PROSPECTUS
VISTA(SM) U.S. GOVERNMENT INCOME FUND
March 1, 1996
VISTA U.S. GOVERNMENT INCOME FUND (the "Fund") seeks to provide its
shareholders with monthly dividends as well as to protect the value of its
shareholders' investment (i.e., to preserve principal) by investing in debt
obligations that are backed by the "full faith and credit" of the U.S.
Government as well as by using futures contracts on fixed income securities or
indexes of fixed income securities and options on such futures contracts for the
purpose of protecting (i.e., "hedging") the value of its portfolio. Neither the
United States nor any of its agencies insures or guarantees the market value of
shares of the Fund. The Fund is a non-diversified series of Mutual Fund Group
(the "Trust"), an open-end management investment company organized as a business
trust under the laws of the Commonwealth of Massachusetts on May 11, 1987,
presently consisting of 15 separate series (the "Funds"). Because the Fund is
"non-diversified", more of the Fund's assets may be concentrated in the
securities of any single issuer than if the Fund was "diversified", which may
make the value of shares of the Fund more susceptible to certain risks than
shares of a diversified mutual fund.
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 6.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's investment
adviser, custodian (the "Custodian") and administrator (the "Administrator").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 11. Vista Broker-Dealer Services, Inc. ("VBDS") is
the Fund's distributor and is unaffiliated with Chase. INVESTMENTS IN THE FUND
ARE SUBJECT TO RISK--INVOLVING POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE
NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Class B shares, each with a public offering price that reflects
different sales charges and expense levels. Class A shares are offered at net
asset value plus the applicable sales charge (maximum of 4.50% of public
offering price). Class B shares are offered at net asset value without an
initial sales charge, with a maximum contingent deferred sales charge of 5% of
redemption proceeds imposed on certain redemptions made within six years of the
date of purchase. This charge will decline to zero for redemptions more than six
years after initial purchase. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert into Class A shares in the eighth year
after purchase. Salespersons and any other person entitled to receive
compensation for selling or servicing shares of the Fund may receive different
compensation with respect to one particular class of shares over another in the
Fund.
For more information on the differences in these classes, see "Variable
Distribution Method," "Purchases and Redemptions of Shares" and "Conversion of
Class B Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the Statement of Additional Information without
charge by contacting his or her Shareholder Servicing Agent, the Distributor, or
the Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund, simply call the Vista Service Center at the
following toll-free number: 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary........................................................ 3
Financial Highlights................................................... 4
Investment Objective and Policies...................................... 5
Additional Information on Investment Policies and Techniques........... 6
Variable Distribution Method........................................... 10
Management of the Fund................................................. 11
Purchases and Redemptions of Shares.................................... 14
Tax Matters............................................................ 25
Other Information Concerning Shares of the Fund........................ 26
Shareholder Servicing Agents, Transfer Agent and Custodian............. 30
Yield and Performance Information...................................... 32
2
<PAGE>
EXPENSE SUMMARY
<TABLE><CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
- --------------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases (as a percentage of offering
price)*........................................................................ 4.50% None
Maximum Sales Charge Imposed on Reinvested Dividends............................. None None
Exchange Fee................................................................... None None
Maximum Contingent Deferred Sales Charge (as a percentage of redemption
proceeds)+..................................................................... None 5.00%
<CAPTION>
(AS A
PERCENTAGE
ANNUAL FUND OPERATING EXPENSES OF NET ASSETS)
- --------------------------------------------------------------------------------- ------------------
<S> <C> <C>
Investment Advisory Fee (After waiver of fees)**................................. .17% .17%
Rule 12b-1 Distribution Plan Fee (After waiver of fees)++**...................... .20% .75%
Administration Fee............................................................... .05% .05%
Other Expenses (After waiver of fees)**
- --Sub-administration Fee......................................................... .05% .05%
- --Shareholder Servicing Fee...................................................... .05% .25%
- --Other Operating Expenses+++.................................................... .38% .38%
------- -------
Total Fund Operating Expenses.................................................... .90% 1.65%
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming a 5% annual rate of return:
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1).................................................... $54 $72 $ 93 $ 151
Class B Shares
Assuming complete redemption at end of period(2)(3).................. 68 85 113 166
Assuming no redemption(3)............................................ 17 52 90 166
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
** Fees waived on a month-to-month basis.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may
pay more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.50% initial
sales charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of eighth year.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee,
shareholder servicing fee and other operating expenses expected to be incurred
by the Fund during the fiscal year after waiver of fees. Absent such waivers,
the annual investment advisory fee, distribution plan fee, administrative fee,
sub-administrative fee, and shareholder servicing agent fee would be 0.30%,
0.25% (0.75% for Class B shares), 0.10%, 0.05% and 0.25%, respectively, of the
Fund's average net assets. A more complete description of the Fund's expenses,
including any potential fee waivers, is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE ASSUMES ALL DIVIDENDS AND OTHER DISTRIBUTIONS
ARE REINVESTED AND THAT THE PERCENTAGES UNDER "ANNUAL FUND OPERATING EXPENSES"
REMAIN THE SAME IN THE YEARS SHOWN. THE "EXAMPLE" SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN SHOWN. THE ACTUAL EXPENSES INCURRED AND ATTRIBUTABLE TO
EACH CLASS OF SHARES WILL DEPEND ON SEVERAL FACTORS, INCLUDING THE LEVEL OF
AVERAGE NET ASSETS AND THE EXTENT TO WHICH A CLASS INCURS VARIABLE EXPENSES,
SUCH AS TRANSFER AGENCY COSTS.
3
<PAGE>
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 are incorporated by reference into the statement of additional
information). The financial statements and notes, as well as the financial
information set forth in the table below with respect to each of the last five
years 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 its Shareholder Servicing Agent.
U.S. GOVERNMENT INCOME
<TABLE><CAPTION>
9/8/87* YEAR
TO ENDED
YEAR ENDED OCTOBER 31, 10/31/87 10/31/95
----------------------------------------------------------------------- CLASS A CLASS B
1994 1993 1992 1991 1990 1989 1988
1995
CLASS A SHARES SHARES SHARES
----------------------------------------------------------------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $10.60 $ 12.10 $11.68 $11.53 $10.93 $11.21 $10.90 $10.69 $10.00 $10.59
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 0.621
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 0.797
------- ------- ------- ------- ------- -------- ------- ------- -------- --------
Total from Investment
Operations...................... 1.497 (0.651) 1.365 1.053 1.480 0.598 1.204 1.100 0.690 1.418
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 0.638
Distributions from capital
gains...................... -- 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 0.638
------- ------- ------- ------- ------- -------- ------- ------- -------- --------
Net Asset Value, End of
Period........................ $11.40 $ 10.60 $12.10 $11.68 $11.53 $10.93 $11.21 $10.90 $10.69 $11.37
------- ------- ------- ------- ------- -------- ------- ------- -------- --------
------- ------- ------- ------- ------- -------- ------- ------- -------- --------
Total Return(1)................. 14.59% (5.58%) 12.35% 9.40% 14.07% 5.70% 11.64% 10.70% 46.64% 13.80%
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 $10,652
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%# 1.62%
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%# 5.53%
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%# 1.89%
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%# 5.26%
Portfolio Turnover Rate......... 164% 163% 296% 514% 103% 15% 34% 3% 0% 164%
<CAPTION>
11/4/93**
THROUGH
10/31/94
CLASS B
SHARES
--------
<S> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $11.98
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income........ 0.592
Net Gains or Losses in
Securities (both realized
and unrealized)............ (1.187)
--------
Total from Investment
Operations...................... (0.595)
LESS DISTRIBUTIONS
Dividends from net investment
income....................... 0.592
Distributions from capital
gains........................ 0.203
--------
Total Distributions...... 0.795
--------
Net Asset Value, End of
Period.......................... $10.59
--------
--------
Total Return(1)................. (5.18%)
RATIOS/SUPPLEMENTAL DATA*
Net Assets, End of Period (000
omitted)..................... $5,184
Ratio of Expenses to Average
Net Assets...................... 1.50%#
Ratio of Net Investment Income
to Average Net Assets........ 5.28%#
Ratio of expenses without
waivers and assumption of
expenses to Average Net
Assets....................... 1.78%#
Ratio of net investment income
without waivers and assumption
of expenses to Average Net
Assets......................... 5.00%#
Portfolio Turnover Rate......... 163%
</TABLE>
- ------------
# Short periods have been annualized.
* Commencement of operations.
** Commencement of offering of shares.
(1) Total return figures are calculated before taking into account sales load on
Class A shares or any contingent deferred sales charges on Class B shares.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with monthly dividends as well as to protect the value of its
shareholders' investment (i.e., to preserve principal).
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing in debt obligations that are backed by the "full faith and credit" of
the U.S. Government as well as by using futures contracts on fixed income
securities or indexes of fixed income securities and options on such futures
contracts for the purpose of protecting (i.e., "hedging") the value of its
portfolio. Neither the United States nor any of its agencies insures or
guarantees the market value of shares of the Fund.
The debt obligations in which the Fund's assets will be invested include:
(1) U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance, such as U.S. Treasury bills (maturity of one
year or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years); and (2)
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities if such obligations are backed by the "full faith and credit"
of the U.S. Treasury, e.g., direct pass-through certificates of the Government
National Mortgage Association ("GNMA"). For a description of such obligations,
see "Additional Information on Investment Policies and Techniques" on page 6.
Although there is no credit risk involved in the purchase of debt
obligations that are backed by the "full faith and credit" of the U.S.
Government, shares of the Fund are neither insured nor guaranteed by the U.S.
Government or its agencies or instrumentalities. MOREOVER, THE NET ASSET VALUE
OF THE SHARES OF AN OPEN-END INVESTMENT COMPANY SUCH AS THE FUND, WHICH INVESTS
IN FIXED INCOME SECURITIES, CHANGES AS THE GENERAL LEVELS OF INTEREST RATES
FLUCTUATE. WHEN INTEREST RATES DECLINE, THE VALUE OF A PORTFOLIO CAN BE EXPECTED
TO RISE. CONVERSELY, WHEN INTEREST RATES RISE, THE VALUE OF A PORTFOLIO CAN BE
EXPECTED TO DECLINE.
The Fund may invest in repurchase agreements, "when-issued" securities and
futures contracts. For a description of these types of investments, and further
information regarding the investment policies and techniques of the Fund, see
"Additional Information on Investment Policies and Techniques", on page 7. In
addition, the Statement of Additional Information includes a further discussion
of futures and option contracts to be entered into by the Fund. Although the
Fund will enter into futures and option contracts for hedging purposes only, the
use of such instruments does involve transaction costs and certain risks, which
are discussed in the Statement of Additional Information.
Shareholder approval is not required to change the Fund's investment
objective or any of the investment policies discussed above or in "Additional
Information on Investment Policies and Techniques". The Fund has, however,
adopted a policy which is fundamental and which provides that all of its 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 up to 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.
5
<PAGE>
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
The following are summaries of obligations in which the Fund may be
invested. All such obligations are backed by the full faith and credit of the
U.S. Government.
D.C. ARMORY BOARD BONDS are bonds issued by the District of Columbia Armory
Board.
EXPORT-IMPORT BANK CERTIFICATES are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank
of the United States.
FHA DEBENTURES are debentures issued by the Federal Housing Authority of the
U.S. Government.
FHA INSURED NOTES are bonds issued by the Farmers Home Administration of 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.
The Fund will purchase only GNMA Certificates of the "modified pass-through"
type, which entitle the holder to receive its proportionate share of all
interest and principal payments owed on the mortgage pool, net of fees paid to
the issuer and GNMA. Payment of principal and interest on GNMA Certificates of
the "modified pass-through" type is guaranteed by GNMA.
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 will usually
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 rates of individual mortgage pools will vary widely, it is
not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single-family dwelling mortgage with a 25- to 30-year
maturity, the type of mortgage which backs the vast majority of GNMA
Certificates, is approximately 12 years. It is therefore customary practice to
treat GNMA Certificates as 30-year, mortgage-backed securities which prepay
fully in the twelfth year.
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 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 may
result in a loss to the Fund.
6
<PAGE>
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.
GNMA FHLMC BONDS are mortgage-backed bonds issued by the Federal Home Loan
Mortgage Corporation and guaranteed by GNMA.
GNMA FNMA BONDS are mortgage-backed bonds issued by the Federal National
Mortgage Association and guaranteed by GNMA.
GSA PARTICIPATION CERTIFICATES are participation certificates issued by the
General Services Administration of 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 Secretary of Transportation of
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
Secretary of Transportation of the U.S. Government.
The list of securities set forth above does not purport to be an exhaustive
compilation of all debt obligations which are backed by the full faith and
credit of the U.S. Government. The Fund reserves the right to invest its assets
in debt obligations backed by the full faith and credit of the U.S. Government
other than those listed above.
If GNMA securities are purchased by the Fund 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 to the Fund 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. However,
the Fund does not intend to hold such securities to maturity for the purpose of
achieving potential capital gains, unless current yields on these securities
remain attractive.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be sold by the Fund,
but the Fund might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, the Fund, through its
custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been
7
<PAGE>
established for the Fund to monitor, on a daily basis, the market value of the
collateral underlying all repurchase agreements to ensure that the collateral is
at least 100% of the value of the repurchase agreements. Not more than 10% of
the total assets of the Fund will be invested in securities which are subject to
legal or contractual restrictions on resale, including securities that are not
readily marketable and repurchase agreements maturing in more than seven days.
WHEN-ISSUED OR FORWARD DELIVERY PURCHASES. The Fund may purchase new issues
of securities in which it is permitted to invest on a "when-issued" or, with
respect to existing issues, on a "forward delivery" basis, which means that the
securities will be delivered at a future date beyond the customary settlement
time. Although there is no limit as to the amount of the commitments which may
be made by the Fund to purchase securities on a "when-issued" or "forward
delivery" basis, it is expected that under normal circumstances not more than
30% of the Fund's total assets will be committed to such purchases. The Fund
does not pay for such obligations or start earning interest on them until the
contractual settlement date. Although commitments to purchase "when-issued" or
"forward delivery" securities will only be made with the intention of actually
acquiring them, these securities may be sold before the settlement date if
deemed advisable by the Adviser.
While it is not intended that such purchases would be made for speculative
purposes, purchases of securities on a "when-issued" or "forward delivery" basis
can involve more risk than other types of purchases. For example, when the time
comes to pay for a "when-issued" or "forward delivery" security, the Fund's
portfolio securities may have to be sold in order to meet payment obligations,
and a sale of securities to meet such obligations carries with it a greater
potential for the realization of capital gain, which is not tax-exempt. Also, if
it is necessary to sell the "when-issued" or "forward delivery" security before
delivery, the Fund may incur a loss because of market fluctuations since the
time the commitment to purchase the "when-issued" or "forward delivery" security
was made. Any gain resulting from any such sale would not be tax-exempt. For
additional information concerning these risks and other risks associated with
the purchase of "when-issued" or "forward delivery" securities as well as other
aspects of the purchase of securities on a "when-issued" or "forward delivery"
basis, see "Investment Objective, Policies and Restrictions--Investment
Policies: When-Issued and Forward Delivery Purchases" in the Statement of
Additional Information.
PORTFOLIO MANAGEMENT AND TURNOVER. It is intended that the portfolio of the
Fund will be fully managed by buying and selling securities, as well as holding
securities to maturity. In managing the portfolio of the Fund, the Adviser seeks
to take advantage of market developments, yield disparities and variations in
the creditworthiness of issuers. For a description of the strategies that may be
used by the Adviser in managing the portfolio of the Fund, which may include
adjusting the average maturity of a portfolio in anticipation of a change in
interest rates, see "Investment Objectives, Policies and
Restrictions--Investment Policies: Portfolio Management" in the Statement of
Additional Information.
Generally, the primary consideration in placing portfolio securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. For a complete discussion of portfolio transactions
and brokerage allocation, see "Investment Objectives, Policies and
Restrictions--Investment Policies; Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit
8
<PAGE>
issued by financial institutions. Such collateral will be maintained at all
times in an amount equal to at least 100% of the current market value of the
securities loaned. The Fund can increase its income through the investment of
such collateral. The Fund continues to be entitled to the interest payable or
any dividend-equivalent payments received on a loaned security and, in addition,
receive interest on the amount of the loan. However, the receipt of any
dividend-equivalent payments by the Fund on a loaned security from the borrower
will not qualify for the dividends-received deduction. Such loans will be
terminable at any time upon specified notice. The Fund might experience risk of
loss if the institutions with which it has engaged in portfolio loan
transactions breach their agreements with the Fund. 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
Adviser to be of good standing and will not be made unless, in the judgment of
the Adviser, the consideration to be earned from such loans justifies the risk.
FUTURES AND OPTIONS TRANSACTIONS. The Fund may invest its assets in
derivative and related instruments subject only to the Fund's investment
objective and policies and the requirement that, to avoid leveraging the Fund,
the Fund 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.
The value of some derivatives or related instruments in which the Fund
invests may be particularly sensitive to changes in the prevailing interest
rates or other economic factors, and--like other investments of the Fund--the
ability of a Fund to successfully utilize these instruments may depend in part
upon the ability of the Adviser to forecast interest rates and other economic
factors correctly. If the Adviser incorrectly forecasts such factors and has
taken positions in derivative or related instruments contrary to prevailing
market trends, the Fund could be exposed to the risk of a loss. The Fund might
not employ any or all of the instruments described herein, and no assurance can
be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
. purchase, write and exercise call and put options on securities
(including using options in combination with securities, other options or
derivative instruments):
. enter into futures contracts and options on futures contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the Fund and the hedging vehicle so that the portfolio return
might have been greater had hedging not been attempted.
. The Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
9
<PAGE>
. 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 the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract,
no trades may be made that day at a price beyond that limit. In addition,
certain instruments are relatively new and without a significant trading
history. As a result, there is no assurance that an active secondary market
will develop or continue to exist.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of futures contracts and options thereon,
including certain percentage limitations on the use of such instruments, see
"Investment Objectives, Policies and Restrictions--Investment Policies:
Additional Policies Regarding Futures and Options Transactions, Risk Factors
Associated with Futures and Options Transactions, and Restrictions on the Use of
Futures and Options Contracts" in the Statement of Additional Information.
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE><CAPTION>
CONTINGENT DISTRIBUTION
INITIAL DEFERRED AND OTHER
SALES CHARGE SALES CHARGE SERVICE FEES INFORMATION
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Class A Maximum of 4.50% None Distribution Fee Initial Sales
of public of 0.25%; Charge reduced
offering price Service Fee of in certain
0.25% circumstances.
Class B None Maximum contingent Distribution Fee Shares convert to
deferred sales of 0.75%; Class A shares,
charge of 5% of Service Fee of and thus pay
redemption 0.25% lower
proceeds distribution
declines to 0% fees, in the
after 6 years eighth year
after issuance
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
10
<PAGE>
SALES CHARGES Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.50% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gain distributions. 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.
REDUCTIONS OF CLASS A SALES CHARGES As explained more fully in "Purchases
and Redemptions of Shares," certain purchases of Class A shares in amounts
exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES Class A and Class B each have an annual shareholder
servicing fee of 0.25% of average daily net assets. Class A has an annual
distribution fee under Rule 12b-1 of 0.25% of its average daily net assets,
while Class B has an annual distribution fee under Rule 12b-1 of 0.75% of its
average daily net assets. Moreover, other operating expenses borne by each class
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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT OF THE FUND
THE ADVISER
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") manages the assets
of the Fund pursuant to an Investment Advisory Agreement dated August 19, 1987.
Subject to such policies as the Board of Trustees may determine, the Adviser
makes investment decisions for the Fund. Alex Powers, Vice President of the
Adviser, is responsible for the day-to-day management of the Vista U.S.
Government Income Fund and the fixed-income trading for the Vista Balanced Fund.
He also manages various individual and institutional accounts. Mr. Powers is
part of a team responsible for fixed-income strategy, research and trading
within 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. For its services under the Investment Advisory
Agreement, the Adviser is entitled to receive an annual fee computed daily and
paid monthly based at an annual rate equal to 0.30% of the Fund's average daily
11
<PAGE>
net assets. The Adviser may, from time to time, voluntarily waive all or a
portion of its fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other
12
<PAGE>
investment companies sponsored by the Distributor or affiliates of the
Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser, including the division that performs services for the
Fund as Custodian, or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989, as
amended September 30, 1993 (the "Administration Agreement"), Chase serves as
administrator of the Fund. The Administrator provides certain administrative
services, including, among other responsibilities, coordinating relationships
with independent contractors and agents; preparing for signature by officers and
filing of certain documents required for compliance with applicable laws and
regulations excluding those of the securities laws of the various states;
preparing financial statements; arranging for the maintenance of books and
records; and providing office facilities necessary to carry out the duties
thereunder. The Administrator receives from the Fund a fee computed daily and
paid monthly at an annual rate equal to 0.10% of the Fund's average daily net
assets. The Administrator may, from time to time, voluntarily waive all or a
portion of its fees payable to it under the Administration Agreement. The
Administrator shall not have any responsibility or authority for the Fund's
investments, the determination of investment policy, or for any matter
pertaining to the distribution of Fund shares.
