by sending a signed letter with signature guarantee
and a deposit slip or voided check to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset value
next determined after the Vista Service Center receives your order in proper
form. In most cases, in order to receive that day's public offering price,
the Vista Service Center must receive your order before the close of regular
trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before
the close of regular trading on the New York Stock Exchange to receive that
day's public offering price. Orders for shares are accepted by each Fund
after funds are converted to federal funds. Orders paid by check and received
by 2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
If you are considering redeeming or exchanging shares or transferring
shares to another person shortly after purchase, you should pay for those
shares with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
a Fund will not issue certificates for your Class A shares unless you request
them. Due to the conversion feature of Class B shares, certificates for Class
B shares will not be issued and all Class B shares will be held in book entry
form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Funds
receive the net asset value. The sales charge is allocated between your
broker-dealer and the Funds' distributor as shown in the following table,
except when the Funds' distributor, in its discretion, allocates the entire
amount to your broker-dealer.
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Sales charge as a
percentage of: Amount of sales charge
-------------------- reallowed to dealers as a
Amount of transaction Offering Net amount percentage of offering
at offering price ($) price invested price
- ------------------------------- -------- ---------- -------------------------
Under 100,000 ................ 4.75 4.99 4.00
100,000 but under 250,000 ..... 3.75 3.90 3.25
250,000 but under 500,000 ..... 2.50 2.56 2.25
500,000 but under 1,000,000 .. 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1
million or more.
The Funds' distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases of shares of a Fund. Such commissions are paid at the rate of 1.00%
of the amount under $2.5 million, 0.75% of the next $7.5 million, 0.50% of
the next $40 million and 0.20% thereafter. The Funds' distributor may
withhold such payments with respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC
will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, each Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are calculated if you
exchange your shares, see "How to Exchange Your Shares." The Funds'
distributor pays broker-dealers a commission of 4.00% of the offering price
on sales of Class B shares, and the disributor receives the entire amount of
any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for
details about Vista's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee benefit plans,
and other plans. Descriptions are also included in the enclosed application
and in the SAI. In addition, sales charges will not apply to shares purchased
with redemption proceeds received within the prior ninety days from non-
Vista mutual funds on which the investor paid a front-end or contingent
deferred sales charge.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes
of determining whether the plan may purchase Class A shares at net asset
value.
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These investments will also be included for purposes of the discount
privileges and programs described above.
The Funds may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate
families), current and retired employees (and their immediate families) of
Chase, the Funds' distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and
their immediate families) of broker-dealers having selected dealer agreements
with the Funds' distributor, employees (and their immediate families) of
financial institutions having selected dealer agreements with the Funds'
distributor (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares of
the Funds by an investor seeking to invest the proceeds of a qualified
retirement plan, where a portion of the plan was invested in the Vista Family
of Funds, 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 Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's
assets.
Purchases of Class A shares of the Funds may be made with no initial sales
charge through an investment adviser or financial planner that charges a fee
for its services. Purchases of Class A shares of the Funds may be made with
no initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Funds or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may be made for retirement and deferred compensation plans and
trusts used to fund those plans.
Purchases of Class A shares of the Funds 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 exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the particular Funds, the Funds' distributor or
the Vista Service Center.
Shareholders of record of any Vista fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Funds
with no initial sales charge for as long as they continue to own Class A
shares of any Vista fund, provided there is no change in account
registration. Shareholders of record of any portfolio of The Hanover Funds,
Inc. or The Hanover Investment Funds, Inc. as of May 3, 1996 and certain
related investors may purchase Class A shares of the Funds with no initial
sales charge for as long as they continue to own shares of any Vista fund
following this date, provided there is no change in account registration.
The Funds may sell Class A shares at net asset value without an initial
sales charge in connection with the acquisition by the Funds of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in
connection with certain withdrawals from IRA or other retirement plans. Up to
12% of the value of Class B shares subject to a systematic withdrawal plan
may also be redeemed each year without a CDSC, provided that the Class B
account had a minimum balance of $20,000 with respect to the applicable Fund
at the time
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the systematic withdrawal plan was established. The SAI contains additional
information about purchasing the Funds' shares at reduced sales charges.
The Funds reserve 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.
Shareholders of other Vista funds may be entitled to exchange their shares
for, or reinvest distributions from their funds in, shares of the Funds at
net asset value.
How to Sell Shares
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to a Fund or through your investment representative. A Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
Selling shares directly to a Fund. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares
you want to sell. The price you will receive is the next net asset value
calculated after the particular Fund receives your request in proper form,
less any applicable CDSC. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
A Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
A Fund generally sends you payment for your shares the business day after
your request is received in proper form, assuming the Fund has collected
payment of the purchase price of your shares. Under unusual circumstances,
the Funds may suspend redemptions, or postpone payment for more than seven
days, as permitted by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares from
your account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Funds. Unless an investor indicates otherwise on the account application, the
Funds will be authorized to act upon redemption and transfer instructions
received by telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide the Funds with his or her account
registration and address as it appears on the Funds' records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it
fails to employ reasonable procedures, a Fund may be liable for any losses
due to unauthorized or fraudulent instructions. An investor agrees, however,
that to the extent permitted by applicable law, neither a Fund nor its agents
will be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written
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redemption request, as described above, or contact your investment
representative. The Telephone Redemption Privilege is not available if you
were issued certificates for shares that remain outstanding. The Telephone
Redemption Privilege may be modified or terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts. Call the Vista Service Center at
1-800-34- VISTA for complete instructions.
Selling shares through your investment representative. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
Involuntary Redemption of Accounts. Each Fund may involuntarily redeem
your shares if at such time the aggregate net asset value of the shares in
your account is less than $500 or if you purchase through the Systematic
Investment Plan and fail to meet that Fund's investment minimum within a
twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption. In the event a Fund redeems
Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market funds
other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the CDSC
- --and a subsequent purchase. Class B shares of any Vista non-money market
fund may be exchanged into the Class B shares of the Vista Prime Money Market
Fund in order to continue the aging of the initial purchase of such shares.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
A Telephone Exchange Privilege is currently available. Call the Vista
Service Center for procedures for telephone transactions. The Telephone
Exchange Privilege is not available if you were issued certificates for
shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
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
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limit excessive exchange activity and in other circumstances where Vista
management or the Trustees believe doing so would be in the best interests of
the Funds, the Funds reserve the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any exchange. In
addition, any shareholder who makes more than ten exchanges of shares
involving a Fund in a year or three in a calendar quarter will be charged a
$5.00 administration fee for each such exchange. Shareholders would be
notified of any such action to the extent required by law. Consult the Vista
Service Center before requesting an exchange. See the SAI to find out more
about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time privilege of
reinstating their investment in a Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
HOW THE FUNDS VALUES THEIR SHARES
The net asset value of each class of each Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Funds, by
dividing the net assets of the particular Fund attributable to that class by
the total number of outstanding shares of that class. Values of assets held
by the Funds are determined on the basis of their market or other fair value,
as described in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
Each Fund distributes any net investment income at least semi-annually and
any net realized capital gains at least annually. Distributions from capital
gains are made after applying any available capital loss carryovers.
Distributions paid by the Funds with respect to Class A shares will generally
be greater than those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not
paid in cash or by ACH will be reinvested in shares of the class on which the
distributions are paid. You will receive a statement confirming reinvestment
of distributions in additional Fund shares promptly following the quarter in
which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
applicable Fund or in another Vista fund. If the Vista Service Center does
not receive your election, the distribution will be reinvested in the
particular Fund. Similarly, if correspondence sent by a Fund or the Vista
Service Center is returned as "undeliverable," distributions will
automatically be reinvested in such Fund.
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Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. Each Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If a Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
Distributions by the Funds will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will be taxable
as such, regardless of how long you have held the shares. Distributions will
be taxable as described above whether received in cash or in shares through
the reinvestment of distributions.
Investment income received by the Funds from sources within foreign
countries may be subject to foreign taxes withheld at the source. Since more
than 50% of the value of the total assets of each Fund at the close of the
Fund's taxable year is anticipated to be stock or securities of foreign
corporations, each Fund may elect to "pass through" to its shareholders the
amount of foreign taxes paid by such Fund.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next distribution date. Those investors purchasing
shares just prior to a distribution will be taxed on the entire amount of the
distribution received, even though the net asset value per share on the date
of such purchase reflected the amount of such distribution.
Early in each calendar year each Fund will notify you of the amount and
tax status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in a Fund. You should consult your tax adviser to determine the
precise effect of an investment in a Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUNDS
Distribution Plans
The Funds' distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares
which provide that the Funds will pay distribution fees at annual rates of up
to 0.25% and 0.75% of the average daily net assets attributable to Class A
and Class B shares of each Fund, respectively. Payments under the
distribution plans shall be used to compensate or reimburse the Funds'
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to
the amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or maintenance commissions at an annual rate of up
to 0.25% of the average daily net asset value of Class A or Class B shares
maintained in a Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended
to promote the sale of Class A and Class B shares will be conducted generally
by the Vista Family of Funds, and activities intended to promote a Fund's
Class A or Class B shares may also benefit the Fund's other shares and other
Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional
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meal, ticket to a sporting event or theater or entertainment for
broker-dealers and their guests; and payment or reimbursement for travel
expenses, including lodging and meals, in connection with attendance at
training and educational meetings within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class B shares of the Funds. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class B shares of each Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption
of Fund shares, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of a Fund attributable to shares of such
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to a Fund or its shareholders, since it will
be paid by Chase.
Administrator and Sub-Administrator
Chase acts as the Funds' administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Funds' pursuant to
a distribution and sub- administration agreement and is entitled to receive a
fee for these services from each Fund at an annual rate equal to 0.05% of
each Funds' average daily net assets. VFD has agreed to use a portion of this
fee to pay for certain expenses incurred in connection with organizing new
series of the Trust and certain other ongoing expenses of the Trust. VFD is
located at 101 Park Avenue, New York, New York 10178.
Custodian
Chase acts as custodian and fund accountant for the Funds and receives
compensation under an agreement with the Trust. Fund securities and cash may
be held by sub-custodian banks if such arrangements are reviewed and approved
by the Trustees.
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Expenses
Each Fund pays the expenses incurred in its operations, including each
Fund's pro rata share of expenses of the Trust. These expenses include
investment advisory and administrative fees; the compensation of the
Trustees; registration fees; interest charges; taxes; expenses connected with
the execution, recording and settlement of security transactions; fees and
expenses of the Fund's custodian for all services to the Funds, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Funds. Shareholder servicing and distribution fees
are allocated to specific classes of each of the Funds. In addition, the
Funds may allocate transfer agency and certain other expenses by class.
Service providers to a Fund may, from time to time, voluntarily waive all or
a portion of any fees to which they are entitled.
Organization and Description of Shares
Each Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no 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 the Trust shall not be voted. Shares of each class of a Fund
generally vote together except when required under federal securities laws to
vote separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
Each Fund issues multiple classes of shares. This Prospectus relates to
Class A and Class B shares of each Fund. The Funds may offer other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of each Fund's shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which would affect the relative performance of the different classes.
Investors may call 1-800-34-VISTA to obtain additional information about
other classes of shares of the Funds that are offered. Any person entitled to
receive compensation for selling or servicing shares of a Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of all series or classes when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. The Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less
than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring finan-
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cial loss on account of shareholder liability is limited to circumstances in
which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and
generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting
as investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws.
If future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of
the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations
and municipal obligations to, and purchase them from, other investment
companies sponsored by the Funds' distributor or affiliates of the
distributor. Chase will not invest the Funds' 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 Chase or
an affiliate is a non-principal member. This restriction may limit the amount
or type of U.S. Government obligations, municipal obligations or commercial
paper available to be purchased by the Funds. Chase has informed the Funds
that in making its investment decisions, it does not obtain or use material
inside information in the possession of any other division or department of
Chase, including the division that performs services for the Funds as
custodian, or in the possession of any affiliate of Chase. Shareholders of
the Funds should be aware that, subject to applicable legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in
accordance with applicable federal regulations.
PERFORMANCE INFORMATION
Each Fund's investment performance may from time to time be included in
advertisements about the Funds. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing
the annualized net investment income per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or for the life
of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in a
Fund invested at the maximum public offering price (in the case of Class A
shares) or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of Class B
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shares). Total return may also be presented for other periods or without
reflecting sales charges. Any quotation of investment performance not
reflecting the maximum initial sales charge or contingent deferred sales
charge would be reduced if such sales charges were used.
All performance data is based on each Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of
each Fund's portfolio, each Fund's operating expenses and which class of
shares you purchase. Investment performance also often reflects the risks
associated with the Funds' investment objectives and policies. These factors
should be considered when comparing each Fund's investment results to those
of other mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. Each Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
(bullet) FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in
the same class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
(bullet) REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in their Fund at net asset value
next determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders of a Fund who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares of that Fund with no initial
sales charge (in an amount not in excess of their redemption proceeds) if the
purchase occurs within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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[Vista Logo]
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
- -------------------------------------------
Transfer Agent and Dividend Paying Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
VEJA-1-596CX
[Vista Logo]
Southeast Asian Fund
Japan Fund
European Fund
- -------------------------------------------
Prospectus
and Application
May 6, 1996
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
STATEMENT OF
ADDITIONAL INFORMATION
May 6, 1996
VISTA[SM] AMERICAN VALUE FUND
VISTA[SM] BALANCED FUND
VISTA[SM] BOND FUND
VISTA[SM] CAPITAL GROWTH FUND
VISTA[SM] EQUITY INCOME FUND
VISTA[SM] GROWTH AND INCOME FUND
VISTA[SM] LARGE CAP EQUITY FUND
VISTA[SM] SHORT-TERM BOND FUND
VISTA[SM] SMALL CAP EQUITY FUND
VISTA[SM] U.S. GOVERNMENT SECURITIES FUND
VISTA[SM] U.S. TREASURY INCOME FUND
101 Park Avenue, New York, New York 10178
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering
shares of Vista U.S. Government Securities Fund, Vista U.S. Treasury Income
Fund, Vista Bond Fund and Vista Short-Term Bond Fund (collectively the
"Income Funds"), and Vista American Value Fund, Vista Balanced Fund, Vista
Equity Income Fund, Vista Growth and Income Fund, Vista Capital Growth Fund,
Vista Large Cap Equity Fund and Vista Small Cap Equity Fund (collectively the
"Equity Funds"). Any references to a "Prospectus" in this Statement of
Additional Information is a reference to one or more of the foregoing
Prospectuses, as the context requires. Copies of each Prospectus may be
obtained by an investor without charge by contacting Vista Fund Distributors,
Inc.("VFD"), the Funds' distributor (the "Distributor"), at the above-listed
address.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
For more information about your account, simply call or write the Vista
Service Center at:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
MFG-SAI
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
The Funds ................................................................. 3
Investment Policies and Restrictions ...................................... 3
Performance Information ................................................... 21
Determination of Net Asset Value .......................................... 27
Purchases, Redemptions and Exchanges ...................................... 28
Tax Matters ............................................................... 30
Management of the Trust and the Funds or Portfolios ....................... 35
Independent Accountants ................................................... 49
General Information ....................................................... 49
Appendix A--Description of Certain Obligations Issued or Guaranteed by
U.S. Government Agencies or Instrumentalities ........................... A-1
Appendix B--Description of Ratings ........................................ B-1
2
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THE FUNDS
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists
of 16 separate series (the "Funds"). Certain of the Funds are diversified and
other Funds are non-diversified, as such term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). The shares of the Funds are
collectively referred to in this Statement of Additional Information as the
"Shares."
The Growth and Income Fund and Capital Growth Fund converted to a master
fund/feeder fund structure in December 1993. Under this structure, each of
these Funds seeks to achieve its investment objective by investing all of its
investable assets in an open-end management investment company which has the
same investment objective as that Fund. The Growth and Income Fund invests in
the Growth and Income Portfolio and the Capital Growth Fund invests in the
Capital Growth Portfolio (collectively the "Portfolios"). Each of the
Portfolios is a New York trust with its principal office in New York. Certain
qualified investors, in addition to a Fund, may invest in a Portfolio. For
purposes of this Statement of Additional Information, any information or
references to either or both of the Portfolios refer to the operations and
activities after implementation of the master fund/feeder fund structure.
On May 3, 1996, The Hanover American Value Fund merged into Vista American
Value Fund, The Hanover Large Cap Equity Fund merged into the Institutional
Shares of Vista Large Cap Equity Fund, The Hanover Short-Term Bond Fund
merged into the Class A shares of Vista Short-Term Bond Fund, Investor Shares
of The Hanover Small Cap Equity Fund merged into the Class A shares of Vista
Small Cap Equity Fund, CBC Benefit Shares of The Hanover Small Cap Equity
Fund merged into the Institutional Shares of Vista Small Cap Equity Fund and
The Hanover U.S. Government Securities Fund merged into the Institutional
Shares of Vista U.S. Government Securities Fund. The foregoing mergers are
referred to herein as the "Hanover Reorganization."
Effective as of May 6, 1996, Vista U.S. Government Income Fund changed its
name to Vista U.S. Treasury Income Fund and Vista Equity Fund changed its
name to Vista Large Cap Equity Fund.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. In the case of the Portfolios,
separate Boards of Trustees, with certain common members, provide broad
supervision. The Chase Manhattan Bank ("Chase") is the investment adviser for
the Funds (other than the Growth and Income Fund and Capital Growth Fund,
which do not have their own advisers) and the two Portfolios. Chase also
serves as the Trust's administrator (the "Administrator") and supervises the
overall administration of the Trust, including the Funds, and is the
administrator of the Portfolios. A majority of the Trustees of the Trust are
not affiliated with the investment adviser or sub-advisers. Similarly, a
majority of the Trustees of the Portfolios are not affiliated with the
investment adviser or sub-advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies of each Fund
and Portfolio. The following information supplements and should be read in
conjunction with the related sections of each Prospectus. For descriptions of
the securities ratings of Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P") and Fitch Investors Service, Inc.
("Fitch"), see Appendix B.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities
of one year or less), U.S. Treasury notes (maturities of one to ten years)
and U.S. Treasury bonds (generally maturities of greater than ten years); and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and
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credit of the U.S. Treasury, (b) the right of the issuer to borrow any amount
listed to a specific line of credit from the U.S. Treasury, (c) discretionary
authority of the U.S. Government to purchase certain obligations of the U.S.
Government agency or instrumentality or (d) the credit of the agency or
instrumentality. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Student Loan Marketing Association, United
States Postal Service, Chrysler Corporate Loan Guarantee Board, Small
Business Administration, Tennessee Valley Authority and any other enterprise
established or sponsored by the U.S. Government. Certain U.S. Government
Securities, including U.S. Treasury bills, notes and bonds, Government
National Mortgage Association certificates and Federal Housing Administration
debentures, are supported by the full faith and credit of the United States.
Other U.S. Government Securities are issued or guaranteed by federal agencies
or government sponsored enterprises and are not supported by the full faith
and credit of the United States. These securities include obligations that
are supported by the right of the issuer to borrow from the U.S. Treasury,
such as obligations of the Federal Home Loan Banks, and obligations that are
supported by the creditworthiness of the particular instrumentality, such as
obligations of the Federal National Mortgage Association or Federal Home Loan
Mortgage Corporation. For a description of certain obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small
Business Administration, Federal Aviation Administration, Department of
Defense, Bureau of Indian Affairs and Private Export Funding Corporation,
which often provide higher yields than are available from the more common
types of government-backed instruments. However, such specialized instruments
may only be available from a few sources, in limited amounts, or only in very
large denominations; they may also require specialized capability in
portfolio servicing and in legal matters related to government guarantees.
While they may frequently offer attractive yields, the limited-activity
markets of many of these securities means that, if a Fund or Portfolio were
required to liquidate any of them, it might not be able to do so
advantageously; accordingly, each Fund and Portfolio investing in such
securities normally to hold such securities to maturity or pursuant to
repurchase agreements, and would treat such securities (including repurchase
agreements maturing in more than seven days) as illiquid for purposes of its
limitation on investment in illiquid securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation, and foreign
banks (including their U.S. branches) having total assets in excess of $10
billion (or the equivalent in other currencies), and such other U.S. and
foreign commercial banks which are judged by the advisers to meet comparable
credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit
is a short-term negotiable certificate issued by a commercial bank against
funds deposited in the bank and is either interest-bearing or purchased on a
discount basis. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction. The borrower is liable for payment as is the bank,
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Fixed time deposits are obligations of branches of United
States banks or foreign banks which are payable at a stated maturity date and
bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits
subject to withdrawal penalties and with respect to which a Fund or Portfolio
cannot realize the proceeds thereon within seven days are deemed "illiquid"
for the purposes of its restriction on investments in illiquid securities.
Deposit notes are notes issued by commercial banks which generally bear fixed
rates of interest and typically have original maturities ranging from
eighteen months to five years.
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Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may
be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit
losses arising from possible financial difficulties of borrowers might affect
a bank's ability to meet its obligations. Bank obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Investors
should also be aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.
Depositary Receipts. A Fund or Portfolio will limit its investment in
Depository Receipts not sponsored by the issuer of the underlying security to
no more than 5% of the value of its net assets (at the time of investment). A
purchaser of an unsponsored Depositary Receipt may not have unlimited voting
rights and may not receive as much information about the issuer of the
underlying securities as with a sponsored Depositary Receipt.
ECU Obligations. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Trustees do not
believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities.
Supranational Obligations. Supranational organizations, include
organizations such as The World Bank, which was chartered to finance
development projects in developing member countries; the European Community,
which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union
of various European nations steel and coal 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.
Corporate Reorganizations. In general, securities that are the subject of
a tender or exchange offer or proposal sell at a premium to their historic
market price immediately prior to the announcement of the offer or proposal.
The increased market price of these securities may also discount what the
stated or appraised value of the security would be if the contemplated action
were approved or consummated. These investments may be advantageous when the
discount significantly overstates the risk of the contingencies involved;
significantly undervalues the securities, assets or cash to be received by
shareholders of the prospective portfolio company as a result of the
contemplated transaction; or fails adequately to recognize the possibility
that the offer or proposal may be replaced or superseded by an offer or
proposal of greater value. The evaluation of these contingencies requires
unusually broad knowledge and experience on the part of the advisers that
must appraise not only the value of the issuer and its component businesses
as well as the assets or securities to be received as a result of the
contemplated transaction, but also the financial resources and business
motivation of the offeror as well as the dynamics of the business climate
when the offer or proposal is in progress. Investments in reorganization
securities may tend to increase the turnover ratio of a Fund and increase its
brokerage and other transaction expenses.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants but normally have a shorter duration and are
distributed directly by the issuer to shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing arrangement
involv-
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ing periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.
Repurchase Agreements. A Fund or Portfolio will enter into repurchase
agreements only with member banks of the Federal Reserve System and
securities dealers believed creditworthy, and only if fully collateralized by
securities in which such Fund or Portfolio is permitted to invest. Under the
terms of a typical repurchase agreement, a Fund or Portfolio would acquire an
underlying instrument for a relatively short period (usually not more than
one week) subject to an obligation of the seller to repurchase the instrument
and the Fund or Portfolio to resell the instrument at a fixed price and time,
thereby determining the yield during the Fund's or Portfolio's holding
period. This procedure results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to
the risk that the seller may fail to repurchase the security. Repurchase
agreements are considered under the 1940 Act to be loans collateralized by
the underlying securities. All repurchase agreements entered into by a Fund
or Portfolio will be fully collateralized at all times during the period of
the agreement in that the value of the underlying security will be at least
equal to 102% of the amount of the loan, including the accrued interest
thereon, and the Fund or Portfolio or its custodian or sub-custodian will
have possession of the collateral, which the Board of Trustees believes will
give it a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a
collateralized loan has not been conclusively established. This might become
an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by the Fund or Portfolio, but would only constitute
collateral for the seller's obligation to pay the repurchase price.
Therefore, a Fund or Portfolio may suffer time delays and incur costs in
connection with the disposition of the collateral. The Board of Trustees
believes that the collateral underlying repurchase agreements may be more
susceptible to claims of the seller's creditors than would be the case with
securities owned by a Fund or Portfolio. Repurchase agreements maturing in
more than seven days are treated as illiquid for purposes of the Funds' and
Portfolios' restrictions on purchases of illiquid securities. Repurchase
agreements are also subject to the risks described below with respect to
stand-by commitments.
Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will
normally be purchased. When a commitment to purchase a security on a forward
commitment basis is made, procedures are established consistent with the
General Statement of Policy of the Securities and Exchange Commission
concerning such purchases. Since that policy currently recommends that an
amount of the respective Fund's or Portfolio's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the
commitment, a separate account of such Fund or Portfolio consisting of cash,
cash equivalents or high quality debt securities equal to the amount of such
Fund's or Portfolio's commitments securities will be established at such
Fund's or Portfolio's custodian bank. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market value. If the market value of such securities declines,
additional cash, cash equivalents or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount
of such commitments by the respective Fund or Portfolio.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis
may involve more risk than other types of purchases. Securities purchased on
a forward commitment basis and the securities held in the respective Fund's
or Portfolio's portfolio are subject to changes in value based upon the
public's perception of the issuer and changes, real or anticipated, in the
level of interest rates. Purchasing securities on a forward commitment basis
can involve the risk that the yields available in the market when the
delivery takes place may actually be higher or lower than those obtained in
the transaction itself. On the settlement date of the forward commitment
transaction, the respective Fund or Portfolio will meet its obligations from
then available cash flow, sale of securities held in the separate account,
sale of other securities or, although it would not normally expect to do so,
from sale of the forward commitment securities themselves (which may have a
value greater or lesser than such Fund's
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<PAGE>
or Portfolio's payment obligations). The sale of securities to meet such
obligations may result in the realization of capital gains or losses.
To the extent a Fund or Portfolio engages in forward commitment
transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for the purpose
of investment leverage, and settlement of such transactions will be within 90
days from the trade date.
Floating and Variable Rate Securities; Participation Certificates. The
securities in which certain Funds and Portfolios may be invested include
participation certificates issued by a bank, insurance company or other
financial institution in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate
gives a Fund or Portfolio an undivided interest in the security in the
proportion that the Fund's or Portfolio's participation interest bears to the
total principal amount of the security and generally provides the demand
feature described below. Each Participation Certificate is backed by an
irrevocable letter of credit or guaranty of a bank (which may be the bank
issuing the Participation Certificate, a bank issuing a confirming letter of
credit to that of the issuing bank, or a bank serving as agent of the issuing
bank with respect to the possible repurchase of the Participation
Certificate) or insurance policy of an insurance company that the Board of
Trustees of the Trust has determined meets the prescribed quality standards
for a particular Fund or Portfolio.
A Fund or Portfolio may have the right to sell the Participation
Certificate back to the institution and draw on the letter of credit or
insurance on demand after the prescribed notice period, for all or any part
of the full principal amount of the Fund's or Portfolio's participation
interest in the security, plus accrued interest. The institutions issuing the
Participation Certificates would retain a service and letter of credit fee
and a fee for providing the demand feature, in an amount equal to the excess
of the interest paid on the instruments over the negotiated yield at which
the Participation Certificates were purchased by a Fund or Portfolio. The
total fees would generally range from 5% to 15% of the applicable prime rate
or other short-term rate index. With respect to insurance, a Fund or
Portfolio will attempt to have the issuer of the participation certificate
bear the cost of any such insurance, although the Funds and Portfolios retain
the option to purchase insurance if deemed appropriate. Obligations that have
a demand feature permitting a Fund or Portfolio to tender the obligation to a
foreign bank may involve certain risks associated with foreign investment. A
Fund's or Portfolio's ability to receive payment in such circumstances under
the demand feature from such foreign banks may involve certain risks such as
future political and economic developments, the possible establishments of
laws or restrictions that might adversely affect the payment of the bank's
obligations under the demand feature and the difficulty of obtaining or
enforcing a judgment against the bank.
The advisers have been instructed by the Board of Trustees to monitor on
an ongoing basis the pricing, quality and liquidity of the floating and
variable rate securities held by the Funds and Portfolios, including
Participation Certificates, on the basis of published financial information
and reports of the rating agencies and other bank analytical services to
which the Funds and Portfolios may subscribe. Although these instruments may
be sold by a Fund or Portfolio, it is intended that they be held until
maturity.
Past periods of high inflation, together with the fiscal measures adopted
to attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the
underlying floating or variable rate securities may change with changes in
interest rates generally, the floating or variable rate nature of the
underlying floating or variable rate securities should minimize changes in
value of the instruments. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation and the risk of potential
capital depreciation is less than would be the case with a portfolio of fixed
rate securities. A Fund's or Portfolio's portfolio may contain floating or
variable rate securities on which stated minimum or maximum rates, or maximum
rates set by state law, limit the degree to which interest on such floating
or variable rate securities may fluctuate; to the extent it does, increases
or decreases in value may be somewhat greater than would be the case without
such limits. Because the adjustment of interest rates on the floating or
variable rate securities is made in relation to movements of the applicable
banks' "prime rates" or other short-term rate adjustment indices, the
floating or variable rate securities are not comparable to long-
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term fixed rate securities. Accordingly, interest rates on the floating or
variable rate securities may be higher or lower than current market rates for
fixed rate obligations of comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of (i)
the notice period required before a Fund or Portfolio is entitled to receive
payment of the principal amount of the security upon demand or (ii) the
period remaining until the security's next interest rate adjustment.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund or Portfolio with an agreement to
repurchase the securities at an agreed upon price and date. The repurchase
price is generally equal to the original sales price plus interest. Reverse
repurchase agreements are usually for seven days or less and cannot be repaid
prior to their expiration dates. Reverse repurchase agreements involve the
risk that the market value of the portfolio securities transferred may
decline below the price at which the Fund or Portfolio is obliged to purchase
the securities.
Zero Coupon, Payment-in-Kind and Stripped Obligations. The principal and
interest components of United States Treasury bonds with remaining maturities
of longer than ten years are eligible to be traded independently under the
Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that
of United States Treasury bills with comparable maturities.
Zero coupon obligations are sold at a substantial discount from their
value at maturity and, when held to maturity, their entire return, which
consists of the amortization of discount, comes from the difference between
their purchase price and maturity value. Because interest on a zero coupon
obligation is not distributed on a current basis, the obligation tends to be
subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying securities with similar maturities.
The value of zero coupon obligations appreciates more than such ordinary
interest-paying securities during periods of declining interest rates and
depreciates more than such ordinary interest-paying securities during periods
of rising interest rates. Under the stripped bond rules of the Internal
Revenue Code of 1986, as amended, investments by a Fund or Portfolio in zero
coupon obligations will result in the accrual of interest income on such
investments in advance of the receipt of the cash corresponding to such
income.
Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the
coupon payments and principal payment that will be generated by this security
separately. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities, Treasury Investment Growth Receipts and generic Treasury
Receipts, are examples of stripped U.S. Treasury securities separated into
their component parts through such custodial arrangements.
Payment-in-kind ("PIK") bonds are debt obligations which provide that the
issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments benefit the issuer
by mitigating its need for cash to meet debt service, but also require a
higher rate of return to attract investors who are willing to defer receipt
of such cash. Such investments experience greater volatility in market value
due to changes in interest rates than debt obligations which provide for
regular payments of interest. A Fund or Portfolio will accrue income on such
investments for tax and accounting purposes, as required, which is
distributable to shareholders and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy the Fund's or Portfolio's distribution obligations.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund and Portfolio may elect to treat as liquid, in
accordance with procedures established by the Board of Trustees, certain
investments in restricted securities for which there may be a secondary
market of qualified institutional buyers as contemplated by Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act") and commercial
obligations issued in reliance on the so-called "private placement" exemption
from regis-
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tration afforded by Section 4(2) of the Securities Act ("Section 4(2)
paper"). Rule 144A provides an exemption from the registration requirements
of the Securities Act for the resale of certain restricted securities to
qualified institutional buyers. Section 4(2) paper is restricted as to
disposition under the federal securities laws, and generally is sold to
institutional investors such as a Fund or Portfolio who agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale of Section 4(2) paper by the purchaser must be in an
exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid
market for Rule 144A securities or Section 4(2) paper will develop or be
maintained. The Trustees have adopted policies and procedures for the purpose
of determining whether securities that are eligible for resale under Rule
144A and Section 4(2) paper are liquid or illiquid for purposes of the
limitation on investment in illiquid securities. Pursuant to those policies
and procedures, the Trustees have delegated to the advisers the determination
as to whether a particular instrument is liquid or illiquid, requiring that
consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security
and the number of potential purchasers, dealer undertakings to make a market
in the security, the nature of the security and the time needed to dispose of
the security. The Trustees will periodically review the Funds' and
Portfolios' purchases and sales of Rule 144A securities and Section 4(2)
paper.
Stand-By Commitments. In a put transaction, a Fund or 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 Fund
or 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. Stand-by commitments are subject to certain risks,
which include the inability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the
commitment is not marketable by a Fund or Portfolio, and that the maturity of
the underlying security will generally be different from that of the
commitment.
Securities Loans. To the extent specified in its Prospectus, each Fund and
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 Fund's or
Portfolio's total assets. In connection with such loans, a Fund or 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 plus accrued interest of the
securities loaned. A Fund or Portfolio can increase its income through the
investment of such collateral. A Fund or Portfolio continues to be entitled
to the interest payable or any dividend-equivalent payments received on a
loaned security and, in addition, to receive interest on the amount of the
loan. However, the receipt of any dividend-equivalent payments by a Fund or
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 Fund or Portfolio might experience risk of loss if the
institutions with which it has engaged in portfolio loan transactions breach
their agreements with such Fund or Portfolio. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
experience financial difficulty. Loans will be made only to firms deemed by
the advisers to be of good standing and will not be made unless, in the
judgment of the advisers, the consideration to be earned from such loans
justifies the risk.
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Funds and Portfolios may
employ derivative and related instruments as tools in the management of
portfolio assets. Put briefly, a "derivative" instrument may be considered a
security or other instrument which derives its value from the value or
performance of other instruments or assets, interest or currency exchange
rates, or indexes. For instance, derivatives include futures, options,
forward contracts, structured notes and various over-the-counter instruments.
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Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways: First,
to reduce risk by hedging (offsetting) an investment position. Second, to
substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for a Fund or Portfolio.
Each Fund and Portfolio may invest its assets in derivative and related
instruments subject only to the Fund's or Portfolio's investment objective
and policies and the requirement that the Fund or Portfolio maintain
segregated accounts consisting of liquid assets, such as cash, U.S.
Government securities, or other high-grade debt obligations (or, as permitted
by applicable regulation, enter into certain offsetting positions) to cover
its obligations under such instruments with respect to positions where there
is no underlying portfolio asset so as to avoid leveraging the Fund or
Portfolio.
The value of some derivative or similar instruments in which the Funds or
Portfolios may invest may be particularly sensitive to changes in prevailing
interest rates or other economic factors, and--like other investments of the
Funds and Portfolios--the ability of a Fund or Portfolio to successfully
utilize these instruments may depend in part upon the ability of the advisers
to forecast interest rates and other economic factors correctly. If the
advisers inaccurately forecast such factors and has taken positions in
derivative or similar instruments contrary to prevailing market trends, a
Fund or Portfolio could be exposed to the risk of a loss. The Funds and
Portfolios might not employ any or all of the strategies described herein,
and no assurance can be given that any strategy used will succeed.
Set forth below is an explanation of the various derivatives strategies
and related instruments the Funds or Portfolios may employ along with risks
or special attributes associated with them. This discussion is intended to
supplement the Funds' current prospectuses as well as provide useful
information to prospective investors.
Risk Factors. As explained more fully below and in the discussions of
particular strategies or instruments, there are a number of risks associated
with the use of derivatives and related instruments. There can be no
guarantee that there will be a correlation between price movements in a
hedging vehicle and in the portfolio assets being hedged. An incorrect
correlation could result in a loss on both the hedged assets in a Fund or
Portfolio and the hedging vehicle so that the portfolio return might have
been greater had hedging not been attempted. This risk is particularly acute
in the case of "cross-hedges" between currencies. The advisers may
inaccurately forecast interest rates, market values or other economic factors
in utilizing a derivatives strategy. In such a case, a Fund or 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
Fund or Portfolio. Certain strategies, such as yield enhancement, can have
speculative characteristics and may result in more risk to a Fund or
Portfolio than hedging strategies using the same instruments. There can be no
assurance that a liquid market will exist at a time when a Fund or 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 particular contract, no trades may be made
that day at a price beyond that limit. In addition, certain instruments are
relatively new and without a significant trading history. As a result, there
is no assurance that an active secondary market will develop or continue to
exist. Finally, over-the-counter instruments typically do not have a liquid
market. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position. Activities of large traders in the
futures and securities markets involving arbitrage, "program trading," and
other investment strategies may cause price distortions in these markets. In
certain instances, particularly those involving over-the-counter
transactions, forward contracts there is a greater potential that a
counterparty or broker may default or be
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unable to perform on its commitments. In the event of such a default, a Fund
or 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.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by
a Fund or Portfolio.
Options on Securities, Securities Indexes and Debt Instruments. A Fund or
Portfolio may PURCHASE, SELL or EXERCISE call and put options on (i)
securities, (ii) securities indexes, and (iii) debt instruments.
Although in most cases these options will be exchange-traded, the Funds
and Portfolios may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller. As such, over-the-counter options generally have much less market
liquidity and carry the risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund or
Portfolio may also use combinations of options to minimize costs, gain
exposure to markets or take advantage of price disparities or market
movements. For example, a Fund or Portfolio may sell put or call options it
has previously purchased or purchase put or call options it has previously
sold. These transactions may result in a net gain or loss depending on
whether the amount realized on the sale is more or less than the premium and
other transaction costs paid on the put or call option which is sold. A Fund
or Portfolio may write a call or put option in order to earn the related
premium from such transactions. Prior to exercise or expiration, an option
may be closed out by an offsetting purchase or sale of a similar option. The
Funds will not write uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund or Portfolio writing a covered call (i.e., where the underlying
securities are held by the Fund or Portfolio) has, in return for the premium
on the option, given up the opportunity to profit from a price increase in
the underlying securities above the exercise price, but has retained the risk
of loss should the price of the underlying securities decline. The writer of
an option has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
securities at the exercise price.
If a put or call option purchased by a Fund or Portfolio is not sold when
it has remaining value, and if the market price of the underlying security,
in the case of a put, remains equal to or greater than the exercise price or,
in the case of a call, remains less than or equal to the exercise price, such
Fund or Portfolio will lose its entire investment in the option. Also, where
a put or call option on a particular security is purchased to hedge against
price movements in a related security, the price of the put or call option
may move more or less than the price of the related security. There can be no
assurance that a liquid market will exist when a Fund or Portfolio seeks to
close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund or Portfolio may be
unable to close out a position.
Futures Contracts and Options on Futures Contracts. A Fund or Portfolio
may purchase or sell (i) interest-rate futures contracts, (ii) futures
contracts on specified instruments or indices, and (iii) options on these
futures contracts ("futures options").
The futures contracts and futures options may be based on various
instruments or indices in which the Funds and Portfolios may invest such as
foreign currencies, certificates of deposit, Eurodollar time deposits,
securities indices, economic indices (such as the Consumer Price Indices
compiled by the U.S. Department of Labor).
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Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For example,
a Fund or Portfolio may sell a futures contract--or buy a futures option--to
protect against a decline in value, or reduce the duration, of portfolio
holdings. Likewise, these instruments may be used where a Fund or Portfolio
intends to acquire an instrument or enter into a position. For example, a Fund
or Portfolio may purchase a futures contract--or buy a futures option--to gain
immediate exposure in a market or otherwise offset increases in the purchase
price of securities or currencies to be acquired in the future. Futures options
may also be written to earn the related premiums.
When writing or purchasing options, the Funds and Portfolios may
simultaneously enter into other transactions involving futures contracts or
futures options in order to minimize costs, gain exposure to markets, or take
advantage of price disparities or market movements. Such strategies may
entail additional risks in certain instances. The Funds and Portfolios may
engage in cross-hedging by purchasing or selling futures or options on a
security or currency different from the security or currency position being
hedged to take advantage of relationships between the two securities or
currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Funds and
Portfolios will only enter into futures contracts or options on futures
contracts which are traded on a U.S. or foreign exchange or board of trade,
or similar entity, or quoted on an automated quotation system.
Forward Contracts. A Fund and Portfolio may use foreign currency and
interest-rate forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and
other complex factors, as seen from an international perspective. A Fund or
Portfolio that may invest in securities denominated in foreign currencies
may, in addition to buying and selling foreign currency futures contracts and
options on foreign currencies and foreign currency futures, enter into
forward foreign currency exchange contracts to reduce the risks or otherwise
take a position in anticipation of changes in foreign exchange rates. A
forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be a fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. By entering into a forward foreign currency
contract, a Fund or Portfolio "locks in" the exchange rate between the
currency it will deliver and the currency it will receive for the duration of
the contract. As a result, a Fund or Portfolio reduces its exposure to
changes in the value of the currency it will deliver and increases its
exposure to changes in the value of the currency it will exchange into. The
effect on the value of a Fund or Portfolio is similar to selling securities
denominated in one currency and purchasing securities denominated in another.
Transactions that use two foreign currencies are sometimes referred to as
"cross-hedges."
A Fund or Portfolio may enter into these contracts for the purpose of
hedging against foreign exchange risk arising from the Fund's or Portfolio'
investments or anticipated investments in securities denominated in foreign
currencies. A Fund or Portfolio may also enter into these contracts for
purposes of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one country to another.
A Fund or Portfolio may also use forward contracts to hedge against
changes in interest rates, increase exposure to a market or otherwise take
advantage of such changes. An interest-rate forward contract involves the
obligation to purchase or sell a specific debt instrument at a fixed price at
a future date.
Interest Rate and Currency Transactions. A Fund or Portfolio may employ
currency and interest rate management techniques, including transactions in
options (including yield curve options), futures, options on futures, forward
foreign currency exchange contracts, currency options and futures and
currency and interest rate swaps. The aggregate amount of a Fund's or
Portfolio's net currency exposure will not exceed the total net asset value
of its portfolio. However, to the extent that a Fund or Portfolio is fully
invested while also maintaining currency positions, it may be exposed to
greater combined risk.
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The Funds and Portfolios will only enter into interest rate and currency
swaps on a net basis, i.e., the two payment streams are netted out, with the
Fund or Portfolio receiving or paying, as the case may be, only the net amount
of the two payments. Interest rate and currency swaps do not involve the
delivery of securities, the underlying currency, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate and
currency swaps is limited to the net amount of interest or currency payments
that a Fund or Portfolio is contractually obligated to make. If the other party
to an interest rate or currency swap defaults, a Fund's or Portfolio's risk of
loss consists of the net amount of interest or currency payments that the Fund
or Portfolio is contractually entitled to receive. Since interest rate and
currency swaps are individually negotiated, the Funds and Portfolios expect to
achieve an acceptable degree of correlation between their portfolio investments
and their interest rate or currency swap positions.
A Fund or Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in
the relevant exchange rate.
A Fund or Portfolio may purchase or sell without limitation as to a
percentage of its assets forward foreign currency exchange contracts when the
advisers anticipate that the foreign currency will appreciate or depreciate
in value, but securities denominated in that currency do not present
attractive investment opportunities and are not held by such Fund or
Portfolio. In addition, a Fund or Portfolio may enter into forward foreign
currency exchange contracts in order to protect against adverse changes in
future foreign currency exchange rates. A Fund or Portfolio may engage in
cross-hedging by using forward contracts in one currency to hedge against
fluctuations in the value of securities denominated in a different currency
if its advisers believe that there is a pattern of correlation between the
two currencies. Forward contracts may reduce the potential gain from a
positive change in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for a Fund or Portfolio than if it had not entered into
such contracts. The use of foreign currency forward contracts will not
eliminate fluctuations in the underlying U.S. dollar equivalent value of the
prices of or rates of return on a Fund's or Portfolio's foreign currency
denominated portfolio securities and the use of such techniques will subject
the Fund or Portfolio to certain risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Fund or Portfolio may not always be able to enter
into foreign currency forward contracts at attractive prices, and this will
limit a Fund's or Portfolio's ability to use such contract to hedge or
cross-hedge its assets. Also, with regard to a Fund's or Portfolio's use of
cross-hedges, there can be no assurance that historical correlations between
the movement of certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time poor correlation may exist between movements in
the exchange rates of the foreign currencies underlying a Fund's or
Portfolio's cross-hedges and the movements in the exchange rates of the
foreign currencies in which the Fund's or Portfolio's assets that are the
subject of such cross-hedges are denominated.
A Fund or Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. A Fund or Portfolio will
typically use interest rate swaps to shorten the effective duration of its
portfolio. Interest rate swaps involve the exchange by a Fund or Portfolio
with another party of their respective commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate
payments. Currency swaps involve the exchange of their respective rights to
make or receive payments in specified currencies.
Mortgage-Related Securities. A Fund or Portfolio may purchase
mortgage-backed securities--i.e., securities representing an ownership
interest in a pool of mortgage loans issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations. Mortgage loans
included in the pool--but not the security itself--may be insured by the
Government National Mortgage Association or the Federal Housing
Administration or guaranteed by the Federal National Mortgage Association,
the Federal Home Loan
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Mortgage Corporation or the Veterans Administration. Mortgage-backed
securities provide investors with payments consisting of both interest and
principal as the mortgages in the underlying mortgage pools are paid off.
Although providing the potential for enhanced returns, mortgage-backed
securities can also be volatile and result in unanticipated losses.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and
mortgage foreclosures will usually result in the return of the greater part
of the principal invested far in advance of the maturity of the mortgages in
the pool. The actual rate of return of a mortgage-backed security may be
adversely affected by the prepayment of mortgages included in the mortgage
pool underlying the security.
A Fund or Portfolio may also invest in securities representing interests
in collateralized mortgage obligations ("CMOs"), real estate mortgage
investment conduits ("REMICs") and in pools of certain other asset- backed
bonds and mortgage pass-through securities. Like a bond, interest and prepaid
principal are paid, in most cases, monthly. CMOs may be collateralized by
whole mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government, or U.S.
Government-related entities, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Monthly payment of principal received from the
pool of underlying mortgages, including prepayments, are allocated to
different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
REMICs include governmental and/or private entities that issue a fixed
pool of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities. REMICs issued by
private entities are not U.S. Government securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer.
The advisers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed-rate mortgages. A Fund or Portfolio may
also invest in debentures and other securities of real estate investment
trusts. As new types of mortgage-related securities are developed and offered
to investors, the Funds and Portfolios may consider making investments in
such new types of mortgage-related securities.
Asset-Backed Securities. A Fund or Portfolio may invest in asset-backed
securities, including conditional sales contracts, equipment lease
certificates and equipment trust certificates. The advisers expect that other
asset-backed securities (unrelated to mortgage loans) will be offered to
investors in the future. Several types of asset-backed securities already
exist, including, for example, "Certificates for Automobile ReceivablesSM" or
"CARSSM" ("CARS"). CARS represent undivided fractional interests in a trust
whose assets consist of a pool of motor vehicle retail installment sales
contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS are passed-through monthly to
certificate holders, and are guaranteed up to certain amounts and for a
certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the CARS trust. An investor's
return on CARS may be affected by early prepayment of principal on the
underlying vehicle sales contracts. If the letter of credit is exhausted, the
CARS trust may be prevented from realizing the full amount due on a sales
contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, the
failure of servicers to take appropriate steps to perfect the CARS trust's
rights in the underlying loans and the servicer's sale of such loans to bona
fide purchasers, giving rise to interests in such loans superior to those of
the CARS trust, or other factors.
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As a result, certificate holders may experience delays in payments or losses
if the letter of credit is exhausted. A Fund or Portfolio also may invest in
other types of asset-backed securities. In the selection of other asset-
backed securities, the advisers will attempt to assess the liquidity of the
security giving consideration to the nature of the security, the frequency of
trading in the security, the number of dealers making a market in the
security and the overall nature of the marketplace for the security.
Structured Products. A Fund or Portfolio may invest in interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of certain other investments. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, or specified instruments (such as commercial bank
loans) and the issuance by that entity of one or more classes of securities
("structured products") backed by, or representing interests in, the
underlying instruments. The cash flow on the underlying instruments may be
apportioned among the newly issued structured products to create securities
with different investment characteristics such as varying maturities, payment
priorities and interest rate provisions, and the extent of the payments made
with respect to structured products is dependent on the extent of the cash
flow on the underlying instruments. A Fund or Portfolio may invest in
structured products which represent derived investment positions based on
relationships among different markets or asset classes.
A Fund or Portfolio may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by
a formula to the price of an underlying instrument. Inverse floaters have
coupon rates that vary inversely at a multiple of a designated floating rate
(which typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost
of Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon
rate while any drop in the reference rate of an inverse floater causes an
increase in the coupon rate. A spread trade is an investment position
relating to a difference in the prices or interest rates of two securities
where the value of the investment position is determined by movements in the
difference between the prices or interest rates, as the case may be, of the
respective securities. When a Fund or Portfolio invests in notes linked to
the price of an underlying instrument, the price of the underlying security
is determined by a multiple (based on a formula) of the price of such
underlying security. A structured product may be considered to be leveraged
to the extent its interest rate varies by a magnitude that exceeds the
magnitude of the change in the index rate of interest. Because they are
linked to their underlying markets or securities, investments in structured
products generally are subject to greater volatility than an investment
directly in the underlying market or security. Total return on the structured
product is derived by linking return to one or more characteristics of the
underlying instrument. Because certain structured products of the type in
which a Fund or Portfolio may invest may involve no credit enhancement, the
credit risk of those structured products generally would be equivalent to
that of the underlying instruments. A Fund or Portfolio may invest in a class
of structured products that is either subordinated or unsubordinated to the
right of payment of another class. Subordinated structured products typically
have higher yields and present greater risks than unsubordinated structured
products. Although a Fund's or Portfolio's purchase of subordinated
structured products would have similar economic effect to that of borrowing
against the underlying securities, the purchase will not be deemed to be
leverage for purposes of a Fund's or Portfolio' fundamental investment
limitation related to borrowing and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investments in
these structured products may be limited by the restrictions contained in the
1940 Act. Structured products are typically sold in private placement
transactions, and there currently is no active trading market for structured
products. As a result, certain structured products in which a Fund or
Portfolio invests may be deemed illiquid and subject to its limitation on
illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security.
In addition, because structured products are typically sold in private
placement transactions, there currently is no active trading market for
structured products.
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Additional Restrictions on the Use of Futures and Option Contracts. None
of the Funds is a "commodity pool" (i.e., a pooled investment vehicle which
trades in commodity futures contracts and options thereon and the operator of
which is registered with the CFTC and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that a Fund may enter into such transactions for purposes other than
bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5%
of the liquidation value of the Fund's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation.
When a Fund or Portfolio purchases a futures contract, an amount of cash
or cash equivalents or high quality debt securities will be deposited in a
segregated account with such Fund's or Portfolio's custodian or sub-custodian
so that the amount so segregated, plus the initial deposit and variation
margin held in the account of its broker, will at all times equal the value
of the futures contract, thereby insuring that the use of such futures is
unleveraged.
A Fund's or Portfolio's ability to engage in the transactions described
herein may be limited by the current federal income tax requirement that a
Fund or Portfolio derive less than 30% of its gross income from the sale or
other disposition of stock or securities held for less than three months.
Investment Restrictions
The Funds and Portfolios have adopted the following investment
restrictions which may not be changed without approval by a "majority of the
outstanding shares" of a Fund or Portfolio which, as used in this Statement
of Additional Information, means the vote of the lesser of (i) 67% or more of
the shares of a Fund or total beneficial interests of a Portfolio present at
a meeting, if the holders of more than 50% of the outstanding shares of a
Fund or total beneficial interests of a Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding shares of a Fund or total
beneficial interests of a Portfolio.
Whenever the Trust is requested to vote on a fundamental policy of a
Portfolio, the Trust will hold a meeting of shareholders of the Fund that
invests in such Portfolio and will cast its votes as instructed by the
shareholders of such Fund.
With respect to the Growth and Income Fund and the Capital Growth Fund, it
is a fundamental policy of each Fund that when the Fund holds no portfolio
securities except interests in the Portfolio in which it invests, the Fund's
investment objective and policies shall be identical to the Portfolio's
investment objective and policies, except for the following: a Fund (1) may
invest more than 10% of its net assets in the securities of a registered
investment company, (2) may hold more than 10% of the voting securities of a
registered investment company, and (3) will concentrate its investments in
the investment company. It is a fundamental investment policy of each such
Fund that when the Fund holds only portfolio securities other than interests
in the Portfolio, the Fund's investment objective and policies shall be
identical to the investment objective and policies of the Portfolio at the
time the assets of the Fund were withdrawn from the Portfolio.
Each Fund and Portfolio may not:
(1) borrow money, except that each Fund and 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 Fund's or
Portfolio's total assets must be repaid before the Fund or Portfolio may
make additional investments;
(2) make loans, except that each Fund and 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
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and policies; (ii) enter into repurchase agreements with respect to
portfolio securities; and (iii) lend portfolio securities with a value not
in excess of one-third of the value of its total assets;
(3) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of the Fund's or 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 Fund's or 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 Fund or 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
Fund or Portfolio from investing insecurities or other instruments backed
by real estate or securities of companies engaged in the real estate
business). Investments by a Fund or 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 Fund or 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 Fund or 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 Fund or Portfolio may
borrow money as authorized by the 1940 Act. For purposes of this
restriction, collateral arrangements with respect to permissible options
and futures transactions, including deposits of initial and variation
margin, are not considered to be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as
a Fund or Portfolio may technically be deemed to be an underwriter under
the Securities Act of 1933 in selling a portfolio security.
In addition, as a matter of fundamental policy, notwithstanding any other
investment policy or restriction, each Fund may seek to achieve its
investment objective by investing all of its investable assets in another
investment company having substantially the same investment objective and
policies as the Fund. For purposes of investment restriction (5) above, real
estate includes Real Estate Limited Partnerships. For purposes of investment
restriction (3) above, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry." Investment restriction
(3) above, however, is not applicable to investments by a Fund or Portfolio
in municipal obligations where the issuer is regarded as a state, city,
municipality or other public authority since such entities are not members of
an "industry." Supranational organizations are collectively considered to be
members of a single "industry" for purposes of restriction (3) above.
In addition, each Fund and Portfolio is subject to the following
nonfundamental restrictions which may be changed without shareholder
approval:
(1) Each Fund other than the Capital Growth Fund, Growth and Income
Fund, Small Cap Equity Fund and U.S. Treasury Income Fund may not, with
respect to 75% of its assets, hold more than 10% of the outstanding voting
securities of any issuer or invest more than 5% of its assets in the
securities of any one issuer (other than obligations of the U.S.
Government, its agencies and instrumentalities); Each Portfolio and each
of the Capital Growth Fund, Growth and Income Fund, Small Cap Equity Fund
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and U.S. Treasury Income Fund may not, with respect to 50% of its assets,
hold more than 10% of the outstanding voting securities of any issuer.
(2) Each Fund and 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 Fund or Portfolio.
(3) Each Fund and Portfolio may not purchase or sell interests in
oil, gas or mineral leases.
(4) Each Fund and Portfolio may not invest more than 15% of its net
assets in illiquid securities.
(5) Each Fund and 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 Fund's or Portfolio's permissible futures and options
transactions, the writing, purchasing, ownership, holding or selling of
futures and options positions or of puts, calls or combinations thereof
with respect to futures.
(6) Each Fund may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more than 3% of
the securities of any one investment company or invest more than 10% of
its total assets in the securities of other investment companies.
It is the Trust's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Trust has been
advised that the staff of the Securities and Exchange Commission's Division
of Investment Management does not consider these to be United States
Government securities, as defined under the Investment Company Act of 1940,
as amended.
For purposes of the Funds' and 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.
In order to permit the sale of its shares in certain states, a Fund or
Portfolio may make commitments more restrictive than the investment policies
and limitations described above and in its Prospectus. Should a Fund or
Portfolio determine that any such commitment is no longer in its best
interests, it will revoke the commitment by terminating sales of its shares
in the state involved. In order to comply with certain federal and state
statutes and regulatory policies, as a matter of operating policy, each Fund
and Portfolio will not: (i) invest more than 5% of its assets in companies
which, including predecessors, have a record of less than three years'
continuous operation, except for the Small Cap Equity Fund which may invest
up to 15% of its assets in such companies, (ii) invest in warrants, valued at
the lower of cost or market, in excess of 5% of the value of its net assets,
and no more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges, or (iii) purchase or retain in its
portfolio any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the Trust
or Portfolio, or is an officer or director of the adviser, if after the
purchase of the securities of such issuer by the Fund or Portfolio one or
more of such persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities, or both, all taken at
market value.
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time a transaction is
effected, later changes in percentage resulting from any cause other than
actions by a Fund or Portfolio will not be considered a violation. If the
value of a Fund's or 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.
18
<PAGE>
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for a Fund or Portfolio
are made by a portfolio manager who is an employee of the adviser or
sub-adviser to such Fund or Portfolio and who is appointed and supervised by
senior officers of such adviser or sub-adviser. Changes in a Fund's or
Portfolio's investments are reviewed by the Board of Trustees of the Trust or
Portfolio. The port- folio managers may serve other clients of the advisers
in a similar capacity.
The frequency of a Fund's or Portfolio's portfolio transactions--the
portfolio turnover rate--will vary from year to year depending upon market
conditions. Because a high turnover rate may increase transaction costs and
the possibility of taxable short-term gains, the advisers will weigh the
added costs of short-term investment against anticipated gains. Each Fund or
Portfolio will engage in portfolio trading if its advisers believe a
transaction, net of costs (including custodian charges), will help it achieve
its investment objective. Funds investing in both equity and debt securities
apply this policy with respect to both the equity and debt portions of their
portfolios.
For the fiscal years ended October 31, 1993, 1994 and 1995, the annual
rates of portfolio turnover for the following Funds were as follows:
1993 1994 1995
---- ---- ----
Balanced Fund -- 77% 68%
U.S. Treasury Income Fund 296 163% 164%
Growth and Income Fund 41% * *
Capital Growth Fund 43% * *
Equity Income Fund -- 75% 91%
Bond Fund 20% 17% 30%
Short-Term Bond Fund 17% 44% 62%
Large Cap Equity Fund 33% 53% 45%
- ---------------
* The Growth and Income Fund and the Capital Growth Fund invest all of their
investable assets in their respective Portfolio and do not invest directly
in a portfolio of assets, and therefore do not have reportable portfolio
turnover rates. The portfolio turnover rates for the Growth and Income
Portfolio and the Capital Growth Portfolio for the fiscal year ended
October 31, 1994 were 57% and 60%, respectively, and for the fiscal year
ended October 31, 1995, the portfolio turnover rates were 71% and 86%,
respectively.
For the period November 4, 1992 through October 31, 1993, the annual
portfolio turnover rate for the Balanced Fund was 65%. For the period July
16, 1993 through October 31, 1993, the Equity Income Fund had a portfolio
turnover rate of 54%. For the period December 20, 1994 through October 31,
1995, the Small Cap Equity Fund had a portfolio turnover rate of 75%.
For the fiscal period ending October 31, 1996, the annual portfolio
turnover rates for the American Value Fund and U.S. Government Securities
Fund are expected not to exceed 100%.
Under the advisory agreement and the sub-advisory agreements, the adviser
and sub-advisers shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs
or proceeds being the most favorable to the Funds and Portfolios. In
assessing the best overall terms available for any transaction, the adviser
and sub-advisers consider all factors they deem relevant, including the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer,
research services provided to the adviser or sub-advisers, and the
reasonableness of the commissions, if any, both for the specific transaction
and on a continuing basis. The adviser and sub-advisers are not required to
obtain the lowest commission or the best net price for any Fund or Portfolio
on any particular transaction, and are not required to execute any order in a
fashion either preferential to any or Portfolio Fund relative to other
accounts they manage or otherwise materially adverse to such other accounts.
19
<PAGE>
Debt securities are traded principally in the over-the-counter market through
dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the adviser or
sub- adviser to a Fund or Portfolio normally seeks to deal directly with the
primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's or Portfolio's portfolio
securities in so-called tender or exchange offers. Such soliciting dealer fees
are in effect recaptured for a Funds and Portfolios by the adviser and
sub-advisers. At present, no other recapture arrangements are in effect.
Under the advisory and sub-advisory agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the adviser or sub-advisers may
cause the Funds and Portfolios to pay a broker-dealer which provides
brokerage and research services to the adviser or sub-advisers, the Funds or
Portfolios and/or other accounts for which they exercise investment
discretion an amount of commission for effecting a securities transaction for
a Fund or Portfolio in excess of the amount other broker-dealers would have
charged for the transaction if they determine in good faith that the greater
commission is reasonable in relation to the value of the brokerage and
research services provided by the executing broker-dealer viewed in terms of
either a particular transaction or their overall responsibilities to accounts
over which they exercise investment discretion. Not all of such services are
useful or of value in advising the Funds and Portfolios. The adviser and
sub-advisers report to the Board of Trustees regarding overall commissions
paid by the Funds and Portfolios and their reasonableness in relation to the
benefits to the Funds and Portfolios. The term "brokerage and research
services" includes advice as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or of purchasers or sellers of securities, furnishing analyses and
reports concerning issues, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts, and effecting
securities transactions and performing functions incidental thereto such as
clearance and settlement.
The management fees that the Funds and Portfolios pay to the adviser will
not be reduced as a consequence of the adviser's or sub-advisers' receipt of
brokerage and research services. To the extent the Funds' or Portfolios'
portfolio transactions are used to obtain such services, the brokerage
commissions paid by the Funds or Portfolios will exceed those that might
otherwise be paid by an amount which cannot be presently determined. Such
services generally would be useful and of value to the adviser or
sub-advisers in serving one or more of their other clients and, conversely,
such services obtained by the placement of brokerage business of other
clients generally would be useful to the adviser and sub-advisers in carrying
out their obligations to the Funds and Portfolios. While such services are
not expected to reduce the expenses of the adviser or sub-advisers, they
advisers would, through use of the services, avoid the additional expenses
which would be incurred if they should attempt to develop comparable
information through their own staffs.
In certain instances, there may be securities that are suitable for one or
more of the Funds and Portfolios as well as one or more of the adviser's or
sub-advisers' other clients. Investment decisions for the Funds and
Portfolios and for other clients are made with a view to achieving their
respective investment objectives. It may develop that the same investment
decision is made for more than one client or that a particular security is
bought or sold for only one client even though it might be held by, or bought
or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more clients are selling that same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the
same security is suitable for the investment objectives of more than one
client. When two or more Funds or Portfolios or other clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the Funds
or Portfolios are concerned. However, it is
20
<PAGE>
believed that the ability of the Funds and Portfolios to participate in
volume transactions will generally produce better executions for the Funds
and Portfolios.
For the fiscal years ended October 31, 1991, 1992, 1993 the Capital Growth
Fund paid aggregate brokerage commissions of $6,495, $60,979 and $283,972,
respectively. For the fiscal year-ended October 31, 1994 and 1995, the
Capital Growth Portfolio paid aggregated brokerage commission of $1,242,652
and $2,311,291 respectively. For the same periods, the Growth and Income Fund
paid aggregate brokerage commissions of $146,944 , $231,193 and $1,092,931,
respectively. For the fiscal year-ended October 31, 1994 and 1995, the Growth
and Income Portfolio paid aggregated brokerage commission of $1,515,504 and
$2,352,596, respectively.
For the period from November 30, 1990 through June 30, 1991, the fiscal
year ended June 30, 1992 and the fiscal period July 1, 1992 through October
31, 1992, the Vista Large Cap Equity Fund paid aggregate brokerage
commissions of $57,804, $49,230 and $37,288, respectively. For the fiscal
year ended October 31, 1993, 1994 and 1995, the Large Cap Equity Fund paid
aggregate brokerage commissions of $129,600, $202,556 and $23,824,
respectively.
For the period from November 4, 1992 through October 31, 1993, and the
fiscal year ended October 31, 1994 and October 31, 1995, the Balanced Fund
paid aggregate brokerage commissions of $10,667, $26,724, and $27,315,
respectively.
For the period from July 16, 1993 through October 31, 1993, and the fiscal
year-ended October 31, 1994 and October 31, 1995, the Equity Income Fund paid
aggregate brokerage commissions of $1,241, $23,520 and $23,824, respectively.
For the period December 20, 1994 through October 31, 1995, the Small Cap
Equity Fund paid aggregate brokerage commissions of $56,980.
No portfolio transactions are executed with the advisers or a Shareholder
Servicing Agent, or with any affiliate of the advisers or a Shareholder
Servicing Agent, acting either as principal or as broker.
PERFORMANCE INFORMATION
From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based
on past investment results, it should not be considered as an indication or
representation of the performance of any classes of a Fund in the future.
From time to time, the performance and yield of classes of a Fund may be
quoted and compared to those of other mutual funds with similar investment
objectives, unmanaged investment accounts, including savings accounts, or
other similar products and to stock or other relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the performance of
a Fund 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 Fund or its
classes. A Fund's performance may be compared with indices such as the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Government Bond
Index, the Lehman Government Bond 1-3 Year Index and the Lehman Aggregate
Bond Index; the S&P 500 Index, the Dow Jones Industrial Average or any other
commonly quoted index of common stock prices; and the Russell 2000 Index and
the NASDAQ Composite Index. Additionally, a Fund may, with proper
authorization, reprint articles written about such Fund and provide them to
prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in
a Fund over a period (which period shall be stated in any adver-
21
<PAGE>
tisement or communication with a shareholder) based on any change in net
asset value per share including the value of any shares purchased through the
reinvestment of any dividends or capital gains distributions declared during
such period. For Class A shares, the average annual total rate of return
figures will assume payment of the maximum initial sales load at the time of
purchase. For Class B shares, the average annual total rate of return figures
will assume deduction of the applicable contingent deferred sales charge
imposed on a total redemption of shares held for the period. One-, five-, and
ten-year periods will be shown, unless the class has been in existence for a
shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values of the classes
of shares of a Fund will vary based on market conditions, the current market
value of the securities held by the Fund and changes in the Fund's expenses.
The advisers, Shareholder Servicing Agents, the Administrator, the
Distributor and other service providers may voluntarily waive a portion of
their fees on a month-to-month basis. In addition, the Distributor may assume
a portion of a Fund's operating expenses on a month-to-month basis. These
actions would have the effect of increasing the net income (and therefore the
yield and total rate of return) of the classes of shares of the Fund during
the period such waivers are in effect. These factors and possible differences
in the methods used to calculate the yields and total rates of return should
be considered when comparing the yields or total rates of return of the
classes of shares of a Fund to yields and total rates of return published for
other investment companies and other investment vehicles (including different
classes of shares). The Trust 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, 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.
In connection with the Hanover Reorganization, the Vista U.S. Government
Securities and Vista American Value Fund were established to receive the
assets of The Hanover U.S. Government Securities Fund and The Hanover
American Value Fund, respectively. Performance results presented for each
class of the Vista U.S. Government Securities Fund and Vista American Value
Fund will be based upon the performance of The Hanover U.S. Government
Securities Fund and The Hanover American Value Fund, respectively, for
periods prior to the consummation of the Hanover Reorganization.