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund, as described below, without
violating the federal banking law commonly known as the Glass-Steagall Act. The
Act generally bars banks from publicly underwriting or distributing certain
securities.
Based on the advice of its counsel, Chase believes that the Court's decision
and other decisions of federal banking regulators permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and render the services described below and
as set forth in the shareholder servicing agreement and Custodian Agreement, as
an appropriate, incidental national banking function and as a proper adjunct to
its serving as investment adviser and administrator to the Fund.
13
<PAGE>
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. Chase, on the
advice of its counsel believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the transfer to a new adviser, shareholder
servicing agent, custodian or administrator could be accomplished without undue
disruption to the Fund's operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge.
Class B shares of the Fund are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares in the eighth year after issuance. See "Variable
Distribution Method."
Both classes of shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time) on each business day during which the Exchange is open for trading ("Fund
Business Day"). (See "Other Information Concerning Shares of the Fund-Net Asset
Value"). The public offering price of Class A shares is the next determined net
asset value, plus applicable initial sales charge. Orders received by Dealers
prior to the New York Stock Exchange closing time are confirmed at the
applicable offering price effective at the close of such Exchange, provided the
order is received by the Transfer Agent prior to its close of business. Dealers
are responsible for forwarding orders for the purchase of shares on a timely
basis. Fund shares normally will be maintained in book entry form and only Class
A share certificates will be issued upon request. Management reserves the right
to refuse to sell shares of the Fund to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
14
<PAGE>
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ----------------------------------------------- --------------------------
Individual.................................... $2,500(1)
Individual Retirement Account (IRA)........... $1,000(2)
Spousal IRA................................... $ 250
SEP-IRA....................................... $1,000(2)
Purchase Accumulation Plan.................... $ 250(3)
Payroll Deduction Program (401K, 403B,
Keogh). ...................................... $ 100(4)
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment
15
<PAGE>
Plan at any time by sending a signal letter with signature guarantee to the
Vista Service Center, P.O. Box 419392, Kansas City, MO 64141-6392. The letter
should contain your Vista Fund account number, the desired amount and cycle of
the systematic investment, and must include a voided check from the checking
account from which debits are to be made. A signature guarantee may be obtained
from a bank, trust company, broker-dealer or other member of the national
securities exchange. Please note that a notary public cannot provide signature
guarantees.
INITIAL SALES CHARGES --CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value, plus any applicable initial sales charge, which will vary with the size
of the purchase as shown in the following table:
CONCESSION
SALES CHARGE TO DEALERS
-------------------- -----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------ -------- -------- -----------
Less than $100,000........................ 4.50 4.71 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 0.75
$2,500,000 to $9,999,999.................. -- -- 0.50
$10,000,000 to $49,999,999................ -- -- 0.25
$50,000,000 and over...................... -- -- 0.15
The initial sales charge on Class A shares varies with the size of the
purchase of Class A share as shown above. The reduced charges apply to the
aggregate of purchases of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from it own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For the three-year period commencing July 19,
1993, for activities in maintaining and servicing accounts of customers invested
in the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are in
such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares, 4.00%, and that portion paid to selling group member broker-
dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are
16
<PAGE>
expected to sell significant amounts of the Fund or other Funds in the Trust. At
various times the Distributor may implement programs under which a Dealer's
sales force may be eligible to win cash or awards for certain sales efforts or
under which the Distributor will reallow an amount not exceeding the total
applicable initial sales charges on the sales of Class A shares or the Maximum
Contingent Deferred Sales Charge of Class B shares generated by the Dealer
during such programs to any Dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Distributor or participates
in sales programs sponsored by the Distributor. The Distributor may provide
marketing services to Dealers with whom it has sales agreements, consisting of
written informational material relating to sales incentive campaigns conducted
by such Dealers for their representatives.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, provided there is
no change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or employees
(including their spouses, children, siblings and parents) of the Adviser,
Distributor, Transfer Agency or any affiliates or subsidiaries thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares of the
Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the Fund
serves as Trustee or custodian of the plan or manages some portion of the plan's
assets.
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<PAGE>
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. 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,
including but not limited to those defined in action 401(a), 403(b) or 457 of
the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transaction through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of shares of the Fund may be made with no initial sales charge in
accounts opened by a bank, trust company or thrift institution which is acting
as a fiduciary (i.e., exercises investment authority with respect to such
accounts), provided that appropriate notification of such fiduciary relationship
is reported at the time of the investment to the Fund, the distributor or the
Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
The Fund reserves the right to cease offering Class A shares for sale at any
time or to reject any order for the purchase of Class A shares and to cease
offering any services provided by a Shareholder Servicing Agent.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
"any person" at a reduced sales charge which is determined by (a) aggregating
the dollar amount of the new purchase and the greater of the purchaser's total
(i) net asset value or (ii) cost of any shares acquired and still held in the
Fund, or any other Vista Fund, including any Vista money market Fund acquired by
exchange for which a sales charge had been incurred and (b) applying the initial
sales charge applicable to such aggregate dollar value. The privilege of the
cumulative quantity discount is subject to modification or discontinuance at any
time with respect to all Class A shares purchased thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75% on the $15,000 purchase. In order to obtain such
discount, the purchaser or investment dealer must provide the Transfer Agent
with sufficient information, including the purchaser's total cost, at the time
of purchase to permit verification that the purchaser qualifies for a cumulative
quantity discount, and confirmation of the order is subject to such
verification. Information
18
<PAGE>
concerning the current initial sales charge applicable to a group may be
obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Fund and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced initial sales charges by signing a Statement of Intention (the
"Statement"). This enables the investor to aggregate purchases of Class A shares
in the Fund with purchases of Class A shares of any other fund in the Trust (or
if a fund has only one class, shares of such fund), including shares of any
Vista money market fund acquired by exchange, during a 13-month period. The
sales charge is based on the total amount to be invested in Class A shares
during the 13-month period. All Class A or other qualifying shares of these
Funds currently owned by the investor will be credited as purchases (at their
current offering prices on the date the Statement is signed) toward completion
of the Statement. A 90-day back-dating period can be used to include earlier
purchases at the investor's cost. The 13-month period would then begin on the
date of the first purchase during the 90-day period. No retroactive adjustment
will be made if purchases exceed the amount indicated in the Statement. A
SHAREHOLDER MUST NOTIFY THE TRANSFER AGENT OR DISTRIBUTOR WHENEVER A PURCHASE IS
BEING MADE PURSUANT TO A STATEMENT.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See
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"Exchange Privilege." In addition, Class B shareholders who have redeemed Class
B shares and paid a contingent deferred sales charge in connection with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not exceeding the redemption proceeds) if the purchase occurs within 30
days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF NET
REDEMPTION DURING ASSET VALUE AT REDEMPTION
- ------------------------------------------- ------------------------------
1st Year Since Purchase.................... 5%
2nd Year Since Purchase.................... 4%
3rd Year Since Purchase.................... 3%
4th Year Since Purchase.................... 3%
5th Year Since Purchase.................... 2%
6th Year Since Purchase.................... 1%
7th Year Since Purchase.................... 0%
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a redemption is made first of Class B
shares representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time.
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (ii) a redemption in connection with a Minimum
Required Distribution from an IRA,
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Keogh or custodial account under section 403(b) of the Internal Revenue Code;
(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, as described on page 22; (iv) distributions from a qualified plan upon
retirement; (v) a redemption resulting from an over-contribution to an IRA; and
(vi) a redemption of an account balance under $500, as described on page 22.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth year after the date of purchase,
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares. The conversion will
be effected at the relative net asset values per share of the two classes on the
first business day of the month following the seventh anniversary of the
original purchase occurs. If any exchanges of Class B shares during the
eight-year period occurred, the holding period for the shares exchanged will be
counted toward the eight-year 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.
The Fund reserves the right to cease offering Class B shares for sale at any
time or reject any order for the purchase of Class B shares and to cease
offering any services provided by a Servicing Agent.
For further information as to how to direct a Shareholder Servicing Agent to
purchase shares of the Fund, an investor should contact his Shareholder
Servicing Agent.
Due to the conversion feature of Class B shares, certificates will not be
issued and all shares will be held in book entry form.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent subject to any
applicable contingent deferred sales charge for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
shares by authorizing his Shareholder Servicing Agent, Dealer or its agent to
redeem such shares, which the Shareholder Servicing Agent, Dealer or its agent
must do on a timely basis. The signature of both shareholders is required for
any written redemption requests from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
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<PAGE>
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") committing it to pay
in cash all redemptions by a shareholder of record up to the amounts specified
by the rule (approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of at least $100
from his account. A sufficient number of full and fractional Class A shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS AT LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
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<PAGE>
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds
which has a similar class of shares, respectively in accordance with the terms
of the then current prospectus of the Fund being acquired. No initial sales
charge is imposed on the Class A shares being acquired, and no contingent
deferred sales charge is imposed on the Class B shares being redeemed, through
an exchange. However, contingent deferred sales charges may apply to redemptions
of Class B shares acquired through an exchange. 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. Under the Exchange Privilege,
shares of the Fund may be exchanged for shares of such other Vista Funds only if
those Funds and their shares are registered in the states where the exchange may
legally be made. Shares of the Fund may only be exchanged into the same class of
another Vista Fund and only if the account registrations are identical.
With respect to exchanges from any Vista money market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
money market funds will be done at relative net asset value plus the appropriate
sales charge. An exchange of Class B shares into any of the Vista money market
Funds other than the Class B shares of the Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
contingent deferred sales charge--and a subsequent purchase. Class B shares of
any Vista non-money market Fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares while maintaining a stable net asset value. This exchange will
not be treated as a redemption and will not be subject to a Contingent Deferred
Sales Charge unless those shares are later redeemed. The Class B shares of the
Prime Money Market Fund carry the same Distributor and Sub-Administration Fee,
and Shareholder and Fund Servicing Fee as the Class B shares of the non-money
market Funds. Redemption of shares acquired through an exchange will be subject
to the applicable contingent deferred sales charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
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<PAGE>
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such reasonable procedures, it may be liable for losses due to
unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the procedures that have been established for Fund accounts
and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
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<PAGE>
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes, but
do not qualify for the dividends-received deduction for corporations.
Distributions by the Fund of the excess, if any, of its net long-term capital
gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time a shareholder has held his shares.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends and capital gains dividends, will be sent to the Fund's shareholders
promptly after the end of each year.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund.
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<PAGE>
Generally, shareholders are subject to backup withholding if they have not
provided the Fund with a correct taxpayer identification number and certain
required certifications.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Ordinary income dividends and capital gain dividends from the Fund are
subject to federal income tax as discussed above, and may also may be subject to
state and local taxes. The laws of some states and localities, however, exempt
from some taxes dividends such as those paid on shares of the Fund to the extent
such dividends are attributable to interest from obligations of the U.S.
Government and certain of its agencies and instrumentalities. The Fund intends
to advise its shareholders of the portion of their ordinary income dividends
which are attributable to such interest.
The State of New York, for example, exempts from its personal income tax
dividends such as those paid on shares of the Fund to the extent such dividends
are attributable to interest from obligations of the U.S. Government and certain
of its agencies and instrumentalities, provided that at least 50% of the Fund's
portfolio consists of such obligations and the Fund complies with certain notice
requirements. The New York State Department of Taxation and Finance (like most
other states) currently takes the position, however, that certain obligations
backed by the full faith and credit of the U.S. Treasury, such as GNMA
Certificates, and repurchase agreements backed by any U.S. Government
obligation, do not constitute exempt obligations of the U.S. Government. Under
present market conditions, it is expected that less than 50% of the Fund's
portfolio will consist of obligations which the New York State Department of
Taxation and Finance views as exempt. Accordingly, no portion of dividends paid
on shares of the Fund will be exempt from New York State personal income tax.
Shareholders are urged to consult their tax advisers regarding the possible
exclusion from state and local income tax of a portion of the dividends paid on
shares of the Fund which is attributable to interest from obligations of the
U.S. Government and its agencies and instrumentalities.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class B shares to Class A shares.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of a class of shares of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time, however, options are priced at 4:15 p.m.) on each Fund Business
Day, by deducting the amount of the Fund's liabilities from the value of its
assets and dividing the difference by the number of its shares outstanding.
Values of assets in the Fund's portfolio are determined on the basis of their
market or other fair value, as described in the Statement of Additional
Information. A share's net asset value is effective for orders received by a
Shareholder Servicing Agent prior to its calculation and received by the
Distributor prior to the close of
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<PAGE>
business, usually 4:00 p.m. Eastern time, on the Fund Business Day on which such
net asset value is determined.
The per share net asset value of Class B shares of the Fund will generally
be lower than that of the Class A shares because of the higher expenses borne by
the Class B shares.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends are declared daily and paid monthly. The net investment
income consists of the interest income earned on the assets of the Fund, less
expenses. The Fund will distribute its net realized short-term or long-term
capital gains, if any, to its shareholders at least annually. 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, and certain other expenses,
borne by the Class B shares.
The Fund intends to make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLANS AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted Distribution Plans (the "Distribution Plans") for
both Class A and Class B shares in accordance with Rule 12b-1 under the 1940
Act, after having concluded that there is a reasonable likelihood that the
Distribution Plans for each class will benefit that class and its respective
shareholders.
The Class A Distribution Plan provides that the Fund shall pay distribution
fees, including payments to the Distributor, at an annual rate not to exceed
0.20% of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees including
payments to the Distributor, at an annual rate not to exceed 0.75% of its
average annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in amounts not to exceed 0.20% 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 the Fund by such broker-dealers'
customers. Trail or maintenance commissions on Class B shares will be paid to
Broker-Dealers beginning in 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 the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plan. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
compensation is directly linked to its expenses). 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
27
<PAGE>
commissions attributable to sales of Class B shares in any one year will be
accrued and paid by the Fund to the Distributor in fiscal years subsequent
thereto. In determining whether to purchase Class B shares, investors should
consider that daily compensation payments could continue until the Distributor
has been reimbursed for the commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
Under its Distribution Plan, the Class A shares are also permitted to pay an
additional fee at an annual rate not to exceed 0.05% of its average daily net
assets 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 assets.
The Distribution and Sub-Administration Agreement dated April 2, 1990, as
amended June 1, 1990 and September 30, 1993 (the "Distribution Agreement"),
provides that the Distributor will act as the principal underwriter of the
Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plans. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The expenses each of the Funds of the Trust include the compensation of its
Trustees; registration fees; interest charges; taxes; fees and expenses of
independent accountants, of legal counsel and of any transfer agent, custodian,
registrar or dividend disbursing agent of the Trust; insurance premiums; and
expenses of calculating the net investment asset value of, and the net income
on, the shares of the Fund.
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular
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class and the preparation, printing and mailing of prospectuses for such
purposes (except that the Distribution and Sub-Administration Agreement requires
the Distributor to pay for prospectuses which are to be used for sales to
prospective investors).
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because the Fund is "non-diversified", more of the assets
of the Fund may be concentrated in the securities of any single issuer than if
the Fund was "diversified", which may make the value of the shares in a fund
more susceptible to certain risks than shares of a diversified mutual fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class including Class A and Class B,
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. Shares
of Class A and Class B generally vote separately, for example to approve
distribution plans, but vote together, to the extent required under the 1940
Act, in the election or selection of Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B or of all series or
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class,
including Class A and Class B, would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of the Fund or that series or Class.
The Trust reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series).
29
<PAGE>
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) quarterly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Fund, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Fund; receive, tabulate and transmit to
the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder Servicing Agents may be required to
register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liaison to shareholders and providing personal services to
shareholders will not exceed, on an annual basis, 0.25% of the average daily net
assets of each class of the Fund represented by shares owned during the period
for which payment is being made by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship. Each Shareholder Servicing Agent may,
from time to time, voluntarily waive all or a portion of the fees payable to it.
In addition, Chase may provide other related services to the Fund for which it
may receive compensation.
30
<PAGE>
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A or Class B shares, receive
dividends and distributions on Fund investments, and take advantage of any
services related to an Account offered by such Shareholder Servicing Agent from
time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
31
<PAGE>
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Vista Service Center for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc., or
the Morningstar Mutual Funds on Disc, widely recognized independent services
which monitor the performance of mutual funds. Performance and yield data as
reported in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in the
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares the average annual total rate of return will assume payment of
the maximum initial sales load at the time of purchase. For Class B shares, the
average annual total rate of return figures will assume deduction of the
applicable contingent deferred sales charge imposed on a total redemption of
shares held for the period. One-, five- and ten-year periods will be shown,
unless the Class has been in existence for a shorter period.
The Fund may provide "yield" quotations in addition to total rate of return
quotations. The "yield" quotations of the Fund will be based upon a hypothetical
net investment income earned by the Fund over a thirty day or one month period
(which period shall be stated in any advertisement or communication with a
shareholder). The "yield" is then "annualized" by assuming that the income
generated over the period will be generated over a one year period. A "yield"
quotation, unlike a total rate of return quotation, does not reflect changes in
net asset value.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of classes of shares
the Fund will vary based on interest rates, the current market value of the
securities held in the Fund's portfolio and changes in the Fund's expenses. The
Adviser, the Shareholder Servicing Agent, the Administrator or the Distributor
have all voluntarily
32
<PAGE>
agreed to waive a portion of its fees on a month-to-month basis. In addition,
the Distributor may assume a portion of the Fund's operating expenses on a
month-to-month basis. These actions have the effect of increasing the net income
(and therefore the yield and total rate of return) of the Fund classes of shares
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 the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the yields or
total rates of return quotations for the classes of shares of the Fund.
The Fund generally will include performance data for both classes of Fund
shares in any advertisements or promotional materials including Fund performance
data.
OTHER INFORMATION
The net asset value of shares of the Fund changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a portfolio
invested at higher yields can be expected to rise. Conversely, when interest
rates rise, the value of a portfolio invested at lower yields can be expected to
decline. Although changes in the value of the portfolio securities of the Fund
subsequent to their acquisition are reflected in the Fund's net asset values,
such changes will not affect the income received by the Fund from such
securities. Debt securities with longer maturities such as those intended for
investment by the Fund generally tend to produce higher yields and are subject
to greater market fluctuation as a result of changes in interest rates than debt
securities with shorter maturities. Since available yields vary over time, no
specific level of income can ever be assured. The dividends paid on shares of
the Fund will increase or decrease in relation to the income received by the
Fund from its investments, which will in any case be reduced by the Fund's
expenses before being distributed to its shareholders.
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
Administrator and the Adviser, (iv) portfolio transactions, (v) the Funds'
shares, including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or total
rate of return quotations of the Fund.
33
<PAGE>
PROSPECTUS
VISTA(SM) BALANCED FUND
March 1, 1996
VISTA BALANCED FUND (the "Fund") seeks to provide its shareholders with
maximum total return through a combination of long-term growth of capital and
current income by investing in a diversified portfolio of equity and debt
securities, including common stocks, convertible securities and government and
corporate fixed-income obligations. Under normal market conditions, between
35%-70% of the Fund's total assets will be invested in common stocks and other
equity investments and at least 25% of the Fund's assets will be invested in
fixed-income senior securities, defined for this purpose to include
non-convertible corporate debt securities and preferred stock, and government
obligations. The Adviser considers both the opportunity for gain and the risk of
loss in making investments, and may alter the relative percentages of assets
invested in equity and fixed income securities from time to time, depending on
the judgment of the Adviser as to general market and economic conditions, trends
and yields and interest rates and changes in fiscal monetary policies. The Fund
is a diversified series of Mutual Fund Group (the "Trust"), an open-end
management investment company organized as a business trust under the laws of
the Commonwealth of Massachusetts on May 11, 1987, presently consisting of 15
separate series (the "Funds").