Advertising or communications to shareholders may contain the views of the
advisers as to current market, economic, trade and interest rate trends, as
well as legislative, regulatory and monetary developments, and may include
investment strategies and related matters believed to be of relevance to a
Fund.
Advertisements for the Vista funds may include references to the asset
size of other financial products made available by Chase, such as the
offshore assets of other funds.
Total Rate of Return
A Fund's or class' total rate of return for any period will be calculated
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day of the period
of shares purchasable with dividends and capital gains declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day
of such period, and (b) subtracting 1 from the result. The average annual
rate of return quotation will be calculated by (x) adding 1 to the period
total rate of return quotation as calculated above, (y) raising such sum to a
power which is equal to 365 divided by the number of days in such period, and
(z) subtracting 1 from the result.
The average annual total rate of return figures for the following Funds,
reflecting the initial investment and reinvested dividends (but excluding the
effects of any applicable sales charges) for the one and five year periods
ended October 31, 1995 (November 30, 1995 with respect to American Value Fund
and U.S. Government Securities Fund), and for the period from commencement of
business operations of each such Fund
22
<PAGE>
to October 31, 1995 (November 30, 1995 with respect to American Value Fund
and U.S. Government Securities Fund), were as follows:
One Five Since Date of
Fund Year Years Inception Inception
- ------------------------------ ----- ----- -------- ----------
American Value Fund* -- -- -- 2/3/95
U.S. Treasury Income Fund
A Shares 14.59% 8.68% 9.64% 9/8/87
B Shares 13.80% -- 3.90% 11/4/93
Balanced Fund
A Shares 17.70% -- 12.09% 11/4/93
B Shares 16.93% -- 9.36% 11/4/93
Equity Income Fund 17.97% -- 9.54% 7/15/93
Growth and Income Fund
A Shares 17.79% 21.01% 22.99% 9/8/87
B Shares 17.21% -- 9.15% 11/5/93
Institutional Shares -- -- -- 11/4/95
Capital Growth Fund
A Shares 13.89% 25.37% 20.32% 9/8/87
B Shares 13.34% -- 8.72% 11/5/93
Institutional Shares -- -- -- 11/4/95
Bond Fund Class A Shares -- -- -- 5/6/96
Class B Shares -- -- -- 5/6/96
Institutional Shares 15.83% -- 9.14% 11/30/90
Short-Term Bond Fund
Class A Shares -- -- -- 5/6/96
Institutional Shares 7.37% -- 5.81% 11/30/90
Large Cap Equity Fund
Class A Shares -- -- -- 5/6/96
Class B Shares -- -- -- 5/6/96
Institutional Shares 20.41% -- 14.12% 11/30/90
Small Cap Equity Fund
A Shares -- -- -- 12/20/94
B Shares -- -- -- 3/28/95
Institutional Shares -- -- -- 11/4/95
U.S. Government Securities Fund*
A Shares 16.82% -- 6.31% 2/19/93
Institutional Shares 16.82% -- 6.31% 2/19/93
- -------------
*Performance presented in the table above and in each table that follows for
each class of these Funds is based upon the performance of their respective
predecessor funds (which had fiscal years ending on November 30, 1995) for
periods prior to the consummation of the Hanover Reorganization. PERFORMANCE
PRESENTED FOR EACH CLASS OF EACH OF THESE FUNDS IS BASED ON THE HISTORICAL
EXPENSES AND PERFORMANCE OF A SINGLE CLASS OF SHARES OF ITS PREDECESSOR FUND
AND DOES NOT REFLECT THE CURRENT DISTRIBUTION, SERVICE AND/OR OTHER EXPENSES
THAT AN INVESTOR WOULD INCUR AS A HOLDER OF SUCH CLASS OF SUCH FUND. Class A
shares of the Vista U.S. Government Securities Fund currently bear expenses
in excess of those borne by its Institutional Shares. If such current
expenses were reflected in the table above and in each table that follows
for the Vista U.S. Government Securities Fund, the performance for its
Institutional Shares would exceed that presented for its Class A shares.
With the current maximum sales charge for Class A shares (4.50% for the
U.S. Treasury Income Fund, Balanced Fund and Equity Income Fund and 4.75% for
the Small Cap Equity Fund, Growth and Income Fund
23
<PAGE>
and Capital Growth Fund) reflected and the currently applicable CDSC for
Class B shares for each period length, the average annual total rate of
return figures for the same periods would be as follows:
One Five Since
Fund Year Years Inception
- ---------------------------------- ------- ------- ------------
U.S. Treasury Income Fund
A Shares 9.43% 7.69% 9.02%
B Shares 8.80% -- --
Balanced Fund
A Shares 12.40% -- 10.38%
B Shares 11.95%
Equity Income Fund 12.66% -- 7.36%
Growth and Income Fund
A Shares 12.19% 19.84% 22.25%
B Shares 12.21% -- 7.29%
Institutional Shares
Capital Growth Fund
A Shares 8.48% 24.15% 19.60%
B Shares 8.34% -- 6.85%
Institutional Shares -- -- --
Small Cap Equity Fund
A Shares -- -- --
B Shares -- -- --
Institutional Shares -- -- --
U.S. Government Securities Fund
A Shares 4.56% -- 11.56%
The Funds may also from time to time include in advertisements or other
communications a total return figure that is not calculated according to the
formula set forth above in order to compare more accurately the performance
of a Fund with other measures of investment return.
24
<PAGE>
Yield Quotations
Any current "yield" quotation for a class of shares shall consist of an
annualized hypothetical yield, carried at least to the nearest hundredth of
one percent, based on a thirty calendar day period and shall be calculated by
(a) raising to the sixth power the sum of 1 plus the quotient obtained by
dividing the Fund's net investment income earned during the period by the
product of the average daily number of shares outstanding during the period
that were entitled to receive dividends and the maximum offering price per
share on the last day of the period, (b) subtracting 1 from the result, and
(c) multiplying the result by 2.
The yields of the shares of the Funds for the thirty-day period ended
October 31, 1995 (November 30, 1995 with respect to American Value Fund and
U.S. Government Securities Fund) were as follows:
Class A Class B Institutional
-------- -------- ----------------
U.S. Treasury Income Fund 5.09% 4.58% N/A
Capital Growth Fund 0.49% 0.02% **
Balanced Fund 2.74% 2.12% N/A
Large Cap Equity Fund 1.87% * 1.87%
Equity Income Fund 2.04% * N/A
Bond Fund 6.15% * 6.15%
Growth and Income Fund 1.50% 1.08% **
Short-Term Bond Fund 5.69% N/A 5.69%
Small Cap Equity Fund 1.39% 0.73% **
U.S. Government Securities Fund 5.34% N/A 5.34%
American Value Fund -- N/A N/A
- -------------
* Commencement of offering of class of shares on May 6, 1996.
** The Institutional Shares of the Growth and Income, Capital Growth and
Small Cap Equity Funds were first offered January 8, 1996.
Advertisements for the Funds may include references to the asset size of
other financial products made available by Chase, such as the offshore assets
of other funds advised by Chase.
25
<PAGE>
Non-Standardized Performance Results
The table below reflects the net change in the value of an assumed initial
investment of $10,000 in the following Funds (excluding the effects of any
applicable sale charges) for the period from the commencement date of
business for each such Fund through October 31, 1995 (November 30, 1995 with
respect to the American Value Fund and U.S. Government Securities Fund). The
values reflect an assumption that capital gain distributions and income
dividends, if any, have been invested in additional shares of the same class.
From time to time, the Funds may provide these performance results in
addition to the total rate of return quotations required by the Securities
and Exchange Commission. As discussed more fully in the Prospectuses, neither
these performance results, nor total rate of return quotations, should be
considered as representative of the performance of the Funds in the future.
These factors and the possible differences in the methods used to calculate
performance results and total rates of return should be considered when
comparing such performance results and total rate of return quotations of the
Funds with those published for other investment companies and other
investment vehicles.
Value of Value of
Initial Capital Value of
$10,000 Gains Reinvested
Investment Distributions Dividends Total Value
- ------------------------ ---------- ------------- ---------- -----------
U.S. Treasury
Income Fund
A Shares $11,400.00 $ 1,065.04 $8,176.49 $21,181.53
B Shares 9,490.82 183.40 1,115.89 10,790.11
Balanced Fund
A Shares 12,450.00 239.70 1,334.82 14,074.53
B Shares 11,025.87 247.10 674.74 11,947.71
Equity Income Fund
A Shares 10,190.25 1,538.96 596.70 12,325.92
Growth and Income Fund
A Shares 34,960.00 12,306.73 6,310.85 53,577.58
B Shares 11,454.43 132.30 315.91 11,902.64
Capital Growth Fund
A Shares 35,650.00 6,047.67 3,139.91 44,837.58
B Shares 11,277.88 481.89 48.83 11,808.60
Large Cap Equity Fund
Institutional Shares 12,240.00 5,436.94 1,480.01 19,156.95
Small Cap Equity Fund
A Shares 15,070.00 -- 55.16 15,125.16
B Shares 13,178.23 -- 31.09 13,209.32
Bond Fund
Institutional Shares 10,910.00 273.37 4,193.78 15,377.14
Short Term Bond Fund
Institutional Shares 10,080.00 16.32 3,107.56 3,203.88
U.S. Government
Securities Fund
A Shares 10,180.00 117.72 1,555.80 11,853.52
Institutional Shares 10,180.00 117.72 1,555.80 11,853.52
American Value Fund 12,180.00 -- 79.53 12,179.53
26
<PAGE>
With the current maximum sales charge for Class A shares (4.50% for the
U.S. Treasury Income Fund, Balanced Fund and Equity Income Fund and 4.75% for
the Growth and Income Fund, Capital Growth Fund and Small Cap Equity Fund)
reflected , and the currently applicable CDSC for Class B shares for each
period length, the performance figures for the same periods would be as
follows:
Value of Value of
Initial Capital Value of
Period Ended $10,000 Gains Reinvested
October 31, 1995 Investment Distributions Dividends Total Value
- ------------------------ ---------- ------------- ---------- -----------
U.S. Treasury
Income Fund
A Shares $10,887.00 $ 1,017.11 $8,324.25 $20,228.36
B Shares 9,111.19 183.40 1,115.89 10,410.48
Balanced Fund
A Shares 11,889.75 276.67 1,274.76 13,441.17
B Shares 10,625.87 247.10 674.74 11,547.71
Equity Income Fund
A Shares 9,731.70 1,469.70 569.85 11,771.25
Growth and Income Fund
A Shares 33,299.40 11,722.16 6,011.09 51,032.65
B Shares 11,054.43 132.30 315.91 11,502.64
Capital Growth Fund
A Shares 33,956.63 5,760.40 2,990.77 42,707.80
B Shares 10,877.88 481.89 48.83 11,408.60
Small Cap Equity Fund
A Shares 14,354.18 -- 52.54 14,406.72
B Shares 12,709.32 -- 31.09 12,709.32
U.S. Government
Securities Fund 9,721.90 112.42 1,485.79 11,320.11
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities in a Fund's or Portfolio's portfolio are valued at the
last sale price on the exchange on which they are primarily traded or on the
NASDAQ National Market System, or at the last quoted bid price for securities
in which there were no sales during the day or for other unlisted
(over-the-counter) securities not reported on the NASDAQ National Market
System. Bonds and other fixed income securities (other than short-term
obligations, but including listed issues) in a Fund's or Portfolio's
portfolio are valued on the basis of valuations furnished by a pricing
service, the use of which has been approved by the Board of Trustees. In
making such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques that take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees. Futures and option contracts that are traded on commodities or
securities exchanges are normally valued at the settlement price on the
exchange on which they are traded. Portfolio securities (other than
short-term obligations) for which there are no such quotations or valuations
are valued at fair value as determined in good faith by or at the direction
of the Board of Trustees.
Interest income on long-term obligations in a Fund's or Portfolio's
portfolio is determined on the basis of coupon interest accrued plus
amortization of discount (the difference between acquisition price and stated
27
<PAGE>
redemption price at maturity) and premiums (the excess of purchase price over
stated redemption price at maturity). Interest income on short-term
obligations is determined on the basis of interest and discount accrued less
amortization of premium.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses are not
available until a completed and signed account application has been received
by the Transfer Agent. 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.
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, a Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service
options chosen by the shareholder or joint shareholders in his or their
latest account application or other written request for services, including
purchasing, exchanging, or redeeming shares of such Fund and depositing and
withdrawing monies from the bank account specified in the Bank Account
Registration section of the shareholder's latest account application or as
otherwise properly specified to such Fund in writing.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of readily marketable portfolio
securities (instead of cash). The securities so distributed would be valued
at the same amount as that assigned to them in calculating the net asset
value for the shares being sold. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting
the securities to cash. The Trust has filed an election under Rule 18f-1
committing to pay in cash all redemptions by a shareholder of record up to
amounts specified by the rule (approximately $250,000).
With respect to the Growth and Income Fund and Capital Growth Fund, the
Trust will redeem Fund shares in kind only if it has received a redemption in
kind from the corresponding Portfolio and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of such
Portfolio and in no case will they receive a security issued by the
Portfolio. Each Portfolio has advised the Trust that the Portfolio will not
redeem in kind except in circumstances in which the corresponding Fund is
permitted to redeem in kind or unless requested by the corresponding Fund.
To retain investment flexibility, the Small Cap Equity Fund may decide to
discontinue selling shares of the Fund to new shareholders when the net
assets reach approximately $500 million.
Each investor in a Portfolio, including the corresponding Fund, may add to
or reduce its investment in the Portfolio on each day that the New York Stock
Exchange is open for business. Once each such day, based upon prices
determined as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time, however, options are priced at 4:15 p.m.,
Eastern time) the value of each investor's interest in a Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions which are to be
effected on that day will then be effected. The investor's percentage of the
aggregate beneficial interests in a Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of such time on such day plus
or minus, as the case may be, the amount of net additions to or reductions in
the investor's investment in the Portfolio effected on such day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
such time on such day plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage
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so determined will then be applied to determine the value of the investor's
interest in the Portfolio as of such time on the following day the New York
Stock Exchange is open for trading.
Investors in Class A shares may qualify for reduced initial sales charges
by signing a statement of intention (the "Statement"). This enables the
investor to aggregate purchases of Class A shares in the Fund with purchases
of Class A shares of any other Fund in the Trust (or if a Fund has only one
class, shares of such Fund), excluding shares of any Vista money market fund,
during a 13-month period. The sales charge is based on the total amount to be
invested in Class A shares during the 13-month period. All Class A or other
qualifying shares of these Funds currently owned by the investor will be
credited as purchases (at their current offering prices on the date the
Statement is signed) toward completion of the Statement. A 90-day back-dating
period can be used to include earlier purchases at the investor's cost. The
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicated in the Statement. A shareholder must notify the Transfer
Agent or Distributor whenever a purchase is being made pursuant to a
Statement.
Under the Exchange Privilege, shares may be exchanged for shares of
another fund only if shares of the fund exchanged into are registered in the
state where the exchange is to be made. Shares of a Fund may only be
exchanged into another fund if the account registrations are identical. With
respect to exchanges from any Vista money market fund, shareholders must have
acquired their shares in such money market fund by exchange from one of the
Vista non-money market funds or the exchange will be done at relative net
asset value plus the appropriate sales charge. Any such exchange may create a
gain or loss to be recognized for federal income tax purposes. Normally,
shares of the fund to be acquired are purchased on the redemption rate, but
such purchase may be delayed by either fund for up to five business days if a
fund determines that it would be disadvantaged by an immediate transfer of
the proceeds.
The contingent deferred sales charge for Class B shares will be waived for
certain exchanges and for redemptions in connection with a Fund's systematic
withdrawal plan, subject to the conditions described in the Prospectuses. In
addition, subject to confirmation of a shareholder's status, the contingent
deferred sales charge will be waived for: (i) a total or partial redemption
made within one year of the shareholder's death or initial qualification for
Social Security disability payments; (ii) a redemption in connection with a
Minimum Required Distribution from an IRA, Keogh or custodial account under
section 403(b) of the Internal Revenue Code or a mandatory distribution from
a qualified plan; (iii) redemptions made from an IRA, Keogh or custodial
account under section 403(b) of the Internal Revenue Code through an
established Systematic Redemption Plan; (iv) a redemption resulting from an
over-contribution to an IRA; and (v) an involuntary redemption of an account
balance under $500.
Class B shares automatically convert to Class A shares (and thus are then
subject to the lower expenses borne by Class A shares) after a period of time
specified below has elapsed since the date of purchase (the "CDSC Period"),
together with the pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares
attributable to the Class B shares then converting. The conversion of Class B
shares purchased on or after May 1, 1996, will be effected at the relative
net asset values per share of the two classes on the first business day of
the month following the eighth anniversary of the original purchase. The
conversion of Class B shares purchased prior to May 1, 1996, will be effected
at the relative net asset values per share of the two classes on the first
business day of the month following the seventh anniversary of the original
purchase. If any exchanges of Class B shares during the CDSC Period occurred,
the holding period for the shares exchanged will be counted toward the CDSC
Period. At the time of the conversion the net asset value per share of the
Class A shares may be higher or lower than the net asset value per share of
the Class B shares; as a result, depending on the relative net asset values
per share, a shareholder may receive fewer or more Class A shares than the
number of Class B shares converted.
A Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written requests for
additional account services made after a shareholder has submitted an initial
account application
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to the Fund, and in certain other circumstances described in the
Prospectuses. A Fund may also refuse to accept or carry out any transaction
that does not satisfy any restrictions then in effect. A signature guarantee
may be obtained from a bank, trust company, broker-dealer or other member of
a national securities exchange. Please note that a notary public cannot
provide a signature guarantee.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described
in the respective Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in each Fund's Prospectus are not intended as
substitutes for careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company, each Fund is not subject to federal income
tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital
gain net income (i.e., the excess of capital gains over capital losses) that
it distributes to shareholders, provided that it distributes at least 90% of
its investment company taxable income (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for
the taxable year (the "Distribution Requirement"), and satisfies certain
other requirements of the Code that are described below. Distributions by a
Fund made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains of the taxable year and can therefore
satisfy the Distribution Requirement. Because certain Funds invest all of
their assets in Portfolios which will be classified as partnerships for
federal income tax purposes, such Funds will be deemed to own a proportionate
share of the income of the Portfolio into which each contributes all of its
assets for purposes of determining whether such Funds satisfy the
Distribution Requirement and the other requirements necessary to qualify as a
regulated investment company (e.g., Income Requirement (hereinafter defined),
etc.).
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency gains are directly related to the
regulated investment company's principal business of investing in stock or
securities) and other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business
of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain gains on designated hedging transactions that are offset by realized
or unrealized losses on offsetting positions) from the sale or other
disposition of stock, securities or foreign currencies (or options, futures
or forward contracts thereon) held for less than three months (the
"Short-Short Gain Test"). However, foreign currency gains, including those
derived from options, futures and forwards, will not in any event be
characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options
or futures thereon). Because of the Short-Short Gain Test, a Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent a Fund from
disposing of investments at a loss, since the recognition of a loss before
the expiration of the three-month holding period is disregarded for this
purpose. Interest (including original issue discount) received by a Fund at
maturity or upon the disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of such security within the meaning of the Short-Short Gain Test.
However, income that is attributable to realized market appreciation will be
treated as gross income from the sale or other disposition of securities for
this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market dis-
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count (generally, at a price less than its principal amount) will be treated
as ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property
by such Fund and a contemporaneous contract to sell substantially identical
property in the future; (2) the transaction is a straddle within the meaning
of Section 1092 of the Code; (3) the transaction is one that was marketed or
sold to such Fund on the basis that it would have the economic
characteristics of a loan but the interest-like return would be taxed as
capital gain; or (4) the transaction is described as a conversion transaction
in the Treasury Regulations. The amount of the gain recharacterized generally
will not exceed the amount of the interest that would have accrued on the net
investment for the relevant period at a yield equal to 120% of the federal
long-term, mid-term, or short-term rate, depending upon the type of
instrument at issue, reduced by an amount equal to: (1) prior inclusions of
ordinary income items from the conversion transaction; and (2) the
capitalized interest on acquisition indebtedness under Code Section 263(g).
Built-in losses will be preserved where a Fund has a built-in loss with
respect to property that becomes a part of a conversion transaction. No
authority exists that indicates that the converted character of the income
will not be passed to a Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if: (1) the asset
is used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset
so used, (2) the asset is otherwise held by the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the
Fund grants a qualified covered call option (which, among other things, must
not be deep-in-the-money) with respect thereto); or (3) the asset is stock
and the Fund grants an in-the- money qualified covered call option with
respect thereto. However, for purposes of the Short-Short Gain Test, the
holding period of the asset disposed of may be reduced only in the case of
clause (1) above. In addition, a Fund may be required to defer the
recognition of a loss on the disposition of an asset held as part of a
straddle to the extent of any unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option
written by a Fund will commence on the date it is written and end on the date
it lapses or the date a closing transaction is entered into. Accordingly, a
Fund may be limited in its ability to write options which expire within three
months and to enter into closing transactions at a gain within three months
of the writing of options.
Transactions that may be engaged in by certain of the Funds (such as
regulated futures contracts, certain foreign currency contracts, and options
on stock indexes and futures contracts) will be subject to special tax
treatment as "Section 1256 contracts." Section 1256 contracts are treated as
if they are sold for their fair market value on the last business day of the
taxable year, even though a taxpayer's obligations (or rights) under such
contracts have not terminated (by delivery, exercise, entering into a closing
transaction or otherwise) as of such date. Any gain or loss recognized as a
consequence of the year-end deemed disposition of Section 1256 contracts is
taken into account for the taxable year together with any other gain or loss
that was previously recognized upon the termination of Section 1256 contracts
during that taxable year. Any capital gain or loss for the taxable year with
respect to Section 1256 contracts (including any capital gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is generally
treated as 60% long- term capital gain or loss and 40% short-term capital
gain or loss. A Fund, however, may elect not to have this special tax
treatment apply to Section 1256 contracts that are part of a "mixed straddle"
with other investments of the Fund that are not Section 1256 contracts. The
Internal Revenue Service (the "IRS") has held in several private rulings that
gains arising from Section 1256 contracts will be treated for purposes of the
Short-Short Gain Test as being derived from securities held for not less than
three months if the gains arise as a result of a constructive sale under Code
Section 1256.
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Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) for any
taxable year, to elect (unless it has made a taxable year election for excise
tax purposes as discussed below) to treat all or any part of any net capital
loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the Fund has not invested more than 5% of the value of the Fund's total
assets in securities of such issuer and as to which the Fund does not hold
more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses. Generally, an option (call or put) with respect to a
security is treated as issued by the issuer of the security not the issuer of
the option. However, with regard to forward currency contracts, there does
not appear to be any formal or informal authority which identifies the issuer
of such instrument. For purposes of asset diversification testing,
obligations issued or guaranteed by agencies or instrumentality's of the U.S.
Government such as the Federal Agricultural Mortgage Corporation, the Farm
Credit System Financial Assistance Corporation, a Federal Home Loan Bank, the
Federal Home Loan Mortgage Association, the Government National Mortgage
Corporation, and the Student Loan Marketing Association are treated as U.S.
Government Securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (a "taxable year
election"). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar
year (and, instead, include such gains and losses in determining ordinary
taxable income for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end
of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends
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for federal income tax purposes, but they will qualify for the 70%
dividends-received deduction for corporations only to the extent discussed
below. Dividends paid on Class A and Class B shares are calculated at the
same time. In general, dividends on Class B shares are expected to be lower
than those on Class A shares due to the higher distribution expenses borne by
the Class B shares. Dividends may also differ between classes as a result of
differences in other class specific expenses.
A Fund may either retain or distribute to shareholders its net realized
capital gain for each taxable year. Each Fund currently intends to distribute
any such amounts. If net capital gain is distributed and designated as a
capital gain dividend, it will be taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder has held his
shares [or whether such gain was recognized by the Fund prior to the date on
which the shareholder acquired his shares.]
Conversely, if a Fund elects to retain its net realized capital gain, the
Fund will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If a Fund elects to retain
its net capital gain, it is expected that the Fund also will elect to have
shareholders of record on the last day of its taxable year treated as if each
received a distribution of his pro rata share of such gain, with the result
that each shareholder will be required to report his pro rata share of such
gain on his tax return as long-term capital gain, will receive a refundable
tax credit for his pro rata share of tax paid by the Fund on the gain, and
will increase the tax basis for his shares by an amount equal to the deemed
distribution less the tax credit.
Ordinary income dividends paid by a Fund with respect to a taxable year
will qualify for the 70% dividends- received deduction generally available to
corporations to the extent of the amount of qualifying dividends received by
a Fund from domestic corporations for the taxable year. A dividend received
by a Fund will not be treated as a qualifying dividend (1) if it has been
received with respect to any share of stock that the Fund has held for less
than 46 days (91 days in the case of certain preferred stock), excluding for
this purpose under the rules of Code Section 246(c) (3) and (4): (i) any day
more than 45 days (or 90 days in the case of certain preferred stock) after
the date on which the stock becomes ex-dividend and (ii) any period during
which a Fund has an option to sell, is under a contractual obligation to
sell, has made and not closed a short sale of, is the grantor of a
deep-in-the-money or otherwise nonqualified option to buy, or has otherwise
diminished its risk of loss by holding other positions with respect to, such
(or substantially identical) stock; (2) to the extent that a Fund is under an
obligation (pursuant to a short sale or otherwise) to make related payments
with respect to positions in substantially similar or related property; or
(3) to the extent the stock on which the dividend is paid is treated as
debt-financed under the rules of Code Section 246A. Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed or
reduced (1) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of a Fund or (2) by application of
Code Section 246(b) which in general limits the dividends-received deduction
to 70% of the shareholder's taxable income (determined without regard to the
dividends-received deduction and certain other items). In the case where a
Fund invests all of its assets in a Portfolio and the Fund satisfies the
holding period rules pursuant to Code Section 246(c) as to its interest in
the Portfolio, a corporate shareholder which satisfies the foregoing
requirements with respect to its shares of the Fund should receive the
dividends- received deduction.
For purposes of the Corporate AMT and the environmental Superfund tax, the
corporate dividends- received deduction is not itself an item of tax
preference that must be added back to taxable income or is otherwise
disallowed in determining a corporation's AMT. However, corporate
shareholders will generally be required to take the full amount of any
dividend received from a Fund into account (without a dividends- received
deduction) in determining its adjusted current earnings.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at
the source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption
from, taxes on such income. It is impossible to determine the effective rate
of foreign tax in advance since the amount of any such Fund's assets to be
invested in various countries is not known.
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Distributions by a Fund that do not constitute ordinary income dividends,
or capital gain dividends will be treated as a return of capital to the
extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of a Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions
of such amounts will be taxable to the shareholder in the manner described
above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31
of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the
year.
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it
is a corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after
the sale or redemption. In general, any gain or loss arising from (or treated
as arising from) the sale or redemption of shares of a Fund will be
considered capital gain or loss and will be long- term capital gain or loss
if the shares were held for longer than one year. However, any capital loss
arising from the sale or redemption of shares held for six months or less
will be disallowed to the extent of the amount of exempt- interest dividends
received on such shares and (to the extent not disallowed) will be treated as
a long-term capital loss to the extent of the amount of capital gain
dividends received on such shares. For this purpose, the special holding
period rules of Code Section 246(c)(3) and (4) (discussed above in connection
with the dividends-received deduction for corporations) generally will apply
in determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year
are deductible only to the extent of capital gains plus, in the case of a
noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of a Fund,
(2) disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales
load on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
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Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a
Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Such a foreign shareholder would generally be exempt from U.S. federal income
tax on gains realized on the sale of shares of the Fund, capital gain
dividends and exempt-interest dividends and amounts retained by the Fund that
are designated as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that
are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
its foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Fund, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions
may have a retroactive effect with respect to the transactions contemplated
herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in a Fund.
MANAGEMENT OF THE TRUST AND THE FUNDS OR PORTFOLIOS
Trustees and Officers
The Trustees and officers of the Trust and their principal occupations for
at least the past five years are set forth below. Their titles may have
varied during that period.
Fergus Reid, III--Chairman of the Trust. Chairman and Chief Executive
Officer, Lumelite Corporation, since September 1985; Trustee, Morgan Stanley
Funds. Age: 63. Address: 202 June Road, Stamford, CT 06903.
Richard E. Ten Haken--Trustee; Chairman of the Audit Committee. Formerly
District Superintendent of Schools, Monroe No. 2 and Orleans Counties, New
York; Chairman of the Board and President, New York State Teachers'
Retirement System. Age: 61. Address: 4 Barnfield Road, Pittsford, NY 14534.
William J. Armstrong--Trustee. Vice President and Treasurer,
Ingersoll-Rand Company. Age: 54. Address: 49 Aspen Way, Upper Saddle River,
NJ 07458.
35
<PAGE>
John R.H. Blum--Trustee. Attorney in private practice; formerly, partner in
the law firm of Richards, O'Neil & Allegaert; Commissioner of Agriculture -
State of Connecticut, 1992-1995. Age: 66. Address: 322 Main Street, Lakeville,
CT 06039.
Joseph J. Harkins--Trustee. Retired; Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He has been employed by Chase in numerous capacities and offices since
1954. Director of Blessings Corporation, Jefferson Insurance Company of New
York, Monticello Insurance Company and Nationar. Age: 64. Address: 257
Plantation Circle South, Ponte Vedra Beach, FL 32082.
*H. Richard Vartabedian--Trustee and President of the Trust; Chairman of
the Portfolios. Consultant, Republic Bank of New York; formerly, Senior
Investment Officer, Division Executive of the Investment Management Division
of The Chase Manhattan Bank, N.A., 1980 through 1991. Age: 60. Address: P.O.
Box 296, Beach Road, Hendrick's Head, Southport, ME 04576.
Stuart W. Cragin, Jr.--Trustee. Retired; formerly President, Fairfield
Testing Laboratory, Inc. He has previously served in a variety of marketing,
manufacturing and general management positions with Union Camp Corp., Trinity
Paper & Plastics Corp., and Conover Industries. Age: 63. Address: 108 Valley
Road, Cos Cob, CT 06807.
Irving L. Thode--Trustee. Retired; formerly Vice President of Quotron
Systems. He has previously served in a number of executive positions with
Control Data Corp., including President of its Latin American Operations, and
General Manager of its Data Services business. Age: 64. Address: 80 Perkins
Road, Greenwich, CT 06830.
*W. Perry Neff--Trustee. Independent Financial Consultant; Director of
North America Life Assurance Co., Petroleum & Resources Corp. and The Adams
Express Co.; Director and Chairman of The Hanover Funds, Inc.; Director,
Chairman and President of The Hanover Investment Funds, Inc. Age: 68.
Address: RR 1 Box 102, Weston, VT 05181.
Roland R. Eppley, Jr.--Trustee. Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association Inc. (1971-1988);
Director, Janel Hydraulics, Inc.; Director of The Hanover Funds, Inc. Age:
63. Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer
of The Adams Express Co. and Petroleum & Resources Corp.; Director of The
Hanover Funds, Inc. and The Hanover Investment Funds, Inc. Age: 68. Address:
624 East 45th Street, Savannah, GA 31405
Martin R. Dean--Treasurer and Assistant Secretary. Associate Director,
Accounting Services, BISYS Fund Services; formerly Senior Manager, KPMG Peat
Marwick (1987-1994). Age: 32. Address: 3435 Stelzer Road, Columbus, OH 43219.
Ann E. Bergin--Secretary. First Vice President, BISYS Fund Services, Inc.;
formerly, Senior Vice President, Administration, Concord Financial Group
(1991-1995); Assistant Vice President, Dreyfus Service Corporation
(1982-1991). Age: 35. Address: 125 West 55th Street, New York, NY 10019.
* Asterisks indicate those Trustees that are "interested persons" (as defined
in the 1940 Act). Mr. Reid is not an interested person of the Trust's
investment advisers or principal underwriter, but may be deemed an
interested person of the Trust solely by reason of being an officer of the
Trust.
36
<PAGE>
The Board of Trustees of the Trust presently has an Audit Committee. The
members of the Audit Committee are Messrs. Ten Haken (Chairman), Blum,
Cragin, Thode, Armstrong, Harkins, Reid and Vartabedian. The function of the
Audit Committee is to recommend independent auditors and monitor accounting
and financial matters. The Audit Committee met two times during the fiscal
year ended October 31, 1995.
The Board of Trustees of the Trust has established an Investment
Committee. The members of the Investment Committee are Messrs. Vartabedian
(Chairman) and Reid, as well as Leonard M. Spalding, President of Vista
Capital Management. The function of the Investment Committee is to review the
investment management process of the Trust.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisers is compensated for his or her services according to
a fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the advisers. Each Trustee
receives a fee, allocated among all investment companies for which the
Trustee serves, which consists of an annual retainer component and a meeting
fee component. Effective August 21, 1995, each Trustee of the Vista Funds
receives a quarterly retainer of $12,000 and an additional per meeting fee of
$1,500. Members of committees receive a meeting fee only if the committee
meeting is held on a day other than a day on which a regularly scheduled
meeting is held. Prior to August 21, 1995, the quarterly retainer was $9,000
and the per-meeting fee was $1,000. The Chairman of the Trustees and the
Chairman of the Investment Committee each receive a 50% increment over
regular Trustee total compensation for serving in such capacities for all the
investment companies advised by the adviser.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1995 for each Trustee of the Trust:
<TABLE>
<CAPTION>
Growth
Equity and Capital Large Cap
Balanced Income Income Growth Equity Bond
Fund Fund Fund Fund Fund Fund
------- ----- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, $241.30 $96.13 $14,393.16 $7,594.67 $540.99 $468.64
Trustee
Richard E. Ten 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Haken, Trustee
William J. 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Armstrong, Trustee
John R.H. Blum, 190.83 62.60 9,376.63 4,955.42 352.06 305.11
Trustee
Joseph J. Harkins, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
H. Richard 169.60 67.79 10,159.13 5,376.61 330.18 330.18
Vartabedian, Trustee
Stuart W. Cragin, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Jr., Trustee
Irving L. Thode, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
W. Perry Neff, Trustee 0 0 0 0 0 0
Ronald R. Eppley, Jr., 0 0 0 0 0 0
Trustee
W.D. MacCallan, Trustee 0 0 0 0 0 0
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Short- U.S. Inter- Global
Term Treasury Small Cap national Fixed Southeast
Bond Income Equity Equity Income Asian Japan European
Fund Fund Fund Fund Fund Fund Fund Fund
------ ------- ---------- ------- ----- -------- ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, $298.13 $919.27 $172.16 $315.97 $8.47 0 0 0
Trustee
Richard E. Ten 195.40 612.85 114.79 210.64 5.64 0 0 0
Haken, Trustee
William J. 195.40 612.85 114.79 210.64 5.64 0 0 0
Armstrong, Trustee
John R.H. Blum, 190.83 598.68 114.79 205.42 5.64 0 0 0
Trustee
Joseph J. Harkins, 195.40 612.85 114.79 210.64 5.64 0 0 0
Trustee
H. Richard 206.44 646.75 133.68 219.47 5.64 0 0 0
Vartabedian, Trustee
Stuart W. Cragin, Jr., 195.40 612.85 114.79 210.64 5.64 0 0 0
Trustee
Irving L. Thode, 195.40 612.85 114.79 210.64 5.64 0 0 0
Trustee
W. Perry Neff, 0 0 0 0 0 0 0 0
Trustee
Ronald R. Eppley, Jr., 0 0 0 0 0 0 0 0
Trustee
W.D. MacCallan, 0 0 0 0 0 0 0 0
Trustee
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Accrued from
as Fund "Fund Complex"
Expenses (1)
------------- ----------------
<S> <C> <C>
Fergus Reid, 0 $78,456.65
III, Trustee
Richard E. Ten 0 52,304.39
Haken, Trustee
William J. 0 52,304.39
Armstrong, Trustee
John R.H. Blum, 0 51,304.37
Trustee
Joseph J. 0 52,304.39
Harkins, Trustee
H. Richard 0 74,804.44
Vartabedian, Trustee
Stuart W. 0 52,304.39
Cragin, Jr.,
Trustee
Irving L. Thode, 0 52,304.39
Trustee
W. Perry Neff, 0 0
Trustee
Ronald R. Eppley, Jr., 0 0
Trustee
W.D. MacCallan, 0 0
Trustee
</TABLE>
- --------------
(1) Data reflects total compensation earned during the period January 1, 1995
to December 31, 1995 for service as a Trustee to all Funds advised by the
adviser.
39
<PAGE>
Vista Funds Retirement Plan for Eligible Trustees
Effective August 21, 1995, the Trustees also instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not
an employee of any of the Funds, the advisers administrator or distributor or
any of their affiliates) may be entitled to certain benefits upon retirement
from the Board of Trustees. Pursuant to the Plan, the normal retirement date
is the date on which the eligible Trustee has attained age 65 and has
completed at least five years of continuous service with one or more of the
investment companies advised by the adviser (collectively, the "Covered
Funds"). Each Eligible Trustee is entitled to receive from the Covered Funds
an annual benefit commencing on the first day of the calendar quarter
coincident with or following his date of retirement equal to 10% of the
highest annual compensation received from the Covered Funds multiplied by the
number of such Trustee's years of service (not in excess of 10 years)
completed with respect to any of the Covered Funds. Such benefit is payable
to each eligible Trustee in monthly installments for the life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service for
Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian, Cragin, and
Thode are 11, 11, 8, 11, 5, 3, 3 and 3 respectively.
Highest Annual Compensation Paid by All Vista Funds
-----------------------------------------------------
$40,000 $45,000 $50,000 $55,000
Years of
Service Estimated Annual Benefits upon Retirement
- -------- -----------------------------------------------------
10 $40,000 $45,000 $50,000 $55,000
9 36,000 40,500 45,000 49,500
8 32,000 36,000 40,000 44,000
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to
which each Trustee (who is not an employee of any of the Funds, the advisers,
administrator or distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustee's fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination
of service). The deferred amounts are invested in shares of Vista funds
selected by the Trustee. The deferred amounts are paid out in a lump sum or
over a period of several years as elected by the Trustee at the time of
deferral. If a deferring Trustee dies prior to the distribution of amounts
held in the deferral account, the balance of the deferral account will be
distributed to the Trustee's designated beneficiary in a single lump sum
payment as soon as practicable after such deferring Trustee's death.
Messrs. Ten Haken, Thode and Vartabedian have each executed a deferred
compensation agreement for the 1996 calendar year and as of March 29, 1996
they had contributed $4,700, $9,500 and $14,250 respectively.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with
the Trust, unless, as to liability to the Trust or its shareholders, it is
finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices or with respect to any matter unless it is finally adjudicated that
they did not act in good faith in the reasonable belief that their actions
were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court
or other body approving the settlement or other disposition, or by a
reasonable determination based upon a review of readily available facts, by
vote of a
40
<PAGE>
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their
duties.
As of April 15, 1996, the Trustees and officers as a group owned less than
1% of each Fund's outstanding shares, all of which were acquired for
investment purposes. For the fiscal year ended October 31, 1995, the Trust
paid its disinterested Trustees fees and expenses for all of the meetings of
the Board and any committees attended in the aggregate amount of
approximately $39,790 which amount is then apportioned between the Funds
comprising the Trust.
Adviser and Sub-Adviser
Chase acts as investment adviser to the Funds or Portfolios pursuant to an
Investment Advisory Agreement, dated as of May 6, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase is responsible for investment decisions for the Funds or Portfolios.
Pursuant to the terms of the Advisory Agreement, Chase provides the Funds or
Portfolios with such investment advice and supervision as it deems necessary
for the proper supervision of the Funds' or Portfolios' investments. The
advisers continuously provide investment programs and determine from time to
time what securities shall be purchased, sold or exchanged and what portion
of the Funds' or Portfolios' assets shall be held uninvested. The advisers to
the Funds or Portfolios furnish, at their own expense, all services,
facilities and personnel necessary in connection with managing the
investments and effecting portfolio transactions for the Funds or Portfolios.
The Advisory Agreement for the Funds or Portfolios will continue in effect
from year to year only if such continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of a Fund's or
Portfolio's outstanding voting securities and by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on such Advisory
Agreement.
Under the Advisory Agreement, the adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Funds
and Portfolios with greater opportunities and flexibility in accessing
investment expertise.
Pursuant to the terms of the Advisory Agreement and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without
penalty by the Trust on behalf of the Funds on not more than 60 days', nor
less than 30 days', written notice when authorized either by a majority vote
of a Fund's shareholders or by a vote of a majority of the Board of Trustees
of the Trust, or by the adviser or sub-adviser on not more than 60 days', nor
less than 30 days', written notice, and will automatically terminate in the
event of its "assignment" (as defined in the 1940 Act). The advisory
agreements provide that the adviser or sub-adviser under such agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for wilful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties thereunder.
With respect to the Equity Funds or Equity Portfolios, the equity research
team of the adviser looks for two key variables when analyzing stocks for
potential investment by equity portfolios: value and momentum. To uncover
these qualities, the team uses a combination of quantitative analysis,
fundamental research and computer technology to help identify undervalued
stocks.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Funds imposed by the securities laws or
regulations thereunder of any state in which the shares of the Funds are
qualified for sale, as such limitations may be raised or lowered from time to
time, the adviser shall reduce its advisory fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by the adviser shall be deducted from the monthly
advisory
41
<PAGE>
fee otherwise payable with respect to the Funds during such fiscal year; and
if such amounts should exceed the monthly fee, the adviser shall pay to a
Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement
provides that Chase may render services through its own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser of the Fund and are under the common control of Chase as
long as all such persons are functioning as part of an organized group of
persons, managed by authorized officers of Chase.
Chase, on behalf of the Funds or Portfolios (except the American Value
Fund), has entered into an investment sub-advisory agreement dated as of May
6, 1996 with Chase Asset Management, Inc. ("CAM"). With respect to the
American Value Fund, Chase has entered into an investment sub-advisory
agreement with Van Deventer & Hoch ("VDH") dated as of May 6, 1996. With
respect to the day-to-day management of the Funds or Portfolios, under the
sub-advisory agreements, the sub-advisers make decisions concerning, and
place all orders for, purchases and sales of securities and helps maintain
the records relating to such purchases and sales. The sub-advisers may, in
their discretion, provide such services through their own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser to the Company under applicable laws and are under the
common control of Chase; provided that (i) all persons, when providing
services under the sub-advisory agreement, are functioning as part of an
organized group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the sub-advisers. This
arrangement will not result in the payment of additional fees by the Funds.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range
of banking and investment services to customers throughout the United States
and around the world. The Chase Manhattan Corporation is the entity resulting
from the merger of The Chase Manhattan Corporation into Chemical Banking
Corporation on March 31, 1996. Chemical Banking Corporation was thereupon
renamed The Chase Manhattan Corporation. Also included among Chase's accounts
are commingled trust funds and a broad spectrum of individual trust and
investment management portfolios. These accounts have varying investment
objectives.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange Commission as an investment
adviser and was formed for the purpose of providing discretionary investment
advisory services to institutional clients and to consolidate Chase's
investment management function, and the same individuals who serve as
portfolio managers for CAM also serve as portfolio managers for Chase.
VDH has been in the investment counselling business since 1969 and is
ultimately controlled and equally owned by key professionals of VDH and Chase
Manhattan Corporation. VDH provides a wide range of asset management services
to individuals, corporations, private and charitable trusts, endowments,
foundations and retirement funds.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from each Fund or
Portfolio an investment advisory fee computed daily and paid monthly based on
a rate equal to a percentage of such Fund's or Portfolio's average daily net
assets specified in the relevant Prospectuses. However, the adviser may
voluntarily agree to waive a portion of the fees payable to it on a
month-to-month basis. For its services under its sub-advisory agreement, CAM
(or VDH in the case of the American Value Fund) will be entitled to receive,
with respect to each such Fund or Portfolio, such compensation, payable by
the adviser out of its advisory fee, as is described in the relevant
Prospectuses.
For the fiscal years ended October 31, 1993, 1994 and 1995, Chase was paid
or accrued the following investment advisory fees with respect to the
following Funds and Portfolios, and voluntarily waived the amounts in
parentheses following such fees with respect to each such period:
42
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
----------------------------------------------------------------------------------
1993 1994 1995
Fund paid/accrued waived paid/accrued waived paid/accrued waived
- ---------------------- ------------ --------- ------------ --------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Income Fund $ 227,496 ($107,208) $351,680 ($234,236) $319,705 ($220,998)
Growth and
Income Fund $1,878,340 -- * -- * --
Capital Growth
Fund $ 430,099 -- * -- * --
Balanced Fund -- -- $103,522 ($103,522) $145,295 ($145,295)
Equity Income Fund -- -- $ 52,804 ($ 31,989) $ 44,277 ($ 35,433)
Large Cap Equity Fund $ 463,533 $463,533 $378,813 ($378,813) $250,452 ($250,452)
Bond Fund $ 166,164 $166,164 $167,780 ($167,780) $162,618 ($162,618)
Short-Term Bond Fund $ 177,700 $177,700 $137,634 ($137,634) $ 85,353 ($ 85,353)
Small Cap Equity Fund -- -- -- -- $130,401 ($130,401)
</TABLE>
- --------------
* On November 23, 1993, these Funds changed their structure to a
Master/Feeder Fund Structure and do not have an investment adviser because
the Trust seeks to achieve the investment objective of the Funds by
investing all of the investable assets of each respective Fund in each
respective Portfolio. The Portfolios' investment adviser is Chase. For the
period October 31, 1993 to November 22, 1993, with respect to the Growth
and Income Fund and the Capital Growth Fund, Chase was paid or accrued, and
voluntarily waived those amounts in parentheses following such fees:
$296,161 ($0.00) and $71,213 ($0.00), respectively. With respect to the
Growth and Income Portfolio and the Capital Growth Portfolio, for the
period November 23, 1993 to October 31, 1994, Chase was paid or accrued the
following investment advisory fees, and voluntarily waived the amounts in
parentheses following such fees: $4,805,067 ($0.00) and $1,649,889 ($0.00),
respectively. For the fiscal year ended October 31, 1995, Chase was paid or
accrued the following investment advisory fees, and voluntarily waived the
amounts in parentheses following such fees: $6,815,197 ($0.00) and
$3,563,194 ($0.00), respectively, with respect to such Portfolios.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds and the administrator
of each Portfolio. Chase provides certain administrative services to the
Funds and Portfolios, including, among other responsibilities, coordinating
the negotiation of contracts and fees with, and the monitoring of performance
and billing of, the Funds' and Portfolios' independent contractors and
agents; preparation for signature by an officer of the Trust and Portfolios
of all documents required to be filed for compliance by the Trust and
Portfolios with applicable laws and regulations excluding those of the
securities laws of various states; arranging for the computation of
performance data, including net asset value and yield; responding to
shareholder inquiries; and arranging for the maintenance of books and records
of the Funds and Portfolios and providing, at its own expense, office
facilities, equipment and personnel necessary to carry out its duties. Chase
in its capacity as administrator does not have any responsibility or
authority for the management of the Funds or Portfolios, the determination of
investment policy, or for any matter pertaining to the distribution of Fund
shares.
Under the Administration Agreements Chase is permitted to render
administrative services to others. The Administration Agreements will
continue in effect from year to year with respect to each Fund or Portfolio
only if such continuance is specifically approved at least annually by the
Board of Trustees of the Trust or Portfolio or by vote of a majority of such
Fund's or Portfolio's outstanding voting securities and, in either case, by a
majority
43
<PAGE>
of the Trustees who are not parties to the Administration Agreements or
"interested persons" (as defined in the 1940 Act) of any such party. The
Administration Agreements are terminable without penalty by the Trust on
behalf of each Fund or by a Portfolio on 60 days' written notice when
authorized either by a majority vote of such Fund's or Portfolio shareholders
or by vote of a majority of the Board of Trustees, including a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust or Portfolios, or by Chase on 60 days' written notice, and will
automatically terminate in the event of their "assignment" (as defined in the
1940 Act). The Administration Agreements also provide that neither Chase or
its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration of the Funds or Portfolios,
except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Administration Agreements.
In addition, the Administration Agreements provide that, in the event the
operating expenses of any Fund or Portfolio, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, Chase shall reduce its administration fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by Chase shall be deducted from the monthly
administration fee otherwise payable to Chase during such fiscal year, and if
such amounts should exceed the monthly fee, Chase shall pay to such Fund or
Portfolio its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreements, Chase receives from each Fund a fee computed daily
and paid monthly at an annual rate equal to 0.10% of each of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year, except that with respect to the Growth and Income Fund and
Capital Growth Fund, Chase receives from each of the Funds and the Portfolios
a fee computed daily and paid monthly at an annual rate equal to 0.05% of
their respective average daily net assets. Chase may voluntarily waive a
portion of the fees payable to it with respect to each Fund on a
month-to-month basis.
For the fiscal years ended October 31, 1993, 1994 and 1995, Chase was paid
or accrued the following administration fees and voluntarily waived the
amounts in parentheses following such fees:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
--------------------------------------------------------------------------------
1993 1994 1995
Fund paid/accrued waived paid/accrued waived paid/accrued waived
- ------------------------ ------------ -------- ------------ -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Income Fund $ 75,832 ($35,736) $117,228 ($78,078) $106,559 ($ 76,094)
Growth and
Income Fund $469,785 none $637,264 none $830,077 ($252,586)
Capital Growth Fund $107,524 none $208,866 none $435,695 ($116,282)
Balanced Fund -- -- $ 20,704 ($20,704) $ 29,053 ($ 29,053)
Equity Income Fund ($
-- -- $ 13,201 7,764) $ 11,069 ($ 8,855)
Large Cap Equity Fund * * $ 94,703 ($94,703) $ 62,613 ($ 62,613)
Bond Fund * * $ 55,927 ($55,927) $ 54,206 ($ 54,206)
Short-Term Bond Fund * * $ 55,054 ($55,054) $ 34,141 ($ 34,141)
Small Cap Equity Fund -- -- -- -- $ 20,040 ($ 20,040)
</TABLE>
- --------------
* For the fiscal year ended October 31, 1993, the Equity Fund, Bond Fund and
Short-Term Bond Fund Chase voluntarily waived its entire Administrative Fee
of $155,883, $55,388 and $71,080, respectively.
44
<PAGE>
Distribution Plans
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") on behalf of certain classes
of shares of certain Funds as described in the Prospectuses, which provide
such classes of such Funds shall pay for distribution services a distribution
fee (the "Distribution Fee"), including payments to the Distributor, at
annual rates not to exceed the amounts set forth in their respective
Prospectuses. The Distributor may use all or any portion of such Distribution
Fee to pay for Fund expenses of printing prospectuses and reports used for
sales purposes, expenses of the preparation and printing of sales literature
and other such distribution-related expenses.
Class B shares pay a Distribution Fee of up to 0.75% of average daily net
assets. The Distributor currently expects to pay sales commissions to a
dealer at the time of sale of Class B shares of up to 4.00% of the purchase
price of the shares sold by such dealer. The Distributor will use its own
funds (which may be borrowed or otherwise financed) to pay such amounts.
Because the Distributor will receive a maximum Distribution Fee of 0.75% of
average daily net assets with respect to Class B shares, it will take the
Distributor several years to recoup the sales commissions paid to dealers and
other sales expenses.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to
exceed 0.25% annualized of the average net asset values of Class A shares, or
0.25% annualized of the average net asset value of the Class B shares, or
0.25% annualized of the average net asset value of the shares of the American
Value Fund maintained in a Fund by such broker-dealers' customers. Trail or
maintenance commissions on Class B shares will be paid to broker- dealers
beginning the 13th month following the purchase of such Class B shares. Since
the distribution fees are not directly tied to expenses, the amount of
distribution fees paid by a Fund during any year may be more or less than
actual expenses incurred pursuant to the Distribution Plans. For this reason,
this type of distribution fee arrangement is characterized by the staff of
the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
payments are directly linked to its expenses). With respect to Class B
shares, because of the 0.75% annual limitation on the compensation paid to
the Distributor during a fiscal year, compensation relating to a large
portion of the commissions attributable to sales of Class B shares in any one
year will be accrued and paid by a Fund to the Distributor in fiscal years
subsequent thereto. In determining whether to purchase Class B shares,
investors should consider that compensation payments could continue until the
Distributor has been fully reimbursed for the commissions paid on sales of
Class B shares. However, the Shares are not liable for any distribution
expenses incurred in excess of the Distribution Fee paid.
Each class of shares is entitled to exclusive voting rights with respect
to matters concerning its Distribution Plan.
Each Distribution Plan provides that it will continue in effect
indefinitely if such continuance is specifically approved at least annually
by a vote of both a majority of the Trustees and a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Trust
and who have no direct or indirect financial interest in the operation of the
Distribution Plans or in any agreement related to such Plan ("Qualified
Trustees"). The continuance of each Distribution Plan was most recently
approved on October 13, 1995. Each Distribution Plan requires that the Trust
shall provide to the Board of Trustees, and the Board of Trustees shall
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Distribution Plan. Each Distribution Plan
further provides that the selection and nomination of Qualified Trustees
shall be committed to the discretion of the disinterested Trustees (as
defined in the 1940 Act) then in office. Each Distribution Plan may be
terminated at any time by a vote of a majority of the Qualified Trustees or,
with respect to a particular Fund, by vote of a majority of the outstanding
voting Shares of the class of such Fund to which it applies (as defined in
the 1940 Act). Each Distribution Plan may not be amended to increase
materially the amount of permitted expenses thereunder without the approval
of shareholders and may not be materially amended in any case without a vote
of the majority of both the Trustees and the Qualified Trustees. Each of the
Funds will preserve copies of any plan, agreement or report made pursuant to
45
<PAGE>
a Distribution Plan for a period of not less than six years from the date of
the Distribution Plan, and for the first two years such copies will be
preserved in an easily accessible place. For the fiscal year ended October
31, 1995, the Distributor was paid or accrued the following Basic
Distribution Fees and voluntarily waived the amounts of such fees:
Fund Paid/Accrued Waived
- --------------------------- --------------- --------
U.S. Treasury Income Fund
A Shares $ 246,262 $49,250
B Shares $ 60,477 none
Growth and Income Fund
A Shares $3,610,606 none
B Shares $1,619,344 none
Capital Growth Fund
A Shares $1,673,901 none
B Shares $1,501,615 none
Balanced Fund
A Shares $ 60,657 $12,130
B Shares $ 35,952 none
Equity Income Fund $ 27,673 $ 5,535
Large Cap Equity Fund $ 156,533 $55,921
Bond Fund $ 135,515 $88,485
Short-Term Bond Fund $ 85,353 $77,817
Small Cap Equity Fund
A Shares $ 35,265 $ 8,946
B Shares $ 44,661 none
With respect to the Class A shares of the Funds, the Basic Distribution
Fee was allocated as follows:
Printing,
Postage Sales Advertising &
Fund and Handling Compensation Administrative Filings
- ------------------------- ------------ ------------ ----------------------
U.S. Treasury Income Fund $ 42,141 $ 120,768 $ 34,063
Growth and Income Fund $772,309 $2,213,301 $624,274
Capital Growth Fund $358,047 $1,026,101 $289,417
Balanced Fund $ 10,380 $ 29,747 $ 8,390
Equity Income Fund $ 4,735 $ 13,571 $ 3,828
Large Cap Equity Fund $ 21,521 $ 61,675 $ 17,396
Bond Fund $ 10,060 $ 28,829 $ 8,131
Short-Term Bond Fund $ 1,612 $ 4,620 $ 1,303
Small Cap Equity Fund $ 5,630 $ 16,134 $ 4,551
Distribution and Sub-Administration Agreement
The Trust has entered into a Distribution and Sub-Administration Agreement
dated August 24, 1995, (the "Distribution Agreement") with the Distributor,
pursuant to which the Distributor acts as the Funds' exclusive underwriter,
provides certain administration services and promotes and arranges for the
sale of each class of Shares. The Distributor is a wholly-owned subsidiary of
BISYS Fund Services, Inc. The Distribution Agreement provides that the
Distributor will bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for
sales purposes, and of preparing and printing sales literature and
advertisements not paid for by the Distribution Plan. The Trust pays for all
of the expenses for qualification of the shares of each Fund for sale in
connection with the public offering of such shares, and all legal expenses in
connection therewith. In addition, pursuant to the Distribution Agreement,
the Distributor provides certain sub-administration services to the Trust,
including providing officers, clerical staff and office space.
46
<PAGE>
The Distribution Agreement is currently in effect and will continue in
effect with respect to each Fund only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority
of such Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Distribution Agreement is terminable without penalty by the Trust on behalf
of each Fund on 60 days' written notice when authorized either by a majority
vote of such Fund's shareholders or by vote of a majority of the Board of
Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Distributor on 60 days' written notice, and will automatically terminate in
the event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall
be liable for any act or omission in the course of, or connected with,
rendering services under the Distribution Agreement, except for willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties.
In the event the operating expenses of any Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Distributor shall reduce its sub-administration fee with respect to
such Fund (which fee is described below) to the extent of its share of such
excess expenses. The amount of any such reduction to be borne by the
Distributor shall be deducted from the monthly sub-administration fee
otherwise payable with respect to such Fund during such fiscal year; and if
such amounts should exceed the monthly fee, the Distributor shall pay to such
Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives
an annual fee, payable monthly, of 0.05% of the net assets of each Fund.
However, the Distributor has voluntarily agreed to waive a portion of the
fees payable to it under the Distribution Agreement with respect to each Fund
on a month-to-month basis. For the fiscal years ended October 31, 1993, 1994
and 1995 the Distributor was paid or accrued the following sub-administration
fees under the Distribution Agreement, and voluntarily waived the amounts in
parentheses following such fees:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
-------------------------------------------------------------------
1993 1994 1995
Fund payable waived payable waived payable waived
- ------------------------ ------- -------- ------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Income Fund $ 37,917 ($17,868) $ 58,614 none $ 53,284 none
Growth and Income
Fund $234,794 none $637,264 none $830,077 none
Capital Growth Fund $ 53,763 none $208,866 none $435,488 none
Balanced Fund -- -- $ 10,352 ($10,352) $ 14,527 ($14,527)
Equity Income Fund -- -- $ 6,601 none $ 5,535 none
Large Cap Equity Fund $ 47,352 none $ 31,306 none
Bond Fund * * $ 27,963 none $ 27,103 none
Short-Term Bond Fund * * 27,527 none $ 17,071 none
Small Cap Equity Fund -- -- -- -- $ 10,030 $ 3,488
</TABLE>
- --------------
* For the fiscal year ended June 30, 1992, Trinity Equity Fund, Trinity Bond
Fund and Trinity Short-Term Bond Fund paid Trinity Capital Management
distribution and sub-administration fees equal to $98,825, $39,198 and
$75,404, respectively.
47
<PAGE>
Shareholder Servicing Agents, Transfer Agent and Custodian
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent to provide certain services
including but not limited to the following: answer customer inquiries
regarding account status and history, the manner in which purchases and
redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining
to the Fund; assist shareholders in designating and changing dividend
options, account designations and addresses; provide necessary personnel and
facilities to establish and maintain shareholder accounts and records; assist
in processing purchase and redemption transactions; arrange for the wiring of
funds; transmit and receive funds in connection with customer orders to
purchase or redeem shares; verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an
integrated basis with other reports sent to a shareholder by a Shareholder
Servicing Agent) quarterly and year-end statements and confirmations of
purchases and redemptions; transmit, on behalf of the Fund, proxy statements,
annual reports, updated prospectuses and other communications to shareholders
of the Fund; receive, tabulate and transmit to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and
provide such other related services as the Fund or a shareholder may request.
Shareholder servicing agents may be required to register pursuant to state
securities law.
Each Shareholder Servicing Agent may voluntarily agree from time to time
to waive a portion of the fees payable to it under its Servicing Agreement
with respect to each Fund on a month-to-month basis. For the fiscal years
ended October 31, 1993, 1994 and 1995, fees payable to the Shareholder
Servicing Agents (all of which currently are related parties) and the amounts
voluntarily waived for each such period (as indicated in parentheses), were
as follows:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
---------------------------------------------------------------------------
1993 1994 1995
Fund payable waived payable waived payable waived
- ------------------------ --------- -------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury
Income Fund
Class A $ 211,063 ($99,758) $ 285,388 ($177,004) $ 246,251 ($197,001)
Class B n/a n/a $ 7,681 -- $ 20,153 --
Growth and Income
Fund
Class A $1,126,760 -- $2,999,532 -- $3,610,762 --
Class B n/a n/a $ 186,791 -- $ 539,805 --
Capital Growth Fund
Class A $ 261,208 -- $ 936,977 -- $1,674,668 --
Class B n/a n/a $ 107,015 -- $ 503,805 --
Balanced Fund
Class A n/a n/a $ 47,750 ($ 45,962) $ 60,650 ($ 48,520)
Class B n/a n/a $ 4,011 -- $ 11,983 --
Equity Income Fund
Class A n/a n/a $ 33,030 ($ 22,131) $ 27,673 ($ 26,964)
Small Cap Equity Fund
Class A n/a n/a n/a -- -- --
Class B n/a n/a n/a $ 14,689 -- --
</TABLE>
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian,
48
<PAGE>
Chase provides oversight and record keeping for the assets held in the
portfolios of each Fund. Chase also provides fund accounting services for the
income, expenses and shares outstanding for such Funds. Chase is located at 3
Metrotech Center, Brooklyn, NY 11245. Investors Bank and Trust Co., One First
Canadian Place, Toronto, Canada, M5X 1C8, provides similar services for the
Capital Growth and Growth and Income Portfolios.
INDEPENDENT ACCOUNTANTS
The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended October 31, 1995,
and the related financial highlights which appear in the Prospectuses, have
been incorporated herein and included in the Prospectuses in reliance on the
reports of Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New
York 10036, independent accountants of the Funds, given on the authority of
said firm as experts in accounting and auditing. Price Waterhouse LLP
provides the Funds with audit services, tax return preparation and assistance
and consultation with respect to the preparation of filings with the
Securities and Exchange Commission.
The financial statements incorporated herein by reference from The Hanover
Investment Funds, Inc.'s Annual Reports to Shareholders for the fiscal year
ended November 30, 1995, and the related financial highlights which appear in
the Prospectuses, have been incorporated herein and included in the
Prospectuses in reliance on the reports of KPMG Peat Marwick LLP, independent
certified public accountants, and upon the authority of said firm as experts
in accounting and auditing. KPMG Peat Marwick LLP has offices at 345 Park
Avenue, New York, New York 10154.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, non-diversified management investment
company organized as Massachusetts business trust under the laws of the
Commonwealth of Massachusetts in 1987. The Trust currently consists of 16
series of shares of beneficial interest, par value $.001 per share. With
respect to certain Funds, the Trust may offer more than one class of shares.
The Trust has reserved the right to create and issue additional series or
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or
class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Expenses of
the Trust which are not attributable to a specific series or class are
allocated amount all the series in a manner believed by management of the
Trust to be fair and equitable. Shares have no pre-emptive or conversion
rights. Shares when issued are fully paid and non-assessable, except as set
forth below. Shareholders are entitled to one vote for each share held.
Shares of each series or class generally vote together, except when required
under federal securities laws to vote separately on matters that only affect
a particular class, such as the approval of distribution plans for a
particular class. With respect to shares purchased through a Shareholder
Servicing Agent and, in the event written proxy instructions are not received
by a Fund or its designated agent prior to a shareholder meeting at which a
proxy is to be voted and the shareholder does not attend the meeting in
person, the Shareholder Servicing Agent for such shareholder will be
authorized pursuant to an applicable agreement with the shareholder to vote
the shareholder's outstanding shares in the same proportion as the votes cast
by other Fund shareholders represented at the meeting in person or by proxy.
Certain Funds offer both Class A and Class B shares. The classes of shares
have several different attributes relating to sales charges and expenses, as
described herein and in the Prospectuses. In addition to such differences,
expenses borne by each class of a Fund may differ slightly because of the
allocation of other class-specific expenses. For example, a higher transfer
agency fee may be imposed on Class B shares than on Class A shares. The
relative impact of initial sales charges, contingent deferred sales charges,
and ongoing annual expenses will depend on the length of time a share is
held.
49
<PAGE>
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for
a shareholder vote. Shareholders have, under certain circumstances, the right
to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have, in certain circumstances, the right to remove one or
more Trustees without a meeting. No material amendment may be made to the
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each portfolio affected by the
amendment. The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Trust or of any series or class, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are not represented in person or by proxy at the
meeting, proportionately in accordance with the votes cast by holders of all
shares of that portfolio otherwise represented at the meeting in person or by
proxy as to which such Shareholder Servicing Agent is the agent of record.
Any shares so voted by a Shareholder Servicing Agent will be deemed
represented at the meeting for purposes of quorum requirements. Shares have
no preemptive or conversion rights. Shares, when issued, are fully paid and
non-assessable, except as set forth below. Any series or class may be
terminated (i) upon the merger or consolidation with, or the sale or
disposition of all or substantially all of its assets to, another entity, if
approved by the vote of the holders of two-thirds of its outstanding shares,
except that if the Board of Trustees recommends such merger, consolidation or
sale or disposition of assets, the approval by vote of the holders of a
majority of the series' or class' outstanding shares will be sufficient, or
(ii) by the vote of the holders of a majority of its outstanding shares, or
(iii) by the Board of Trustees by written notice to the series' or class'
shareholders. Unless each series and class is so terminated, the Trust will
continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to
shares that may be redeemed through expedited or automated procedures
established by a Shareholder Servicing Agent. No certificates are issued for
Class B shares due to their conversion feature. No certificates are issued
for Institutional Shares.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of
the Trust. The Trust's Declaration of Trust also provides that the Trust
shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, errors of judgment or mistakes of fact or law, but nothing
in the Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The Code of Ethics substantially conforms to the
recommendations made by the Investment Company Institute ("ICI") (except
where noted) and includes such provisions as:
(bullet) Prohibitions on investment personnel acquiring securities in initial
offerings;
(bullet) A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer granting such
approval have no interest in the issuer making the private
placement;
50
<PAGE>
(bullet) A restriction on access persons executing transactions for
securities on a recommended list until 14 days after distribution of
that list;
(bullet) A prohibition on access persons acquiring securities that are
pending execution by one of the Funds or Portfolios until 7 days
after the transactions of the Funds or Portfolios are completed;
(bullet) A prohibition of any buy or sell transaction in a particular
security in a 30-day period, except as may be permitted in certain
hardship cases or exigent circumstances where prior approval is
obtained. This provision differs slightly from the ICI
recommendation;
(bullet) A requirement for pre-clearance of any buy or sell transaction in a
particular security after 30 days, but within 60 days;
(bullet) A requirement that any gift exceeding $75.00 from a customer must be
reported to the appropriate compliance officer;
(bullet) A requirement that access persons submit in writing any request to
serve as a director or trustee of a publicly traded company;
(bullet) A requirement that all securities transactions in excess of $1,000
be pre-cleared, except that if a person has engaged in more than
$10,000 of securities transactions in a calendar quarter all
securities of such person require pre-clearance (this de minimus
exception differs slightly from the ICI recommendations);
(bullet) A requirement that all access persons direct their broker-dealer to
submit duplicate confirmation and customer statements to the
appropriate compliance unit; and
(bullet) A requirement that all access persons sign a Code of Ethics
acknowledgment, affirming that they have read and understood the
Code and submit a personal security holdings report upon
commencement of employment or status and a personal security
transaction report within 10 days of each calendar quarter
thereafter.