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective, Policies
and Risk Consideration" in this Prospectus. Investors should also refer to
"Additional Information on Investment Policies and Techniques" on page 6.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's investment
adviser, custodian (the "Custodian") and administrator (the "Administrator").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 10. Vista Broker-Dealer Services, Inc. ("VBDS") is
the Fund's distributor and is unaffiliated with Chase. INVESTMENTS IN THE FUND
ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE
NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Class B shares, each with a public offering price that reflects
different sales charges and expense levels. Class A shares are offered at net
asset value plus the applicable sales charge (maximum of 4.50% of public
offering price). Class B shares are offered at net asset value without an
initial sales charge, with a maximum contingent deferred sales charge of 5% of
redemption proceeds imposed on certain redemptions made within six years of the
date of purchase. This charge will decline to zero for redemptions more than six
years after initial purchase. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert into Class A shares in the eighth year
after purchase. Salespersons and any other person entitled to receive
compensation for selling or servicing shares of the Fund may receive different
compensation with respect to one particular class of shares over another in the
Fund.
For more information on the differences in these classes, see "Variable
Distribution Method," "Purchases and Redemptions of Shares" and "Conversion of
Class B Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the Statement of Additional Information without
charge by contacting his or her Shareholder Servicing Agent, the Distributor, or
the Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund, simply call the Vista Service Center at the
following toll-free number: 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary............................................... 3
Financial Highlights.......................................... 4
Investment Objective, Policies and Risk Consideration......... 5
Additional Information on Investment Policies and Techniques.. 6
Variable Distribution Method.................................. 9
Management of the Fund........................................ 10
Purchases and Redemptions of Shares........................... 12
Tax Matters................................................... 23
Other Information Concerning Shares of the Fund............... 24
Shareholder Servicing Agents, Transfer Agent and Custodian.... 28
Yield and Performance Information............................. 29
Appendix A--Description of Ratings............................ A-1
2
<PAGE>
EXPENSE SUMMARY
<TABLE>
<CAPTION>
CLASS A CLASS B
------- -------
<S> <C> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Initial Sales Charge Imposed on Purchases (as a percentage of
offering price)*......................................................... 4.50% None
Maximum Sales Charge Imposed on Reinvested Dividends...................... None None
Exchange Fee.............................................................. None None
Maximum Contingent Deferred Sales Charge (as a percentage of
redemption proceeds)+.................................................... None 5.00%
AS A PERCENTAGE OF
ANNUAL FUND OPERATING EXPENSES NET ASSETS
-------------------
Investment Advisory Fee (After waivers of fees)........................... .12% .12%
Rule 12b-1 Distribution Plan Fee (After waivers of fees)++................ .20% .75%
Administration Fee (After waiver of fees)................................. .03% .03%
Other Expenses (After waiver of fees and reimbursement of expenses)
--Sub-administration Fee................................................. .05% .05%
--Shareholder Servicing Fee.............................................. .05% .25%
--Other Operating Expenses+++............................................ .80% .80%
Total Fund Operating Expenses............................................. 1.25% 2.00%
</TABLE>
EXAMPLE:
You would pay the following expenses on a $1,000 invested in the Fund,
assuming a 5% annual rate of return:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1)............................................... $57 $83 $111 $189
Class B Shares:
Assuming complete redemption at end of period(2)(3)............. 72 96 131 204
Assuming no redemption(3)....................................... 20 63 108 204
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may
pay more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.50% intitial
sales charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of eighth year.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee,
shareholder servicing fee and other operating expenses expected to be incurred
by the Fund after waiver of fees. Fees are waived on a month-to-month basis.
Absent such waivers, the annual investment advisory fee, distribution plans fee,
administrative fee, sub-administrative fee and shareholder servicing fee for the
Fund would be 0.50%, 0.25% (0.75% for Class B shares), 0.10%, 0.05% and 0.25%. A
more complete description of the Fund's expenses, including any potential fee
waivers, is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE ASSUMES ALL DIVIDENDS AND OTHER DISTRIBUTIONS
ARE REINVESTED AND THAT THE PERCENTAGES UNDER "ANNUAL FUND OPERATING EXPENSES"
REMAIN THE SAME IN THE YEARS SHOWN. THE "EXAMPLE" SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN SHOWN. THE ACTUAL EXPENSES INCURRED AND ATTRIBUTABLE TO
EACH CLASS OF SHARES WILL DEPEND ON SEVERAL FACTORS, INCLUDING THE LEVEL OF
AVERAGE NET ASSETS AND THE EXTENT TO WHICH A CLASS INCURS VARIABLE EXPENSES,
SUCH AS TRANSFER AGENCY COSTS.
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 the 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 Statement of
Additional Information. 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>
YEAR YEAR 11/4/92* YEAR 11/4/93**
ENDED ENDED THRU ENDED THROUGH
10/31/95 10/31/94 10/31/93 10/31/95 10/31/94
CLASS A SHARES CLASS B SHARES
----------------------------------------- ------------------------
<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 Income to Average
Net Assets#.................... 3.48% 3.21% 3.87% 2.68% 2.46%
Ratio of expenses without
waivers and assumption of
expenses#......................... 2.20% 2.20% 3.07% 2.72% 2.69%
Ratio of net investment income
without waivers and assumption
of expenses#...................... 2.34% 1.59% 0.80% 1.78% 1.24%
Portfolio 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.
4
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATION
INVESTMENT OBJECTIVES -- The primary investment objective of the Fund is to
maximize total return through a combination of long-term growth of capital and
current income.
INVESTMENT POLICIES -- The Fund seeks to achieve this objective through a
policy of diversified investments in equity and debt securities, including
common stocks, convertible securities and government and corporate fixed-income
obligations. The Adviser considers both the opportunity for gain and the risk of
loss in making investments, and may alter the relative percentages of assets
invested in equity and fixed income senior securities from time to time,
depending on the judgment of the Adviser as to general market and economic
conditions, trends and yields and interest rates and changes in fiscal monetary
policies.
Under normal market conditions, between 35%-70% of the Fund's total assets
will be invested in common stocks and other equity investments (which consists
of preferred stocks, convertible debt, warrants and other securities convertible
into or exchangeable for common stocks). The majority of the Fund's common
stocks and other equity investments will be invested in well-known and
established companies with a market capitalization of at least $200 million and
be traded on established securities markets or over-the-counter.
In addition, at least 25% of the Fund's assets will be invested in
fixed-income senior securities, defined for this purpose to include
non-convertible corporate debt securities and preferred stock, and government
obligations. The average maturity of these investments will vary from time to
time depending on the Adviser's assessment of the relative yields available on
securities of different maturities. It is currently anticipated that the average
maturity of the fixed income securities in the Fund's portfolio will be between
two and fifteen years under normal market conditions. Non-convertible corporate
debt obligations held in the Fund's portfolio will be rated, at the time of
purchase, BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or
higher by Moody's Investor Service, Inc. ("Moody's") or, if unrated, determined
to be of comparable quality by the Adviser under criteria approved by the Board
of Trustees. Bonds rated BBB by S&P or Baa by Moody's may possess speculative
characteristics and may be sensitive to changes in the economy and the financial
condition of issuers.
The Fund may also purchase obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and may invest in high quality
short-term debt securities such as commercial paper rated A-1 by S&P or P-1 by
Moody's.
THE NET ASSET VALUE OF THE FUND WILL FLUCTUATE BASED ON THE VALUE OF THE
SECURITIES IN ITS PORTFOLIO.
The Fund normally will be substantially fully invested. However, the Fund
reserves the right to invest up to 100% of its assets in cash, cash equivalents,
high quality short-term money market instruments, and in bills, notes or bonds
issued by the U.S. Treasury Department or by other agencies of the U.S.
Government for temporary defensive purposes during periods that the Adviser
considers to be unsuitable for the Fund's normal investment strategies.
The Fund may write covered call options on its equity securities for the
purpose of hedging its portfolio. "Additional Information on Investment Policies
and Techniques" contains a more complete description of option contracts, as
well as further information concerning the investment policies and techniques of
the Fund. In addition, the Statement of Additional Information includes a
further discussion of option contracts to be entered into by the Fund. Although
the Fund will enter into option
5
<PAGE>
contracts for hedging purposes only, the use of such instruments does involve
transaction costs and certain risks, which are discussed in the Statement of
Additional Information.
Shareholder approval is required to change the Fund's investment objectives
which are considered to be fundamental. However, shareholder approval is not
required to change any of the investment policies described above or in
"Additional Information on Investment Policies and Techniques".
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Fund are not invested in common stocks, they
will consist of or be invested in cash, cash equivalents, high quality
short-term money market instruments, and in bills, notes or bonds issued by the
U.S. Treasury Department or by other agencies of the U.S. Government, as
described under "Investment Objective, Policies and Restrictions" in the
Statement of Additional Information, and in repurchase agreements, as described
below and in greater detail under "Investment Objective, Policies and
Restrictions" in the Statement of Additional Information.
The Fund may invest up to 20% of its assets in sponsored American Depositary
Receipts, which are U.S. exchange listed interests in securities of foreign
companies, and in debt and equity securities issued by foreign corporate and
government issuers when the Adviser believes that such investments provide good
opportunities for achieving income and capital gains without undue risk. These
securities may represent a greater degree of risk (e.g., risk related to
exchange rate fluctuation, tax provisions, war or expropriation) than do
securities of domestic issuers.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment
objectives of the Fund will be achieved.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be sold by the Fund,
but the Fund might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, the Fund, through its
custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been established for the
Fund to monitor, on a daily basis, the market value of the collateral underlying
all repurchase agreements to ensure that the collateral is at least 100% of the
value of the repurchase agreements. Not more than 15% of the total assets of the
Fund will be invested in securities which are subject to legal or contractual
restrictions on resale, including securities that are not readily marketable and
repurchase agreements maturing in more than seven days. The purchase by the Fund
of securities subject to legal or contractual restrictions on resale may involve
additional risks and costs otherwise not incurred in connection with purchases
of securities without such restrictions. This limitation may be subject to
additional restrictions imposed by jurisdictions in which the Fund's shares are
offered for sale. See "Investment Restrictions" in the Statement of Additional
Information.
PORTFOLIO MANAGEMENT AND TURNOVER. It is not intended that the assets of the
Fund will be invested in securities for the purpose of short-term profits.
However, the Fund will dispose of portfolio
6
<PAGE>
securities whenever the Adviser believes that changes are appropriate.
Generally, the primary consideration in placing portfolio securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. It is anticipated that the annual portfolio turnover
rate for both the equity and fixed-income portions of the Fund's portfolio will
be approximately 100%. For a complete discussion of portfolio transactions and
brokerage allocation, including the Fund's overall portfolio turnover rate, the
turnover rate for the portion of the Fund's portfolio consisting of common stock
and the turnover rate for the portion of the Fund's portfolio consisting of
non-equity investments, see "Investment Objectives, Policies and
Restrictions--Investment Policies: Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned. The Fund
can increase its income through the investment of such collateral. The Fund
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the Fund on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their agreements
with the Fund. 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 Adviser to be of good standing and will not
be made unless, in the judgment of the Adviser, the consideration to be earned
from such loans justifies the risk.
FUTURES AND OPTIONS. The Fund may invest its assets in derivative and
related instruments subject only to the Fund's investment objective and policies
and the requirement that, to avoid leveraging the Fund, the Fund 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.
The value of some derivatives or related instruments in which the Fund
invests may be particularly sensitive to changes in the prevailing interest
rates or other economic factors, and--like other investments of the Fund--the
ability of the Fund to successfully utilize these instruments may depend in part
upon the ability of the Adviser to forecast interest rates and other economic
factors correctly. If the Adviser incorrectly forecasts such factors and has
taken positions in derivative or related instruments contrary to prevailing
market trends, the Fund could be exposed to the risk of a loss. The Fund might
not employ any or all of the instruments described herein, and no assurance can
be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
- 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);
7
<PAGE>
- enter into futures contracts and options on futures contracts;
- purchase and sell mortgage-backed and asset-backed securities; and
- purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
- 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. Incorrect correlation could result in a loss on both the hedged
assets in the Fund 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
- Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains.
- Strategies not involving hedging may increase the risk to the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
- There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract,
no trades may be made that day at a price beyond that limit. In addition,
certain instruments are relatively new and without a significant trading
history. As a result, there is no assurance that an active secondary market
will develop or continue to exist.
- Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
- In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of options contracts, including certain
percentage limitations on the use of such instruments, see "Investment
Objective, Policies and Restrictions--Investment Policies: Additional Policies
Regarding Options Transactions, Risk Factors Associated with Options
Transactions, and Restrictions on the Use of Options Contracts" in the Statement
of Additional Information.
8
<PAGE>
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE><CAPTION>
INITIAL CONTINGENT DEFERRED DISTRIBUTION AND
SALES CHARGE SALES CHARGE SERVICE FEES OTHER INFORMATION
------------ -------------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Class A......... Maximum of None Distribution Fee Initial Sales Charge
4.50% of of 0.25%; reduced in certain
public Service Fee of circumstances
offering 0.25%
price
Class B......... None Maximum contingent Distribution Fee Shares convert to
deferred sales of 0.75%; Class A shares, and
charge of 5% of Service Fee of thus pay lower
redemption proceeds 0.25% distribution fees,
declines to 0% after in the eighth year
6 years after issuance
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
SALES CHARGES -- Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.50% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gains distributions. 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.
REDUCTIONS OF CLASS A SALES CHARGES -- As explained more fully in "Purchases
and Redemptions of Shares," certain purchases of Class A shares in amounts
exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES -- Class A and Class B each have an annual
shareholder servicing fee of 0.25% of average daily net assets. Class A has an
annual distribution fee under Rule 12b-1 of 0.25% of its average daily net
assets, while Class B has an annual distribution fee under Rule 12b-1 of 0.75%
of its average daily net assets. Moreover, expenses borne by each class 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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
9
<PAGE>
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT OF THE FUND
THE ADVISER
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") manages the assets
of the Fund pursuant to an Investment Advisory Agreement dated August 4, 1992.
Subject to such policies as the Board of Trustees may determine, the Adviser
makes investment decisions for the Fund. Alex Powers and Greg Adams, Vice
Presidents of the Adviser, are responsible for the day-to-day management of the
Fund's portfolio. Mr. Powers is responsible for the fixed-income trading for the
Fund. He also manages the Vista U.S. Government Income Fund as well as various
individual and institutional accounts. Mr. Powers is part of a team responsible
for fixed-income strategy, research and trading with Chase. Mr. Adams joined
Chase in 1987 and oversees the equity trading of the Fund, as well as a number
of Chase's pooled equity Funds. For its services under the Investment Advisory
Agreement, the Adviser is entitled to receive an annual fee computed daily and
paid monthly based at an annual rate equal to 0.50% of the Fund's average daily
net assets. The Adviser may, from time to time, voluntarily waive all or a
portion of its fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, the Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The Board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers'). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
10
<PAGE>
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser, including the division that performs services for the
Fund as Custodian, or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989, as
amended September 30, 1993 (the "Administration Agreement"), Chase serves as
administrator of the Fund. The Administrator provides certain administrative
services, including, among other responsibilities, coordinating relationships
with independent contractors and agents; preparing for signature by officers and
filing of certain documents required for compliance with applicable laws and
regulations excluding those of the securities laws of the various states;
preparing financial statements; arranging for the maintenance of books and
records; and providing office facilities necessary to carry out the duties
thereunder. The Administrator is entitled to receive from the Fund a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets. The Administrator may, from time to time, voluntarily
waive all or a portion of its fees payable to it under the Administration
Agreement. The Administrator shall not have any responsibility or authority for
the Fund's investments, the determination of investment policy, or for any
matter pertaining to the distribution of Fund shares.
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund, as described below, without
violating the federal banking law commonly known as the Glass-Steagall Act. The
Act generally bars banks from publicly underwriting or distributing certain
securities.
Based on the advice of its counsel, Chase believes that the Court's decision
other decisions of federal banking regulators permit it to serve as investment
adviser to a registered, open-end investment company.
11
<PAGE>
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and render the services described below and
as set forth in the shareholder servicing agreement and Custodian Agreement, as
an appropriate, incidental national banking function and as a proper adjunct to
it, serving as investment adviser and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. Chase, on the
advice of its counsel, believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the transfer to a new adviser, shareholder
servicing agent, custodian or administrator could be accomplished without undue
disruption to the Fund's operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge.
Class B shares of the Fund are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares in the eighth year after issuance. See "Variable
Distribution Method."
Both classes of shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on
each business day during which the Exchange is open for trading ("Fund Business
Day"). (See "Other Information Concerning Shares of the Fund-Net Asset Value").
The public offering price of Class A shares is the next determined net assset
value, plus applicable initial sales charge. Orders received by Dealers prior to
the New York Stock Exchange closing time are confirmed at the offering price
effective at the close of such Exchange, provided the order is received by the
Transfer Agent prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Fund shares
normally will be maintained in book entry form and only Class A share
certificates will be issued upon request. Management reserves the right to
refuse to sell shares of the Fund to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for
12
<PAGE>
15 calendar days. In addition, redemption of shares purchased by periodic
automatic investment will not be allowed for 7 calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ------------- --------------------------
Individual.................................... $2,500(1)
Individual Retirement Account (IRA)........... $1,000(2)
Spousal IRA................................... $ 250
SEP-IRA....................................... $1,000(2)
Purchase Accumulation Plan.................... $ 250(3)
Payroll Deduction Program..................... $ 100(4)
(401K, 403B, Keogh)
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Sstematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check
13
<PAGE>
from the checking account from which debits are to be made. A signature
guarantee may be obtained from a bank, trust company, broker-dealer or other
member of the national securities exchange. Please note that a notary public
cannot provide signature guarantees.
INITIAL SALES CHARGES--CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value, plus any applicable initial sales charge, which will vary with the size
of the purchase as shown in the following table:
CONCESSION
SALES CHARGE TO DEALERS
------------ ---------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------- -------- -------- ----------
Less than $100,000........................ 4.50 4.71 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 0.75
$2,500,000 to $9,999,999.................. -- -- 0.50
$10,000,000 to $49,999,999................ -- -- 0.25
$50,000,000 and over...................... -- -- 0.15
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from it own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For the three-year period commencing July 19,
1993, for activities in maintaining and servicing accounts of customers invested
in the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are in
such accounts. In addition, under an arrangement between Associated Securities
and the Distributor, Associated Securities will be entitled to receive either
50% or 70% of the difference between the total front-end sales load, or in the
case of Class B shares 4.00%, and that portion paid to selling group member
broker-dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash or awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum Contingent Deferred
Sales Charge of Class B shares generated by the Dealer during such programs to
any Dealer that sponsors sales contests or recognition programs conforming to
criteria established by the Distributor or participates in sales programs
sponsored by the Distributor. The Distributor may provide marketing services to
Dealers with whom it has sales agreements, consisting of written informational
material relating to sales incentive campaigns conducted by such Dealers for
their representatives.
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PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, provided there is
no change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or
employees (including their spouses, children, siblings and parents) of the
Adviser, Distributor, Transfer Agency or any affiliates or subsidiaries
thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares of the
Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants.
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the
Fund serves as Trustee or custodian of the plan or manages some portion of
the plan's assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. 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,
including but not limited to those defined in section 401(a), 403(b) or 457 of
the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transactions through a broker or
agent.
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PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A Shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts, provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to the Fund, the
distributor or the Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
The Fund reserves the right to cease offering Class A shares for sale at any
time or to reject any order for the purchase of Class A shares and to cease
offering any services provided by a Shareholder Servicing Agent.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
any person at a reduced sales charge which is determined by (a) aggregating the
dollar amount of the new purchase and the greater of the purchaser's total (i)
net asset value or (ii) cost of any shares acquired and still held in the Fund,
or any other Vista Fund, including any Vista money market Fund acquired by
exchange for which a sales charge had been incurred and (b) applying the initial
sales charge applicable to such aggregate dollar value. The privilege of the
cumulative quantity discount is subject to modification or discontinuance at any
time with respect to all Class A shares purchased thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75% on the $15,000 purchase. In order to obtain such
discount, the purchaser or investment dealer must provide the Transfer Agent
with sufficient information, including the purchaser's total cost, at the time
of purchase to permit verification that the purchaser qualifies for a cumulative
quantity discount, and confirmation of the order is subject to such
verification. Information concerning the current initial sales charge applicable
to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Fund and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
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STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced initial sales charges by signing a Statement of Intention (the
"Statement"). This enables the investor to aggregate purchases of Class A shares
in the Fund with purchases of Class A shares of any other Vista Fund (or if a
fund has only one class, shares of such fund), including shares of any Vista
money market Fund acquired by exchange from a Fund which charge an initial sales
charge, during a 13-month period. The sales charge is based on the total amount
invested in Class A shares during the 13-month period. All Class A or other
qualifying shares of these Funds currently owned by the investor will be
credited as purchases (at their current offering prices on the date the
Statement is signed) toward completion of the Statement. A 90-day back-dating
period can be used to include earlier purchases at the investor's cost. The
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicated in the Statement. A shareholder must notify the Transfer Agent
or Distributor whenever a purchase is being made pursuant to a Statement.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder. Reinvested dividend and
capital gain distributions are not counted toward satisfying the Statement.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 calendar days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See "Exchange Privilege." In addition, Class B
shareholders who have redeemed Class B shares and paid a contingent deferred
sales charge in connection with such redemption may purchase Class A shares with
no initial sales charge (in an amount not exceeding the redemption proceeds) if
the purchase occurs within 30 days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
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The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF NET
REDEMPTION DURING ASSET VALUE AT REDEMPTION
- ----------------- -------------------------------
1st Year Since Purchase...................... 5%
2nd Year Since Purchase...................... 4%
3rd Year Since Purchase...................... 3%
4th Year Since Purchase...................... 3%
5th Year Since Purchase...................... 2%
6th Year Since Purchase...................... 1%
7th Year Since Purchase...................... 0%
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a redemption is made first of Class B
shares representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time.