Principal Holders
As of March 31, 1996, the following persons owned of record 5% or more of
the outstanding shares of the following classes of the following Funds:
Vista US Government Income Fund--A Shares
Chase Manhattan Bank N/A 8.85%
Global SEC Services Omnibus
Attn: Alex Kwong
3 Chase Metro Tech
Center 7th Floor
Brooklyn, NY 11245-0002
Carrier ILA Containter Royalty 9.99%
Fund
One Evertrust Plaza
Jersey City, NJ 07302-3051
Trulin & Co. 7.96%
Chase Lincoln First Bank
Attn: Melodie R. Sparks-Stewart
Mutual Funds/T-C
PO Box 1412
Rochester, NY 14603-1412
51
<PAGE>
Carrier ILA CFS Trust Fund 14.99%
c/o CCC Inc.
One Evertrust Plaza
Jersey City, NJ 07302-3051
Testa and Co. 5.97%
c/o Chase Manhattan Bank NA
Attn: Mutual Funds T-C
PO Box 1412
Rochester, NY 14603-1412
Vista Growth & Income--A Shares
CMB Thrift Incentive Plan 14.16%
(Fund 50)
Attn: Jeff Salazar
3 Metrotech Center 5th Floor
Brooklyn, NY 11245-0001
Vista Growth & Income--Institutional Shares
Davis and Company 65.58%
c/o Marshall & Ilsley Trust Co.
PO Box 8020
Appleton, WI 54913-8020
Chase Manhattan Bank N/A 34.41%
Global SEC Services Omnibus
Attn: Alex Kwong
3 Chase Metro Tech Center
7th Floor
Brooklyn NY 11245-0002
Vista Capital Growth Fund--A Shares
Charles Schwab & Co. Inc. 7.99%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
Vista Capital Growth--Institutional Shares
Bankers Trust of the Southwest 67.12%
as TTEE for the MAPCO Inc. & Subsid.
Profit Sharing & Savings Plan
Attn: Deborah L. Turri
648 Grassmere Park Drive
Nashville, TN 37211-3658
Chase Manhattan Bank N/A 32.88%
Global SEC Services Omnibus
Attn: Alex Kwong
3 Chase Metro Tech Center
7th Floor
Brooklyn, NY 11245-0002
52
<PAGE>
Vista Small Cap Equity Fund--A Shares
Charles Schwab & Co. Inc. 12.91%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94101-4122
Jupiter & Co. 11.74%
c/o Investors Bank Trust Co.
PO Box 1537 Top 57
Boston, MA 02205-1537
Vista Small Cap Equity--Institutional Fund
Vista Broker Dealer Services 100.00%
c/o Fund Administration
3435 Stelzer Road
Columbus, OH 43219-6004
Vista Balanced Fund--A Shares
Trulin & Co. 8.57%
Chase Lincoln First Bank
One Lincoln First Square
Rochester, NY 14643-0001
Chase Manhattan Bank N/A 21.55%
Global SEC Services Omnibus
Attn: Alex Kwong
3 Chase Metro Tech Center
7th Floor
Brooklyn, NY 11245-0002
Testa and Co. 21.55%
c/o Chase Manhattan Bank NA
Attn: Mutual Funds/T-C
PO Box 1412
Rochester, NY 14603-1412
Vista Large Cap Equity Fund--Institutional Shares
Liva & Company 6.01%
c/o Chase Lincoln First Bank NA
Trust Securities--Mutual Fund
Attn: Ed Sheidlower
One Lincoln First Square
Rochester, NY 14643-0001
Trulin & Co. 79.49%
c/o Chase Lincoln First NA
Trust Securities/ Mutual Funds
Attn: Ed Sheidlower
One Lincoln First Square
Rochester, NY 14643-0001
53
<PAGE>
Testa and Co. 8.31%
c/o Chase Manhattan Bank NA
Attn: Mutual Funds/T-C
PO Box 1412
Rochester, NY 14603-1412
Vista Bond Fund
Trulin & Co. 91.70%
c/o Chase Lincoln First Bank NA
Trust Securities/Mutual Funds
Attn: Ed Sheidlower
One Lincoln First Square
Rochester, NY 14643-0001
Vista Short Term Bond Fund--Institutional Funds
Trulin & Co. 73.31%
c/o Chase Lincoln First Bank NA
Trust Securities/Mutual Funds
Attn: Ed Sheidlower
One Lincoln First Square
Rochester, NY 14643-0001
Testa and Co. 9.06%
c/o Chase Manhattan Bank NA
Attn: Mutual Funds/T-C
PO Box 1412
Rochester, NY 14603-1412
Financial Statements
The 1995 Annual Report to Shareholders of each Fund other than the Vista
U.S. Government Securities Fund and Vista American Value Fund, including the
reports of independent accounts, financial highlights and financial
statements for the fiscal year ended October 31, 1995 contained therein, are
incorporated herein by reference. The 1995 Annual Report to Shareholders of
each of The Hanover U.S. Government Securities Fund and The Hanover American
Value Fund, each a series of The Hanover Investment Funds, Inc., including
the reports of independent auditors, financial highlights and financial
statements for the fiscal year ended November 30, 1995 contained therein, are
incorporated herein by reference.
Specimen Computations of Offering Prices Per Share
U.S. Treasury Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $11.40
Maximum Offering Price per Share
($11.40 divided by .955)
(reduced on purchases of $100,000 or more) $11.94
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31,1995 and Income Fund (specimen computations)
54
<PAGE>
Growth and Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $34.96
Maximum Offering Price per Share
($34.96 divided by .9525)
(reduced on purchases of $100,000 or more) $36.70
B Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 3 $34.81
Capital Growth Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $35.65
Maximum Offering Price per Share ($35.65 divided by .9525)
(reduced on purchases of $100,000 or more $37.43
B Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31,1995 $35.39
Equity Income Fund (specimen computations)
A Shares
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $13.39
Maximum Offering Price per Share ($13.39 divided by .955)
(reduced on purchases of $100,000 or more $14.02
Balanced Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1995 $12.45
Maximum Offering Price per Share ($12.45 divided by .955)
(reduced on purchases of $100,000 or more) $13.04
B Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $12.36
Large Cap Equity Fund (specimen computations)
Institutional Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $12.24
55
<PAGE>
Bond Fund (specimen computations)
Institutional Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $10.91
Short-Term Bond Fund (specimen computations)
Institutional Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $10.08
Small Cap Equity Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $15.07
Maximum Offering Price per Share ($15.07 divided by .9525)
(reduced on purchases of $100,000 or more) $15.82
B Shares:
Net Asset Value and Redemption Price per Share of
Beneficial Interest at October 31, 1995 $15.01
56
<PAGE>
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government are guaranteed by the
U.S. Government.
FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S.
Government.
FHA Insured Notes--are bonds issued by the Farmers Home Administration of
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees Paid to GNMA
and the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures may result in the return of the greater
part of principal invested far in advance of the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee. As the prepayment rate of individual mortgage pools will vary
widely, it is not possible to accurately predict the average life of a
particular issue of GNMA Certificates. The yield which will be earned on GNMA
Certificates may vary from their coupon rates for the following reasons: (i)
Certificates may be issued at a premium or discount, rather than at par; (ii)
Certificates may trade in the secondary market at a premium or discount after
issuance; (iii) interest is earned and compounded monthly which has the
effect of raising the effective yield earned on the Certificates; and (iv)
the actual yield of each Certificate is affected by the prepayment of
mortgages included in the mortgage pool underlying the Certificates.
Principal which is so prepaid will be reinvested although possibly at a lower
rate. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium could result in a loss
to a Fund. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on,
among other things, the level of market rates, the Certificate's coupon rate
and the prepayment experience of the pool of mortgages backing each
Certificate. If agency securities are purchased at a premium above principal,
the premium is not guaranteed by the issuing agency and a decline in the
market value to par may result in a loss of the premium, which may be
particularly likely in the event of a prepayment. When and if available, U.S.
Government obligations may be purchased at a discount from face value.
GNMA FHLMC Bonds and GNMA FNMA Bonds--are mortgage-backed bonds issued by
the Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association, respectively, and are guaranteed by the U.S. Government.
A-1
<PAGE>
GSA Participation Certificates--are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed
by the U.S. Government.
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development
Act of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of
Housing and Urban Development of the U.S. Government, the payment of which is
secured by the U.S. Government.
Penn Central Transportation Certificates--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds--are bonds issued by
the Washington Metropolitan Area Transit Authority and guaranteed by the U.S.
Government.
FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and bonds--are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds--are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import
Bank of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
A description of the rating policies of Moody's, S&P and Fitch with respect
to bonds and commercial paper appears below.
Moody's Investors Service's Corporate Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin, and principal is secure.
While the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment qualities and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguared
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance
and other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in
high degree.
Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and
pay interest.
B-1
<PAGE>
AA--Bonds rated "AA" also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and differs from "AAA" issues
only in small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such
payments will be made during such grace period. The "D" rating is also used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries,
high rates of return on funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal
cash generation, and well- established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level
of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as
follows:
B-2
<PAGE>
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.
B--Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
AAA--Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA--Bonds rated AA by Fitch are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issues is generally rated F-1+ by Fitch.
A--Bonds rated A by Fitch are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
consequences on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of a
credit within a rating category. Plus and minus signs, however, are not used
in the AAA category.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
B-3
<PAGE>
F-1--Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance for
timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term
adverse changes could cause these securities to be rated below investment
grade.
LOC--The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.
After purchase by a Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by a Fund. However, a Fund's
investment manager will consider such event in its determination of whether
such Fund should continue to hold the security. To the extent the ratings
given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, a Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment
policies contained in this Prospectus and in the Statement of Additional
Information.
B-4
<PAGE>
Rule 497(c)
File Nos. 33-14196
and 811-5151
STATEMENT OF
ADDITIONAL INFORMATION
May 6, 1996
VISTA[SM] EUROPEAN FUND
VISTA[SM] GLOBAL FIXED INCOME FUND
VISTA[SM] INTERNATIONAL EQUITY FUND
VISTA[SM] JAPAN FUND
VISTA[SM] SOUTHEAST ASIAN FUND
101 Park Avenue, New York, New York 10178
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering
shares of Vista Global Fixed Income Fund, Vista International Equity Fund,
Vista European Fund, Vista Japan Fund and Vista Southeast Asian Fund. Any
references to a "Prospectus" in this Statement of Additional Information is a
reference to one or more of the foregoing Prospectuses, as the context
requires. Copies of each Prospectus may be obtained by an investor without
charge by contacting Vista Fund Distributors, Inc. ("VFD"), the Funds'
distributor (the "Distributor"), at the above-listed address.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
For more information about your account, simply call or write the Vista
Service Center at:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 6414
INTL-SAI
<PAGE>
Table of Contents Page
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The Funds ............................................................... 3
Investment Policies and Restrictions .................................... 3
Performance Information ................................................. 21
Determination of Net Asset Value ........................................ 25
Purchases, Redemptions and Exchanges .................................... 25
Tax Matters ............................................................. 27
Management .............................................................. 34
Independent Accountants ................................................. 45
General Information ..................................................... 45
Appendix A--Description of Certain Obligations Issued or
Guaranteed by U.S. Government Agencies or Instrumentalities .......... A-1
Appendix B--Description of Ratings ..................................... B-1
2
<PAGE>
THE FUNDS
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists
of 16 separate series (the "Funds"). Certain of the Funds are diversified and
other Funds are non-diversified, as such term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). The shares of the Funds are
collectively referred to in this Statement of Additional Information as the
"Shares."
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Global Fixed Income Fund and
International Equity Fund each seek to achieve their investment objectives by
investing all of their respective investable assets in an open-end,
management investment company which has the same investment objective as such
Fund. The Global Fixed Income Fund invests in the Global Fixed Income
Portfolio and the International Equity Fund invests in the International
Equity Portfolio (collectively the "Portfolios"). Each of the Portfolios is a
New York trust with its principal office in New York. Certain qualified
investors, in addition to a Fund, may invest in a Portfolio. For purposes of
this Statement of Additional Information, any information or references to
either or both of the Portfolios refer to the operations and activities after
implementation of the master fund/feeder fund structure.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. In the case of the Portfolios,
separate Boards of Trustees, with certain common members, provide broad
supervision. The Chase Manhattan Bank ("Chase") is the investment adviser for
the Funds (other than the Vista Global Fixed Income Fund and Vista
International Equity Fund, which do not have their own advisers) and the two
Portfolios. Chase also serves as the administration of the Trust, including
the Funds, and is the administrator of the Portfolios. A majority of the
Trustees of the Trust are not affiliated with the investment adviser or
sub-advisers. Similarly, a majority of the Trustees of the Portfolios are not
affiliated with the investment adviser or sub-advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies of each Fund
and Portfolio. The following information supplements and should be read in
conjunction with the related sections of each Prospectus. For descriptions of
the securities ratings of Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P") and Fitch Investors Service, Inc.
("Fitch"), see Appendix B.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities
of one year or less), U.S. Treasury notes (maturities of one to ten years)
and U.S. Treasury bonds (generally maturities of greater than ten years); and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
any amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain
obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. Agencies and instrumentalities of
the U.S. Government include but are not limited to: Federal Land Banks,
Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Student Loan Marketing
Association, United States Postal Service, Chrysler Corporate Loan Guarantee
Board, Small Business Administration, Tennessee Valley Authority and any
other enterprise established or sponsored by the U.S. Government. Certain
U.S. Government Securities, including U.S. Treasury bills, notes and bonds,
Government National Mortgage Association certificates and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government Securities are
3
<PAGE>
issued or guaranteed by federal agencies or government sponsored enterprises
and are not supported by the full faith and credit of the United States.
These securities include obligations that are supported by the right of the
issuer to borrow from the U.S. Treasury, such as obligations of Federal Home
Loan Banks, and obligations that are supported by the creditworthiness of the
particular instrumentality, such as obligations of the Federal National
Mortgage Association or Federal Home Loan Mortgage Corporation. For a
description of certain obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small
Business Administration, Federal Aviation Administration, Department of
Defense, Bureau of Indian Affairs and Private Export Funding Corporation,
which often provide higher yields that are available from the more common
types of government-backed instruments. However, such specialized instruments
may only be available from a few sources in limited amounts, or only in very
large denominations; they may also require specialized capability in
portfolio servicing and in legal matters related to government guarantees.
While they may frequently offer attractive yields, the limited-activity
markets of many of these securities means that, if a Fund or Portfolio were
required to liquidate any of them, it might not be able to do so
advantageously; accordingly, each Fund and Portfolio investing in such
securities normally to hold such securities to maturity or pursuant to
repurchase agreements, and would treat such securities (including repurchase
agreements maturing in more than seven days) as illiquid for purposes of its
limitation on investment in illiquid securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are
insured by either the Bank Insurance Fund or the Savings Association
Insurance Fund of the Federal Deposit Insurance Corporation, and foreign
banks (including their U.S. branches) having total assets in excess of $10
billion (or the equivalent in other currencies), and such other U.S. and
foreign commercial banks which are judged by the advisers to meet comparable
credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit
is a short-term negotiable certificate issued by a commercial bank against
funds deposited in the bank and is either interest-bearing or purchased on a
discount basis. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction. The borrower is liable for payment as is the bank,
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Fixed time deposits are obligations of branches of United
States banks or foreign banks which are payable at a stated maturity date and
bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits
subject to withdrawal penalties and with respect to which a Fund or Portfolio
cannot realize the proceeds thereon within seven days are deemed "illiquid"
for the purposes of its restriction on investments in illiquid securities.
Deposit notes are notes issued by commercial banks which generally bear fixed
rates of interest and typically have original maturities ranging from
eighteen months to five years.
Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may
be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit
losses arising from possible financial difficulties of borrowers might affect
a bank's ability to meet its obligations. Bank obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Investors
should also be aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.
4
<PAGE>
Depositary Receipts. A Fund or Portfolio will limit its investment in
Depository Receipts not sponsored by the issuer of the underlying security to no
more than 5% of the value of its net assets (at the time of investment). A
purchaser of an unsponsored Depositary Receipt may not have unlimited voting
rights and may not receive as much information about the issuer of the
underlying securities as with a sponsored Depositary Receipt.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which
is a type of commercial paper) represents a direct borrowing arrangement
involving periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.
ECU Obligations. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Trustees do not
believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities.
Supranational Obligations. Supranational organizations include
organizations such as The World Bank, which was chartered to finance
development projects in developing member countries; the European Community,
which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union
of various European nations steel and coal 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.
Repurchase Agreements. A Fund or Portfolio will enter into repurchase
agreements only with member banks of the Federal Reserve System and
securities dealers believed creditworthy, and only if fully collateralized by
securities in which such Fund or Portfolio is permitted to invest. Under the
terms of a typical repurchase agreement, a Fund or Portfolio would acquire an
underlying instrument for a relatively short period (usually not more than
one week) subject to an obligation of the seller to repurchase the instrument
and the Fund or Portfolio to resell the instrument at a fixed price and time,
thereby determining the yield during the Fund's or Portfolio's holding
period. This procedure results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to
the risk that the seller may fail to repurchase the security. Repurchase
agreements are considered under the 1940 Act to be loans collateralized by
the underlying securities. All repurchase agreements entered into by a Fund
or Portfolio will be fully collateralized at all times during the period of
the agreement in that the value of the underlying security will be at least
equal to 102% of the amount of the loan, including the accrued interest
thereon, and the Fund or Portfolio or its custodian or sub-custodian will
have possession of the collateral, which the Board of Trustees believes will
give it a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a
collateralized loan has not been conclusively established. This might become
an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by the Fund or Portfolio, but would only constitute
collateral for the seller's obligation to pay the repurchase price.
Therefore, a Fund or Portfolio may suffer time delays and incur costs in
connection with the disposition of the collateral. The Board of Trustees
believes that the collateral underlying repurchase agreements may be more
susceptible to claims of the seller's creditors than would be the case with
securities owned by a Fund or Portfolio. Repurchase agreements maturing in
more than seven days are treated as illiquid for purposes of the Funds' and
Portfolios' restrictions on purchases of illiquid securities. Repurchase
agreements are also subject to the risks described below with respect to
stand-by commitments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund or Portfolio with an agreement to
repurchase the securities at an agreed upon price and date. The repurchase
price is generally equal to the original sales price plus interest. Reverse
repurchase agree-
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ments are usually for seven days or less and cannot be repaid prior to their
expiration dates. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities transferred may decline below the
price at which the Fund or Portfolio is obliged to purchase the securities.
Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will
normally be purchased. When a commitment to purchase a security on a forward
commitment basis is made, procedures are established consistent with the
General Statement of Policy of the Securities and Exchange Commission
concerning such purchases. Since that policy currently recommends that an
amount of the respective Fund's or Portfolio's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the
commitment, a separate account of such Fund or Portfolio consisting of cash,
cash equivalents or high quality debt securities equal to the amount of such
Fund's or Portfolio's commitments securities will be established at such
Fund's or Portfolio's custodian bank. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market value. If the market value of such securities declines,
additional cash, cash equivalents or highly liquid securities will be placed
in the account daily so that the value of the account will equal the amount
of such commitments by the respective Fund or Portfolio.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis
may involve more risk than other types of purchases. Securities purchased on
a forward commitment basis and the securities held in the respective Fund's
or Portfolio's portfolio are subject to changes in value based upon the
public's perception of the issuer and changes, real or anticipated, in the
level of interest rates. Purchasing securities on a forward commitment basis
can involve the risk that the yields available in the market when the
delivery takes place may actually be higher or lower than those obtained in
the transaction itself. On the settlement date of the forward commitment
transaction, the respective Fund or Portfolio will meet its obligations from
then available cash flow, sale of securities held in the separate account,
sale of other securities or, although it would not normally expect to do so,
from sale of the forward commitment securities themselves (which may have a
value greater or lesser than such Fund's or Portfolio's payment obligations).
The sale of securities to meet such obligations may result in the realization
of capital gains or losses.
To the extent a Fund or Portfolio engages in forward commitment
transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for the purpose
of investment leverage, and settlement of such transactions will be within 90
days from the trade date.
Floating and Variable Rate Securities; Participation Certificates. The
securities in which certain Funds and Portfolios may be invested include
participation certificates issued by a bank, insurance company or other
financial institution in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate
gives a Fund or Portfolio an undivided interest in the security in the
proportion that the Fund's or Portfolio's participation interest bears to the
total principal amount of the security and generally provides the demand
feature described below. Each Participation Certificate is backed by an
irrevocable letter of credit or guaranty of a bank (which may be the bank
issuing the Participation Certificate, a bank issuing a confirming letter of
credit to that of the issuing bank, or a bank serving as agent of the issuing
bank with respect to the possible repurchase of the Participation
Certificate) or insurance policy of an insurance company that the Board of
Trustees of the Trust has determined meets the prescribed quality standards
for a particular Fund or Portfolio.
A Fund or Portfolio may have the right to sell the Participation
Certificate back to the institution and draw on the letter of credit or
insurance on demand after the prescribed notice period, for all or any part
of the full principal amount of the Fund's or Portfolio's participation
interest in the security, plus accrued interest. The institutions issuing the
Participation Certificates would retain a service and letter of credit fee
and a fee
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for providing the demand feature, in an amount equal to the excess of the
interest paid on the instruments over the negotiated yield at which the
Participation Certificates were purchased by a Fund or Portfolio. The total
fees would generally range from 5% to 15% of the applicable prime rate or
other short-term rate index. With respect to insurance, a Fund or Portfolio
will attempt to have the issuer of the participation certificate bear the
cost of any such insurance, although the Funds and Portfolios retain the
option to purchase insurance if deemed appropriate.
Obligations that have a demand feature permitting a Fund or Portfolio to
tender the obligation to a foreign bank may involve certain risks associated
with foreign investment. A Fund's or Portfolio's ability to receive payment
in such circumstances under the demand feature from such foreign banks may
involve certain risks such as future political and economic developments, the
possible establishments of laws or restrictions that might adversely affect
the payment of the bank's obligations under the demand feature and the
difficulty of obtaining or enforcing a judgment against the bank.
The advisers have been instructed by the Board of Trustees to monitor on
an ongoing basis the pricing, quality and liquidity of the floating or
variable rate securities held by the Funds and Portfolios, including
Participation Certificates, on the basis of published financial information
and reports of the rating agencies and other bank analytical services to
which the Funds and Portfolios may subscribe. Although these instruments may
be sold by a Fund or Portfolio, it is intended that they be held until
maturity.
Past periods of high inflation, together with the fiscal measures adopted
to attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the
underlying variable rate securities may change with changes in interest rates
generally, the floating or variable rate nature of the underlying floating or
variable rate securities should minimize changes in value of the instruments.
Accordingly, as interest rates decrease or increase, the potential for
capital appreciation and the risk of potential capital depreciation is less
than would be the case with a portfolio of fixed rate securities. A Fund's or
Portfolio's portfolio may contain floating or variable rate securities on
which stated minimum or maximum rates, or maximum rates set by state law,
limit the degree to which interest on such floating or variable rate
securities may fluctuate; to the extent it does, increases or decreases in
value may be somewhat greater than would be the case without such limits.
Because the adjustment of interest rates on the floating or variable rate
securities is made in relation to movements of the applicable banks' "prime
rates" or other short-term rate adjustment indices, the floating or variable
rate securities are not comparable to long-term fixed rate securities.
Accordingly, interest rates on the floating or variable rate securities may
be higher or lower than current market rates for fixed rate obligations of
comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of (i)
the notice period required before a Fund or Portfolio is entitled to receive
payment of the principal amount of the security upon demand or (ii) the
period remaining until the security's next interest rate adjustment.
Zero Coupon, Payment-in-Kind and Stripped Obligations. The principal and
interest components of United States Treasury bonds with remaining maturities
of longer than ten years are eligible to be traded independently under the
Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that
of United States Treasury bills with comparable maturities.
Zero coupon obligations are sold at a substantial discount from their
value at maturity and, when held to maturity, their entire return, which
consists of the amortization of discount, comes from the difference between
their purchase price and maturity value. Because interest on a zero coupon
obligation is not distributed on a current basis, the obligation tends to be
subject to greater price fluctuations in response to
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changes in interest rates than are ordinary interest-paying securities with
similar maturities. The value of zero coupon obligations appreciates more
than such ordinary interest-paying securities during periods of declining
interest rates and depreciates more than such ordinary interest-paying
securities during periods of rising interest rates. Under the stripped bond
rules of the Internal Revenue Code of 1986, as amended, investments by a Fund
or Portfolio in zero coupon obligations will result in the accrual of
interest income on such investments in advance of the receipt of the cash
corresponding to such income.
Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the
coupon payments and principal payment that will be generated by this security
separately. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities, Treasury Investment Growth Receipts and generic Treasury
Receipts, are examples of stripped U.S. Treasury securities separated into
their component parts through such custodial arrangements.
Payment-in-kind ("PIK") bonds are debt obligations which provide that the
issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments benefit the issuer
by mitigating its need for cash to meet debt service, but also require a
higher rate of return to attract investors who are willing to defer receipt
of such cash. Such investments experience greater volatility in market value
due to changes in interest rates than debt obligations which provide for
regular payments of interest. A Fund or Portfolio will accrue income on such
investments for tax and accounting purposes, as required, which is
distributable to shareholders and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy the Fund's or Portfolio's distribution obligations.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices
do not necessarily move parallel to the prices of the underlying securities.
Rights are similar to warrants but normally have a shorter duration and are
distributed directly by the issuer to shareholders. Rights and warrants have
no voting rights, receive no dividends and have no rights with respect to the
assets of the issuer.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund and Portfolio may elect to treat as liquid, in
accordance with procedures established by the Board of Trustees, certain
investments in restricted securities for which there may be a secondary
market of qualified institutional buyers as contemplated by Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act") and commercial
obligations issued in reliance on the so-called "private placement" exemption
from registration afforded by Section 4(2) of the Securities Act. ("Section
4(2) paper") Rule 144A provides an exemption from the registration
requirements of the Securities Act for the resale of certain restricted
securities to qualified institutional buyers. Section 4(2) paper is
restricted as to disposition under the federal securities laws, and generally
is sold to institutional investors such as a Fund or Portfolio who agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale of Section 4(2) paper by the purchaser must be in an
exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid
market for Rule 144A securities or Section 4(2) paper will develop or be
maintained. The Trustees have adopted policies and procedures for the purpose
of determining whether securities that are eligible for resale under Rule
144A and Section 4(2) paper are liquid or illiquid for purposes of the
limitation on investment in illiquid securities. Pursuant to those policies
and procedures, the Trustees have delegated to the advisers the determination
as to whether a particular instrument is liquid or illiquid, requiring that
consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell and security
and the number of potential purchasers, dealer undertakings to make a market
in the security, the nature of the security and the time needed to dispose of
the security. The Trustees will periodically review the Funds' and
Portfolios' purchases and sales of Rule 144A securities and Section 4(2)
paper.
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Stand-By Commitments. In a put transaction, a Fund or 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 Fund
or 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. Stand-by commitments are subject to certain risks,
which include the inability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the
commitment is not marketable by a Fund or Portfolio, and that the maturity of
the underlying security will generally be different from that of the
commitment.
Securities Loans. To the extent specified in its Prospectus, each Fund and
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 Fund's or
Portfolio's total assets. In connection with such loans, a Fund or 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 plus accrued interest of the
securities loaned. A Fund or Portfolio can increase its income through the
investment of such collateral. A Fund or Portfolio continues to be entitled
to the interest payable or any dividend-equivalent payments received on a
loaned security and, in addition, to receive interest on the amount of the
loan. However, the receipt of any dividend-equivalent payments by a Fund or
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 Fund or Portfolio might experience risk of loss if the
institutions with which it has engaged in portfolio loan transactions breach
their agreements with such Fund or Portfolio. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
experience financial difficulty. Loans will be made only to firms deemed by
the advisers to be of good standing and will not be made unless, in the
judgment of the advisers, the consideration to be earned from such loans
justifies the risk.
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Funds and Portfolios may
employ derivative and related instruments as tools in the management of
portfolio assets. Put briefly, a "derivative" instrument may be considered a
security or other instrument which derives its value from the value or
performance of other instruments or assets, interest or currency exchange
rates, or indexes. For instance, derivatives include futures, options,
forward contracts, structured notes and various over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways:
First, to reduce risk by hedging (offsetting) an investment position. Second,
to substitute for another security particularly where it is quicker, easier
and less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction
costs, quicker investment and more profitable use of portfolio assets.
However, derivatives also have the potential to significantly magnify risks,
thereby leading to potentially greater losses for a Fund or Portfolio.
Each Fund and Portfolio may invest its assets in derivative and related
instruments subject only to the Fund's or Portfolio's investment objective
and policies and the requirement that the Fund or Portfolio maintain
segregated accounts consisting of liquid assets, such as cash, U.S.
Government securities, or other high-grade debt obligations (or, as permitted
by applicable regulation, enter into certain offsetting positions) to cover
its obligations under such instruments with respect to positions where there
is no underlying portfolio asset so as to avoid leveraging the Fund or
Portfolio.
The value of some derivative or similar instruments in which the Funds and
Portfolios may invest may be particularly sensitive to changes in prevailing
interest rates or other economic factors, and--like other investments of the
Funds and Portfolios--the ability of a Fund or Portfolio to successfully
utilize these instru-
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ments may depend in part upon the ability of the advisers to forecast
interest rates and other economic factors correctly. If the advisers
inaccurately forecasts such factors and has taken positions in derivative or
similar instruments contrary to prevailing market trends, the Funds and
Portfolios could be exposed to the risk of a loss. The Funds and/or
Portfolios may not employ any or all of the strategies described herein, and
no assurance can be given that any strategy used will succeed.
Set forth below is an explanation of the various derivatives strategies
and related instruments the Funds and Portfolios may employ along with risks
or special attributes associated with them. This discussion is intended to
supplement the Funds' current prospectuses as well as provide useful
information to prospective investors.
Risk Factors. As explained more fully below and in the discussions of
particular strategies or instruments, there are a number of risks associated
with the use of derivatives and related instruments: There can be no
guarantee that there will be a correlation between price movements in a
hedging vehicle and in the portfolio assets being hedged. An incorrect
correlation could result in a loss on both the hedged assets in a Fund or
Portfolio and the hedging vehicle so that the portfolio return might have
been greater had hedging not been attempted. This risk is particularly acute
in the case of "cross-hedges" between currencies. The advisers may
inaccurately forecast interest rates, market values or other economic factors
in utilizing a derivatives strategy. In such a case, a Fund or 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
Fund or Portfolio. Certain strategies, such as yield enhancement, can have
speculative characteristics and may result in more risk to a Fund or
Portfolio than hedging strategies using the same instruments.
There can be no assurance that a liquid market will exist at a time when a
Fund or 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 particular contract, no
trades may be made that day at a price beyond that limit. In addition,
certain instruments are relatively new and without a significant trading
history. As a result, there is no assurance that an active secondary market
will develop or continue to exist. Finally, over- the-counter instruments
typically do not have a liquid market. Lack of a liquid market for any reason
may prevent a Fund or Portfolio from liquidating an unfavorable position.
Activities of large traders in the futures and securities markets involving
arbitrage, "program trading," and other investment strategies may cause price
distortions in these markets. In certain instances, particularly those
involving over-the-counter transactions, forward contracts, 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 Fund or 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.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by
a Fund or Portfolio.
Options on Securities, Securities Indexes, Currencies and Debt
Instruments. A Fund or Portfolio may PURCHASE, SELL or EXERCISE call and put
options on: securities; securities indexes; currencies; or debt instruments.
Although in most cases these options will be exchange-traded, the Funds
and Portfolios may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller. As such, over-the-counter options generally have much less market
liquidity and carry the risk of default or nonperformance by the other party.
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One purpose of purchasing put options is to protect holdings in an underlying
or related security against a substantial decline in market value. One purpose
of purchasing call options is to protect against substantial increases in prices
of securities a Fund or Portfolio intends to purchase pending its ability to
invest in such securities in an orderly manner. A Fund or Portfolio may also use
combinations of options to minimize costs, gain exposure to markets or take
advantage of price disparities or market movements. For example, a Fund or
Portfolio may sell put or call options it has previously purchased or purchase
put or call options it has previously sold. These transactions may result in a
net gain or loss depending on whether the amount realized on the sale is more or
less than the premium and other transaction costs paid on the put or call option
which is sold. A Fund or Portfolio may write a call or put option in order to
earn the related premium from such transactions. Prior to exercise or
expiration, an option may be closed out by an offsetting purchase or sale of a
similar option. The Funds will not write uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund or Portfolio writing a covered call (i.e., where the underlying
securities are held by the Fund or Portfolio) has, in return for the premium
on the option, given up the opportunity to profit from a price increase in
the underlying securities above the exercise price, but has retained the risk
of loss should the price of the underlying securities decline. The writer of
an option has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
securities at the exercise price.
If a put or call option purchased by a Fund or Portfolio is not sold when
it has remaining value, and if the market price of the underlying security,
in the case of a put, remains equal to or greater than the exercise price or,
in the case of a call, remains less than or equal to the exercise price, such
Fund or Portfolio will lose its entire investment in the option. Also, where
a put or call option on a particular security is purchased to hedge against
price movements in a related security, the price of the put or call option
may move more or less than the price of the related security. There can be no
assurance that a liquid market will exist when a Fund or Portfolio seeks to
close out an option position. Furthermore, if trading restrictions or
suspensions are imposed on the options markets, a Fund or Portfolio may be
unable to close out a position.
Futures Contracts and Options on Futures Contracts. A Fund on Portfolio
may purchase or sell: interest-rate futures contracts; stock index futures
contracts; foreign currency futures contracts; futures contracts on specified
instruments or indices; and options on these futures contracts ("futures
options").