............
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS -- CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (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, (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, as discussed on page 20; (iv)
distributions from a qualified plan upon retirement; (v) a redemption resulting
from an over-contribution to an IRA; and (vi) a redemption of an account balance
under $500, as described on page 20.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth year after the date of purchase,
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares. The conversion will
be effected at the relative
18
<PAGE>
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 occurs. If any
exchanges of Class B shares during the eight-year period occurred, the holding
period for the shares exchanged will be counted toward the eight-year 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.
For further information as to how to direct a Shareholder Servicing Agent to
purchase shares of the Fund, an investor should contact his Shareholder
Servicing Agent.
The Fund reserves the right to cease offering Class B shares for sale at any
time or reject any order for the purchase of Class B shares and to cease
offering any services provided by a Servicing Agent.
Due to the conversion feature of Class B shares, certificates will not be
issued and all shares will be held in book entry form.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent subject to any
applicable contingent deferred sales charge for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
Fund shares by authorizing his Shareholder Servicing Agent, Dealer or its agent
to redeem such shares, which the Shareholder Servicing Agent, Dealer or its
agent must do on a timely basis. The signature of both shareholders is required
for any written redemption requests from a joint account. In addition, a
redemption request may be deferred for up to 15 calendar days if the Transfer
Agent has been notified of a change in either the address or the bank account
registration previously listed in the Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
Investment Company Act of 1940, as
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<PAGE>
amended (the "1940 Act") committing it to pay in cash all redemptions by a
shareholder of record up to the amounts specified by the rule (approximately
$250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of at least $100
from his account. A sufficient number of full and fractional Class A shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS AT LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
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<PAGE>
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds
which has a similar class of shares, respectively, in accordance with the terms
of the then current prospectus of the Fund being acquired. No initial sales
charge is imposed on the Class A shares being acquired, and no contingent
deferred sales charge is imposed on the Class B shares being redeemed, through
an exchange. However, contingent deferred sales charges may apply to redemptions
of Class B shares acquired through an exchange. 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. Under the Exchange Privilege,
shares of the Fund also may be exchanged for shares of such other Vista Funds
only if those Funds and their shares are registered in the states where the
exchange may legally be made. Shares of the Fund may only be exchanged into the
same class of another Vista Fund and only if the account registrations are
identical.
With respect to exchanges from any Vista money market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
money market funds will be done at relative net asset value plus the appropriate
sales charge. An exchange of Class B shares into any of the Vista money market
funds other than the Class B shares of the Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
contingent deferred sales charge--and a subsequent purchase. Class B shares of
any Vista non-money market Fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares while maintaining a stable net asset value. This exchange will
not be subject to a Contigent Deferred Sales Charge unless those shares are
later redeemed. The Class B shares of the Prime Money Market Fund carry the same
Distribution and Sub-Administration Fee, and Shareholder and Fund Servicing Fee
as the Class B shares of the non-money market Funds. Redemptions of shares
acquired through an exchange will be subject to the applicable contingent
deferred sales charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
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<PAGE>
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephonic transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such reasonable procedures, it may be liable for losses due to
unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the procedures that have been established for Fund accounts
and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
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TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of qualifying dividends received by
the Fund from domestic corporations during the year) may qualify for the 70%
dividends-received deductions for corporate shareholders, but any such
dividends-received deduction will not be allowed in computing a corporate
shareholder's adjusted current earnings, upon which is based a corporate
preference item which may be subject to an alternative minimum tax or to the
environmental superfund tax. Distributions by a Fund of the excess, if any, of
its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has held
his shares. Ordinary income dividends and capital gain dividends from the Fund
may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax
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<PAGE>
status of all distributions made (or deemed made) during the fiscal year,
including any portions which constitute ordinary income dividends (and any
portion thereof which qualify for the dividends-received deduction for
corporations) and capital gain dividends, will be sent to the Fund's
shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class B shares to Class A shares.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of a class of shares of the Fund is determined as of
the close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time, however, options are priced at 4:15 p.m.) on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other fair value, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by a Shareholder
Servicing Agent prior to its calculation and received by the Distributor prior
to the close of business, usually 4:00 p.m. Eastern time, on the Fund Business
Day on which such net asset value is determined.
The per share net asset value of Class B shares of the Fund will generally
be lower than that of the Class A shares because of the higher expenses borne
by the Class B shares.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net income from dividends and interest (if any) of
the Fund is paid to its shareholders quarterly (in the months of March, June,
September and December) as a dividend. The net investment income consists of the
dividends and interest income earned, less expenses. The Fund will distribute
its net realized short-term and long-term capital gains, if any, to its
shareholders annually after the close of its fiscal year. 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, and certain other expenses borne
by the Class B shares. Dividends may also differ between classes as a result of
differences in other class specific expenses.
24
<PAGE>
The Fund will also make additional distributions to the extent necessary to-
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains imposed by Section 4982 of the Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLANS AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted Distribution Plans (the "Distribution Plans") for
both Class A and Class B shares in accordance with Rule 12b-1 under the 1940
Act, after having concluded that there is a reasonable likelihood that the
Distribution Plans for each class will benefit that class and its respective
shareholders.
The Class A Distribution Plan provides that the Fund shall pay distribution
fees including payments to the Distributor, at an annual rate not to exceed
0.20% of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees including
payments to the Distributor, at an annual rate not to exceed 0.75% of its averge
annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in amounts not to exceed 0.20% annualized of the average
net asset value of Class A shares, or 0.25% of the annualized average net asset
value of the Class B shares maintained in the Fund by such broker-dealers'
customers. Trail or maintenance commissions on Class B shares will be paid to
Broker-Dealers beginning in the 13th month following the purchase of such Class
B shares. The distribution fees are not directly tied to expenses; therefore,
the amount of distribution fees paid by the Fund during any year may be more or
less than actual expenses incurred pursuant to the Distribution Plans. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements such as those described in the next
paragraph, by which a distributor's compensation is 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 paid by the Fund to the
distributor in fiscal years subsequent thereto. In determining whether to
purchase Class B shares, investors should consider that daily compensation
payments could continue until the Distributor has been reimbursed for the
commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
Under its Distribution Plan, the Class A shares are also permitted to pay an
additional fee at an annual rate not to exceed 0.05% of its average daily net
assets 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. As of the date of this Prospectus, no such expenses have
been incurred and no amounts have been paid by the Fund pursuant to this
provision. However, if such expenses are incurred in the future, 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 assets.
25
<PAGE>
The Distribution and Sub-Administration Agreement dated April 2, 1990, as
amended June 1, 1990 and September 30, 1993 (the "Distribution Agreement"),
provides that the Distributor will act as the principal underwriter of the
Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plans. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The expenses of each of the Funds of the Trust include the compensation of
its Trustees; registration fees; interest charges; taxes; fees and expenses of
independent accountants, of legal counsel and of any transfer agent, custodian,
registrar or dividend disbursing agent of the Trust; insurance premiums; and
expenses of calculating the net asset value of, and the net income on, the
shares of the Fund.
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. The Trust has reserved the right to create and issue
additional series and classes. Each share of a series or class, including Class
A and Class B, 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
26
<PAGE>
fractional vote, except that Trust shares held in the treasury of the Trust
shall not be voted. Shares of Class A and Class B generally vote separately, for
example to approve distribution plans but vote together, to the extent required
under the 1940 Act, in the election or selection of Trustees and independent
accountants. With respect to shares purchased through a Shareholder Servicing
Agent and, in the event written proxy instructions are not received by the Fund
or its designated agent prior to a shareholder meeting at which a proxy is to be
voted and the shareholder does not attend the meting in person, the Shareholder
Servicing Agent for such shareholder will be authorized pursuant to an
applicable agreement with the shareholder to vote the shareholder's outstanding
shares in the same proportion as the votes cast by other Fund shareholders
represented at the meeting in person or by proxy.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B or of all series or
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class,
including Class A and Class B would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of the Fund or that series or class.
The Trust reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series).
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
27
<PAGE>
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers
perform various services, including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) quarterly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Fund, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Fund; receive, tabulate and transmit to
the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder Servicing Agents may be required to
register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liaison to shareholders and providing personal services to
shareholders will not exceed, on an annual basis, 0.25% of the average daily net
assets of each class of the Fund represented by shares owned during the period
for which payment is being made by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship. Each Shareholder Servicing Agent may,
from time to time, voluntarily waive all or a portion of the fees payable to it.
In addition, Chase may provide other related services to the Fund for which it
may receive compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A or Class B shares, receive
dividends and distributions on Fund investments, and take advantage of any
services related to an Account offered by such Shareholder Servicing Agent from
time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described
28
<PAGE>
above. While the matter is not free from doubt, Trust management believes that
such laws should not preclude a bank, including a bank which acts as investment
adviser, custodian or administrator, or in all such capacities, for the Fund,
from acting as a Shareholder Servicing Agent. However, possible future changes
in federal law or administrative or judicial interpretations of current or
future law, could prevent a bank from continuing to perform all or part of its
servicing activities. If that occurred, the bank's shareholder clients would be
permitted to remain Fund shareholders and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund might occur and a shareholder serviced by such bank might
no longer be able to avail himself of any automatic investment or other services
then being provided by such bank. The Fund does not expect that shareholders
would suffer any adverse financial consequences as a result of these
occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Vista Service Center for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an
29
<PAGE>
indication or representation of the performance of any classes of the Fund in
the future. From time to time, the performance and yield of classes of the Fund
may be quoted and compared to those of other mutual funds with similar
investment objectives, unmanaged investment accounts, including savings
accounts, or other similar products and to stock or other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of the Fund or its classes may be compared to data prepared by
Lipper Analytical Services, Inc. or Morningstar Mutual Funds on Disc, widely
recognized independent services which monitor the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in local or regional publications, may also
be used in comparing the performance and yield of the Fund or its classes.
Additionally, the Fund may, with proper authorization, reprint articles written
about the Fund and provide them to prospective shareholders.
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains distributions are reinvested;
annualized total rates of return will be slightly higher than period total rates
of return (if the periods are shorter than one year) because of the compounding
effect of the assumed reinvestment. For Class A shares the annual total rate of
return and yield 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.
The Fund may provide annualized "yield" quotations in addition to total rate
of return quotations. The annualized "yield" quotations of the Fund will be
based on net investment income and refer to the income generated by an
investment in the Fund over a stated period (which period shall be stated in any
advertisement or communication with a shareholder). The "yield" is then
"annualized" by assuming that the income generated over the period will be
generated over a 52-week period. A "yield" quotation, unlike a total rate of
return quotation, does not reflect changes in net asset value.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of classes of shares of
the Fund will vary based on interest rates, the current market value of the
securities held in the Fund's portfolio and changes in the Fund's expenses. The
Adviser, the Shareholder Servicing Agent, the Administrator or the Distributor
have all voluntarily agreed to waive a portion of their fees on a month-to-month
basis. In addition, the Distributor may assume a portion of the Fund's operating
expenses on a month-to-month basis. These actions have the effect of increasing
the net income (and therefore the yield and total rate of return) of the Fund
classes of shares 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 the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The
30
<PAGE>
Fund is advised that certain Shareholder Servicing Agents may credit to the
accounts of their customers from whom they are already receiving other fees
amounts not exceeding the Shareholder Servicing Agent fees received (see
"Purchases and Redemptions of Shares -- Purchases"), which will have the effect
of increasing the net return on the investment of customers of those Shareholder
Servicing Agents. Such customers may be able to obtain through their Shareholder
Servicing Agents quotations reflecting such increased return. See the Statement
of Additional Information for further information concerning the calculation of
the yields or total rates of return quotations for the classes of shares of the
Fund.
The Fund generally will include performance data for both classes of Fund
shares in any advertisements or promotional materials including Fund performance
data.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
Administrator and the Adviser, (iv) portfolio transactions, (v) the Funds'
shares, including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or total
rate of return quotations of the Fund. The audited financial statements of the
Fund are incorporated by reference in the Statement of Additional Information.
31
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS*
The ratings of Moody's and Standard & Poor's represent their opinions as to
the quality of various debt securities. It should be emphasized, however, that
ratings are not absolute standards of quality. Consequently, debt securities
with the same maturity, coupon and rating may have different yields while debt
securities of the same maturity and coupon with different ratings may have the
same yield.
DESCRIPTION OF MOODY'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". 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 attributes
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 and 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.
- ------------
* As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time
revise such ratings, they undertake no obligation to do so.
A-1
<PAGE>
DESCRIPTION OF STANDARD & POOR'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal 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 pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
<PAGE>
PROSPECTUS
VISTASM EQUITY INCOME FUND March 1, 1996
VISTA EQUITY INCOME FUND'S (the "Fund") investment objective is to obtain
income by investing at least 65% of the net assets of the Fund in
income-producing equity securities. The Fund may also invest in securities
convertible into such equity securities. However, in choosing these securities
the Fund will also consider the potential for capital appreciation. The Fund is
a diversified series of Mutual Fund Group (the "Trust"), an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987, presently consisting of 15
separate series (the "Funds").
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies, Techniques and Risk Factors" on page 6.
The Chase Manhattan Bank, N.A. is the Fund's investment adviser (the
"Adviser"), custodian (the "Custodian") and administrator (the "Administrator").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 9. Vista Broker-Dealer, Inc. ("VBDS") is the Fund's
distributor (the "Distributor"), and is unaffiliated with Chase. INVESTMENTS IN
THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND WILL
FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS
AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS at the net
asset value per share next determined plus a varying sales charge depending on
the amount of the purchase, to investors who are customers of a financial
institution, such as a federal or state-chartered bank, trust company or savings
and loan association with which the Fund has entered into a shareholder
servicing agreement (collectively, "Shareholder Servicing Agents"), and selected
securities brokers or financial institutions (collectively, "Dealers") which
have entered into Selected Dealer Agreements with the Distributor. The Fund has
a distribution plan and may incur distribution expenses, as described herein, at
an annual rate, not to exceed 0.25% of its average daily net assets. An investor
should obtain from his Shareholder Servicing Agent, if appropriate, and should
read in conjunction with this Prospectus, the materials provided by the
Shareholder Servicing Agent describing the procedures under which the shares of
the Fund may be purchased and redeemed through such Shareholder Servicing Agent.
Fund shares may be redeemed by shareholders at the net asset value next
determined on any Fund Business Day as hereinafter defined.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the Statement of Additional Information without
charge by contacting his Shareholder Servicing Agent, the Distributor or the
Fund.
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.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
For information about the Fund simply call the Vista Service Center at the
following toll-free number: 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary.......................................................... 3
Financial Highlights..................................................... 4
Investment Objective and Policies........................................ 5
Additional Information on Investment Policies, Techniques and Risk
Factors.................................................................. 6
Management of the Fund................................................... 9
Purchases and Redemptions of Shares...................................... 11
Tax Matters.............................................................. 19
Other Information Concerning Shares of the Fund.......................... 20
Shareholder Servicing Agents, Transfer Agent and Custodian............... 23
Yield and Performance Information........................................ 25
2
<PAGE>
EXPENSE SUMMARY
<TABLE><CAPTION>
Shareholder Transaction Expenses
- -------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge imposed on Purchase (as a percentage of offering price)*........ 4.50%
Maximum Sales Charge imposed on Reinvested Dividends (as a percentage of offering
price)............................................................................... None
Deferred Sales Charge (as a percentage of original purchase price or redemption
proceeds, as applicable)........................................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)**................ None
Exchange Fee......................................................................... None
<CAPTION>
AS A
PERCENTAGE
ANNUAL FUND OPERATING EXPENSES OF NET ASSETS
- -------------------------------------------------------------------------------- -------------
<S> <C>
Investment Advisory Fee......................................................... .00%
Rule 12b-1 Distribution Plan Fee+............................................... .00%
Administration Fee.............................................................. .00%
Other Expenses
- --Sub-Administration Fee........................................................ .05%
- --Shareholder Servicing Agent Fee++............................................. .00%
- --Other Operating Expenses...................................................... 1.45%
-----
Total Fund Operating Expenses................................................... 1.50%
-----
-----
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) 5% annual return and (2) redemption at the end of:
1 year...................................................................... $ 60
3 years..................................................................... 90
5 years..................................................................... 123
10 years.................................................................... 216
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
** A shareholder may incur a $10.00 charge for certain wire redemptions.
+ As a result of 12b-1 fees, a long-term shareholder in the Fund may pay more
than the economic equivalent of the maximum front-end sales charge permitted
by the rules of the National Association of Securities Dealers, Inc.
++ Shareholder Servicing Agents may provide various services to their customers
and charge fees for these services.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administration fee, sub-administration fee,
shareholder servicing agent fee and other operating expenses expected to be
incurred by the Fund during the fiscal year. Absent certain waivers, the
investment advisory fee, distribution plan fee, administration fee,
sub-administration fee, shareholder servicing fee would be 0.40%, 0.25%, 0.10%,
0.05% and 0.25%, respectively. A more complete description of the Fund's
expenses is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for a
share outstanding throughout the 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
Statement of Additional Information. 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.
<TABLE><CAPTION>
YEAR ENDED 7/15/93*
-------------------- THROUGH
10/31/95 10/31/94 10/31/93
-------- -------- --------
<S> <C> <C> <C>
EQUITY INCOME FUND
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
-------- --------
2.045 (0.187 ) 0.778
Less Distributions:
Dividends from net investment income....................... 0.776 0.258 0.078
Distributions from capital gains........................... -- 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#.................................................. 2.19% 2.02% 2.40%
Ratio of net investment income without waivers and assumption
of expenses#............................................... 2.12% 1.79% 0.82%
Portfolio Turnover Rate...................................... 91% 75% 54%
</TABLE>
- ------------
# Short periods have been annualized.
(1) Total return figures do not include the effect of any front-end sales load.
* Commencement of offering of shares.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVES -- The investment objective of the Fund is to obtain
income by investing at least 65% of Fund's net assets in a diversified portfolio
of income producing equity securities. The Fund may also invest in securities
convertible into equity securities. In choosing these securities however, the
Fund will also consider the potential for capital appreciation. The Fund seeks
to obtain a yield which exceeds the composite yield on the securities
compromising the Standard and Poor's 500 Stock Price Index. Investors in the
Fund will receive at least 30 days written notice prior to a change in the
investment objective.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objectives
by investing principally in income-producing common stocks, preferred stocks and
convertible preferred stocks. The remainder of the portfolio will usually be
invested in corporate bonds which are convertible into common stock. In most
cases, the major portion of the Fund will be invested in common stocks traded on
a national securities exchange or NASDAQ. A significant portion of the Fund
(e.g., 20 to 30 percent) may be invested in convertible bonds or convertible
preferred stock. Such securities may be of varying quality and may, under
certain circumstances, be considered of relatively higher risk, but will not be
securities of companies without proven earnings or credit. Under certain
circumstances, the Fund may invest more than 5% of its total assets in issuers
that have not been in existence for less than three years or in securities that
are not readily marketable. The Fund may also make temporary investments in
securities such as investment-grade bonds and short-term notes, for defensive
purposes when the Adviser believes market conditions warrant. There is no
limitation on the percentage of the Fund's portfolio that may be invested in
common and preferred stocks and bonds, and the Adviser contemplates that the
portfolio mix will vary from time to time depending on market conditions,
interest rates and other factors.
The Fund may invest in foreign securities, including American Depositary
Receipts ("ADRs"), at any time in an amount up to 20% of the value of its net
assets. ADRs are securities issued by U.S. banks in place of foreign securities
held in trust by those banks. Investments in foreign securities are subject to
certain risks to which investments in domestic securities are not subject,
including political or economic instability of the issuer or the country of
issue and the possibility of the imposition of exchange controls. See
"Additional Information on Investment Policies and Techniques and Risk Factors--
Foreign Securities" on page 6.