The futures contracts and futures options may be based on various
instruments or indices in which the Funds and Portfolios may invest such as
foreign currencies, certificates of deposit, Eurodollar time deposits,
securities indices, economic indices (such as the Consumer Price Indices
compiled by the U.S. Department of Labor).
Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For
example, a Fund or Portfolio may sell a futures contract--or buy a futures
option--to protect against a decline in value, or reduce the duration, of
portfolio holdings. Likewise, these instruments may be used where a Fund or
Portfolio intends to acquire an instrument or enter into a position. For
example, a Fund or Portfolio may purchase a futures contract--or buy a
futures option--to gain immediate exposure in a market or otherwise offset
increases in the purchase price of securities or currencies to be acquired in
the future. Futures options may also be written to earn the related premiums.
When writing or purchasing options, the Funds and Portfolios may
simultaneously enter into other transactions involving futures contracts or
futures options in order to minimize costs, gain exposure to markets, or take
advantage of price disparities or market movements. Such strategies may
entail additional risks in certain instances. The Funds and Portfolios may
engage in cross-hedging by purchasing or selling futures or options on a
security or currency different from the security or currency position being
hedged to take advantage of relationships between the two securities or
currencies.
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Investments in futures contracts and options thereon involve risks similar to
those associated with options transactions discussed above. The Funds and
Portfolios will only enter into futures contracts or options or futures
contracts which are traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system.
Forward Contracts. A Fund or Portfolio may use foreign currency and
interest-rate forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and
other complex factors, as seen from an international perspective. The Funds
and Portfolios may invest in securities denominated in foreign currencies and
may, in addition to buying and selling foreign currency futures contracts and
options on foreign currencies and foreign currency futures, enter into
forward foreign currency exchange contracts to reduce the risks or otherwise
take a position in anticipation of changes in foreign exchange rates. A
forward foreign currency exchange contract involves an obligation to purchase
or sell a specific currency at a future date, which may be a fixed number of
days from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. By entering into a forward foreign currency
contract, a Fund or Portfolio "locks in" the exchange rate between the
currency it will deliver and the currency it will receive for the duration of
the contract. As a result, a Fund or Portfolio reduces its exposure to
changes in the value of the currency it will deliver and increases its
exposure to changes in the value of the currency it will exchange into. The
effect on the value of a Fund or Portfolio is similar to selling securities
denominated in one currency and purchasing securities denominated in another.
Transactions that use two foreign currencies are sometimes referred to as
"cross-hedges."
A Fund or Portfolio may enter into these contracts for the purpose of
hedging against foreign exchange risk arising from investments or anticipated
investments in securities denominated in foreign currencies. A Fund or
Portfolio may also enter into these contracts for purposes of increasing
exposure to a foreign currency or to shift exposure to foreign currency
fluctuations from one country to another.
A Fund or Portfolio may also use forward contracts to hedge against
changes in interest-rates, increase exposure to a market or otherwise take
advantage of such changes. An interest-rate forward contract involves the
obligation to purchase or sell a specific debt instrument at a fixed price at
a future date.
Interest Rate and Currency Transactions. A Fund or Portfolio may employ
currency and interest rate management techniques, including transactions in
options (including yield curve options), futures, options on futures, forward
foreign currency exchange contracts, currency options and futures and
currency and interest rate swaps. The aggregate amount of a Fund's or
Portfolio's net currency exposure will not exceed the total net asset value
of its portfolio. However, to the extent that a Fund or Portfolio is fully
invested while also maintaining currency positions, it may be exposed to
greater combined risk.
The Funds and Portfolios will only enter into interest rate and currency
swaps on a net basis, i.e., the two payment streams are netted out, with the
Fund or Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. Interest rate and currency swaps do not involve
the delivery of securities, the underlying currency, other underlying assets
or principal. Accordingly, the risk of loss with respect to interest rate and
currency swaps is limited to the net amount of interest or currency payments
that a Fund or Portfolio is contractually obligated to make. If the other
party to an interest rate or currency swap defaults, a Fund's or Portfolio's
risk of loss consists of the net amount of interest or currency payments that
the Fund or Portfolio is contractually entitled to receive. Since interest
rate and currency swaps are individually negotiated, the Funds and Portfolios
expect to achieve an acceptable degree of correlation between their portfolio
investments and their interest rate or currency swap positions.
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A Fund or Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
A Funds or Portfolio may purchase or sell without limitation as to a
percentage of its assets forward foreign currency exchange contracts when the
advisers anticipate that the foreign currency will appreciate or depreciate
in value, but securities denominated in that currency do not present
attractive investment opportunities and are not held by such Fund or
Portfolio. In addition, a Fund or Portfolio may enter into forward foreign
currency exchange contracts in order to protect against adverse changes in
future foreign currency exchange rates. A Fund or Portfolio may engage in
cross-hedging by using forward contracts in one currency to hedge against
fluctuations in the value of securities denominated in a different currency
if its advisers believe that there is a pattern of correlation between the
two currencies. Forward contracts may reduce the potential gain from a
positive change in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for a Fund or Portfolio than if it had not entered into
such contracts. The use of foreign currency forward contracts will not
eliminate fluctuations in the underlying U.S. dollar equivalent value of the
prices of or rates of return on a Fund's or Portfolio's foreign currency
denominated portfolio securities and the use of such techniques will subject
the Fund or Portfolio to certain risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency
denominated asset that is the subject of the hedge generally will not be
precise. In addition, a Fund or Portfolio may not always be able to enter
into foreign currency forward contracts at attractive prices, and this will
limit a Fund's or Portfolio's ability to use such contract to hedge or
cross-hedge its assets. Also, with regard to a Fund's or Portfolio's use of
cross-hedges, there can be no assurance that historical correlations between
the movement of certain foreign currencies relative to the U.S. dollar will
continue. Thus, at any time poor correlation may exist between movements in
the exchange rates of the foreign currencies underlying a Fund's or
Portfolio's cross-hedges and the movements in the exchange rates of the
foreign currencies in which the Fund's or Portfolio's assets that are the
subject of such cross-hedges are denominated.
A Fund or Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. A Fund or Portfolio will
typically use interest rate swaps to shorten the effective duration of its
portfolio. Interest rate swaps involve the exchange by a Fund or Portfolio
with another party of their respective commitments to pay or receive
interest, such as an exchange of fixed rate payments for floating rate
payments. Currency swaps involve the exchange of their respective rights to
make or receive payments in specified currencies.
Mortgage-Related Securities. A Fund or Portfolio may purchase
mortgage-backed securities--i.e., securities representing an ownership
interest in a pool of mortgage loans issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations. Mortgage loans
included in the pool--but not the security itself--may be insured by the
Government National Mortgage Association or the Federal Housing
Administration or guaranteed by the Federal National Mortgage Association,
the Federal Home Loan Mortgage Corporation or the Veterans Administration.
Mortgage-backed securities provide investors with payments consisting of both
interest and principal as the mortgages in the underlying mortgage pools are
paid off. Although providing the potential for enhanced returns,
mortgage-backed securities can also be volatile and result in unanticipated
losses.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and
mortgage foreclosures will usually result in the return of the greater part
of the principal invested far in advance of the maturity of the mortgages in
the pool. The actual rate of return of a mortgage-backed security may be
adversely affected by the prepayment of mortgages included in the mortgage
pool underlying the security.
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A Fund or Portfolio may also invest in securities representing interests in
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits ("REMICs") and in pools of certain other asset- backed bonds and
mortgage pass-through securities. Like a bond, interest and prepaid principal
are paid, in most cases, monthly. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by the U.S. Government, or U.S.
Government-related entities, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Monthly payment of principal received from the
pool of underlying mortgages, including prepayments, are allocated to
different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
REMICs include governmental and/or private entities that issue a fixed
pool of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities. REMICs issued by
private entities are not U.S. Government securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer.
The advisers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed-rate mortgages. A Fund or Portfolio may
also invest in debentures and other securities of real estate investment
trusts. As new types of mortgage-related securities are developed and offered
to investors, the Funds and Portfolios may consider making investments in
such new types of mortgage-related securities.
Asset-Backed Securities. A Fund or Portfolio may invest in asset-backed
securities, including conditional sales contracts, equipment lease
certificates and equipment trust certificates. The advisers expect that other
asset-backed securities (unrelated to mortgage loans) will be offered to
investors in the future. Several types of asset-backed securities already
exist, including, for example, "Certificates for Automobile ReceivablesSM" or
"CARSSM" ("CARS"). CARS represent undivided fractional interests in a trust
whose assets consist of a pool of motor vehicle retail installment sales
contracts and security interests in the vehicles securing the contracts.
Payments of principal and interest on CARS are passed-through monthly to
certificate holders, and are guaranteed up to certain amounts and for a
certain time period by a letter of credit issued by a financial institution
unaffiliated with the trustee or originator of the CARS trust. An investor's
return on CARS may be affected by early prepayment of principal on the
underlying vehicle sales contracts. If the letter of credit is exhausted, the
CARS trust may be prevented from realizing the full amount due on a sales
contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, the
failure of servicers to take appropriate steps to perfect the CARS trust's
rights in the underlying loans and the servicer's sale of such loans to bona
fide purchasers, giving rise to interests in such loans superior to those of
the CARS trust, or other factors. As a result, certificate holders may
experience delays in payments or losses if the letter of credit is exhausted.
A Fund or Portfolio also may invest in other types of asset-backed
securities. In the selection of other asset-backed securities, the advisers
will attempt to assess the liquidity of the security giving consideration to
the nature of the security, the frequency of trading in the security, the
number of dealers making a market in the security and the overall nature of
the marketplace for the security.
Structured Products. A Fund or Portfolio may invest in interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of certain other investments. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, or specified
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instruments (such as commercial bank loans) and the issuance by that entity
of one or more classes of securities ("structured products") backed by, or
representing interests in, the underlying instruments. The cash flow on the
underlying instruments may be apportioned among the newly issued structured
products to create securities with different investment characteristics such
as varying maturities, payment priorities and interest rate provisions, and
the extent of the payments made with respect to structured products is
dependent on the extent of the cash flow on the underlying instruments. A
Fund or Portfolio may invest in structured products which represent derived
investment positions based on relationships among different markets or asset
classes.
A Fund or Portfolio may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by
a formula to the price of an underlying instrument. Inverse floaters have
coupon rates that vary inversely at a multiple of a designated floating rate
(which typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost
of Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon
rate while any drop in the reference rate of an inverse floater causes an
increase in the coupon rate. A spread trade is an investment position
relating to a difference in the prices or interest rates of two securities
where the value of the investment position is determined by movements in the
difference between the prices or interest rates, as the case may be, of the
respective securities. When a Fund or Portfolio invests in notes linked to
the price of an underlying instrument, the price of the underlying security
is determined by a multiple (based on a formula) of the price of such
underlying security. A structured product may be considered to be leveraged
to the extent its interest rate varies by a magnitude that exceeds the
magnitude of the change in the index rate of interest. Because they are
linked to their underlying markets or securities, investments in structured
products generally are subject to greater volatility than an investment
directly in the underlying market or security. Total return on the structured
product is derived by linking return to one or more characteristics of the
underlying instrument. Because certain structured products of the type in
which a Fund or Portfolio may invest may involve no credit enhancement, the
credit risk of those structured products generally would be equivalent to
that of the underlying instruments. A Fund or Portfolio may invest in a class
of structured products that is either subordinated or unsubordinated to the
right of payment of another class. Subordinated structured products typically
have higher yields and present greater risks than unsubordinated structured
products. Although a Fund's or Portfolio's purchase of subordinated
structured products would have similar economic effect to that of borrowing
against the underlying securities, the purchase will not be deemed to be
leverage for purposes of a Fund's or Portfolio's fundamental investment
limitation related to borrowing and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, an investment in these
structured products may be limited by the restrictions contained in the 1940
Act. Structured products are typically sold in private placement
transactions, and there currently is no active trading market for structured
products. As a result, certain structured products in which a Fund or
Portfolio invests may be deemed illiquid and subject to its limitation on
illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security.
In addition, because structured products are typically sold in private
placement transactions, there currently is no active trading market for
structured products.
Additional Restrictions on the Use of Futures and Option Contracts. None
of the Funds is a "commodity pool" (i.e., a pooled investment vehicle which
trades in commodity futures contracts and options thereon and the operator of
which is registered with the CFTC and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that a Fund may enter into such transactions for purposes other than
bona fide hedging if, immediately thereafter, the sum of the amount
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of its initial margin and premiums on open contracts and options would not
exceed 5% of the liquidation value of the Fund's portfolio, provided,
further, that, in the case of an option that is in-the-money, the
in-the-money amount may be excluded in calculating the 5% limitation.
When a Fund or Portfolio purchases a futures contract, an amount of cash
or cash equivalents or high quality debt securities will be deposited in a
segregated account with such Fund's or Portfolio's custodian or sub-custodian
so that the amount so segregated, plus the initial deposit and variation
margin held in the account of its broker, will at all times equal the value
of the futures contract, thereby insuring that the use of such futures is
unleveraged.
A Fund's or Portfolio's ability to engage in the transactions described
herein may be limited by the current federal income tax requirement that a
Fund or Portfolio derive less than 30% of its gross income from the sale or
other disposition of stock or securities held for less than three months.
Investment Restrictions
The Funds and Portfolios have adopted the following investment
restrictions which may not be changed without approval by a "majority of the
outstanding shares" of a Fund or Portfolio which, as used in this Statement
of Additional Information, means the vote of the lesser of (i) 67% or more of
the shares of a Fund or total beneficial interests of a Portfolio present at
a meeting, if the holders of more than 50% of the outstanding shares of a
Fund or total beneficial interests of a Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding shares of a Fund or total
beneficial interests of a Portfolio.
Whenever the Trust is requested to vote on a fundamental policy of a
Portfolio, the Trust will hold a meeting of shareholders of the Fund that
invests in such Portfolio and will cast its votes as instructed by the
shareholders of such Fund.
With respect to the Global Fixed Income Fund and the International Equity
Fund, it is a fundamental policy of each Fund that when the Fund holds no
portfolio securities except interests in the Portfolio in which it invests,
the Fund's investment objective and policies shall be identical to the
Portfolio's investment objective and policies, except for the following: the
Fund (1) may invest more than 10% of its net assets in the securities of a
registered investment company, (2) may hold more than 10% of the voting
securities of a registered investment company, and (3) will concentrate its
investments in the investment company. It is a fundamental investment policy
of each such Fund that when the Fund holds only portfolio securities other
than interests in the Portfolio, the Fund's investment objective and policies
shall be identical to the investment objective and policies of the Portfolio
at the time the assets of the Fund were withdrawn from the Portfolio.
Each Fund and Portfolio may not:
(1) borrow money, except that each Fund and 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 total assets must
be repaid before the Fund or Portfolio may make additional investments;
(2) make loans, except that each Fund and 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;
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(3) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a result,
more than 25% of the Fund's or 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 Fund's or
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 Fund or 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
Fund or 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 Fund or 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 Fund or 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 Fund or 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 Fund or Portfolio may
borrow money as authorized by the 1940 Act. For purposes of this
restriction, collateral arrangements with respect to permissible options
and futures transactions, including deposits of initial and variation
margin, are not considered to be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as
a Fund or Portfolio may technically be deemed to be an underwriter under
the Securities Act of 1933 in selling a portfolio security.
In addition, as a matter of fundamental policy, each of the Southeast
Asian Fund, Japan Fund and European Fund may not:
(8) make or guarantee loans to any person or otherwise become
liable for or in connection with any obligation or indebtedness of any
person without the prior written consent of the Trustees, provided that
for purposes of this restriction the acquisition of bonds, debentures, or
other corporate debt securities and investments in government bonds,
short-term commercial paper, certificates of deposit and bankers'
acceptances shall not be deemed to be the making of a loan;
(9) invest in securities which are not traded or have not sought a
listing on a stock exchange, over-the-counter market or other organized
securities market that is open to the international public and on which
securities are regularly traded if, regarding all such securities, more
than 10% of its total net assets would be invested in such securities
immediately after and as a result of such transaction;
(10) deal in put options, write or purchase call options, including
warrants, unless such options or warrants are covered and are quoted on a
stock exchange or dealt in on a recognized market, and, at the date of the
relevant transaction: (i) call options written do not involve more than
25%, calculated at the exercise price, of the market value of the
securities within the Fund's portfolio excluding the value of any
outstanding call options purchased, and (ii) the cost of call options or
warrants purchased does not exceed, in terms of premium, 2% of the value
of the net assets of the Fund; or
(11) purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such issuer
to be held by the Fund.
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In addition, as a matter of fundamental policy, notwithstanding any other
investment policy or restriction, each Fund may seek to achieve its
investment objective by investing all of its investable assets in another
investment company having substantially the same investment objective and
policies as the Fund. For purposes of investment restriction (5) above, real
estate includes Real Estate Limited Partnerships. For purposes of investment
restriction (3) above, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within the
same industry, are grouped together as an "industry." Investment restriction
(3) above, however, is not applicable to investments by a Fund or Portfolio
in municipal obligations where the issuer is regarded as a state, city,
municipality or other public authority since such entities are not members of
an "industry." Supranational organizations are collectively considered to be
members of a single "industry" for purposes of restriction (3) above.
In addition, each Fund and Portfolio is subject to the following
nonfundamental restrictions which may be changed without shareholder
approval:
(1) Each of the Global Fixed Income Fund and International Equity
Fund and each Portfolio may not, with respect to 50% of its assets, hold
more than 10% of the outstanding voting securities of an issuer.
(2) Each Fund and 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 Fund or Portfolio.
(3) Each Fund and Portfolio may not purchase or sell interests in
oil, gas or mineral leases.
(4) Each Fund and Portfolio may not invest more than 15% of its net
assets in illiquid securities.
(5) Each Fund and 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 Fund's or Portfolio's permissible futures and options
transactions, the writing, purchasing, ownership, holding or selling of
futures and options positions or of puts, calls or combinations thereof
with respect to futures.
(6) Each Fund and 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.
In addition, each of the Southeast Asian Fund, Japan Fund and European
Fund is subject to the following nonfundamental restrictions which may be
changed without shareholder approval:
(7) The value of a Fund's investments in holdings of options and
warrants (other than those held for hedging purposes) may not exceed 15%
of the total net asset value of the Fund.
(8) Each Fund may not make any investment in assets that involve
assumption of any liability that is unlimited, or acquire any investments
that are for the time being nil paid or partly paid, unless according to
the terms of the issue thereof any call to be made thereon could be met in
full out of cash by the Fund's portfolio.
(9) Each Fund may not sell, purchase or loan securities (excluding
shares in the Fund) or grant or receive a loan or loans to or from the
adviser, corporate and domicillary agent, or paying agent, the
distributors and the authorized agents or any of their directors, officers
or employees or any of their major shareholders (meaning a shareholder who
holds, in his own or other name (as well as a
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nominee's name), more than 10% of the total issued and outstanding shares
of stock of such company) acting as principal, or for their own account,
unless the transaction is made within the other restrictions set forth
above and either (i) at a price determined by current publicly available
quotations, or (ii) at competitive prices or interest rates prevailing
from time to time on internationally recognized securities markets or
internationally recognized money markets.
It is the Trust's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Trust has been
advised that the staff of the Securities and Exchange Commission's Division
of Investment Management does not consider these to be United States
Government securities, as defined under the Investment Company Act of 1940,
as amended.
For purposes of the Funds' and 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.
With respect to each of the Funds, as a matter of nonfundamental policy,
to the extent permitted under applicable law, the above restrictions do not
apply to the following investments ("OECD investments"): (i) any security
issued by or the payment of principal and interest on which is guaranteed by
the government of any member state of the Organization for Economic
Cooperation and Development ("OECD country"); (ii) any fixed income security
issued in any OECD country by any public or local authority or nationalized
industry or undertaking of any OECD country or anywhere in the world by the
International Bank for Reconstruction and Development, European Investment
Bank, Asian Development Bank or any body which is, in the Trustees' opinion,
of similar standing. However, no investment may be made in any OECD
investment of any one issue if that would result in the value of a Fund's
holding of that issue exceeding 30% of the net asset value of the Fund and,
if the Fund's portfolio consists only of OECD investments, those OECD
investments shall be of at least six different issues.
In order to permit the sale of its shares in certain states, a Fund or
Portfolio may make commitments more restrictive than the investment policies
and limitations described above and in its Prospectus. Should a Fund or
Portfolio determine that any such commitment is no longer in its best
interests, it will revoke the commitment by terminating sales of its shares
in the state involved. In order to comply with certain federal and state
statutes and regulatory policies, as a matter of operating policy, each Fund
and Portfolio will not: (i) invest more than 5% of its assets in companies
which, including predecessors, have a record of less than three years'
continuous operation, (ii) invest in warrants, valued at the lower of cost or
market, in excess of 5% of the value of its net assets, and no more than 2%
of such value may be warrants which are not listed on the New York or
American Stock Exchanges, or (iii) purchase or retain in its portfolio any
securities issued by an issuer any of whose officers, directors, trustees or
security holders is an officer or Trustee of the Trust or Portfolio, or is an
officer or director of the adviser, if after the purchase of the securities
of such issuer by the Fund or Portfolio one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, all
taken at market value, of such issuer, and such persons owning more than 1/2
of 1% of such shares or securities together own beneficially more than 5% of
such shares or securities, or both, all taken at market value.
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time a transaction is
effected, later changes in percentage resulting from any cause other than
actions by a Fund or Portfolio will not be considered a violation. If the
value of a Fund's or 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.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for a Fund or Portfolio
are made by a portfolio manager who is an employee of the adviser or
sub-adviser to such Fund or Portfolio and who is appointed and super-
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vised by senior officers of such adviser or sub-adviser. Changes in a Fund's
or Portfolio's investments are reviewed by the Board of Trustees of the Trust
or Portfolios. The portfolio managers may serve other clients of the advisers
in a similar capacity.
The frequency of a Fund's or Portfolio's portfolio transactions--the
portfolio turnover rate--will vary from year to year depending upon market
conditions. Because a high turnover rate may increase a Fund's or Portfolio's
transaction costs and the possibility of taxable short-term gains, the
advisers will weigh the added costs of short-term investment against
anticipated gains. Each Fund or Portfolio will engage in portfolio trading if
its advisers believe a transaction, net of costs (including custodian
charges), will help it achieve its investment objective.
The portfolio turnover rates for the Global Fixed Income Portfolio and the
International Equity Portfolio for the period December 31, 1992 (commencement
of operations) to October 31, 1993 were 456% and 39%, respectively. For the
fiscal year ended October 31, 1994, their portfolio turnover rates were 345%
and 84%, respectively. For the fiscal year ended October 31, 1995, their
portfolio turnover rates were 624% and 137%, respectively. The International
Equity Fund and the Global Fixed Income Fund invest all of their investable
assets in their respective Portfolios and do not invest directly in a
portfolio of assets, and therefore do not have reportable turnover rates.
For the fiscal period ending October 31, 1996 the annual portfolio
turnover rates for the Southeast Asian Fund, Japan Fund and European Fund are
expected not to exceed 100%.
Under the advisory agreement and the sub-advisory agreements, the adviser
and sub-advisers shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs
or proceeds being the most favorable to the Funds and Portfolios. In
assessing the best overall terms available for any transaction, the adviser
and sub-advisers consider all factors they deem relevant, including the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer,
research services provided to the adviser or sub-advisers, and the
reasonableness of the commissions, if any, both for the specific transaction
and on a continuing basis. The adviser and sub-advisers are not required to
obtain the lowest commission or the best net price for any Fund or Portfolio
on any particular transaction, and are not required to execute any order in a
fashion either preferential to any Fund or Portfolio relative to other
accounts they manage or otherwise materially adverse to such other accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case
of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown),
the adviser or sub-adviser to a Fund or Portfolio normally seeks to deal
directly with the primary market makers unless, in its opinion, best
execution is available elsewhere. In the case of securities purchased from
underwriters, the cost of such securities generally includes a fixed
underwriting commission or concession. From time to time, soliciting dealer
fees are available to the adviser or sub-adviser on the tender of a Fund's or
Portfolio's portfolio securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Funds and Portfolios
by the adviser and sub-advisers. At present, no other recapture arrangements
are in effect.
Under the advisory and sub-advisory agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the adviser or sub-advisers may
cause the Funds and Portfolios to pay a broker-dealer which provides
brokerage and research services to the adviser or sub-advisers, the Funds or
Portfolios and/or other accounts for which they exercise investment
discretion an amount of commission for effecting a securities transaction for
a Fund or Portfolio in excess of the amount other broker-dealers would have
charged for the transaction if they determine in good faith that the greater
commission is reasonable in rela-
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tion to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
their overall responsibilities to accounts over which they exercise
investment discretion. Not all of such services are useful or of value in
advising the Funds and Portfolios. The adviser and sub-advisers report to the
Board of Trustees regarding overall commissions paid by the Funds and
Portfolios and their reasonableness in relation to the benefits to the Funds
and Portfolios. The term "brokerage and research services" includes advice as
to the value of securities, the advisability of investing in, purchasing or
selling securities, and the availability of securities or of purchasers or
sellers of securities, furnishing analyses and reports concerning issues,
industries, securities, economic factors and trends, portfolio strategy and
the performance of accounts, and effecting securities transactions and
performing functions incidental thereto such as clearance and settlement.
The management fees that the Funds and Portfolios pay to the adviser will
not be reduced as a consequence of the adviser's or sub-advisers' receipt of
brokerage and research services. To the extent the Funds' or Portfolios'
portfolio transactions are used to obtain such services, the brokerage
commissions paid by the Funds or Portfolios will exceed those that might
otherwise be paid by an amount which cannot be presently determined. Such
services generally would be useful and of value to the adviser or
sub-advisers in serving one or more of their other clients and, conversely,
such services obtained by the placement of brokerage business of other
clients generally would be useful to the adviser and sub-advisers in carrying
out their obligations to the Funds and Portfolios. While such services are
not expected to reduce the expenses of the adviser or sub-advisers, they
would, through use of the services, avoid the additional expenses which would
be incurred if they should attempt to develop comparable information through
their own staffs.
In certain instances, there may be securities that are suitable for one or
more of the Funds and Portfolios as well as one or more of the adviser's or
sub-adviser's, other clients. Investment decisions for the Funds and
Portfolios and for other clients are made with a view to achieving their
respective investment objectives. It may develop that the same investment
decision is made for more than one client or that a particular security is
bought or sold for only one client even though it might be held by, or bought
or sold for, other clients. Likewise, a particular security may be bought for
one or more clients when one or more clients are selling that same security.
Some simultaneous transactions are inevitable when several clients receive
investment advice from the same investment adviser, particularly when the
same security is suitable for the investment objectives of more than one
client. When two or more Funds or Portfolios or other clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable
to each. It is recognized that in some cases this system could have a
detrimental effect on the price or volume of the security as far as the Funds
or Portfolios are concerned. However, it is believed that the ability of the
Funds and Portfolios to participate in volume transactions will generally
produce better executions for the Funds and Portfolios.
The Vista International Equity Portfolio paid brokerage commissions as
detailed below:
12/31/91 Year Year
through Ended Ended
10/31/93 10/31/94 10/31/95
---------- ---------- ---------
Vista International
Equity Portfolio $100,779.76 $285,576.81 $383,649
No portfolio transactions are executed with the advisers or a Shareholder
Servicing Agent, or with any affiliate of the advisers or a Shareholder
Servicing Agent, acting either as principal or as broker.
PERFORMANCE INFORMATION
From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based
on past investment results, it should not be considered as an indication or
rep-
21
<PAGE>
resentation of the performance of any classes of a Fund in the future. From
time to time, the performance and yield of classes of a Fund may be quoted
and compared to those of other mutual funds with similar investment
objectives, unmanaged investment accounts, including savings accounts, or
other similar products and to stock or other relevant indices or to rankings
prepared by independent services or other financial or industry publications
that monitor the performance of mutual funds. For example, the performance of
a Fund 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 Fund or its
classes. A Fund's performance may be compared with indices such as the Lehman
Brothers Government/Corporate Bond Index, the Lehman Brothers Government Bond
Index, the Lehman Government Bond 1-3 Year Index and the Lehman Aggregate
Bond Index; the S&P 500 Index, the Dow Jones Industrial Average or any other
commonly quoted index of common stock prices; and the Russell 2000 Index and
the NASDAQ Composite Index. Additionally, a Fund may, with proper
authorization, reprint articles written about such Fund and provide them to
prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in
a Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return figures will assume
payment of the maximum initial sales load at the time of purchase. For Class
B shares, the average annual total rate of return figures will assume
deduction of the applicable contingent deferred sales charge imposed on a
total redemption of shares held for the period. One-, five-, and ten-year
periods will be shown, unless the class has been in existence for a
shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values of the classes
of shares of a Fund will vary based on market conditions, the current market
value of the securities held by a Fund and changes in the Fund's expenses.
The advisers, Shareholder Servicing Agents, the Administrator, the
Distributor and other service providers may voluntarily waive a portion of
their fees on a month-to-month basis. In addition, the Distributor may assume
a portion of a Fund's operating expenses on a month-to-month basis. These
actions would have the effect of increasing the net income (and therefore the
yield and total rate of return) of the classes of shares of a Fund during the
period such waivers are in effect. These factors and possible differences in
the methods used to calculate the yields and total rates of return should be
considered when comparing the yields or total rates of return of the classes
of shares of a Fund to yields and total rates of return published for other
investment companies and other investment vehicles (including different
classes of shares). The Trust 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, 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.
Advertising or communications to shareholders may contain the views of the
advisers as to current market, economic, trade and interest rate trends, as
well as legislative, regulatory and monetary developments, and may include
investment strategies and related matters believed to be of relevance to a
Fund.
Advertisements for the Vista funds may include references to the asset
size of other financial products made available by Chase, such as the
offshore assets of other funds.
Total Rate of Return
A Fund's or class' total rate of return for any period will be calculated
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day
22
<PAGE>
of the period of shares purchasable with dividends and capital gains declared
during such period with respect to a share held at the beginning of such
period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price per share on the first
day of such period, and (b) subtracting 1 from the result. Any annualized
total rate of return quotation will be calculated by (x) adding 1 to the
period total rate of return quotation as calculated above, (y) raising such
sum to a power which is equal to 365 divided by the number of days in such
period, and (z) subtracting 1 from the result.
The average annual total rates of return for the following Funds,
reflecting the initial investment and reinvested dividends (but excluding the
effects of any applicable sales charges), for the one year period ended
October 31, 1995 and for the period from commencement of business operations
of each such Fund to October 31, 1995, were as follows:
One Since
Year Inception
------------ ---------------
Vista Global Fixed Income Fund
A Shares 9.54% 6.70% (11/4/93)
B Shares 8.82% 4.05% (11/4/94)
Vista International Equity Fund
A Shares (1.19%) 8.60% (11/4/93)
B Shares 1.69% (11/4/94)
(1.61%)
With the current maximum respective sales charges of 4.50% and 4.75% for
Class A shares, and the currently applicable CDSC for Class B shares for each
period length, reflected, the total rates of return would be as follows:
Since
One Inception
Year (11/4/93)
------------ ---------------
Vista Global Fixed Income Fund
A Shares 4.61% 4.98% (11/4/93)
B Shares 3.82% 2.11% (11/4/94)
Vista International Equity Fund
A Shares (5.88%) 6.75% (11/4/93)
B Shares (6.53%) (0.30%) (11/4/94)
The Funds may also from time to time include in advertisements or other
communications a total return figure that is not calculated according to the
formula set forth above in order to compare more accurately the performance
of a Fund with other measures of investment return.
Yield Quotations
Any current "yield" quotation for a class of shares shall consist of an
annualized historical yield, carried at least to the nearest hundredth of one
percent, based on a thirty calendar day period and shall be calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by
dividing the Fund's net investment income earned during the period by the
product of the average daily number of shares outstanding during the period
that were entitled to receive dividends and the maximum offering price per
share on the last day of the period, (b) subtracting 1 from the result, and
(c) multiplying the result by 2.
The yields of the Class A shares of the Global Fixed Income Fund and the
International Equity Fund for the thirty-day period ended October 31, 1995
were 3.32% and (0.299%), respectively. The yields of the Class B shares of
those Funds were 2.81% and (0.822%), respectively.
Non-Standardized Performance Results
The table below reflects the net change in the value of an assumed initial
investment of $10,000 in the following Funds (excluding the effects of any
applicable sales charges) for the period from the commence-
23
<PAGE>
ment date of business for each Fund, with values reflecting an assumption
that capital gain distributions and income dividends, if any, have been
invested in additional shares of the same class. From time to time, the Funds
may provide these performance results in addition to the total rate of return
quotations required by the Securities and Exchange Commission. As discussed
more fully in the Prospectuses, neither these performance results, nor total
rate of return quotations, should be considered as representative of the
performance of the Funds in the future. These factors and the possible
differences in the methods used to calculate performance results and total
rates of return should be considered when comparing such performance results
and total rate of return quotations of the Funds with those published for
other investment companies and other investment vehicles.
A Shares
Value of Value of
Dec. 31, 1992 Initial Capital Value
through $10,000 Gains Reinvested Total
October 31, 1995 Investment Distributions Dividends Value
- --------------------- ----------- ------------ -------- -----------
Vista Global Fixed
Income Fund $10,650.00 -0- $1,168.13 $11,818.13
Vista International
Equity Fund $12,020.00 $198.40 -0- $12,218.40
With the current maximum respective sales charge of 4.50% and 4.75% for
Class A shares reflected, the figures for the same period would be as
follows:
Value of Value of
Dec. 31, 1992 Initial Capital Value
through $10,000 Gains Reinvested Total
October 31, 1995 Investment Distributions Dividends Value
- --------------------- ----------- ------------ -------- -----------
Vista Global Fixed
Income Fund $10,117.75 -0- $1,115.56 $11,286.31
Vista International
Equity Fund 11,449.05 $118.98 -0- 11,638.03
B Shares
Value of Value of
Dec. 31, 1992 Initial Capital Value
through $10,000 Gains Reinvested Total
October 31, 1995 Investment Distributions Dividends Value
- --------------------- ----------- ------------ -------- -----------
Vista Global Fixed
Income Fund $ 9,743.13 -0- $684.05 $10,427.18
Vista International
Equity Fund 10,171.09 $168.71 -0- 10,339.80
With the currently applicable CDSC for Class B shares for the period
length reflected, the figures for the same period would be as follows:
Value of Value of
Nov. 4, 1993 Initial Capital Value
through $10,000 Gains Reinvested Total
October 31, 1995 Investment Distributions Dividends Value
- --------------------- ----------- ------------ -------- -----------
Vista Global
Fixed Income Fund $9,743.13 $ 0.00 $ 684.05 $10,427.18
Vista International
Equity Fund 9,771.09 168.71 9,939.80 -0-
24
<PAGE>
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or on the NASDAQ National Market System, or
at the last quoted bid price for securities in which there were no sales
during the day or for other unlisted (over-the-counter) securities. Bonds and
other fixed income securities (other than short-term obligations, but
including listed issues) are valued on the basis of valuations furnished by a
pricing service, the use of which has been approved by the Board of Trustees.
In making such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques that take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees. Futures and option contracts that are traded on commodities or
securities exchanges are normally valued at the settlement price on the
exchange on which they are traded. Portfolio securities (other than short-
term obligations) for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction of
the Board of Trustees.
Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between coupon acquisition price and stated redemption price at maturity) and
premiums (generally, the excess of purchase price over stated redemption
price at maturity). Interest income on short-term obligations is determined
on the basis of interest and discount accrued less amortization of premium.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses are not
available until a completed and signed account application has been received
by the Transfer Agent. 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.
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, a Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service
options chosen by the shareholder or joint shareholders in his or their
latest account application or other written request for services, including
purchasing, exchanging, or redeeming shares of such Fund and depositing and
withdrawing monies from the bank account specified in the Bank Account
Registration section of the shareholder's latest account application or as
otherwise properly specified to such Fund in writing.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of readily marketable portfolio
securities (instead of cash). The securities so distributed would be valued
at the same amount as that assigned to them in calculating the net asset
value for the shares being sold. If a shareholder received a distribution in
kind, the shareholder could incur brokerage or other charges in converting
the securities to cash. The Trust has filed an election under Rule 18f-1
committing to pay in cash all redemptions by a shareholder of record up to
amounts specified by the rule (approximately $250,000).
25
<PAGE>
With respect to the Vista Global Fixed Income Fund and Vista International
Equity Fund, the Trust will redeem Fund shares in kind only if it has received a
redemption in kind from the corresponding Portfolio and therefore shareholders
of the Fund that receive redemptions in kind will receive portfolio securities
of such Portfolio and in no case will they receive a security issued by the
Portfolio. Each Portfolio has advised the Trust that the Portfolio will not
redeem in kind except in circumstances in which the corresponding Fund is
permitted to redeem in kind or unless requested by the corresponding Fund.
Each investor in a Portfolio, including the corresponding Fund, may add to
or reduce its investment in the Portfolio on each day that the New York Stock
Exchange is open for business. Once on each such day, based upon prices
determined as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time, however, options are priced at 4:15 p.m.
Eastern time) the value of each investor's interest in a Portfolio will be
determined by multiplying the net asset value of the Portfolio by the
percentage representing that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or reductions which are to be
effected on that day will then be effected. The investor's percentage of the
aggregate beneficial interests in a Portfolio will then be recomputed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of such time on such day plus
or minus, as the case may be, the amount of net additions to or reductions in
the investor's investment in the Portfolio effected on such day and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
such time on such day plus or minus, as the case may be, the amount of net
additions to or reductions in the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage so determined will then be
applied to determine the value of the investor's interest in the Portfolio as
of such time on the following day the New York Stock Exchange is open for
trading.
Investors in Class A shares may qualify for reduced initial sales charges
by signing a statement of intention (the "Statement"). This enables the
investor to aggregate purchases of Class A shares in the Fund with purchases
of Class A shares of any other Fund in the Trust (or if a Fund has only one
class, shares of such Fund), excluding shares of any Vista money market fund,
during a 13-month period. The sales charge is based on the total amount to be
invested in Class A shares during the 13-month period. All Class A or other
qualifying shares of these Funds currently owned by the investor will be
credited as purchases (at their current offering prices on the date the
Statement is signed) toward completion of the Statement. A 90-day back-dating
period can be used to include earlier purchases at the investor's cost. The
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicated in the Statement. A shareholder must notify the Transfer
Agent or Distributor whenever a purchase is being made pursuant to a
Statement.
Under the Exchange Privilege, shares may be exchanged for shares of
another fund only if shares of the fund exchanged into are registered in the
state where the exchange is to be made. Shares of a Fund may only be
exchanged into another fund if the account registrations are identical. With
respect to exchanges from any Vista money market fund, shareholders must have
acquired their shares in such money market fund by exchange from one of the
Vista non-money market funds or the exchange will be done at relative net
asset value plus the appropriate sales charge. Any such exchange may create a
gain or loss to be recognized for federal income tax purposes. Normally,
shares of the fund to be acquired are purchased on the redemption date, but
such purchase may be delayed by either fund for up to five business days if a
fund determines that it would be disadvantaged by an immediate transfer of
the proceeds.
The contingent deferred sales charge for Class B shares will be waived for
certain exchanges and for redemptions in connection with a Fund's systematic
withdrawal plan, subject to the conditions described in the Prospectuses. In
addition, subject to confirmation of a shareholder's status, the contingent
deferred sales charge will be waived for: (i) a total or partial redemption
made within one year of the shareholder's death or initial qualification for
Social Security disability payments; (ii) a redemption in connection with a
Minimum Required Distribution form an IRA, Keogh or custodial account under
section 403(b) of the Internal Revenue Code or a mandatory distribution from
a qualified plan; (iii) redemptions made from an IRA, Keogh or custodial
account under section 403(b) of the Internal Revenue Code through an
established Systematic
26
<PAGE>
Redemption Plan; (iv) a redemption resulting from an over-contribution to an
IRA; and (v) an involuntary redemption of an account balance under $500.
Class B shares automatically convert to Class A shares (and thus are then
subject to the lower expenses borne by Class A shares) after a period of time
specified below has elapsed since the date of purchase (the "CDSC Period"),
together with the pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares
attributable to the Class B shares then converting. The conversion of Class B
shares purchased on or after May 1, 1996, will be effected at the relative
net asset values per share of the two classes on the first business day of
the month following the eighth anniversary of the original purchase. The
conversion of Class B shares purchased prior to May 1, 1996, will be effected
at the relative net asset values per share of the two classes on the first
business day of the month following the seventh anniversary of the original
purchase. If any exchanges of Class B shares during the CDSC Period occurred,
the holding period for the shares exchanged will be counted toward the CDSC
Period. At the time of the conversion the net asset value per share of the
Class A shares may be higher or lower than the net asset value per share of
the Class B shares; as a result, depending on the relative net asset values
per share, a shareholder may receive fewer or more Class A shares than the
number of Class B shares converted.
A Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written requests for
additional account services made after a shareholder has submitted an initial
account application to the Fund, and in certain of the circumstances
described in the Prospectuses. A Fund may also refuse to accept or carry out
any transaction that does not satisfy any restrictions then in effect. A
signature guarantee may be obtained from a bank, trust company, broker-dealer
or other member of a national securities exchange. Please note that a notary
public cannot provide a signature guarantee.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described
in the respective Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussion here and in the Prospectus is not intended as a substitute for
careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company, a Fund is not subject to federal income
tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital
gain net income (i.e., the excess of capital gains over capital losses) that
it distributes to shareholders, provided that it distributes at least 90% of
its "investment company taxable income" (i.e., net investment income and the
excess of net short-term capital gain over net long-term capital loss) for
the taxable year (the "Distribution Requirement"), and satisfies certain
other requirements of the Code that are described below. Distributions by a
Fund made during the taxable year or, under specified circumstances, within
twelve months after the close of the taxable year, will be considered
distributions of income and gains of the taxable year and can therefore
satisfy the Distribution Requirement. Because a Fund invests all of its
assets in the Portfolio which will be classified as a partnership for federal
income tax purposes, the Fund will be deemed to own a proportionate share of
the income of the Portfolio for purposes of determining whether the Fund
satisfies the Distribution Requirement and the other requirements necessary
to qualify as a regulated investment company (e.g., Income Requirement
(hereinafter defined), etc.).
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign
currencies (to the extent such currency
27
<PAGE>
gains are directly related to the regulated investment company's principal
business of investing in stock or securities) and other income (including but
not limited to gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies
(the "Income Requirement"); and (2) derive less than 30% of its gross income
(exclusive of certain gains on designated hedging transactions that are
offset by realized or unrealized losses on offsetting positions) from the
sale or other disposition of stock, securities or foreign currencies (or
options, futures or forward contracts thereon) held for less than three
months (the "Short-Short Gain Test"). However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to
the regulated investment company's investments in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, a Fund may
have to limit the sale of appreciated securities that it has held for less
than three months. However, the Short-Short Gain Test will not prevent a Fund
from disposing of investments at a loss, since the recognition of a loss
before the expiration of the three-month holding period is disregarded for
this purpose. Interest (including original issue discount) received by a Fund
at maturity or upon the disposition of a security held for less than three
months will not be treated as gross income derived from the sale or other
disposition of such security within the meaning of the Short-Short Gains
Test. However, income that is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of
securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an
option with respect thereto (but only to the extent attributable to changes
in foreign currency exchange rates), and gain or loss recognized on the
disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code Section
1256, will generally be treated as ordinary income or loss.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property
by a Fund and a contemporaneous contract to sell substantially identical
property in the future; (2) the transaction is a straddle within the meaning
of Section 1092 of the Code; (3) the transaction is one that was marketed or
sold to the Fund on the basis that it would have the economic characteristics
of a loan but the interest-like return would be taxed as capital gain; or (4)
the transaction is described as a conversion transaction in the Treasury
Regulations. The amount of the gain recharacterized generally will not exceed
the amount of the interest that would have accrued on the net investment for
the relevant period at a yield equal to 120% of the federal long-term,
mid-term, or short-term rate, depending upon the type of instrument at issue,
reduced by an amount equal to: (1) prior inclusions of ordinary income items
from the conversion transaction; and (2) the capitalized interest on
acquisition indebtedness under Code Section 263 (g). Built-in losses will be
preserved where a Fund has a built-in loss with respect to property that
becomes a part of a conversion transaction. No authority exists that
indicates that the converted character of the income will not be passed to a
Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset
is used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset
so used, (2) the asset is otherwise held by a Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the
Fund grants a qualified covered call option (which, among other things, must
not be deep-in-the-money) with respect thereto) or (3) the asset is stock and
the Fund grants an in-the-money qualified covered call option with respect
thereto. However, for purposes of the Short-
28
<PAGE>
Short Gain Test, the holding period of the asset disposed of may be reduced
only in the case of clause (1) above. In addition, a Fund may be required to
defer the recognition of a loss on the disposition of an asset held as part
of a straddle to the extent of any unrecognized gain on the offsetting
position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option
written by the Fund will commence on the date it is written and end on the
date it lapses or the date a closing transaction is entered into.
Accordingly, a Fund may be limited in its ability to write options which
expire within three months and to enter into closing transactions at a gain
within three months of the writing of options.
Transactions that may be engaged in by a Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes
and futures contracts) will be subject to special tax treatment as "Section
1256 contracts." Section 1256 contracts are treated as if they are sold for
their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of to such date. Any gain or loss recognized as a consequence
of the year-end deemed disposition of Section 1256 contracts is taken into
account for the taxable year together with any other gain or loss that was
previously recognized upon the termination of Section 1256 contracts during
that taxable year. Any capital gain or loss for the entire taxable year with
respect to Section 1256 contracts (including any capital gain or loss arising
as a consequence of the year-end deemed sale of such contracts) is generally
treated as 60% long-term capital gain or loss and 40% short-term capital gain
or loss. A Fund, however, may elect not to have this special tax treatment
apply to Section 1256 contracts that are part of a "mixed straddle" with
other investments of the Fund that are not Section 1256 contracts. The
Internal Revenue Service (the "IRS") has held in several private rulings that
gains arising from Section 1256 contracts will be treated for purposes of the
Short-Short Gain Test as being derived from securities held for not less than
three months if the gains arise as a result of a constructive sale under Code
Section 1256.
A Fund may enter into notional principal contracts, including interest
rate swaps, caps, floors and collars. Under Treasury Regulations, in general,
the net income or deduction from a notional principal contract for a taxable
year is included in or deducted from gross income for that taxable year. The
net income or deduction from a notional principal contract for a taxable year
equals the total of all of the periodic payments (generally, payments that
are payable or receivable at fixed periodic intervals of one year or less
during the entire term of the contract) that are recognized from that
contract for the taxable year and all of the non-periodic payments (including
premiums for caps, floors and collars) that are recognized from that contract
for the taxable year. No portion of a payment by a party to a notional
principal contract is recognized prior to the first year to which any portion
of a payment by the counterparty relates. A periodic payment is recognized
ratably over the period to which it relates. In general, a non-periodic
payment must be recognized over the term of the notional principal contract
in a manner that reflects the economic substance of the contract. A
non-periodic payment that relates to an interest rate swap, cap, floor or
collar shall be recognized over the term of the contract by allocating it in
accordance with the values of a series of cash-settled forward or option
contracts that reflect the specified index and notional principal amount upon
which the notional principal contract is based under an alternative method
contained in the proposed regulations.
A Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If a Fund invests in a PFIC, it may elect to
treat the PFIC as a qualifying electing fund (a "QEF") in which event the
Fund will each year have ordinary income equal to its pro rata share of the
PFIC's ordinary earnings for the year and long-term capital gain equal to its
pro rata share of the PFIC's net capital gain for the year, regardless of
whether the Fund receives distributions of any such ordinary earnings or net
capital gain from the PFIC. If a Fund does not (because it is unable to,
chooses not to or otherwise) elect to treat the PFIC as a QEF, then in
general (1)
29
<PAGE>
any gain recognized by the Fund upon sale or other disposition of its
interest in the PFIC or any excess distribution received by the Fund from the
PFIC will be allocated ratably over the Fund's holding period of its interest
in the PFIC, (2) the portion of such gain or excess distribution so allocated
to the year in which the gain is recognized or the excess distribution is
received shall be included in the Fund's gross income for such year as
ordinary income (and the distribution of such portion by the Fund to
shareholders will be taxable as an ordinary income dividend, but such portion
will not be subject to tax at the Fund level), (3) a Fund shall be liable for
tax on the portions of such gain or excess distribution so allocated to prior
years in an amount equal to, for each such prior year, (i) the amount of gain
or excess distribution allocated to such prior year multiplied by the highest
tax rate (individual or corporate) in effect for such prior year plus (ii)
interest on the amount determined under clause (i) for the period from the
due date for filing a return for such prior year until the date for filing a
return for the year in which the gain is recognized or the excess
distribution is received at the rates and methods applicable to underpayments
of tax for such period, and (4) the distribution by a Fund to shareholders of
the portions of such gain or excess distribution so allocated to prior years
(net of the tax payable by the Fund thereon) will again be taxable to the
shareholders as an ordinary income dividend.
Under proposed Treasury Regulations issued in 1992 (but not yet
effective), a Fund could elect to recognize as gain the excess as of the last
day of its taxable year, of the fair market value of each share of PFIC stock
over the Fund's adjusted tax basis in that share ("mark-to-market gain").
Such mark-to-market gain will be included by the Fund as ordinary income,
such gain will not be subject to the Short-Short Gain Test, and the Fund's
holding period with respect to such PFIC stock commences on the first day of
the next taxable year. If the Fund makes such election in the first taxable
year it holds PFIC stock, the Fund will include ordinary income from any
mark-to-market gain, if any, and will not incur the tax described in the
previous paragraph.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess
of net long-term capital gain over net short-term capital loss) for any
taxable year, to elect (unless it has made a taxable year election for excise
tax purposes as discussed below) to treat all or any part of any net capital
loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which
the Fund has not invested more than 5% of the value of the Fund's total
assets in securities of such issuer and as to which the Fund does not hold
more than 10% of the outstanding voting securities of such issuer), and no
more than 25% of the value of its total assets may be invested in the
securities of any one issuer (other than U.S. Government securities and
securities of other regulated investment companies), or in two or more
issuers which the Fund controls and which are engaged in the same or similar
trades or businesses. Generally, an option (call or put) with respect to a
security is treated as issued by the issuer of the security, not the issuer
of the option. However, with regard to forward currency contracts, there does
not appear to be any formal or informal authority which identifies the issuer
of such instrument. For purposes of asset diversification testing,
obligations issued by or guaranteed by agencies and instrumentalities of the
U.S. Government such as the Federal Agricultural Mortgage Corporation, the
Farm Credit System Financial Assistance Corporation, a Federal Home Loan
Bank, the Federal Home Loan Mortgage Corporation, the Federal National
Mortgage Association, the Government National Mortgage Corporation, and the
Student Loan Marketing Association are treated as U.S. Government Securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
30
<PAGE>
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98%
of ordinary taxable income for the calendar year and 98% of capital gain net
income for the one-year period ended on October 31 of such calendar year (or,
at the election of a regulated investment company having a taxable year
ending November 30 or December 31, for its taxable year (a "taxable year
election")). The balance of such income must be distributed during the next
calendar year. For the foregoing purposes, a regulated investment company is
treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall (1)
reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar
year (and, instead, include such gains and losses in determining ordinary
taxable income for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end
of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required
to liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be
taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes, but they will not qualify for the 70%
dividends-received deduction for corporate shareholders of the Funds.
Dividends paid on Class A and Class B shares are calculated at the same
time. In general, dividends on Class B shares are expected to be lower than
those on Class A shares due to the higher distribution expenses borne by the
Class B shares. Dividends may also differ between classes as a result of
differences in other class specific expenses.
A Fund may either retain or distribute to shareholders its net realized
capital gain for each taxable year. The Funds currently intend to distribute
any such amounts. If net realized capital gain is distributed and designated
as a capital gain dividend, it will be taxable to shareholders as long-term
capital gain, regardless of the length of time the shareholder has held his
shares or whether such gain was recognized by the Fund prior to the date on
which the shareholder acquired his shares.
Conversely, if a Fund elects to retain its net realized capital gain, the
Fund will be taxed thereon (except to the extent of any available capital
loss carryovers) at the 35% corporate tax rate. If a Fund elects to retain
its net realized capital gain, it is expected that the Fund also will elect
to have shareholders of record on the last day of its taxable year treated as
if each received a distribution of his pro rata share of such gain, with the
result that each shareholder will be required to report his pro rata share of
such gain on his tax return as long-term capital gain, will receive a
refundable tax credit for his pro rata share of tax paid by the Fund on the
gain, and will increase the tax basis for his shares by an amount equal to
the deemed distribution less the tax credit.
Investment income that may be received by a Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Funds to a reduced rate of, or exemption from, taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of a Fund's assets to be
31
<PAGE>
invested in various countries is not known. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of the
stock or securities of foreign corporations, the Fund may elect to "pass
through" to the Fund's shareholders the amount of foreign taxes paid by such
Fund. If a Fund so elects, each shareholder would be required to include in
gross income, even though not actually received, his pro rata share of the
foreign taxes paid by the Fund, but would be treated as having paid his pro
rata share of such foreign taxes and would therefore be allowed to either
deduct such amount in computing taxable income or use such amount (subject to
various Code limitations) as a foreign tax credit against federal income tax
(but not both). For purposes of the foreign tax credit limitation rules of
the Code, each shareholder would treat as foreign source income his pro rata
share of such foreign taxes plus the portion of dividends received from a
Fund representing income derived from foreign sources. No deduction for
foreign taxes could be claimed by an individual shareholder who does not
itemize deductions. Each shareholder should consult his own tax advisor
regarding the potential application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the
extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date. In addition, if the net
asset value at the time a shareholder purchases shares of a Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions
of such amounts will be taxable to the shareholder in the manner described
above, although such distributions economically constitute a return of
capital to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31
of such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the
year.
Each Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it
is a corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of such Fund within 30 days before or
after the sale or redemption. In general, any gain or loss arising from (or
treated as arising from) the sale or redemption of shares of a Fund will be
considered capital gain or loss and will be long-term capital gain or loss if
the shares were held for longer than one year. However, any capital loss
arising from the sale or redemption of shares held for six months or less
will be treated as a long-term capital loss to the extent of the amount of
capital gain dividends received on such shares. For this purpose, the special
holding period rules of Code Section 246(c)(3) and (4) generally will apply
in deter-
32
<PAGE>
mining the holding period of shares. Long-term capital gains of noncorporate
taxpayers are currently taxed at a maximum rate 11.6% lower than the maximum
rate applicable to ordinary income. Capital losses in any year are deductible
only to the extent of capital gains plus, in the case of a noncorporate
taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of a Fund,
(2) disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales
load on the shares disposed of (to the extent of the reduction in the sales
load on the shares subsequently acquired) shall not be taken into account in
determining gain or loss on the shares disposed of but shall be treated as
incurred on the acquisition of the shares subsequently acquired.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the
Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding
tax at the rate of 30% (or lower treaty rate) on the gross income resulting
from a Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or
a credit against this U.S. withholding tax for the foreign shareholder's pro
rata share of such foreign taxes which it is treated as having paid. Such a
foreign shareholder would generally be exempt from U.S. federal income tax on
gains realized on the sale of shares of the Fund, capital gain dividends and
amounts retained by the Fund that are designated as undistributed capital
gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to
U.S. citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that
are otherwise exempt from withholding tax (or taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with proper notification of
its foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Fund, including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions
may have a retroactive effect with respect to the transactions contemplated
herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above.
33
<PAGE>
Shareholders are urged to consult their tax advisers as to the consequences
of these and other state and local tax rules affecting investment in a Fund.
MANAGEMENT OF THE TRUST AND THE FUNDS OR PORTFOLIOS
Trustees and Officers
The Trustees and officers of the Trust and their principal occupations for
at least the past five years are set forth below. Their titles may have
varied during that period.
Fergus Reid, III--Chairman of the Trust. Chairman and Chief Executive
Officer, Lumelite Corporation, since September 1985; Trustee, Morgan Stanley
Funds. Age: 63. Address: 202 June Road, Stamford, CT 06903.
Richard E. Ten Haken--Trustee. Chairman of the Audit Committee. Formerly
District Superintendent of Schools, Monroe No. 2 and Orleans Counties, New
York; Chairman of the Board and President, New York State Teachers'
Retirement System. Age: 61. Address: 4 Barnfield Road, Pittsford, NY 14534.
William J. Armstrong--Trustee. Vice President and Treasurer,
Ingersoll-Rand Company. Age: 54. Address: 49 Aspen Way, Upper Saddle River,
NJ 07458.
John R.H. Blum--Trustee. Attorney in private practice; formerly, partner
in the law firm of Richards, O'Neil & Allegaert; Commissioner of
Agriculture--State of Connecticut, 1992-1995. Age: 66. Address: 322 Main
Street, Lakeville, CT 06039.
Joseph J. Harkins--Trustee. Retired; Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He has been employed by Chase in numerous capacities and offices since
1954. Director of Blessings Corporation, Jefferson Insurance Company of New
York, Monticello Insurance Company and Nationar. Age: 64. Address: 257
Plantation Circle South, Ponte Vedra Beach, FL 32082.
*H. Richard Vartabedian--Trustee and President of the Trust; Chairman of
the Portfolios. Consultant, Republic Bank of New York; formerly, Senior
Investment Officer, Division Executive of the Investment Management Division
of The Chase Manhattan Bank, N.A., 1980 through 1991. Age: 60. Address: P.O.
Box 296, Beach Road, Hendrick's Head, Southport, ME 04576.
Stuart W. Cragin, Jr.--Trustee. Retired; formerly President, Fairfield
Testing Laboratory, Inc. He has previously served in a variety of marketing,
manufacturing and general management positions with Union Camp Corp., Trinity
Paper & Plastics Corp., and Conover Industries. Age: 63. Address: 108 Valley
Road, Cos Cob, CT 06807.
Irving L. Thode--Trustee. Retired; formerly Vice President of Quotron
Systems. He has previously served in a number of executive positions with
Control Data Corp., including President of its Latin American Operations, and
General Manager of its Data Services business. Age: 64. Address: 80 Perkins
Road, Greenwich, CT 06830.
*W. Perry Neff--Trustee. Independent Financial Consultant; Director of
North America Life Assurance Co., Petroleum & Resources Corp. and The Adams
Express Co.; Director and Chairman of The Hanover Funds, Inc.; Director,
Chairman and President of The Hanover Investment Funds, Inc. Age: 68.
Address: RR 1 Box 102, Weston, VT 05181.
34
<PAGE>
Roland R. Eppley, Jr.--Trustee. Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association Inc., (1971-1988);
Director, Janel Hydraulics, Inc.; Director of The Hanover Funds, Inc. Age:
63. Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer
of The Adams Express Co. and Petroleum & Resources Corp.; Director of The
Hanover Funds, Inc. and The Hanover Investment Funds, Inc. Age: 68. Address:
624 East 45th Street, Savannah, GA 31405
Martin R. Dean--Treasurer and Assistant Secretary. Associate Director,
Accounting Services, BISYS Fund Services; formerly Senior Manager, KPMG Peat
Marwick (1987-1994). Age: 32. Address: 3435 Stelzer Road, Columbus, OH 43219.
Ann E. Bergin--Secretary. First Vice President, BISYS Fund Services, Inc.;
formerly, Senior Vice President, Administration, Concord Financial Group
(1991-1995); Assistant Vice President, Dreyfus Service Corporation
(1982-1991). Age: 35. Address: 125 West 55th Street, New York, NY 10019.
- --------------
* Asterisks indicate those Trustees that are "Interested Persons" (as defined
in the 1940 Act). Mr. Reid is not an interested person of the Trust's
investment advisers or principal underwriter, but may be deemed an
interested person of the Trust solely by reason of being an officer of the
Trust.
The Board of Trustees of the Trust presently has an Audit Committee. The
members of the Audit Committee are Messrs. Ten Haken (Chairman), Blum,
Cragin, Thode, Armstrong, Harkins, Reid and Vartabedian. The function of the
Audit Committee is to recommend independent auditors and monitor accounting
and financial matters. The Audit Committee met two times during the fiscal
year ended October 31, 1995.
The Board of Trustees of the Trust has established an Investment
Committee. The members of the Investment Committee are Messrs. Vartabedian
(Chairman) and Reid, as well as Leonard M. Spalding, President of Vista
Capital Management. The function of the Investment Committee is to review the
investment management process of the Trust.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisers is compensated for his or her services according to
a fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the advisers. Each Trustee
receives a fee, allocated among all investment companies for which the
Trustee serves, which consists of an annual retainer component and a meeting
fee component. Effective August 21, 1995, each Trustee of the Vista Funds
receives a quarterly retainer of $12,000 and an additional per meeting fee of
$1,500. Members of committees receive a meeting fee only if the committee
meeting is held on a day other than a day on which a regularly scheduled
meeting is held. Prior to August 21, 1995, the quarterly retainer was $9,000
and the per-meeting fee was $1,000. The Chairman of the Trustees and the
Chairman of the Investment Committee each receive a 50% increment over
regular Trustee total compensation for serving in such capacities for all the
investment companies advised by the adviser.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1995 for each Trustee of the Trust:
35
<PAGE>
<TABLE>
<CAPTION>
Growth Large
Equity and Capital Cap
Balanced Income Income Growth Equity Bond
Fund Fund Fund Fund Fund Fund
------ ----- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee $241.30 $96.13 $14,393.16 $7,594.67 $540.99 $468.64
Richard E. Ten Haken, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
William J. Armstrong, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
John R.H. Blum, Trustee 190.83 62.60 9,376.63 4,955.42 352.06 305.11
Joseph J. Harkins, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
H. Richard Vartabedian, Trustee 169.60 67.79 10,159.13 5,376.61 330.18 330.18
Stuart W. Cragin, Jr., Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Irving L. Thode, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
W. Perry Neff, Trustee 0 0 0 0 0 0
Ronald R. Eppley, Jr., Trustee 0 0 0 0 0 0
W.D. MacCallan, Trustee 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Short- U.S. Small Inter- Global
Term Treasury Cap national Fixed Southeast
Bond Income Equity Equity Income Asian Japan European
Fund Fund Fund Fund Fund Fund Bond Fund
------ ---------- ------ ------ ---- ------- --- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee $298.13 $919.27 $172.16 $315.97 $8.47 0 0 0
Richard E. Ten Haken, Trustee 195.40 612.85 114.79 210.64 5.64 0 0 0
William J. Armstrong, Trustee 195.40 612.85 114.79 210.64 5.64 0 0 0
John R.H. Blum, Trustee 190.83 598.68 114.79 205.42 5.64 0 0 0
Joseph J. Harkins, Trustee 195.40 612.85 114.79 210.64 5.64 0 0 0
H. Richard Vartabedian,
Trustee 206.44 646.75 133.68 219.47 5.64 0 0 0
Stuart W. Cragin, Jr., Trustee 195.40 612.85 114.79 210.64 5.64 0 0 0
Irving L. Thode, Trustee 195.40 612.85 114.79 210.64 5.64 0 0 0
W. Perry Neff, Trustee 0 0 0 0 0 0 0 0
Ronald R. Eppley, Jr., Trustee 0 0 0 0 0 0 0 0
W.D. MacCallan, Trustee 0 0 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Pension or
Retirement Total
Benefits Compensation
Accrued from
as Fund "Fund Complex"
Expenses (1)
------------- --------------
<S> <C> <C>
Fergus Reid, III, Trustee 0 $78,456.65
Richard E. Ten Haken, Trustee 0 52,304.39
William J. Armstrong, Trustee 0 52,304.39
John R.H. Blum, Trustee 0 51,304.37
Joseph J. Harkins, Trustee 0 52,304.39
H. Richard Vartabedian, Trustee 0 74,804.44
Stuart W. Cragin, Jr., 0 52,304.39
Irving L. Thode, Trustee 0 52,304.39
W. Perry Neff, Trustee 0 0
Ronald R. Eppley, Jr., Trustee 0 0
W.D. MacCallan, Trustee 0 0
</TABLE>
(1) Data reflects total compensation earned during the period January 1, 1995
to December 31, 1995 for service as a Trustee to all Funds advised by the
adviser.
36
<PAGE>
Vista Funds Retirement Plan for Eligible Trustees
Effective August 21, 1995, the Trustees also instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not
an employee of any of the Funds, the advisers, administrator or distributor
or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board of Trustees. Pursuant to the Plan, the normal
retirement date is the date on which the eligible Trustee has attained age 65
and has completed at least five years of continuous service with one or more
of the investment companies advised by the adviser (collectively, the
"Covered Funds"). Each Eligible Trustee is entitled to receive from the
Covered Funds an annual benefit commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 10% of
the highest annual compensation received from the Covered Funds multiplied by
the number of such Trustee's years of service (not in excess of 10 years)
completed with respect to any of the Covered Funds. Such benefit is payable
to each eligible Trustee in monthly installments for the life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years
of service classifications. The estimated credited years of service for
Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian, Cragin, and
Thode are 11, 11, 8, 11, 5, 3, 3 and 3 respectively.
Highest Annual Compensation Paid by All Vista Funds
-----------------------------------------------------
$40,000 $45,000 $50,000 $55,000
Years of
Service Estimated Annual Benefits Upon Retirement
- --------- -----------------------------------------------------
10 $40,000 $45,000 $50,000 $55,000
9 36,000 40,500 45,000 49,500
8 32,000 36,000 40,000 44,000
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to
which each Trustee (who is not an employee of any of the Funds, the advisers,
administrator or distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustee's fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination
of service). The deferred amounts are invested in shares of Vista funds
selected by the Trustee. The deferred amounts are paid out in a lump sum or
over a period of several years as elected by the Trustee at the time of
deferral. If a deferring Trustee dies prior to the distribution of amounts
held in the deferral account, the balance of the deferral account will be
distributed to the Trustee's designated beneficiary in a single lump sum
payment as soon as practicable after such deferring Trustee's death.
Messrs. Ten Haken, Thode and Vartabedian have each executed a deferred
compensation agreement for the 1996 calendar year and as of March 29, 1996
they had contributed $4,700, $9,500 and $14,250, respectively.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with
the Trust, unless, as to liability to the Trust or its shareholders, it is
finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices or with respect to any matter unless it is finally adjudicated that
they did not act in good faith in the reasonable belief that their actions
were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court
or other body approving the settlement or other disposition, or by a
reasonable determination based upon a review of readily available facts, by
vote of a
37
<PAGE>
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their
duties.
As of April 15, 1995, the Trustees and officers as a group owned less than
1% of each Fund's outstanding shares, all of which were acquired for
investment purposes. For the fiscal year ended October 31, 1995, the Trust
paid its disinterested Trustees fees and expenses for all of the meetings of
the Board and any committees attended in the aggregate amount of
approximately $39,790 which amount is then apportioned between the Funds
comprising the Trust.
Adviser and Sub-Adviser
Chase acts as investment adviser to the Funds or Portfolios pursuant to an
Investment Advisory Agreement, dated as of May 6, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase is responsible for investment decisions for the Funds or Portfolios.