EQUITY SECURITIES GENERALLY ARE SUBJECT TO GREATER VOLATILITY AND RISK THAN
DEBT OR FIXED-INCOME INSTRUMENTS. LIKEWISE, TO THE EXTENT SUCH SECURITIES ARE
ACTIVELY TRADED THE FUND MAY INCUR GREATER COSTS AND RELATIVELY HIGHER RISKS.
THE NET ASSET VALUE OF THE FUND WILL FLUCTUATE BASED ON THE VALUE OF THE
SECURITIES IN ITS PORTFOLIO.
Shareholder approval is not required to change the investment objectives or
any of the investment policies described above or in "Additional Information on
Investment Policies, Techniques and Risk Factor". For additional information on
the Fund's investment objectives and policies, see "Additional Information on
Investment Policies, Techniques and Risk Factors."
5
<PAGE>
ADDITIONAL INFORMATION ON INVESTMENT POLICIES, TECHNIQUES AND RISK FACTORS
In addition to its investment objective, the Fund has adopted certain other
investment restrictions which, unless otherwise noted as being matters of
operating policy, may not be changed without approval by majority vote of the
Fund's shareholders as defined in the Investment Company Act of 1940 (the "1940
Act"). The most important of these other restrictions are set forth below.
Additional restrictions are discussed in the Statement of Additional
Information.
The Fund may not with respect to at least 75% of its total assets, invest
more than 5% of its assets in the securities of any one issuer (except the U.S.
Government, its agencies and instrumentalities), including issuers of repurchase
agreements, or purchase more than 10% of the outstanding voting securities of
any one issuer.
Except as described below, the Fund may not engage in borrowing of any kind.
However, the Fund is authorized to borrow money up to 10% of the value of its
total assets from banks on a temporary basis for extraordinary or emergency
purposes, provided that no purchases of securities are made by the Fund while
any such borrowings exceed 5% of the value of the Fund's total assets. To secure
authorized borrowings, the Fund is authorized to pledge securities limited to
pledges of securities having a market value at the time of pledge not exceeding
10% of the value of its total assets.
The Fund may not, as a matter of operating policy, purchase a restricted
security or a security which is not readily marketable, if as a result of such
purchase more than 10% of the Fund's net assets would be invested in such
securities.
The Fund may not purchase any securities which would cause more than 25% of
the value of the Fund's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry; provided that this limitation shall not apply
to obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.
FOREIGN SECURITIES. Investments in foreign securities, including American
Depository Receipts ("ADRs"), may be made at any time up to 20% of the value of
the Fund's net assets. Such securities may be subject to foreign government
taxes which would reduce the income on such securities. Foreign investments
involve certain risks, such as political or economic instability of the issuer
or of the country of issue, the difficulty of predicting international trade
patterns, and the possibility of imposition of exchange controls. Such
securities may also be subject to greater fluctuations in price than securities
of domestic corporations or of the U.S. Government. In addition there may be
less publicly available information about a foreign company than about a
domestic company. Foreign companies generally are not subject to uniform
accounting auditing and financial reporting standards comparable to those
applicable to domestic companies. Generally, there is less government regulation
of stock exchanges, broker, and listed companies abroad than in the United
States, and, with respect to certain foreign countries, there is a possibility
of expropriation of confiscatory taxation, or diplomatic developments which
could affect investment in those countries. Finally, in the event of a default
on any foreign debt obligation, it may be more difficult for the Fund to obtain
or to enforce a judgment against the issuer.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
6
<PAGE>
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be sold by the Fund,
but the Fund might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, the Fund, through its
custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been established for the
Fund to monitor, on a daily basis, the market value of the collateral underlying
all repurchase agreements to ensure that the collateral is at least 100% of the
value of the repurchase agreements. Not more than 10% of the total assets of the
Fund will be invested in securities which are subject to legal or contractual
restrictions on resale, including securities that are not readily marketable and
repurchase agreements maturing in more than seven days.
PORTFOLIO MANAGEMENT AND TURNOVER. The Fund may purchase or sell securities
without regard to the length of time a security has been held, and the frequency
of portfolio transactions (the turnover rate) will vary from year to year
depending on market conditions. The rate of portfolio turnover is not a limiting
factor when the Adviser deems it desirable to purchase or sell securities. The
annual rate of portfolio turnover is generally not anticipated to exceed 200%
for the Fund. High portfolio turnover of 100% or more involves correspondingly
greater brokerage commissions and other transactions costs than would otherwise
be the case. These costs are borne directly by the Fund, and may increase
short-term capital gains, which are taxable as ordinary income to shareholders.
For a complete discussion of portfolio transactions and brokerage allocation,
see "Investment Objectives, Policies and Restrictions--Investment Policies:
Portfolio Transactions and Brokerage Allocation" in the Statement of Additional
Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned. The Fund
can increase its income through the investment of such collateral. The Fund
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the Fund on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their agreements
with the Fund. 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 Adviser to be of good standing and will not
be made unless, in the judgment of the Adviser, the consideration to be earned
from such loans justifies the risk.
FUTURES AND OPTIONS. The Fund may invest its assets in derivative and
related instruments subject only to the Fund's investment objective and policies
and the requirement that, to avoid leveraging the Fund, the Fund 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.
7
<PAGE>
The value of some derivatives or related instruments in which the Fund
invests may be particularly sensitive to changes in the prevailing interest
rates or other economic factors, and--like other investments of the Fund--the
ability of the Fund to successfully utilize these instruments may depend in part
upon the ability of the Adviser to forecast interest rates and other economic
factors correctly. If the Adviser incorrectly forecasts such factors and has
taken positions in derivative or related instruments contrary to prevailing
market trends, the Fund could be exposed to the risk of a loss. The Fund might
not employ any or all of the instruments described herein, and no assurance can
be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
. 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);
. enter into futures contracts and options on futures contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the Fund 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains.
. Strategies not involving hedging may increase the risk to the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract,
no trades may be made that day at a price beyond that limit. In addition,
certain instruments are relatively new and without a significant trading
history. As a result, there is no assurance that an active secondary market
will develop or continue to exist.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
8
<PAGE>
. 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 or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
MANAGEMENT OF THE FUND
THE ADVISER
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") manages the assets
of the Fund pursuant to an Investment Advisory Agreement dated May 13, 1993.
Subject to such policies as the Board of Trustees may determine, the Adviser
makes investment decisions for the Fund. Anthony Gleason, Vice President of the
Adviser is responsible for the day-to-day management of the Fund. Mr. Gleason
also co-manages the Vista Capital Growth Fund and is responsible for several
other equity portfolios. In all, Mr. Gleason manages $1.7 billion in equity
assets at Chase Manhattan. Prior to joining Chase in 1995, Mr. Gleason was Vice
President and Portfolio Manager with Prudential Equity Management. In his nine
years at Prudential, he was chiefly responsible for managing $3 billion in
equity portfolios for variable annuities. Before his time with Prudential, he
was with Chubb Insurance, where he focused on equity analysis and modeling. Mr.
Gleason holds an MBA from Fairleigh Dickenson University. He also holds a BS in
organic chemistry from Stockton College, NJ, and is the author of two patents.
Mr. Gleason is a Chartered Financial Analyst and a member of the New York
Security Analysts Society. He has also provided commentary on the U.S. equity
markets for Cable News Network.
For its services under the Investment Advisory Agreement, the Adviser is
entitled to receive an annual fee computed daily and paid monthly based at an
annual rate equal to 0.40% of the Fund's average daily net assets. The Adviser
may, from time to time, voluntarily waive all or a portion of its fees payable
under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
9
<PAGE>
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser, including the division that performs services for the
Fund as Custodian, or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989 (the
"Administration Agreement"), Chase serves as administrator of the Fund. The
Administrator provides certain administrative services, including, among other
responsibilities, coordinating relationships with independent contractors and
agents; preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations excluding those of
the securities laws of the various states; preparing financial statements;
arranging for the maintenance of books and records; and providing office
facilities necessary to carry out the duties thereunder. The Administrator is
entitled to receive from the Fund a fee computed daily and paid monthly at an
annual rate equal to 0.10% of the Fund's average daily net assets. The
Administrator may, from time to time, voluntarily waive all or a portion of its
fees payable to it under the Administration Agreement. The Administrator shall
not have any responsibility
10
<PAGE>
or authority for the Fund's investments, the determination of investment policy,
or for any matter pertaining to the distribution of Fund shares.
GLASS-STEAGALL ACT. The Adviser has received the opinion of its legal
counsel that it may provide the services described in the Investment Advisory
and the Administration Agreements, as described above, and the Shareholder
Servicing Agreements and Custodian Agreement with the Fund, as described below,
without violating the federal banking law commonly known as the Glass-Steagall
Act. The Act generally bars banks from publicly underwriting or distributing
certain securities.
Based on the advice of its counsel, Chase believes that the Court's
decision, and other decisions of federal banking regulators, permit it to serve
as investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and render the services described below and
as set forth in the shareholder servicing agreement and Custodian Agreement, as
an appropriate, incidental national banking function and as a proper adjunct to
its serving as investment adviser and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. The Administrator,
on the advice of its counsel believes that it may render the services described
in its Administration Agreement without violating the Glass-Steagall Act or
other applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the transfer to a new adviser, shareholder
servicing agent, custodian or administrator could be accomplished without undue
disruption to the Fund's operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased through selected financial service firms
such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with Vista Broker-Dealer Services, Inc. at the public
offering price which is computed once daily as of the close of trading on the
New York Stock Exchange (normally 4:00 p.m. Eastern time; however, options are
priced at 4:15 p.m.) on each business day during which the Exchange is open for
trading ("Fund Business Day"). (See "Other Information Concerning Shares of the
Fund-Net Asset Value"). The public offering price of Class A shares is the next
determined net asset value, plus applicable initial sales charge. Orders
received by Dealers prior to the New York Stock Exchange closing time are
confirmed at the offering price effective at the close of such Exchange,
provided the order is received by the Transfer Agent prior to its
11
<PAGE>
close of business. Dealers are responsible for forwarding orders for the
purchase of shares on a timely basis. Fund shares normally will be maintained in
book entry form and share certificates will be issued
only on request. Management reserves the right to refuse to sell shares of the
Fund to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption
programs and "sweep" checking programs. Each Shareholder Servicing Agent may
establish its own terms and conditions, including reduced minimum initial
purchase amounts and limitations on the amounts of subsequent transactions, with
respect to such services. Certain Shareholder Servicing Agents may (although
they are not required by the Trust to do so) credit to the accounts of their
customers from whom they are already receiving other fees an amount not
exceeding the fees for their services as Shareholder Servicing Agents (see
"Shareholder Servicing Agents, Transfer Agent and Custodian -- Shareholder
Servicing Agents"), which will have the effect of increasing the net return on
the investment of customers of that Shareholder Servicing Agent. The public
offering price of Class A shares is the next determined net asset value, plus
applicable initial sales charge.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ----------------------------------------------- --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program
(401K, 403B, Keogh).......................... $ 100(4)
- ------------
(1) Employees of the Advisor and its affiliates, and Qualified Persons as
defined in "Purchases of Shares at Net Asset Value", are eligible for a
$1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
12
<PAGE>
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
SALES CHARGES
CONCESSION
SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------ -------- -------- ----------
Less than $100,000........................ 4.50 4.71 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 0.75
$2,500,000 to $9,999,999.................. -- -- 0.50
$10,000,000 to $49,999,999................ -- -- 0.25
$50,000,000 and over...................... -- -- 0.15
The sales charge varies with the size of the purchase as shown above. The
reduced charges apply to the aggregate of purchases of the Fund made at one time
by "any person", which term includes an individual, spouse and children under
the age of 21, or a Trustee or other fiduciary of a Trust estate or fiduciary
account. The Distributor may compensate Dealers for sales of $1,000,000 or more
from it own resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, Vista
Broker-Dealer Services, Inc. may reallow up to the full applicable sales charge
and such Dealer may therefore be deemed an "underwriter" under the Securities
Act of 1933, as amended, during such periods.
For the three-year period commencing July 19, 1993, for activities in
maintaining and servicing accounts of customers invested in the Fund, Associated
Securities Corp. ("Associated Securities") may receive payments from the Adviser
based, in part, on the amount of the aggregate asset values of the Fund (and
other Vista Funds) in the accounts of shareholders attributable to Associated
Securities and the length of time such assets are in such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load and that portion paid
to certain selling group member broker-dealers.
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To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash or awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable sales
charges on the sales generated by the Dealer during such programs to any Dealer
that sponsors sales contests or recognition programs conforming to criteria
established by the Distributor or participates in sales programs sponsored by
the Distributor. The Distributor may provide marketing services to Dealers with
whom it has sales agreements, consisting of written informational material
relating to sales incentive campaigns conducted by such Dealers for their
representatives.
PURCHASES OF SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
as long as they continue to own shares of any Vista Fund, provided there is no
change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on shares purchased by the following
"Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or employees
(including their spouses, children, siblings and parents) of the Adviser,
Distributor, Transfer Agency or any affiliates or subsidiaries thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of shares of the Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the Fund
serves as Trustee or custodian of the plan or manages some portion of the plan's
assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. Purchases of Class A
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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, including but not limited to those defined in
section 401(a), 403(b) or 457 of the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transactions through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of shares of the Fund may be made with no initial sales charge in
accounts opened by a bank, trust company or thrift institution which is acting
as a fiduciary (i.e., exercises investment authority with respect to such
accounts), provided that appropriate notification of such fiduciary relationship
is reported at the time of the investment to the Fund, the distributor or the
Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
The Fund reserves the right to cease offering shares for sale at any time or
to reject any order for the purchase of shares and to cease offering any
services provided by a Shareholder Servicing Agent.
REDUCED SALES CHARGES
CUMULATIVE QUANTITY DISCOUNT. Shares of the Fund may be purchased by any
person at a reduced sales charge which is determined by (a) aggregating the
dollar amount of the new purchase and the greater of the purchaser's total (i)
net asset value or (ii) cost of any shares acquired and still held in the Fund,
or any other Vista Fund, including any Vista money market Fund acquired by
exchange for which a sales charge had been incurred and (b) applying the sales
charge applicable to such aggregate. The privilege of the cumulative quantity
discount is subject to modification or discontinuance at any time with respect
to all shares purchased thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase shares of the Fund at the reduced sales
charge applicable to the group taken as a whole. The reduced sales charge is
based upon the aggregate dollar value of shares previously purchased and still
owned by the group plus the securities currently being purchased and is
determined as stated above under "Cumulative Quantity Discount". For example, if
members of the group had previously invested and still held $90,000 of Fund
shares and now were investing $15,000, the sales charge would be 3.75%. In order
to obtain such discount, the purchaser or investment dealer must provide the
Transfer Agent with sufficient information, including the purchaser's total
cost, at the time of purchase to permit verification that the purchaser
qualifies for a cumulative quantity discount, and confirmation of the order is
subject to such verification. Information concerning the current sales charge
applicable to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing shares. A qualified group must
have more than 10 members, must be available to arrange for group meetings
between representatives of the Fund and the members, must agree to include sales
and other materials related to the Fund in its
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publications and mailings to members at reduced or no cost to the Distributor,
and must seek to arrange for payroll deduction or other bulk transmission of
investments of the Fund. This privilege is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
STATEMENT OF INTENTION. Investors may also qualify for reduced sales charges
by signing a Statement of Intention (the "Statement"). This enables the investor
to aggregate purchases of the Fund with purchases of shares of any other Fund in
the Trust, including shares of any Vista money market fund acquired by exchange,
during a 13-month period. The sales charge is based on the total amount invested
during the 13-month period. All shares of these Funds currently owned by the
investor will be credited as purchases (at their current offering prices on the
date the Statement is signed) toward completion of the Statement. A 90-day
back-dating period can be used to include earlier purchases at the investor's
cost. The 13-month period would then begin on the date of the first purchase
during the 90-day period. No retroactive adjustment will be made if purchases
exceed the amount indicated in the Statement. A SHAREHOLDER MUST NOTIFY THE
TRANSFER AGENT OR DISTRIBUTOR WHENEVER A PURCHASE IS BEING MADE PURSUANT TO A
STATEMENT.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in shares registered in
the shareholder's name in order to assure payment of the proper sales charge. If
total purchases pursuant to the Statement (less any dispositions and exclusive
of any distributions on such shares automatically reinvested) are less than the
amount specified, the investor will be requested to remit to the Transfer Agent
an amount equal to the difference between the sales charge paid and the sales
charge applicable to the aggregate purchases actually made. If not remitted
within 20 days after written request, an appropriate number of escrowed shares
will be redeemed in order to realize the difference. This privilege is subject
to modification or discontinuance at any time with respect to all shares
purchased thereunder.
REINSTATEMENT PRIVILEGE. Shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
shares by authorizing his Shareholder Servicing Agent, Dealer or its agent to
redeem such shares, which the Shareholder Servicing Agent, Dealer or its agent
must do on a timely basis. The signature of both shareholders is required for
any written redemption requests from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund's records.
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<PAGE>
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
Investment Company Act of 1940 (the "1940 Act") committing to pay in cash all
redemptions by a shareholder of record up to the amounts specified in the rule
(approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholders
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act if an emergency exists.
AUTOMATIC REDEMPTION PLAN. A shareholder owning $10,000 or more of the
shares of the Fund as determined by the then current net asset value may provide
for the payment monthly or quarterly of any requested dollar amount (subject to
limits) from his account. A sufficient number of full and fractional shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset vaue of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, shares of the Fund
for shares of the other Vista Mutual Funds, in accordance with the terms of the
then current prospectus of the Fund being acquired. The prospectus of the other
Vista Fund into which shares are being exchanged should be read carefully prior
to any exchange and retained for future reference. Under the Exchange Privilege,
shares of the Fund may be exchanged for shares of such other Vista Funds only if
those Funds are registered in the states where the exchange may legally be made.
Shares of the Fund may only be exchanged into another Vista 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 Vista money market Fund by exchange from
one of the other Funds in the Trust, or
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<PAGE>
any exchange directly from one of such Vista money market Funds will be done at
relative net asset value plus the appropriate sales charge. Any such exchange
may create a gain or loss to be recognized for federal income tax purposes.
Normally, shares of the Fund to be acquired through an exchange transaction are
purchased on the Redemption Date, but such purchase may be delayed by either
Fund up to five business days if the Fund determines that it would be
disadvantaged by an immediate transfer of the proceeds. This privilege may be
amended or terminated at any time without notice. Arrangements have been made
for the acceptance of instructions by telephone to exchange shares if certain
preauthorizations or indemnifications are accepted and on file. Further
information and telephone exchange forms are available from the Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephonic transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such procedures, it may be liable for losses due to unauthorized or
fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or
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<PAGE>
requests from someone claiming to be a shareholder if the Fund or any of the
above-described parties follow instructions which they reasonably believe to be
genuine and act in good faith by complying with the reasonable procedures that
have been established for Fund accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of qualifying dividends received by
the Fund from domestic corporations during the year) may qualify for the 70%
dividends-received deductions for corporate shareholders, but any such
dividends-received deduction will not be allowed in computing a corporate
shareholder's adjusted current earnings, upon which is based a corporate
preference item which may be subject to an alternative
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<PAGE>
minimum tax or to the environmental superfund tax. Distributions by a Fund of
the excess, if any, of its net long-term capital gain over its net short-term
capital loss are designated as capital gain dividends and are taxable to
shareholders as long-term capital gains, regardless of the length of time a
shareholder has held his shares. Ordinary income dividends and capital gain
dividends from the Fund may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualify for the dividends-received
deduction for corporations) and capital gain dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time;
however, options are priced at 4:15 p.m.) on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other fair value, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by a Shareholder
Servicing Agent prior to its calculation and received by the Distributor prior
to the close of business, usually 4:00 p.m. Eastern time, on the Fund Business
Day on which such net asset value is determined.
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NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net income from dividends and interest (if any) of
the Fund is paid to its shareholders quarterly (in the months of March, June,
September and December) as a dividend. The Fund's net investment income consists
of the dividends and interest income earned on its portfolio, less expenses. The
Fund will distribute its net capital gains, if any, to its shareholders at least
annually.
The Fund intends to make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains imposed by Section 4982 of the Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder may elect to receive dividends and capital gains distributions from
the Fund in either cash or additional shares.
DISTRIBUTION PLAN AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act, after having concluded that there
is a reasonable likelihood that the Distribution Plan will benefit the Fund and
its shareholders.