Pursuant to the terms of the Advisory Agreement, Chase provides the Funds or
Portfolios with such investment advice and supervision as it deems necessary
for the proper supervision of the Funds' or Portfolios' investments. The
advisers continuously provide investment programs and determine from time to
time what securities shall be purchased, sold or exchanged and what portion
of the Funds' or Portfolios' assets shall be held uninvested. The advisers to
the Funds or Portfolios furnish, at their own expense, all services,
facilities and personnel necessary in connection with managing the
investments and effecting portfolio transactions for the Funds or Portfolios.
The Advisory Agreement for the Funds or Portfolios will continue in effect
from year to year only if such continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of a Fund's or
Portfolio's outstanding voting securities and by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on such Advisory
Agreement.
Under the Advisory Agreement, the adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Funds
with greater opportunities and flexibility in accessing investment expertise.
Pursuant to the terms of the Advisory Agreement and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without
penalty by the Trust on behalf of the Funds on not more than 60 days', nor
less than 30 days', written notice when authorized either by a majority vote
of a Fund's shareholders or by a vote of a majority of the Board of Trustees
of the Trust, or by the adviser or sub-adviser on not more than 60 days', nor
less than 30 days', written notice, and will automatically terminate in the
event of its "assignment" (as defined in the 1940 Act). The advisory
agreements provide that the adviser or sub-adviser under such agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for willful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties thereunder.
With respect to the Funds or Portfolios investing in equity securities,
the equity research team of the adviser looks for two key variables when
analyzing stocks for potential investment by equity portfolios: value and
momentum. To uncover these qualities, the team uses a combination of
quantitative analysis, fundamental research and computer technology to help
identify undervalued stocks.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Funds imposed by the securities laws or
regulations thereunder of any state in which the shares of the Funds are
qualified for sales, as such limitations may be raised or lowered from time
to time, the adviser
38
<PAGE>
shall reduce its advisory fee (which fee is described below) to the extent of
its share of such excess expenses. The amount of any such reduction to be
borne by the adviser shall be deducted from the monthly advisory fee
otherwise payable with respect to the Funds during such fiscal year; and if
such amounts should exceed the monthly fee, the adviser shall pay to a Fund
its share of such excess expenses no later than the last day of the first
month of the next succeeding fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement
provides that Chase may render services through its own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser of the Fund and are under the common control of Chase as
long as all such persons are functioning as a part of an organized group of
persons, managed by authorized officers of Chase.
Chase, on behalf of the Funds or Portfolios, has entered into an
investment sub-advisory agreement dated as of May 6, 1996 with Chase Asset
Management, Inc. ("CAM"). With respect to the day-to-day management of the
Funds or Portfolios, under the sub-advisory agreement CAM makes decisions
concerning, and places all orders for, purchases and sales of securities and
helps maintain the records relating to such purchases and sales. CAM may, in
its discretion, provide such services through its own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser to the Company under applicable laws and are under the
common control of Chase; provided that (i) all persons, when providing
services under the sub-advisory agreement, are functioning as part of an
organized group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the sub-advisers. This
arrangement will not result in the payment of additional fees by the Funds.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range
of banking and investment services to customers throughout the United States
and around the world. The Chase Manhattan Corporation is the entity resulting
from the merger of The Chase Manhattan Corporation into Chemical Banking
Corporation on March 31, 1996. Chemical Banking Corporation was thereupon
renamed The Chase Manhattan Corporation. Also included among Chase's accounts
are commingled trust funds and a broad spectrum of individual trust and
investment management portfolios. These accounts have varying investment
objectives.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange Commission as an investment
adviser and was formed for the purpose of providing discretionary investment
advisory services to institutional clients and to consolidate Chase's
investment management function, and the same individuals who serve as
portfolio managers for CAM also serve as portfolio managers for Chase.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from each Fund or
Portfolio an investment advisory fee computed daily and paid monthly based on
a rate equal to a percentage of such Fund's or Portfolio's average daily net
assets specified in the relevant Prospectuses. However, the adviser may
voluntarily agree to waive a portion of the fees payable to it on a
month-to-month basis. For its services under its sub-advisory agreement, CAM
will be entitled to receive, with respect to each such Fund or Portfolio,
such compensation, payable by the adviser out of its advisory fee, as is
described in the relevant Prospectuses.
For the period December 31, 1992 to October 31, 1993 (commencement of
operations), and the fiscal years ended October 31, 1994 and 1995, Chase was
paid or accrued the following investment advisory fees with respect to the
following Funds and Portfolios, and voluntarily waived the amounts in
parentheses following such fees with respect to each such period:
39
<PAGE>
<TABLE>
<CAPTION>
December 31, 1992
to Fiscal Year Ended
October 31, 1993 October 31
----------------------- ------------------------------------------------------
1994 1995
Fund paid/accrued waived paid/accrued waived paid/accrued waived
- -------------------- ----------- -------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
International
Equity Portfolio* ($ 63,377) ($63,377) $462,855 ($202,144) $431,019 ($276,302)
Global Fixed
Income Portfolio* $180,250 ($ 1,334) $537,782 -- $686,268 --
</TABLE>
- ---------------
* The International Equity Fund and the Global Fixed Income Fund do not have
an investment adviser because the Trust seeks to achieve the investment
objective of the Funds by investing all of the investable assets of each
respective Fund in each respective Portfolio.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds and the administrator
of each Portfolio. Chase provides certain administrative services to the
Funds and Portfolios, including, among other responsibilities, coordinating
the negotiation of contracts and fees with, and the monitoring of performance
and billing of, the Funds' and Portfolios' independent contractors and
agents; preparation for signature by an officer of the Trust and Portfolios
of all documents required to be filed for compliance by the Trust and
Portfolios with applicable laws and regulations excluding those of the
securities laws of various states; arranging for the computation of
performance data, including net asset value and yield; responding to
shareholder inquiries, and arranging for the maintenance of books and records
of the Funds and Portfolios and providing, at its own expense, office
facilities, equipment and personnel necessary to carry out its duties. Chase
in its capacity as administrator does not have any responsibility or
authority for the management of the Funds or Portfolios, the determination of
investment policy, or for any matter pertaining to the distribution of Funds
shares.
Under the Administration Agreements Chase is permitted to render
administrative services to others. The Administration Agreements will
continue in effect from year to year with respect to each Fund or Portfolio
only if such continuance is specifically approved at least annually by the
Board of Trustees of the Trust or Portfolio or by vote of a majority of such
Fund's or Portfolio's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Administration Agreements
or "interested persons" (as defined in the 1940 Act) of any such party. The
Administration Agreements are terminable without penalty by the Trust on
behalf of each Fund or by a Portfolio on 60 days' written notice when
authorized either by a majority vote of such Fund's or Portfolio's
shareholders or by vote of a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust or Portfolios, or by Chase on 60 days' written notice,
and will automatically terminate in the event of their "assignment" (as
defined in the 1940 Act). The Administration Agreements also provide that
neither Chase or its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration of the Funds
or Portfolios, except for willful misfeasance, bad faith or gross negligence
in the performance of its or their duties or by reason of reckless disregard
of its or their obligations and duties under the Administration Agreements.
In addition, the Administration Agreements provide that, in the event the
operating expenses of any Fund or Portfolio, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, Chase shall reduce its administration fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to
40
<PAGE>
be borne by Chase shall be deducted from the monthly administration fee
otherwise payable to Chase during such fiscal year, and if such amounts
should exceed the monthly fee, Chase shall pay to such Fund or Portfolio its
share of such excess expenses no later than the last day of the first month
of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreements, Chase receives from each Fund a fee computed daily
and paid monthly at an annual rate equal to 0.10% of each of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year, except that with respect to the Global Fixed Income Fund and
International Equity Fund, Chase receives from each of the Funds and the
Portfolios a fee computed daily and paid monthly at an annual rate equal to
0.05% of their respective average daily net assets. Chase may voluntarily
waive a portion of the fees payable to it with respect to each Fund on a
month-to-month basis.
For the fiscal period December 31, 1992 (commencement of operations)
through October 31, 1993, and the fiscal years ended October 31, 1994 and
1995, Chase was paid or accrued administration fees with respect to the Vista
Global Fixed Income Fund and Vista International Equity Fund and voluntarily
waived the amount in parentheses following such fees:
<TABLE>
<CAPTION>
12/31/92 11/1/93 11/1/94
through through through
10/31/93 11/31/94 10/31/95
------------------- --------------------- ---------------------
<S> <C> <C> <C>
Global Fixed Income Fund: $ 449 ($ 449) $ 1,097 ($ 1,097) $ 916 ($ 916)
International Equity Fund: $1,938 ($1,938) $16,367 ($16,367) $18,799 ($18,799)
</TABLE>
Distribution Plans
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") on behalf of certain classes
or shares of certain Funds as described in the Prospectuses, which provide
that such classes of such Funds shall pay for distribution services a
distribution fee (the "Distribution Fee"), including payments to the
Distributor, at annual rates not to exceed the amounts set forth in their
respective Prospectuses. The Distributor may use all or any portion of such
Class A Distribution Fee to pay for Fund expenses of printing prospectuses
and reports used for sales purposes, expenses of the preparation and printing
of sales literature and other such distribution-related expenses.
Class B shares pay a Distribution Fee of up to 0.75% of average daily net
assets. The Distributor currently expects to pay sales commissions to a
dealer at the time of sale of Class B shares of up to 4.00% of the purchase
price of the shares sold by such dealer. The Distributor will use its own
funds (which may be borrowed or otherwise financed) to pay such amounts.
Because the Distributor will receive a maximum Distribution Fee of 0.75% of
average daily net assets with respect to Class B shares, it will take the
Distributor several years to recoup the sales commissions paid to dealers and
other sales expenses.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to
exceed 0.25% annualized of the average net asset value of Class A shares, or
0.25% annualized of the average net asset value of the Class B shares
maintained in a Fund by such broker-dealers' customers. Trail or maintenance
commissions on Class B shares will be paid to broker-dealers beginning the
13th month following the purchase of such Class B shares. Since the
distribution fees are not directly tied to expenses, the amount of
distribution fees paid by a Fund during any year may be more or less than
actual expenses incurred pursuant to the Distribution Plans. For this reason,
this type of distribution fee arrangement is characterized by the staff of
the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
payments are directly linked to its expenses). With respect to Class B
shares, because of the 0.75% annual limitation on the compensation paid to
the Distributor during a fiscal year, compensation relating to
41
<PAGE>
a large portion of the commissions attributable to sales of Class B shares in
any one year will be accrued and paid by a Fund to the Distributor in fiscal
years subsequent thereto. In determining whether to purchase Class B shares,
investors should consider that compensation payments could continue until the
Distributor has been fully reimbursed for the commissions paid on sales of
Class B shares. However, the shares are not liable for any distribution
expenses incurred in excess of the Distribution Fee paid.
Each class of shares is entitled to exclusive voting rights with respect
to matters concerning its Distribution Plan.
Each Distribution Plan provides that it will continue in effect
indefinitely if such continuance is specifically approved at least annually
by a vote of both a majority of the Trustees and a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Trust
and who have no direct or indirect financial interest in the operation of the
Distribution Plans or in any agreement related to such Plan ("Qualified
Trustees"). The continuance of each Distribution Plan was most recently
approved on October 13, 1995. The Distribution Plans require that the Trust
shall provide to the Board of Trustees, and the Board of Trustees shall
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Distribution Plans. The Distribution Plans
further provides that the selection and nomination of Qualified Trustees
shall be committed to the discretion of the disinterested Trustees (as
defined in the 1940 Act) then in office. The Distribution Plans may be
terminated at any time by a vote of a majority of the Qualified Trustees or,
with respect to a particular Fund, by vote of a majority of the outstanding
voting Shares of the class of such Fund to which it applies (as defined in
the 1940 Act). The Distribution Plans may not be amended to increase
materially the amount of permitted expenses thereunder without the approval
of shareholders and may not be materially amended in any case without a vote
of the majority of both the Trustees and the Qualified Trustees. Each of the
Funds will preserve copies of any plan, agreement or report made pursuant to
a Distribution Plan for a period of not less than six years from the date of
the Distribution Plan, and for the first two years such copies will be
preserved in an easily accessible place.
For the fiscal period December 31, 1992 (commencement of operations)
through October 31, 1993, and the fiscal years ended October 31, 1994 and
1995, the Distributor was paid or accrued distribution fees with respect to
the Income Fund and Equity Fund and voluntarily waived the amount in
parentheses following such fees:
12/31/92 11/1/93 11/1/94
through through through
10/31/93 11/31/94 10/31/95
--------------- -------- --------
A Shares-
Global Fixed Income Fund: $2,246 ($2,246) $ 5,120 $ 3,697
International Equity Fund: $9,683 ($9,683) $73,552 $75,652
B Shares-
Global Fixed Income Fund: -- $ 1,100 $ 2,661
International Equity Fund: -- $24,853 $55,080
With respect to the share of the Class A shares of the Funds, the Basic
Distribution Fee was allocated as follows:
Printing, Advertising &
Postage Sale Administrative
Fund and Handling Compensation Filings
- -------------------------- ------------ ------------ --------------
Global Fixed Income Fund $ 791 $ 2,266 $ 639
International Equity Fund $16,182 $46,375 $13,080
Distribution and Sub-Administration Agreement
The Trust has entered into a Distribution and Sub-Administration Agreement
dated August 24, 1995 (the "Distribution Agreement") with the Distributor,
pursuant to which the Distributor acts as the Funds' exclusive under-
42
<PAGE>
writer, provides certain administration services and promotes and arranges
for the sale of each class of Shares. The Distributor is a wholly-owned
subsidiary of BISYS Fund Services, Inc. The Distribution Agreement provides
that the Distributor will bear the expenses of printing, distributing and
filing prospectuses and statements of additional information and reports used
for sales purposes, and of preparing and printing sales literature and
advertisements not paid for by the Distribution Plan. The Trust pays for all
of the expenses for qualification of the shares of each Fund for sale in
connection with the public offering of such shares, and all legal expenses in
connection therewith. In addition, pursuant to the Distribution Agreement,
the Distributor provides certain sub-administration services to the Trust,
including providing officers, clerical staff and office space.
The Distribution Agreement is currently in effect and will continue in
effect thereafter with respect to each Fund only if such continuance is
specifically approved at least annually by the Board of Trustees or by vote
of a majority of such Fund's outstanding voting securities and, in either
case, by a majority of the Trustees who are not parties to the Distribution
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party. The Distribution Agreement is terminable without penalty by the Trust
on behalf of each Fund on 60 days' written notice when authorized either by a
majority vote of such Fund's shareholders or by vote of a majority of the
Board of Trustees of the Trust, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust, or by the
Distributor on 60 days' written notice, and will automatically terminate in
the event of its "assignment" (as defined in the 1940 Act). The Distribution
Agreement also provides that neither the Distributor nor its personnel shall
be liable for any act or omission in the course of, or connected with,
rendering services under the Distribution Agreement, except for wilful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties.
In the event the operating expenses of any Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to that Fund imposed by the securities laws or
regulations thereunder of any state in which the shares of such Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Distributor shall reduce its sub-administration fee with respect to
such Fund (which fee is described below) to the extent of its share of such
excess expenses. The amount of any such reduction to be borne by the
Distributor shall be deducted from the monthly sub-administration fee
otherwise payable with respect to such Fund during such fiscal year; and if
such amounts should exceed the monthly fee, the Distributor shall pay to such
Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives
an annual fee, payable monthly, of 0.05% of the net assets of each Fund. The
Distributor may voluntarily waive a portion of the fees payable to it under
the Distribution Agreement with respect to each Fund on a month-to-month
basis. For the fiscal period December 31, 1992 (commencement of operations)
through October 31, 1993, and the fiscal years ended October 31, 1994 and
1995, the Distributor was paid or accrued sub-administration fees with
respect to the Global Fixed Income Fund and International Equity Fund and
voluntarily waived the amount in parentheses following such fees:
12/31/92 11/1/93 11/1/94
through through through
10/31/93 11/1/94 10/31/95
--------------- ----------------- ----------------
Global Fixed Income Fund: $ 449 ($ 449) $ 1,097 ($1,097) $ 916 ($ 916)
International Equity Fund: $1,938 ($1,938) $16,367 ($16,367) $18,799 ($18,799)
Shareholder Servicing Agents, Transfer Agent and Custodian
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent to provide certain services
including but not limited to the following: answer customer inquiries
regarding account status and history, the manner in which purchases and
redemptions of
43
<PAGE>
shares may be effected for the Fund as to which the Shareholder Servicing
Agent is so acting and certain other matters pertaining to the Fund; assist
shareholders in designating and changing dividend options, account
designations and addresses; provide necessary personnel and facilities to
establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds;
transmit and receive funds in connection with customer orders to purchase or
redeem shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated
accounts; furnish (either separately or on an integrated basis with other
reports sent to a shareholder by a Shareholder Servicing Agent) quarterly and
year-end statements and confirmations of purchases and redemptions; transmit,
on behalf of the Fund, proxy statements, annual reports, updated prospectuses
and other communications to shareholders of the Fund; receive, tabulate and
transmit to the Fund proxies executed by shareholders with respect to
meetings of shareholders of the Fund; and provide such other related services
as the Fund or a shareholder may request. Shareholder servicing agents may be
required to register pursuant to state securities law.
Each Shareholder Servicing Agent may voluntarily agree from time to time
to waive a portion of the fees payable to it under its Servicing Agreement
with respect to each Fund on a month-to-month basis. For the fiscal period
December 31, 1992 (commencement of operations) through October 31, 1993, and
the fiscal years ended October 31, 1994 and 1995, fees payable to the
Shareholder Servicing Agents and the amounts voluntarily waived for each such
period (as indicated in parentheses) were as follows:
<TABLE>
<CAPTION>
23/31/93 through
10/31/93 Fiscal Year-Ended October 31,
--------------------- -----------------------------------------------
1994 1995
--------------------- -----------------------
payable waived payable waived payable waived
-------- --------- -------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Global Fixed Income Fund:
Class A $2,246 ($2,246) $5,120 ($2,867) $ 4,583 ($2,070)
Class B n/a n/a $ 367 -- $ 887 --
International Equity Fund:
Class A $9,683 ($9,683) $73,55 -- $75,631 --
Class B n/a n/a $8,284 -- $18,367 --
</TABLE>
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight
and record keeping for the assets held in the portfolios of each Fund. Chase
also provides fund accounting services for the income, expenses and shares
outstanding for such Funds. Chase is located at 3 Metro- tech Center,
Brooklyn, NY 11245. Investors Bank and Trust Co., One First Canadian Place,
Toronto, Canada M5X 1C8, provides similar services for the International
Equity and Global Fixed Income Portfolios.
For the fiscal period December 31, 1992 (commencement of operations)
through October 31,1993, and the fiscal years ended October 31, 1994 and
1995, the Transfer Agent was paid or accrued transfer agent fees with respect
to the Global Fixed Income Fund and International Equity Fund, and
voluntarily waived the amount in parentheses following such fees, as follows:
<TABLE>
<CAPTION>
12/31/92 11/1/93 11/1/94
through through through
10/31/93 10/31/94 10/31/95
----------------- ------------------- -------------------
<S> <C> <C> <C>
Global Fixed Income Fund: $25,068 ($24,867) $ 37,426 ($ 60,117) $ 57,001 ($ 76,547)
International Equity Fund: $25,068 ($24,513) $173,457 ($118,713) $280,639 ($157,053)
</TABLE>
44
<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended October 31, 1995,
and the related financial highlights which appear in the Prospectuses, have
been incorporated herein and included in the Prospectuses in reliance on the
reports of Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New
York 10036, independent accountants of the Funds, given on the authority of
said firm as experts in accounting and auditing. Price Waterhouse LLP
provides the Funds with audit services, tax return preparation and assistance
and consultation with respect to the preparation of filings with the
Securities and Exchange Commission.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, non-diversified management investment
company organized as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts in 1987. Because the Trust is
"non-diversified", more than 5% of the assets of certain Funds may be
invested in the obligations of any single issuer, which may make the value of
the shares in such a Fund more susceptible to certain risks than shares of a
diversified mutual fund.
The Trust currently consists of 16 series of shares of beneficial
interest, par value $.001 per share. With respect to certain Funds, the Trust
may offer more than one class of shares. The Trust has reserved the right to
create and issue additional series or classes. Each share of a series or
class represents an equal proportionate interest in that series or class with
each other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Expenses of the Trust which are not attributable to a
specific series or class are allocated among all the series in a manner
believed by management of the Trust 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 share held. Shares of class generally vote together except when
required under federal securities laws to vote separately on matters that
only affect a particular class, such as the approval of distribution plans
for a particular class. With respect to shares purchased through a
Shareholder Servicing Agent and, in the event written proxy instructions are
not received by a Fund or its designated agent prior to a shareholder meeting
at which a proxy is to be voted and the shareholder does not attend the
meeting in person, the Shareholder Servicing Agent for such shareholder will
be authorized pursuant to an applicable agreement with the shareholder to
vote the shareholder's outstanding shares in the same proportion as the votes
cast by other Fund shareholders represented at the meeting in person or by
proxy.
Certain Funds offer both Class A and Class B shares. The classes of shares
have several different attributes relating to sales charges and expenses, as
described herein and in the Prospectuses. In addition to such differences,
expenses borne by each class of a Fund may differ slightly because of the
allocation of other class-specific expenses. For example, a higher transfer
agency fee may be imposed on Class B shares than on class A shares. The
relative impact of initial sales charges, contingent deferred sales charges,
and ongoing annual expenses will depend on the length of time a share is
held.
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for
a shareholder vote. Shareholders have, under certain circumstances, the right
to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have, in certain circumstances, the right to remove one or
more
45
<PAGE>
Trustees without a meeting. No material amendment may be made to the Trust's
Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each series affected by the amendment.
The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Trust or of any series or class, a Shareholder Servicing
Agent may vote any shares as to which such Shareholder Servicing Agent is the
agent of record and which are not represented in person or by proxy at the
meeting, proportionately in accordance with the votes cast by holders of all
shares of that series or class otherwise represented at the meeting in person
or by proxy as to which such Shareholder Servicing Agent is the agent of
record. Any shares so voted by a Shareholder Servicing Agent will be deemed
represented at the meeting for purposes of quorum requirements. Shares have
no preemptive or conversion rights. Shares, when issued, are fully paid and
non-assessable, except as set forth below. Any series or class may be
terminated (i) upon the merger or consolidation with, or the sale or
disposition of all or substantially all of its assets to, another entity, if
approved by the vote of the holders of two thirds of its outstanding shares,
except that if the Board of Trustees recommends such merger, consolidation or
sale or disposition of assets, the approval by vote of the holders of a
majority of the series' or class' outstanding shares will be sufficient, or
(ii) by the vote of the holders of a majority of its outstanding shares, or
(iii) by the Board of Trustees by written notice to the series' or class'
shareholders. Unless each series and class is so terminated, the Trust will
continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to
shares that may be redeemed through expedited or automated procedures
established by a Shareholder Servicing Agent. No certificates are issued for
Class B shares due to their conversion feature. No certificates are issued
for Institutional Shares.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of
the Trust. The Trust's Declaration of Trust also provides that the Trust
shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, errors of judgment or mistakes of fact or law, but nothing
in the Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The Code of Ethics substantially conforms to the
recommendations made by the Investment Company Institute ("ICI") (except
where noted) and includes such provisions as:
(bullet) Prohibitions on investment personnel acquiring securities in
initial offerings;
(bullet) A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer granting
such approval have no interest in the issuer making the private
placement;
46
<PAGE>
(bullet) A restriction on access persons executing transactions for
securities on a recommended list until 14 days after distribution
of that list;
(bullet) A prohibition on access persons acquiring securities that are
pending execution by one of the Fund or Portfolios until 7 days
after the transactions of the Fund or Portfolios are completed;
(bullet) A prohibition of any buy or sell transaction in a particular
security in a 30-day period, except as may be permitted in
certain hardship cases or exigent circumstances where prior
approval is obtained. This provision differs slightly from the
ICI recommendation;
(bullet) A requirement for pre-clearance of any buy or sell transaction in
a particular security after 30 days, but within 60 days;
(bullet) A requirement that any gift exceeding $75.00 from a customer must
be reported to the appropriate compliance officer;
(bullet) A requirement that access persons submit in writing any request
to serve as a director or trustee of a publicly traded company;
(bullet) A requirement that all securities transactions in excess of
$1,000 be pre-cleared, except that if a person has engaged in
more than $10,000 of securities transactions in a calendar
quarter all securities of such person require pre-clearance (this
de minimis exception differs slightly from the ICI
recommendations);
(bullet) A requirement that all access persons direct their broker-dealer
to submit duplicate confirmation and customer statements to the
appropriate compliance unit; and
(bullet) A requirement that all access persons sign a Code of Ethics
acknowledgment, affirming that they have read and understood the
Code and submit a personal security holdings report upon
commencement of employment or status and a personal security
transaction report within 10 days of each calendar quarter
thereafter.
Principal Holders
As of March 31, 1996 the following persons owned of record 5% or more of
the outstanding shares of the following classes of the following Funds:
<TABLE>
<CAPTION>
<S> <C>
Vista Global Fixed Income Fund--A Shares
Cudd & Company 45.48%
CMB Mutual Funds Dept. 35th Floor
1211 6th Avenue
New York, NY 10036-8701
Cudd & Company 5.74%
Custody Division
1211 6th Avenue, 35th Floor
New York, NY 10036-8701
Barbara M. Martin 10.24%
David G. Martin JTWROS
7637 Chancellor Way
Springfield, VA 22153-2344
47
<PAGE>
Vista Global Fixed Income Fund--B Shares
BHC Securities Inc. 11.62%
FAO 84403937
Attn: Mutual Funds
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
NFSC FEBO # CK7-640204 5.66%
NFSC/FMTC IRA
FBO ROSA CRESPO
2312 SW 128 Avenue
Miami, FL 33175-1940
Smith Barney Inc. 12.57%
00108962177
388 Greenwich Street
New York, NY 10013-2375
Vista International Equity Fund--A Shares
Liva & Company 5.07%
c/o Chase Manhattan Bank NA
Attn: Mutual FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
Cudd & Company 11.86%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Vista Japan Fund--A Shares
Cudd & Company 21.47%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Cudd & Company 5.07%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Cudd & Company 63.08%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Vista Japan Fund--B Shares
Randall J. Dekker TTEE 5.52%
Randall J. Dekker PSP
5100 N. Brookline Avenue #790
Oklahoma City, OK 73112-3603
48
<PAGE>
BHC Securities Inc. 6.29%
FAO 84900540
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 22.44%
FAO 84305649
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 11.30%
FAO 84422511
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 9.07%
FAO 84001983
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
BHC Securities Inc. 5.63%
FAO 84449445
Attn: Mutual Funds Dept.
One Commerce Square
2005 Market Street Suite 1200
Philadelphia, PA 19103-7042
Chase Manhattan Bank Cust 11.37%
FBO Michael F. Glennie
Keogh PS
1298 Cocoanut Road
Boca Raton, FL 33432-7710
Chase Manhattan Bank Cust 11.38%
FBO Dianne F. Glennie
Keogh PS
1298 Cocoanut Road
Boca Raton, FL 33432-7710
Vista Southeast Asian Fund--A Shares
Cudd & Company 27.34%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
49
<PAGE>
Cudd & Company 5.97%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Cudd & Company 42.97%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Vista Southeast Asian Fund--B Shares
Resources Trust Co. Tr 9.94%
U/A DTD Feb 02 95
FBO Bert A. Smith IRA
1572349789
PO Box 5900
Denver, CO 80217-5900
IFTC Cust IRA A/C 7.32%
Eric Getson
1713 Independence Lane
Cherry Hill, NJ 08003-3223
Vista European Fund--A Shares
Cudd & Company 31.52%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Cudd & Company 60.26%
Custody Division
1211 6th Avenue 35th Floor
New York, NY 10036-8701
Vista European Fund--B Shares
Frank H. Lipowitz 5.34%
67 Walzer Road
Rochester, NY 14622-2501
IFTC Cust IRA R/O 31.17%
Henderson Cole
122 W. King Street
Danbury, CT 06811
Chase Manhattan Bank Cust 8.22%
FBO Antoinette Scurti
Keogh PS
200 East 27th Street
New York, NY 10016-9202
50
<PAGE>
Chase Manhattan Bank Cust 21.37%
FBO Michael F. Glennie
Keogh PS
1298 Cocoanut Road
Boca Raton, FL 33432-7710
Chase Manhattan Bank Cust 21.37%
FBO Dianne F. Glennie
Keogh PS
1298 Cocoanut Road
Boca Raton, FL 33432-7710
</TABLE>
51
<PAGE>
Financial Statements
The 1995 Annual Report to Shareholders of each Fund, including the reports
of independent accountants, financial highlights and financial statements for
the fiscal year ended October 31, 1995 contained therein, are incorporated
herein by reference.
Specimen Computations of Offering Prices Per Share
The International Equity Fund (specimen computations)
A Shares:
<TABLE>
<CAPTION>
<S> <C>
Net Asset Value and Redemption Price per Share of Beneficial
Interest at October 31, 1995 $12.02
Maximum Offering Price per Share ($10.60 divided by .9525)
(reduced on purchases of $100,000 or more) $12.62
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial
Interest at October 31, 1995 $11.89
The Global Fixed Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial
Interest at October 31, 1995 $10.65
Maximum Offering Price per Share ($30.26 divided by .955)
(reduced on purchases of $100,000 or more) $11.15
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial
Interest at October 31, 1995 $10.63
</TABLE>
The European Fund, Japan Fund and Southeast Asian Fund commenced offering of
Shares on November 1, 1995.
52
<PAGE>
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES
OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S.
Government.
FHA Insured Notes--are bonds issued by the Farmers Home Administration,
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees Paid to GNMA
and the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures may result in the return of the greater
part of principal invested far in advance of the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee. As the prepayment rate of individual mortgage pools will vary
widely, it is not possible to accurately predict the average life of a
particular issue of GNMA Certificates. The yield which will be earned on GNMA
Certificates may vary from their coupon rates for the following reasons: (i)
Certificates may be issued at a premium or discount, rather than at par; (ii)
Certificates may trade in the secondary market at a premium or discount after
issuance; (iii) interest is earned and compounded monthly which has the
effect of raising the effective yield earned on the Certificates; and (iv)
the actual yield of each Certificate is affected by the prepayment of
mortgages included in the mortgage pool underlying the Certificates.
Principal which is so prepaid will be reinvested although possibly at a lower
rate. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium could result in a loss
to a Fund. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on,
among other things, the level of market rates, the Certificate's coupon rate
and the prepayment experience of the pool of mortgages backing each
Certificate. If agency securities are purchased at a premium above principal,
the premium is not guaranteed by the issuing agency and a decline in the
market value to par may result in a loss of the premium, which may be
particularly likely in the event of a prepayment. When and if available, U.S.
Government obligations may be purchased at a discount from face value.
GNMA FHLMC Bonds and GNMA FNMA Bonds--are mortgage-backed bonds issued by
the Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association, respectively, and are guaranteed by the U.S. Government.
GSA Participation Certificates--are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed
by the U.S. Government.
A-1
<PAGE>
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of
Housing and Urban Development of the U.S. Government, the payment of which is
secured by the U.S. Government.
Penn Central Transportation Certificates--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds--are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
U.S. Government.
FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and bonds--are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds--are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import
Bank of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
A description of the rating policies of Moody's, S&P and Fitch with respect
to bonds and commercial paper appears below.
Moody's Investors Service's Corporate Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality and
carry the smallest degree of investment risk. Interest payments are protected
by a large or by an exceptionally stable margin, and principal is secure.
While the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment qualities and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance
and other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal
or interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in
high degree.
Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its
rating classifications. The modifier "1" indicates that the security ranks in
the higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
B-1
<PAGE>
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and
pay interest.
AA--Bonds rated "AA" also qualify as high quality debt obligations. Capacity
to pay principal and interest is very strong, and differs from "AAA" issues
only in small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay
interest, although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher rated
categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity
to pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such
payments will be made during such grace period. The "D" rating is also used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
The ratings set forth above may be modified by the addition of a plus or
minus to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations.
"Prime-1" repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries,
high rates of return on funds employed, conservative capitalization
structures with moderate reliance on debt and ample asset protection, broad
margins in earnings coverage of fixed financial charges and high internal
cash generation, and well-established access to a range of financial markets
and assured sources of alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level
of debt protection measurements and the requirement for relatively high
financial leverage. Adequate alternate liquidity is maintained.
B-2
<PAGE>
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime
rating categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded in several categories, ranging from "A-1" for the highest
quality obligations to "D" for the lowest. The four categories are as
follows:
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher
designations.
B--Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
AAA--Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.
AA--Bonds rated AA by Fitch are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these
issues is generally rated F-1+ by Fitch.
A--Bonds rated A by Fitch are considered to be investment grade and of
high credit quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with higher
ratings.
BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
consequences on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position
of a credit within a rating category. Plus and minus signs, however, are not
used in the AAA category.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes.
B-3
<PAGE>
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest degree
of assurance for timely payment.
F-1--Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance for
timely payment but the margin of safety is not as great as for issues
assigned F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the
degree of assurance for timely payment is adequate, although near-term
adverse changes could cause these securities to be rated below investment
grade.
LOC--The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are
considered to have adequate capacity to pay principal and interest. However,
such bonds may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened
capacity to make principal and interest payments than is the case with higher
grade bonds.
After purchase by a Fund, a security may cease to be rated or its rating may
be reduced below the minimum required for purchase by such Fund. Neither
event will require a sale of such security by a Fund. However, a Fund's
investment manager will consider such event in its determination of whether
such Fund should continue to hold the security. To the extent the ratings
given by Moody's, S&P or Fitch may change as a result of changes in such
organizations or their rating systems, a Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment
policies contained in this Prospectus and in the Statement of Additional
Information.
B-4