The Distribution Plan provides that the Fund shall pay distribution fees
(the "Basic Distribution Fee"), including payments to the Distributor, at an
annual rate not to exceed 0.20% of its average daily net assets for distribution
services. Some payments under the Plan may be used to compensate broker-dealers
with trail or maintenance commissions in an amount not to exceed 0.20%
annualized, of the assets maintained in the Fund by such broker-dealers'
customers. Since the Basic Distribution Fee is not directly tied to expenses,
the amount of Basic Distribution Fee paid by the Fund during any year may be
more or less than actual expenses incurred pursuant to the Distribution Plan.
For this reason, this type of distribution fee arrangement is characterized by
the staff of the Securities and Exchange Commission as being of the
"compensation variety" (in contrast to "reimbursement" arrangements such as
those described in the next paragraph, by which a distributor's compensation is
directly linked to its expenses). However, the Fund is not liable for any
distribution expenses incurred in excess of the Basic Distribution Fee paid.
Under the Distribution Plan, the Fund is also permitted to pay an additional
fee at an annual rate not to exceed 0.05% of its average daily net assets 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
Fund under the Distribution Plan would be at an annual rate of 0.25% of its
average daily net assets.
The Distribution and Sub-Administration Agreement dated April 2, 1990 and
amended June 1, 1990 (the "Distribution Agreement"), provides that the
Distributor will act as the principal underwriter of the Fund's shares and bear
the expenses of printing, distributing and filing prospectuses and statements of
additional information and reports used for sales purposes, and of preparing and
printing sales literature and advertisements not paid for by the Distribution
Plan. In addition, the Distributor will provide certain sub-administration
services, including providing officers, clerical staff and office space. The
Distributor currently receives a fee for sub-administration from the Fund at an
annual rate equal to 0.05% of the Fund's average daily net assets, on an
annualized basis for the Fund's then-current
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fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The Fund intends to pay its pro rata share of the Trust's expenses,
including the compensation of the Trustees; all fees under the Distribution Plan
(see "Purchases and Redemptions of Shares-- Distribution Plan and Agreement");
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, shareholder servicing agent and dividend
disbursing agent; expenses of distributing and redeeming shares and servicing
shareholder accounts; expenses of preparing, printing and mailing prospectuses,
reports, notices, proxy statements and reports to shareholders and to
governmental officers and commissions; expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance premiums;
fees and expenses of the custodian, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
the net asset value of the Fund; expenses of shareholder meetings; and the
advisory fee payable to the Adviser under the Investment Advisory Agreement, the
administrative fee payable to the Administrator under the Administration
Agreement and the sub-administration fee payable to the Distributor under the
Distribution and Sub-Administration Agreement. Expenses relating to the
issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes are borne by
the Fund except that the Distribution and Sub-Administration Agreement with the
Distributor requires the Distributor to pay for prospectuses which are to be
used for sales to prospective investors.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. 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 series or class generally vote
separately, for example to approve investment advisory agreements, but shares of
all series or classes vote together, to the extent required under the 1940 Act,
in the election or selection of Trustees and independent accountants.
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The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of each series or class or of all series
or classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a Trustee(s)
when requested to do so in writing by record holders of not less than 10% of the
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class would
be entitled to share pro rata in the net assets of that series or class
available for distribution to shareholders upon liquidation of that series or
class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under
Massachusetts law, shareholders of such a business trust may, under certain
circumstances, be held personally liable as partners for its obligations.
However, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder
23
<PAGE>
signatures in connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an integrated
basis with other reports sent to a shareholder by a Shareholder Servicing Agent)
quarterly and year-end statements and confirmations of purchases and
redemptions; transmit, on behalf of the Fund, proxy statements, annual reports,
updated prospectuses and other communications to shareholders of the Fund;
receive, tabulate and transmit to the Fund proxies executed by shareholders with
respect to meetings of shareholders of the Fund; and provide such other related
services as the Fund or a shareholder may request Shareholder Servicing Agents
may be required to register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liaison to shareholders and providing personal services to
shareholders will not exceed, on an annual basis, 0.25% of the average daily net
assets of the Fund represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Each Shareholder Servicing Agent may, from
time to time, voluntarily waive all or a portion of the fees payable to it. In
addition, Chase may provide other related services to the Fund for which it may
receive compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Fund shares, receive dividends and
distributions on Fund investments, and take advantage of any services related to
an Account offered by such Shareholder Servicing Agent from time to time. All
Accounts and any related privileges or services shall be governed by the laws of
the State of New York, without regard to its conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser and Custodian and the
Administrator as Shareholder Servicing Agents, only to perform advisory,
custodial, administrative and shareholder servicing functions as described
above. While the matter is not free from doubt, Trust management believes that
such laws should not preclude a bank, including a bank which acts as investment
adviser, custodian or administrator, or in all such capacities, for the Fund,
from acting as a Shareholder Servicing Agent. However, possible future changes
in federal law or administrative or judicial interpretations of current or
future law, could prevent a bank from continuing to perform all or part of its
servicing activities. If that occurred, the bank's shareholder clients would be
permitted to remain Fund shareholders and alternative means for continuing the
servicing of such shareholders would be sought. In such event, changes in the
operation of the Fund might occur and a shareholder serviced by such bank might
no longer be able to avail himself of any automatic investment or other services
then being provided by such bank. The Fund does not expect that shareholders
would suffer any adverse financial consequences as a result of these
occurrences.
24
<PAGE>
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Vista Service Center for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of the Fund in the future. From time to time,
the performance and yield of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products and to stock or
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of the Fund may be compared to data prepared by
Lipper Analytical Services, Inc. or Morningstar Mutual Funds on Disc, widely
recognized independent services which monitors the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in local or regional publications, may also
be used in comparing the performance and yield of the Fund. Additionally, the
Fund may, with proper authorization, reprint articles written about the Fund and
provide them to prospective shareholders.
25
<PAGE>
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains are reinvested; annualized total rates
of return will be slightly higher than period total rates of return (if the
periods are shorter than one year) because of the compounding effect of the
assumed reinvestment. The annual total rate of return and yield figures will
assume payment of the maximum sales load.
The Fund may provide "yield" quotations in addition to total rate of return
quotations. The "yield" quotations of the Fund will be based upon a hypothetical
net investment income earned by the Fund over a thirty day or one month period
(which period shall be stated in any advertisement or communication with a
shareholder). The "yield" is then "annualized" by assuming that the income
generated over the period will be generated over a one year period. A "yield"
quotation, unlike a total rate of return quotation, does not reflect changes in
the value of securities.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of the Fund will vary
based on interest rates, the current market value of the securities held in the
Fund's portfolio and changes in the Fund's expenses. In addition, the Adviser,
the Shareholder Servicing Agent, the Administrator and the Distributor have all
voluntarily agreed to waive a portion of their fees on a month-to-month basis.
In addition, the Distributor may assume a portion of the Fund's operating
expenses on a month-to-month basis. These actions have the effect of increasing
the net income (and therefore the yield and total rate of return) of the Fund
during the period such waivers are in effect. These factors and possible
differences in the methods used to calculate the yield and total rate of return
should be considered when comparing the yield or total rate of return of the
Fund to yields and total rates of return published for other investment
companies and other investment vehicles. The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the Fund's
yield or total rate of return quotations.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
Administrator and the Adviser, (iv) portfolio transactions, (v) the Funds'
shares, including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or total
rate of return quotations of the Fund.
26
<PAGE>
PROSPECTUS
VISTASM GROWTH AND INCOME FUND
March 1, 1996
VISTA GROWTH AND INCOME FUND (the "Fund") seeks to provide its shareholders
with long-term capital appreciation and to provide dividend income primarily
through a broad portfolio (i.e., at least 80% of its assets under normal
circumstances) of common stocks. The Growth and Income Fund will invest its
assets in a portfolio of stocks of issuers (including foreign issuers) ranging
from small to medium to large capitalizations. For the most part, the Adviser
will pursue a "contrary opinion" investment approach, selecting common stocks
that are currently out of favor with investors in the stock market. These
securities are usually characterized by a relatively low price/earnings ratio
(using normalized earnings), a low ratio of market price to book value, or
underlying asset values that the Adviser believes are not fully reflected in the
current market price. The Adviser believes that the risk involved in this policy
will be moderated somewhat by the anticipated dividend returns on the stocks to
be held by the Growth and Income Fund. The Fund is a series of Mutual Fund Group
(the "Trust"), an open-end management investment company organized as a business
trust under the laws of the Commonwealth of Massachusetts on May 11, 1987,
presently consisting of 15 separate series (the "Funds"). Because the Fund is
"non-diversified", more of the Fund's assets may be concentrated in the
securities of any single issuer, which may make the value of shares of the Fund
more susceptible to certain risks than shares of a diversified mutual fund.
THE FUND, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND
MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS ITS INVESTMENT OBJECTIVES BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN GROWTH AND INCOME PORTFOLIO (THE
"PORTFOLIO"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY THE CHASE
MANHATTAN BANK, N.A. WITH INVESTMENT OBJECTIVES THAT ARE IDENTICAL TO THOSE OF
THE FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR
ADDITIONAL INFORMATION REGARDING THIS UNIQUE INVESTMENT STRUCTURE, SEE "UNIQUE
CHARACTERISTICS OF MASTER/FEEDER FUND INVESTMENT STRUCTURE" ON PAGE 9.
Of course, there can be no assurance that the Fund or Portfolio will achieve
their investment objectives. Prospective investors should carefully consider the
risks associated with an investment in the Fund. For a further discussion on the
risks associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 6.
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") is the Portfolio's
investment adviser and the Fund's and Portfolio's, custodian (the "Custodian")
and administrator (the "Administrator"). The parent company of the Adviser, The
Chase Manhattan Corporation has entered into an agreement and Plan of Merger
with Chemical Banking Corporation which, if affected will have certain effects
upon the Adviser, see "Management of the Fund--The Adviser" on page 12. Vista
Broker-Dealer Services, Inc. ("VBDS") is the Fund's distributor and is
unaffiliated with Chase. INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING
POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE
NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE
MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Class B shares, each with a public offering price that reflects
different sales charges and expense levels. Class A shares are offered at net
asset value plus the applicable sales charge (maximum of 4.75% of public
offering price). Class B shares are offered at net asset value without an
initial sales charge, with a maximum contingent deferred sales charge of 5% of
redemption proceeds imposed on certain redemptions made within six years of the
date of purchase. This charge will decline to zero for redemptions more than six
years after initial purchase. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert into Class A shares in the eighth year
after purchase. Salespersons and any other person entitled to receive
compensation for selling or servicing shares of the Fund may receive different
compensation with respect to one particular class of shares over another in the
Fund.
For more information on the differences in these classes, see "Variable
Distribution Method," "Purchases and Redemptions of Shares" and "Conversion of
Class B Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund including the trustees and officers of
the Fund and Portfolio, has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. An investor
may obtain a copy of the Statement of Additional Information without charge by
contacting his or her Shareholder Servicing Agent, the Distributor, or the Fund.
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.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
For information about the Fund, simply call the Vista Service Center at
1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary..................................................... 3
Financial Highlights................................................ 4
Investment Objectives and Policies.................................. 5
Additional Information on Investment Policies and Techniques........ 6
Variable Distribution Method........................................ 11
Management.......................................................... 12
Purchases and Redemptions of Shares................................. 15
Tax Matters......................................................... 25
Other Information Concerning Shares of the Fund..................... 27
Shareholder Servicing Agents, Transfer Agent and Custodian.......... 31
Yield and Performance Information................................... 33
2
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of estimated expenses relating to
purchases and sales of Class A and Class B shares of the Fund, and the estimated
aggregate annual operating expenses of the Fund and the Portfolio, as a
percentage of average net assets of the Fund, and (ii) an example illustrating
the dollar cost of such estimated expenses on a $1,000 investment in Class A or
Class B shares of the Fund. The Trustees of the Trust believe that the aggregate
per share expenses of the Fund and the Portfolio will be less than or
approximately equal to the expenses which the Fund would incur if the Trust
retained the services of the investment adviser and the assets of the Fund were
invested directly in the type of securities to be held by the Portfolio.
<TABLE><CAPTION>
CLASS A CLASS B
------- -------
SHAREHOLDER TRANSACTION EXPENSES
- -----------------------------------------------------------------------------
<S> <C> <C>
Maximum Initial Sales Charge imposed on Purchases (as a percentage of
offering price)*........................................................... 4.75% None
Maximum Sales Charge imposed on Reinvested Dividends......................... None None
Exchange Fee............................................................... None None
Maximum Contingent Deferred Sales Charge (as a percentage of redemption
proceeds)+................................................................. None 5.00%
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
- ------------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fee....................................................... .40% .40%
Rule 12b-1 Distribution Plan Fee++............................................ .25% .75%
Administration Fee............................................................ .10% .10%
Other Expenses
- --Sub-administration Fee...................................................... .05% .05%
- --Shareholder Servicing Fee................................................... .25% .25%
- --Other Operating Expenses+++................................................. .30% .30%
----- -----
Total Fund Operating Expenses................................................. 1.35% 1.85%
----- -----
----- -----
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming a 5% annual rate of return:
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1)............................................... $61 $88 $ 118 $ 202
Class B Shares:
Assuming complete redemption at end of period(2)(3)........... 70 91 123 198
Assuming no redemptions(3).................................... 19 58 100 198
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may
pay more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.75% initial
sales charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of eighth year.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administration fee, sub-administrations fee,
shareholder servicing agent fee and other operating expenses expected to be
incurred by the Fund and/or Portfolio during the fiscal year. A more complete
description of the Fund's and Portfolio's expenses, including any potential fee
waivers, is set forth herein on pages 12-13, 27-29 and 31-33.
THE "EXAMPLE" SET FORTH ABOVE ASSUMES ALL DIVIDENDS AND OTHER DISTRIBUTIONS
ARE REINVESTED AND THAT THE PERCENTAGES UNDER "ESTIMATED ANNUAL FUND OPERATING
EXPENSES" REMAIN THE SAME IN THE YEARS SHOWN. THE "EXAMPLE" SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN SHOWN. THE ACTUAL EXPENSES INCURRED AND
ATTRIBUTABLE TO EACH CLASS OF SHARES WILL DEPEND ON SEVERAL FACTORS, INCLUDING
THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT TO WHICH A CLASS INCURS VARIABLE
EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
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 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 Statement of Additional Information.
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.
GROWTH AND INCOME FUND
<TABLE><CAPTION>
YEAR ENDED OCTOBER 31, 9/8/87* YEAR
------------------------------------------------------------------------------------ TO ENDED
1995 1994 1993 1992 1991 1990 1989 1988 10/31/87 10/31/95
PER SHARE OPERATING CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS B
PERFORMANCE SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
- ---------------------- ----------- ----------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period... $30.26 $30.99 $26.60 $25.49 $16.49 $18.12 $14.08 $10.00 $0.00 $30.12
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 0.463
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 4.700
----------- ----------- -------- -------- -------- -------- -------- -------- --------- ---------
Total from
Investment
Operations......... 5.324 0.037 5.348 3.015 9.909 0.134 5.666 4.275 0.000 5.163
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 0.470
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 0.470
Net Asset Value, End
of Period............. $34.96 $30.26 $30.99 $26.60 $25.49 $16.49 $18.12 $14.08 $10.00 $34.81
----------- ----------- -------- -------- -------- -------- -------- -------- --------- ---------
----------- ----------- -------- -------- -------- -------- -------- -------- --------- ---------
Total Return(1)....... 17.79% 0.15% 20.47% 12.34% 62.60% 0.05% 44.40% 42.87% 0.00% 17.21%
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 $273,685
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%# 1.93%
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%# 1.38%
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%# 1.94%
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%)# 1.36%
Portfolio Turnover
Rate.................. -- -- 41% 56% 103% 160% 319% 109% 0% --
<CAPTION>
11/4/93**
THROUGH
10/31/94
PER SHARE OPERATING CLASS B
PERFORMANCE SHARES
- ---------------------- ----------
<S> <C>
Net Asset Value,
Beginning of Period... $30.39
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income................ 0.336
Net Gains or Losses
in Securities (both
realized and
unrealized)........... 0.109
----------
Total from
Investment
Operations............ 0.445
LESS DISTRIBUTIONS:
Dividends from net
investment
income................ 0.370
Distributions from
capital gains......... 0.345
----------
Total
Distributions......... 0.715
Net Asset Value, End
of Period............. $30.12
----------
----------
Total Return(1)....... 1.55%
RATIOS/SUPPLEMENTAL
DATA+
Net Assets, End of
Period (000
omitted).............. $160,375
Ratio of Expenses to
Average Net
Assets................ 1.89%
Ratio of Net
Investment Income to
Average Net Assets.... 1.21%
Ratio of expenses
without waivers and
assumption of
expenses to Average
Net Assets............ 1.89%
Ratio of net
investment income
without waivers and
assumption of
expenses to Average
Net Assets............ 1.21%
Portfolio Turnover
Rate.................. --
</TABLE>
- ------------
* Commencement of operations.
** 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.
+ Ratios include the Fund's share of Portfolio income and expenses, as
appropriate.
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
INTRODUCTION
The Trust seeks to achieve the investment objective of the Fund by investing
all the investable assets of the Fund in the Portfolio. The Trust may withdraw
the investment of the Fund from the Portfolio at any time, if the Board of
Trustees of the Trust determines that it is in the best interest of the Fund to
do so. Upon any such withdrawal, the Board of Trustees would consider what
action might be taken, including the investment of all the assets of the Fund in
another pooled investment entity having the same investment objective as the
Fund or the retaining of an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Portfolio.
INVESTMENT OBJECTIVES -- The primary investment objective of the Fund is
long-term capital appreciation. The Fund's secondary investment objective is to
provide dividend income.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objectives
by investing in the Portfolio which invests primarily (i.e., at least 80% of its
assets under normal circumstances) in common stocks. In addition, the Portfolio
may invest up to 20% of its net assets in convertible securities. The Portfolio
will invest its assets in stocks of issuers (including foreign issuers) ranging
from small to medium to large capitalizations. For the most part, the Adviser
will pursue a "contrary opinion" investment approach, selecting common stocks
for the Portfolio that are currently out of favor with investors in the stock
market. These securities are usually characterized by a relatively low
price/earnings ratio (using normalized earnings), a low ratio of market price to
book value, or underlying asset values that the Adviser believes are not fully
reflected in the current market price. The Adviser believes that the market risk
involved in this policy will be moderated somewhat by the anticipated dividend
returns on the stocks to be held by the Portfolio.
THE NET ASSET VALUE OF THE FUND WILL FLUCTUATE BASED ON THE VALUE OF THE
SECURITIES IN THE PORTFOLIO.
The Portfolio normally will be substantially fully invested and, in normal
circumstances, invest at least 80% of its assets in common stocks. The Portfolio
may invest up to 20% of its net assets in stocks of foreign issuers. Investments
in foreign securities are subject to certain risks to which investments in
domestic securities are not subject, including political or economic instability
of the issuer or country of issue and the possibility of the imposition of
exchange controls. However, the Portfolio reserves the right to invest more than
20% of its assets in cash, cash equivalents and debt securities for temporary
defensive purposes during periods that the Adviser considers to be particularly
risky for investment in common stocks. See "Additional Information on Investment
Policies and Techniques--Non-U.S. Securities" on page 6.
The Portfolio may enter into transactions in stock index futures contracts,
options on stock index futures contracts, options on stock indexes and options
on equity securities, for the purpose of hedging its portfolio. "Additional
Information on Investment Policies and Techniques" and Appendix A contain a more
complete description of the hedging instruments to be traded, as well as further
information concerning the investment policies and techniques of the Portfolio.
In addition, the Statement of Additional Information includes a further
discussion of futures and option contracts to be entered into by the Portfolio.
Although the Portfolio will enter into futures and option contracts for hedging
purposes only, the use of such instruments does involve transaction costs and
certain risks, which are discussed in the Statement of Additional Information.
5
<PAGE>
Shareholder approval is not required to change the investment objectives or
any of the investment policies described above or in "Additional Information on
Investment Policies and Techniques". However, in the event of a change in the
Fund's or Portfolio's investment objectives, shareholders will be given at least
30 days' prior written notice.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Portfolio are not invested in common stocks,
they will consist of or be invested in cash, cash equivalents and short-term
debt securities, such as U.S. Government securities, bank obligations and
commercial paper, as described under "Investment Objective, Policies and
Restrictions" in the Statement of Additional Information, and in repurchase
agreements, as described below and in greater detail under "Investment
Objective, Policies and Restrictions" in the Statement of Additional
Information.
Among the common stocks in which the Portfolio may invest are stocks of
foreign issuers, although at present the Portfolio does not intend to invest
more than 20% of its assets in such securities. These securities may represent a
greater degree of risk (e.g., risk related to exchange rate fluctuation, tax
provisions, war or expropriation) than do securities of domestic issuers.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
market conditions, there can be no assurance that the investment objectives of
the Fund and Portfolio will be achieved.
REPURCHASE AGREEMENTS. The Portfolio may, when appropriate, enter into
repurchase agreements (a purchase of and simultaneous commitment to resell a
security at an agreed-upon price and date which is usually not more than seven
days from the date of purchase) only with member banks of the Federal Reserve
System and security dealers believed creditworthy and only if fully
collateralized by U.S. Government obligations or other securities in which the
Portfolio is permitted to invest. In the event the seller fails to pay the
agreed-to sum on the agreed-upon delivery date, the underlying security could be
sold by the Portfolio, but the Portfolio might incur a loss in doing so, and in
certain cases may not be permitted to sell the security. As an operating policy,
the Portfolio, through its custodian bank, takes constructive possession of the
collateral underlying repurchase agreements. Additionally, procedures have been
established for the Portfolio to monitor, on a daily basis, the market value of
the collateral underlying all repurchase agreements to ensure that the
collateral is at least 100% of the value of the repurchase agreements. No more
than 10% of the total assets of the Portfolio will be invested in securities
which are subject to legal or contractual restrictions on resale, including
securities that are not readily marketable and repurchase agreements maturing in
more than seven days.
PORTFOLIO MANAGEMENT AND TURNOVER. It is not intended that the assets of the
Portfolio will be invested in securities for the purpose of short-term profits.
However, the Portfolio will dispose of portfolio securities whenever the Adviser
believes that changes are appropriate. Generally, the primary consideration in
placing portfolio securities transactions with broker-dealers for execution is
to obtain, and maintain the availability of, execution at the most favorable
prices and in the most effective manner possible. For a complete discussion of
portfolio transactions and brokerage allocation, see "Investment Objectives,
Policies and Restrictions--Investment Policies: Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Portfolio would not intend to
engage in such activity in the ordinary course of business, the Portfolio is
permitted to lend its securities to broker-
6
<PAGE>
dealers and other institutional investors in order to generate additional
income. Such loans of portfolio securities may not exceed 30% of the value of
the Portfolio's total assets. In connection with such loans, the 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
100% of the current market value of the securities loaned. The Portfolio can
increase its income through the investment of such collateral. The Portfolio
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the 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. The Portfolio might experience risk of loss if the
institutions with which it has engaged in portfolio loan transactions breach
their agreements with the 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 Adviser to be of good
standing and will not be made unless, in the judgment of the Adviser, the
consideration to be earned from such loans justifies the risk.
NON-U.S. SECURITIES
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S. Government.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States, including expropriation, confiscatory taxation, lack of
uniform accounting and auditing standards and potential difficulties in
enforcing contractual obligations and could be subject to extended settlement
periods.
The Portfolio may invest in securities denonimated in the ECU, which is a
"basket" consisting of specified amounts of the currencies of certain member
states of the European Community. 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 Portfolio's
Trustees do not believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities. European
governments and supranational organizations (discussed below), in particular,
issue ECU-denominated securities.
The Portfolio may invest in securities issued by supranational organizations
such as: the World Bank, which was chartered to finance development projects in
developing member countries; the European Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations steel
and coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations of the Asian and Pacific regions.
7
<PAGE>
The Portfolio may invest its assets in securities of foreign issuers in the
form of sponsored ADRs, EDRs, or other similar securities representing
securities of foreign issuers. ADRs are receipts typically issued by an American
bank or trust company evidencing ownership of the underlying foreign securities.
EDRs are receipts issued by a European financial institution evidencing a
similar arrangement.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may invest its assets in
derivative and related instruments subject only to the Portfolio's investment
objective and policies and the requirement that, to avoid leveraging the
Portfolio, the 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.
The value of some derivative or similar instruments in which the Portfolio
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and--like other investments of the Portfolio--the
ability of the Portfolio to successfully utilize these instruments may depend in
part upon the ability of the Adviser to forecast interest rates and other
economic factors correctly. If the Adviser incorrectly forecasts such factors
and has taken positions in derivative or similar instruments contrary to
prevailing market trends, the Portfolio could be exposed to the risk of a loss.
THE PORTFOLIO MIGHT NOT EMPLOY ANY OR ALL OF THE INSTRUMENTS DESCRIBED HEREIN,
AND NO ASSURANCE CAN BE GIVEN THAT ANY STRATEGY USED WILL SUCCEED.
To the extent permitted by the investment objectives and policies of the
Portfolio, and as described more fully in the Fund's Statement of Additional
Information, the Portfolio may:
. purchase, write and exercise call and put options on securities,
securities indexes and foreign currencies (including using options in
combination with securities, other options or derivative instruments);
. enter into futures contracts and options on futures contracts;
. employ forward currency and interest-rate contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the 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 ADVISER MAY INCORRECTLY FORECAST INTEREST RATES, MARKET VALUES OR
OTHER ECONOMIC FACTORS IN UTILIZING A DERIVATIVES STRATEGY. In such a case,
the 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.
8
<PAGE>
. STRATEGIES NOT INVOLVING HEDGING MAY INCREASE THE RISK TO THE FUND.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. THERE CAN BE NO ASSURANCE THAT A LIQUID MARKET WILL EXIST AT A TIME
WHEN THE 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.
. ACTIVITIES OF LARGE TRADERS IN THE FUTURES AND SECURITIES MARKETS
INVOLVING ARBITRAGE, "PROGRAM TRADING," AND OTHER INVESTMENT STRATEGIES MAY
CAUSE PRICE DISTORTIONS IN THESE MARKETS.
. IN CERTAIN INSTANCES, PARTICULARLY THOSE INVOLVING OVER-THE-COUNTER
TRANSACTIONS, FORWARD CONTRACTS, FOREIGN EXCHANGES OR FOREIGN BOARDS OF
TRADE, THERE IS A GREATER POTENTIAL THAT A COUNTERPARTY OR BROKER MAY
DEFAULT OR BE UNABLE TO PERFORM ON ITS COMMITMENTS. In the event of such a
default, the Fund may experience a loss.
. IN TRANSACTIONS INVOLVING CURRENCIES, THE VALUE OF THE CURRENCY
UNDERLYING AN INSTRUMENT MAY FLUCTUATE DUE TO MANY FACTORS, INCLUDING
ECONOMIC CONDITIONS, INTEREST RATES, GOVERNMENTAL POLICIES AND MARKET
FORCES.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of futures contracts and options thereon,
including certain percentage limitations on the use of such instruments, see
"Investment Objective, Policies and Restrictions--Investment Policies:
Additional Policies Regarding Futures and Options Transactions, Risk Factors
Associated with Futures and Options Transactions, and Restrictions on the Use of
Futures and Options Contracts" in the Statement of Additional Information.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objectives as the Fund. Therefore,
an investor'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. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
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.) Also, funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the
9
<PAGE>
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 investment
objectives, policies or restrictions may require the Trust to withdraw the
Fund's interest in the Portfolio. Any such 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, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
investable assets of the Fund in another pooled investment entity having the
same investment objectives as the Fund or retaining an investment adviser to
manage the Fund's assets in accordance with the investment policies of the
Portfolio.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Fund to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the Disinterested
Trustees of the Fund reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Trustees
of the Fund, 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.
There are several domestic investment companies that invest all of their
assets in the Portfolio, as does the Fund, and that are sold primarily to
foreign investors. The Fund perceives no adverse effect to the Fund or its
shareholders as a result of such companies' investment in the Portfolio because
such companies are regulated by U.S. securities law, their investment in the
Portfolio is small as compared to the aggregate investment in the Portfolio, and
their shareholder base is diverse.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other Funds by writing the Vista Service
Center.
For more information, see "Management," "Other Information Concerning Shares
of the Fund," "Shareholder Servicing Agents, Transfer Agent and Custodian" and
"Additional Information on Investment Policies and Techniques."
10
<PAGE>
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE><CAPTION>
INITIAL
SALES CONTINGENT DEFERRED DISTRIBUTION AND OTHER
CHARGE SALES CHARGE SERVICE FEES INFORMATION
----------- ------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Class A.................... Maximum of None Distribution Fee Initial Sales
4.75% of of 0.25%; Charge reduced
public Service Fee of in certain
offering 0.25% circumstances.
price
Class B.................... None Maximum contingent Distribution Fee Shares convert
deferred sales of 0.75%; to Class A
charge of 5% of Service Fee of shares, and
redemption 0.25% thus pay lower
proceeds distribution
declines to 0% fees, in the
after 6 years eighth year
after issuance.
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
SALES CHARGES. Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.75% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gains distributions. 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.
REDUCTIONS OF CLASS A SALES CHARGES. As explained more fully in "Purchases
and Redemptions of Shares," certain purchases of Class A shares in amounts
exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES. Class A and Class B each have an annual shareholder
servicing fee of 0.25% of average daily net assets. Class A has an annual
distribution fee under Rule 12b-1 of 0.25% of its average daily net assets,
while Class B has an annual distribution fee under Rule 12b-1 of 0.75% of
11
<PAGE>
its average daily net assets. Moreover, other operating expenses borne by each
class 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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT
The Fund does not have an investment adviser because the Trust seeks to
achieve the investment objectives of the Fund by investing all of the investable
assets of the Fund in the Portfolio. The Portfolio's investment adviser is
Chase, which also serves as the Fund's administrator. Chase global investment
management capabilities are supported by investment professionals located in
cities around the world, including New York, Geneva and Hong Kong. The Chase
Manhattan Trust Corporation Limited serves as administrator to the Portfolio.
THE ADVISER
The Adviser manages the assets of the Portfolio pursuant to an Investment
Advisory Agreement dated November 15, 1993 and subject to such policies as the
Board of Trustees of the Portfolio may determine, the Adviser will make
investment decisions for the Portfolio. Dave Klassen and Greg Adams, Vice
Presidents of the Advisor, co-manage the Growth and Income Portfolio. Mr.
Klassen, Head of U.S. Equity Funds Management and Research for Chase, is also
primarily responsible for the day-to-day management of the Capital Growth
Portfolio, as well as several pooled equity funds. Mr. Klassen joined Chase in
March of 1992. Prior to that he spent 11 years at Dean Witter Reynolds as Vice
President and Portfolio Manager, responsible for a number of mutual funds and
individual accounts. Mr. Adams, Director of U.S. Equity Research for Chase, is
also responsible for managing the Vista Equity Fund, the Vista Equity Income
Fund, and co-managing the Vista Balanced Fund, as well as managing a number of
Chase's pooled equity funds. Mr. Adams joined Chase in 1987 and has been
responsible for overseeing the proprietary computer model program used in the
U.S. equity selection process. For its services under the Investment Advisory
Agreement, the Adviser is entitled to receive an annual fee computed daily and
paid monthly based at an annual rate equal to 0.40% of the Portfolio's average
daily net assets. The Adviser may, from time to time, voluntarily waive all or a
portion of its fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
12
<PAGE>
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers throughout
the U.S. and around the world. Effective upon consummation of the Holding
Company Merger, the Adviser will be a wholly-owned subsidiary of New Chase. Upon
consummation of the Bank Merger, the Adviser will continue to be a wholly-owned
subsidiary of New Chase.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Portfolio, including outstanding loans
to such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Portfolio's assets in any
U.S. Government obligations, municipal obligations or commercial paper purchased
from itself or any affiliate, although under certain circumstances such
securities may be purchased from other members of an underwriting syndicate in
which the Adviser or an affiliate is a non-principal member. This restriction
may limit the amount or type of U.S. Government obligations, municipal
obligations or commercial paper available to be
13
<PAGE>
purchased by the Portfolio. The Adviser has informed the Portfolio that in
making its investment decisions, it does not obtain or use material inside
information in the possession of any other division or department of the
Adviser, including the division that performs services for the Portfolio as
Custodian, or in the possession of any affiliate of the Adviser. Shareholders of
the Fund should be aware that, subject to applicable legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989, as
amended September 30, 1993 (the "Administration Agreement"), Chase serves as
administrator of the Fund and the Portfolio.
Chase provides certain administrative services, including, among other
responsibilities, coordinating relationships with independent contractors and
agents; preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations excluding those of
the securities laws of the various states; preparing financial statements;
arranging for the maintenance of books and records; and providing office
facilities necessary to carry out the duties thereunder. Chase is entitled to
receive from 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. Chase may, from time to time, voluntarily waive all or a portion of its
fees payable to it under the Administration Agreements.
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund and/or Portfolio, as described
below, without violating the federal banking law commonly known as the
Glass-Steagall Act. The Act generally bars banks from publicly underwriting or
distributing certain securities.
Based on the advice of its counsel, Chase believes that the Court's
decision, and these other decisions of banking regulators, permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and Custodian to the Portfolio and render the
services described below and as set forth in the shareholder servicing agreement
and Custodian Agreement, as an appropriate, incidental national banking function
and as a proper adjunct to its serving as investment adviser and administrator
to the Fund and/or the Portfolio.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. Chase, on the
advice of its counsel, believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund and/or Portfolio. If that
occurred, the Fund's or the Portfolio's Board of Trustees promptly would seek to
obtain for the Fund the services of another qualified adviser, shareholder
servicing agent, custodian or administrator, as necessary.
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<PAGE>
Although no assurances can be given, the Fund and Portfolio believe that, if
necessary, the transfer to a new adviser, shareholder servicing agent, custodian
or administrator could be accomplished without undue disruption to their
operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge.
Class B shares of the Fund are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares in the eighth year after issuance. See "Variable
Distribution Method."
Both classes of shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with VBDS, at the public offering
price which is computed once daily as of the close of trading on the New York
Stock Exchange (normally 4:00 p.m. Eastern time, on each business day during
which the Exchange is open for trading ("Fund Business Day"). (See "Other
Information Concerning Shares of the Fund-Net Asset Value"). The public offering
price of Class A shares is the next determined net asset value, plus applicable
initial sales charge. Orders received by Dealers prior to the New York Stock
Exchange closing time are confirmed at the offering price effective at the close
of such Exchange, provided the order is received by the Transfer Agent prior to
its close of business. Dealers are responsible for forwarding orders for the
purchase of shares on a timely basis. Fund shares normally will be maintained in
book entry form and only Class A share certificates will be issued upon request.
Management reserves the right to refuse to sell shares of the Fund to any
person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
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<PAGE>
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ----------------------------------------------- --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program...................... $ 100(4)
(401K, 403B, Keogh)
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
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<PAGE>
INITIAL SALES CHARGES--CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value, plus any applicable initial sales charge, which will vary with the size
of the purchase as shown in the following table:
CONCESSION
SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------ -------- -------- ----------
Less than $100,000........................ 4.75 4.99 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 1.00
$2,500,000 to $9,999,999.................. -- -- 0.75
$10,000,000 to $49,999,999................ -- -- 0.50
$50,000,000 and over...................... -- -- 0.20
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from its own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For the three-year period commencing July 19,
1993, for activities in maintaining and servicing accounts of customers invested
in the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are in
such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares 4.00%, and that portion paid to selling group member broker-
dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash or awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum applicable
contingent Deferred Sales Charge of Class B Shares generated by the Dealer
during such programs to any Dealer that sponsors sales contests or recognition
programs conforming to criteria established by the Distributor or participates
in sales programs sponsored by the Distributor. The Distributor may provide
marketing
17
<PAGE>
services to Dealers with whom it has sales agreements, consisting of written
informational material relating to sales incentive campaigns conducted by such
Dealers for their representatives.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, provided there is
no change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or
employees (including their spouses, children, siblings and parents) of the
Adviser, Distributor, Transfer Agency or any affiliates or subsidiaries
thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares of the
Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants.
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the
Fund serves as Trustee or custodian of the plan or manages some portion of
the plan's assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. 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,
including but not limited to those defined in section 401(a), 403(b) or 457 of
the Intenal Revenue Code or rabbi trusts.
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<PAGE>
Investors may incur a fee if they effect transactions through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A Shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts), provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to the Fund, the
distributor or the Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
The Fund reserves the right to cease offering Class A shares for sale at any
time or to reject any order for the purchase of Class A shares and to cease
offering any services provided by a Shareholder Servicing Agent.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
any person at a reduced initial sales charge which is determined by (a)
aggregating the dollar amount of the new purchase and the greater of the
purchaser's total (i) net asset value or (ii) cost of any shares acquired and
still held in the Fund, or any other Vista Fund, including any Vista money
market Fund acquired by exchange for which a sales charge had been incurred and
(b) applying the initial sales charge applicable to such aggregate dollar value.
The privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A shares purchased
thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75% on the $15,000 purchase. In order to obtain such
discount, the purchaser or investment dealer must provide the Transfer Agent
with sufficient information, including the purchaser's total cost, at the time
of purchase to permit verification that the purchaser qualifies for a cumulative
quantity discount, and confirmation of the order is subject to such
verification. Information concerning the current initial sales charge applicable
to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Fund and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
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<PAGE>
STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced initial sales charges by signing a Statement of Intention (the
"Statement"). This enables the investor to aggregate purchases of Class A shares
in the Fund with purchases of Class A shares of any other Vista Fund (or if a
fund has only one class, shares of such Fund), including shares of any Vista
money market Fund acquired by exchange from a Fund which charged an initial
sales charge, during a 13-month period. The sales charge is based on the total
amount to be invested in Class A shares during the 13-month period. All Class A
or other qualifying shares of these Funds currently owned by the investor will
be credited as purchases (at their current offering prices on the date the
Statement is signed) toward completion of the Statement. A 90-day back-dating
period can be used to include earlier purchases at the investor's cost. The
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicated in the Statement. A SHAREHOLDER MUST NOTIFY THE TRANSFER AGENT
OR DISTRIBUTOR WHENEVER A PURCHASE IS BEING MADE PURSUANT TO A STATEMENT.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder. Reinvested dividend and
capital gain distributions are not counted toward satisfying the Statement.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 calendar days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See "Exchange Privilege." In addition, Class B
shareholders who have redeemed Class B shares and paid a contingent deferred
sales charge in connection with such redemption may purchase Class A shares with
no initial sales charge (in an amount not exceeding the redemption proceeds) if
the purchase occurs within 30 days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B Shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
20
<PAGE>
The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
REDEMPTION DURING NET ASSET VALUE AT REDEMPTION
- ------------------------------------------- -----------------------------
1st Year Since Purchase.................... 5%
2nd Year Since Purchase.................... 4%
3rd Year Since Purchase.................... 3%
4th Year Since Purchase.................... 3%
5th Year Since Purchase.................... 2%
6th Year Since Purchase.................... 1%
7th Year Since Purchase.................... 0%
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a redemption is made first of Class B
shares representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time.
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other Funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (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; (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, as described on page 22; (iv)
distributions from a qualified plan upon retirement; (v) a redemption resulting
from an over-contribution to an IRA; and (vi) a redemption of an account balance
under $500, as described on page 23.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth year after the date of purchase,
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares. The conversion will
be effected at the relative net asset values per share of the two classes on the
first business day of the month following the seventh anniversary of the
original purchase occurs. If any exchanges of Class B shares during the
eight-year
21
<PAGE>
period occurred, the holding period for the shares exchanged will be counted
toward the eight-year 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.
The Fund reserves the right to cease offering Class B shares for sale at any
time or to reject any order for the purchase of Class B shares and to cease
offering any securities provided by a Shareholder Servicing Agent.
For further information as to how to direct a Shareholder Servicing Agent to
purchase shares of the Fund, an investor should contact his Shareholder
Servicing Agent.
Due to the conversion feature of Class B shares, certificates will not be
issued and all shares will be held in book entry form.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent subject to any
applicable contingent deferred sales charges for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
shares by authorizing his Shareholder Servicing Agent, Dealer or its agent to
redeem such shares, which the Shareholder Servicing Agent, Dealer or its agent
must do on a timely basis. The signature of both shareholders is required for
any written redemption requests from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 of the
Investment Company Act of 1940, as amended (the "1940 Act") committing it to pay
in cash all redemptions by a shareholder of record up to the amounts specified
by the rule (approximately $250,000).
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<PAGE>
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of at least $100
from his account. A sufficient number of full and fractional Class A shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds
which has a similar class of shares, respectively, in accordance with the terms
of the then current prospectus of the Fund being acquired. No initial sales
charge is imposed on the Class A shares being acquired, and no contingent
deferred sales charge is
23
<PAGE>
imposed on the Class B shares being redeemed, through an exchange. However,
contingent deferred sales charges may apply to redemptions of Class B shares
acquired through an exchange. 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. Under the Exchange Privilege, Class A or Class B
shares of the Fund may be exchanged for shares of such other Vista Funds only if
those Funds and their shares are registered in the states where the exchange may
legally be made. Shares of the Fund may only be exchanged into the same class of
another Vista Fund and only if the account registrations are identical.
With respect to exchanges from any Vista money market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
money market funds will be done at relative net asset value plus the appropriate
sales charge. An exchange of Class B shares into any of the Vista money market
Funds other than the Class B shares of Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
contingent deferred sales charge--and a subsequent purchase. Class B shares of
any Vista non-money market Fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares while maintaining a stable net asset value. This exchange will
not be subject to a Contingent Deferred Sales Charge unless those shares are
later redeemed. The Class B shares of the Prime Money Market Fund carry the same
Distributor and Sub-Administration Fee, and Shareholder and Fund Servicing Fee
as the Class B shares of the non-money market Funds. Redemptions of shares
acquired through an exchange will be subject to the applicable contingent
deferred sales charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically
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upon opening an account unless the privilege is declined in section 6 of the
Account Application. To provide evidence of telephone instructions, the Transfer
Agent will record telephone conversations with shareholders. The Fund will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. In the event the Fund does not employ such reasonable
procedures, it may be liable for losses due to unauthorized or fraudulent
instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the procedures that have been established for Fund accounts
and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
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shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits. The Portfolio is not required to
pay any federal or excise taxes.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of it shares of qualifying dividends
received by the Portfolio from domestic corporations during the year) may
qualify for the 70% dividends-received deductions a corporate shareholders, but
any such dividends-received deduction will not be allowed in computing the
corporate shareholder's adjusted current earnings, upon which is based a
corporate preference item which may be subject to an alternative minimum tax or
to the environmental superfund tax. Distributions by a Fund of the excess, if
any, of its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has held
his shares. Ordinary income dividends and capital gain dividends from the Fund
may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualify for the dividends-received
deduction for corporations) and capital gain dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund.
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Generally, shareholders are subject to backup withholding if they have not
provided the Fund with a correct taxpayer identification number and certain
required certifications.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class B shares to Class A shares.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of a class of shares of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time) on each Fund Business Day, by dividing the net assets attributable
to that class by the number of its shares outstanding. Values of assets held by
the Portfolio are determined on the basis of their market or other fair value,
as described in the Statement of Additional Information. A share's net asset
value is effective for orders received by a Shareholder Servicing Agent prior to
its calculation and received by the Distributor prior to the close of business,
usually 4:00 p.m. Eastern time, on the Fund Business Day on which such net asset
value is determined.
The per share net asset value of Class B shares of the Fund will generally
be lower than that of the Class A shares because of the higher expenses borne by
the Class B shares, however these net asset values will tend to converge
immediately after the payment of dividends.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net investment income from dividends and interest
(if any) of the Fund is paid to its shareholders quarterly (in the months of
March, June, September and December) as a dividend. The Fund's net investment
income consists of interest income earned, less expenses. The Fund will
distribute its net realized short-term and long-term capital gains, if any, to
its shareholders at least annually. 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.
The Fund intends to make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains imposed by Section 4982 of the Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLANS AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted Distribution Plans (the "Distribution Plans") for
both Class A and Class B shares in accordance with Rule 12b-1 under the 1940
Act, after having concluded that there is a reasonable likelihood that the
Distribution Plans for each class will benefit that class and its respective
shareholders.
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The Class A Distribution Plan provides that the Fund shall pay distribution
fees including payments to the Distributor, at annual rates not to exceed 0.20%
of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees including
payments to the Distributor, at an annual rate not to exceed 0.75% of its
average annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in amounts not to exceed 0.20% annualized of the assets
values of the Class A shares, or 0.25% annualized of the average net value of
the Class B shares maintained in the Fund by such broker-dealers' customers.
Trail or maintenance commissions on Class B shares will be paid to
Broker-Dealers beginning in 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 the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plans. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
compensation is directly linked to its expenses). 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
paid by the Fund to the Distributor in fiscal years subsequent thereto. In
determining whether to purchase Class B shares, investors should consider that
daily compensation payments could continue until the Distributor has been fully
reimbursed for the commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
Under its Distribution Plan, the Class A shares are also permitted to pay an
additional fee at an annual rate not to exceed 0.05% of its average daily net
assets 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 Distribution Plan would be at an annual
rate of 0.25% of its average daily net assets.
The Distribution and Sub-Administration Agreement dated April 2, 1990, as
amended June 1, 1990 and September 30, 1993 (the "Distribution Agreement"),
provides that the Distributor will act as the principal underwriter of the
Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plans. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
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EXPENSES
The respective expenses of each of the Funds of the Trust and the Portfolio
include the compensation of their respective Trustees; registration fees;
interest charges; taxes; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, custodian, registrar or dividend disbursing
agent of the Trust or the Portfolio; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, the Portfolio and
shares of the Fund.
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
Expenses of the Portfolio also include all fees under the Portfolio's
Administration Agreement; the expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Portfolio's
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government officers and commissions;
expenses of meetings of investors; and the advisory fees payable to the Adviser
under the Advisory Agreement.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because the Fund is "non-diversified", more than 5% of
the assets of the Fund may be concentrated in the securities of any single
issuer, which may make the value of the shares in a fund more susceptible to
certain risks than shares of a diversified mutual fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class, including Class A and Class B,
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. Shares
of Class A and Class B generally vote separately, for example to approve
distribution plans, but vote together, to the extent required under the 1940
Act, in the election or selection of Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B or of all series or
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in
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accordance with certain rules of the Securities and Exchange Commission, be
removed from office when the holders of record of not less than two-thirds of
the outstanding shares either present a written declaration to the Funds'
Custodian or vote in person or by proxy at a meeting called for this purpose. In
addition, the Trustees will promptly call a meeting of shareholders to remove a
trustee(s) when requested to do so in writing by record holders of not less than
10% of all outstanding shares of the Trust. Finally, the Trustees shall, in
certain circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class,
including Class A and Class B, would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of the Fund or that series or class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
The Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund's
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund's investing in the Portfolio.
Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of all Fund shareholders and will cast
its vote as instructed by Fund shareholders. As with any mutual fund, other
investors in the Portfolio could control the results of voting at the Portfolio
level. In certain instances (e.g., a change in fundamental investment policies
or restrictions by the Portfolio which was not approved by the Fund's
shareholders), this could result in the Fund's redeeming its investment in the
Portfolio, which could result in increased expenses for the Trust.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange is open for
trading. At 4:00 p.m., Eastern time, on
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each such day, the value of each investor's beneficial interest in the Portfolio
will be determined by multiplying the net asset value of the Portfolio by the
percentage, effective for that day, which represents that investor's share of
aggregate beneficial interests in the Portfolio. Any additions or reductions,
which are to be effected as of 4:00 p.m. Eastern time, on such day, will then be
effected. The investor's percentage of the aggregate beneficial interests in the
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 4:00 p.m., Eastern time, on such day plus or minus, as the case
may be, the amount of the net additions to or reductions in the investor's
investment in the Portfolio effected as of 4:00 p.m., Eastern time, on such day,
and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of 4:00 p.m., Eastern 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 4:00 p.m., Eastern time, for the following day
the New York Stock Exchange is open for trading.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services, including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) quarterly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Fund, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Fund; receive, tabulate and transmit to
the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder Servicing Agents may be required to
register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liaison to shareholders and providing personal services to
shareholders will not exceed, on an annual basis, 0.25% of the average daily net
assets of each class of the Fund represented by shares owned during the period
for which payment is being made by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship. Each
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Shareholder Servicing Agent may, from time to time, voluntarily waive all or a
portion of the fees payable to it. In addition, Chase may provide other related
services to the Fund and/or Portfolio for which it may receive compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A or Class B shares, receive
dividends and distributions on Fund investments, and take advantage of any
services related to an Account offered by such Shareholder Servicing Agent from
time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST systems, Inc ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund and the Portfolio. In this capacity,
DST maintains the account records of all shareholders in the Funds, including
statement preparation and mailing. DST is also responsible for disbursing
dividend and capital gain distributions to shareholders, whether taken in cash
or additional shares. From time to time, DST and/or the Fund may contract with
other entities to perform certain services for the Transfer Agent. For its
services as Transfer Agent, DST receives such compensation as is from time to
time agreed upon by the Trust or the Portfolio and DST. DST's address is 210 W.
10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund, i.e., cash and securities representing the Fund's interest in the
Portfolio, and as the custodian of the Portfolio's assets, for which Chase
receives compensation as is from time to time agreed upon by the Trust or the
Portfolio and Chase. The Custodian's responsibilities include safeguarding and
controlling the Portfolio's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on the
Portfolio's investments, maintaining books of original entry for Portfolio
accounting and other required books and accounts, and calculating the daily net
asset value of beneficial interests in the Portfolio. Portfolio securities and
cash may be held by sub-custodian banks if such arrangements are
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reviewed and approved by the Trustees. The internal division of Chase which
serves as the Custodian does not determine the investment policies of the Fund
or the Portfolio or decide which securities will be bought or sold on behalf of
the Portfolio or otherwise have access to or share material inside information
with the internal division that performs advisory services for the Portfolio.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains distributions are reinvested;
annualized total rates of return will be slightly higher than period total rates
of return (if the periods are shorter than one year) because of the compounding
effect of the assumed reinvestment. For Class A shares, the annual total rate of
return and yield 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.
33
<PAGE>
The Fund may provide "yield" quotations in addition to total rate of return
quotations. The "yield" quotations of the Fund will be based upon a hypothetical
net investment income earned by the Fund over a thirty day or one month period
(which period shall be stated in any advertisement or communication with a
shareholder). The "yield" is then "annualized" by assuming that the income
generated over the period will be generated over a one year period. A "yield"
quotation, unlike a total rate of return quotation, does not reflect changes in
net asset value.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yields and the net asset values of the classes of
shares of the Fund will vary based on interest rates, the current market value
of the securities held by the Portfolio and changes in the Fund's expenses. The
Adviser, the Shareholder Servicing Agent, the Administrator or the Distributor
may voluntarily waive a portion of their fees on a month-to-month basis. In
addition, the Distributor may assume a portion of the Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of the 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 the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the yields or
total rates of return quotations for the classes of shares of the Fund.
The Fund will include performance data for both classes of Fund shares in
any advertisements or promotional materials including Fund performance data.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Fund and the Portfolio, including information related to (i) the
Fund's and Portfolio's investment policies and restrictions, (ii) risk factors
associated with Fund's and Portfolio's policies and investments, (iii) the
Trust's and Portfolio's Trustees, officers and the administrators and the
Adviser, (iv) portfolio transactions, (v) the Funds' shares, including rights
and liabilities of shareholders, and (vi) additional performance information,
including the method used to calculate yield or total rate of return quotations.
34
<PAGE>
PROSPECTUS
VISTASM CAPITAL GROWTH FUND
March 1, 1996
VISTA CAPITAL GROWTH FUND (the "Fund") seeks to provide its shareholders
with long-term capital growth primarily through a broad portfolio (i.e., at
least 80% of its assets in normal circumstances) in common stocks. The Fund will
invest all of its assets in a portfolio holding stocks of issuers (including
foreign issuers) of small to mid-sized companies, with average capitalization of
$500 million to $4 billion. The adviser intends to utilize both quantitative and
fundamental research to identify undervalued stocks with a catalyst for positive
change. Current income, if any, is a consideration incidental to the Fund's
objective of long term capital growth. The Fund is a non-diversified series of
Mutual Fund Group (the "Trust"), an open-end, management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on May 11, 1987, presently consisting of 15 separate series (the
"Funds"). Because the Fund is "non-diversified", more of the Fund's assets may
be concentrated in the securities of any single issuer, than if the Fund was
"diversified" which may make the value of shares of the Fund more susceptible to
certain risks than shares of a diversified mutual fund.
THE FUND, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND
MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS ITS INVESTMENT OBJECTIVES BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN CAPITAL GROWTH PORTFOLIO (THE
"PORTFOLIO"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY THE CHASE
MANHATTAN BANK, N.A. WITH INVESTMENT OBJECTIVES THAT ARE IDENTICAL TO THOSE OF
THE FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS INVESTMENT APPROACH. FOR
ADDITIONAL INFORMATION REGARDING THIS UNIQUE INVESTMENT STRUCTURE, SEE "UNIQUE
CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE" ON PAGE 10.
Of course, there can be no assurance that the Fund or Portfolio will achieve
their investment objectives. Prospective investors should carefully consider the
risks associated with an investment in the Fund. For a further discussion on the
risks associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 7.
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") is the Portfolio's
investment adviser and custodian (the "Custodian"). The parent company of the
Adviser, The Chase Manhattan Corporation has entered into an agreement and Plan
of Merger with Chemical Banking Corporation which, if affected will have certain
effects upon the Adviser, see "Management of the Fund--The Adviser" on page 12.
Chase also serves as the Fund's and the Portfolio's administrator (the
"Administrator"). Vista Broker-Dealer Services, Inc. ("VBDS") is the Fund's
distributor and is unaffiliated with Chase. INVESTMENTS IN THE FUND ARE SUBJECT
TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL-- AND WILL FLUCTUATE IN VALUE.
SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE NOT
INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Class B shares, each with a public offering price that reflects
different sales charges and expense levels. Class A shares are offered at net
asset value plus the applicable sales charge (maximum of 4.75% of public
offering price). Class B shares are offered at net asset value without an
initial sales charge, with a maximum contingent deferred sales charge of 5% of
redemption proceeds imposed on certain redemptions made within six years of the
date of purchase. This charge will decline to zero for redemptions more than six
years after initial purchase. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert into Class A shares in the eighth year
after purchase. Salespersons and any other person entitled to receive
compensation for selling or servicing shares of the Fund may receive different
compensation with respect to one particular class of shares over another in the
Fund.
For more information on the differences in these classes, see "Variable
Distribution Method," "Purchases and Redemptions of Shares" and"Conversion of
Class B Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund including the trustees and officers of
the Fund and Portfolio, has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. An investor
may obtain a copy of the Statement of Additional Information without charge by
contacting his or her Shareholder Servicing Agent, the Distributor or the Fund.
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.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
For information about the Fund simply call the Vista Service Center at
1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary........................................................ 3
Financial Highlights................................................... 5
Investment Objectives and Policies..................................... 6
Additional Information on Investment Policies and Techniques........... 7
Variable Distribution Method........................................... 11
Management............................................................. 12
Purchases and Redemptions of Shares.................................... 14
Tax Matters............................................................ 24
Other Information Concerning Shares of the Fund........................ 25
Shareholder Servicing Agents, Transfer Agent and Custodian............. 29
Yield and Performance Information...................................... 31
2
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of estimated expenses relating to
purchases and sales of Class A and Class B shares of the Fund, and the estimated
aggregate annual operating expenses of the Fund and the Portfolio, as a
percentage of average net assets of the Fund, and (ii) an example illustrating
the dollar cost of such estimated expenses on a $1,000 investment in Class A or
Class B shares of the Fund. The Trustees of the Trust believe that the aggregate
per share expenses of the Fund and the Portfolio will be less than or
approximately equal to the expenses which the Fund would incur if the Trust
retained the services of the investment adviser and the assets of the Fund were
invested directly in the type of securities to be held by the Portfolio.
<TABLE><CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
- ------------------------------------------------------------------------- ------- -------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases
(as a percentage of offering price)*................................... 4.75% None
Maximum Sales Charge Imposed on Reinvested Dividends..................... None None
Exchange Fee............................................................. None None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)+.............................. None 5.00%
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
- -------------------------------------------------------------------------
<S> <C> <C>
Investment Advisory Fee.................................................. .40% .40%
Rule 12b-1 Distribution Plan Fee++....................................... .25% .75%
Administration Fee....................................................... .10% .10%
Other Expenses
--Sub-administration Fee............................................... .05% .05%
--Shareholder Servicing Fee............................................ .25% .25%
--Other Operating Expenses+++.......................................... .35% .35%
------- -------
Total Fund Operating Expenses............................................ 1.40% 1.90%
------- -------
------- -------
EXAMPLE:
You would pay the following expenses on a $1,000 invested in the Fund,
assuming a 5% annual rate of return:
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1)................................................. $61 $90 $ 120 $ 207
Class B Shares:
Assuming complete redemption at end of period(2)(3)............. 71 93 126 203
Assuming no redemption(3)....................................... 19 60 103 203
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may
pay more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.75% initial
sales charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of eighth year.
3
<PAGE>
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee,
shareholder servicing agent fee and other operating expenses expected to be
incurred by the Fund and/or Portfolio during the fiscal year. A more complete
description of the Fund's and Portfolio's expenses, including any potential fee
waivers, is set forth herein on pages 12-14, 26-27 and 29-31.
THE "EXAMPLE" SET FORTH ABOVE ASSUMES ALL DIVIDENDS AND OTHER DISTRIBUTIONS
ARE REINVESTED AND THAT THE PERCENTAGES UNDER "ESTIMATED ANNUAL FUND OPERATING
EXPENSES" REMAIN THE SAME IN THE YEARS SHOWN. THE "EXAMPLE" SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND OR PORTFOLIO;
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN SHOWN. THE ACTUAL EXPENSES INCURRED
AND ATTRIBUTABLE TO EACH CLASS OF SHARES WILL DEPEND ON SEVERAL FACTORS,
INCLUDING THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT TO WHICH A CLASS INCURS
VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
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 throughout 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 Statement of Additional Information. 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.
CAPITAL GROWTH FUND
<TABLE><CAPTION>
YEAR ENDED OCTOBER 31, 9/8/87*
-------------------------------------------------------------------------------------- TO
1995 1994 1993 1992 1991 1990 1989 1988 10/31/87
CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A CLASS A
SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES SHARES
-------- -------- -------- ------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <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 $16.23 $11.56 $10.00 $10.00
Income from
Investment
Operations:
Net Investment
Income (loss)... 0.189 0.099@ 0.064 0.078 (0.011) 0.436 0.500 0.117 0.000
Net Gains or
(Losses) in
Securities
(both realized
and
unrealized).... 4.160 0.719 7.173 3.044 9.805 (3.141) 5.164 1.498 0.000
-------- -------- -------- ------- ------- ------- ------- ------- --------
Total from
Investment
Operations..... 4.349 0.818 7.237 3.122 9.794 (2.705 ) 5.664 1.615 0.000
Less
Distributions:
Dividends from
net investment
income......... 0.189 0.027 0.093 0.017 0.109 0.592 0.320 0.055 0.000
Dividends in
excess of net
investment income.. -- -- -- -- -- -- -- -- --
Distributions
from capital
gains.......... 0.676 0.631 0.257 0.000 0.000 0.598 0.675 0.000 0.000
-------- -------- -------- ------- ------- ------- ------- ------- --------
Total
Distributions...... 0.865 0.658 0.350 0.017 0.109 1.190 0.995 0.055 0.000
Net Asset Value,
End of Period..... $35.65 $32.17 $32.01 $25.12 $22.02 $12.33 $16.23 $11.56 $10.00
-------- -------- -------- ------- ------- ------- ------- ------- --------
-------- -------- -------- ------- ------- ------- ------- ------- --------
Total Return(1).... 13.89% 2.62% 29.06% 14.16% 79.96 % (18.11 %) 52.12 % 16.15 % 0.00%
Ratios/Supplemental
Data+
Net Assets, End
of Period (000
omitted)....... $747,575 $549,411 $225,235 $39,836 $9,334 $4,749 $4,652 $ 561 $ 13
Ratio of
Expenses to
Average Net
Assets............. 1.51% 1.49% 1.49% 1.40% 1.27% 1.04% 0.00% 0.00% 0.00%#
Ratio of Net
Investment
Income to
Average Net
Assets......... 0.54% 0.33% 0.12% 0.32% (0.09%) 2.82% 3.87% 1.55% 0.00%#
Ratio of
Expenses
without Waivers
and Assumption
of Expenses to
Average Net
Assets......... 1.53% 1.50% 1.49% 1.77% 3.44% 2.50% 2.50% 2.00% 2.00%#
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%) 1.36% 1.37% (0.45%) (2.00%#)
Portfolio
Turnover Rate...... -- -- 43% 67% 83% 139% 189% 229% 0%
<CAPTION>
YEAR 11/4/93**
ENDED THROUGH
10/31/95 10/31/94
CLASS B CLASS B
SHARES SHARES
-------- ---------
<S> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value,
Beginning of
Period............ $32.03 $31.38
Income from
Investment
Operations:
Net Investment
Income.......... 0.044 0.011@
Net Gains or
Losses in
Securities
(both realized
and
unrealized).... 4.100 1.296
-------- ---------
Total from
Investment
Operations..... 4.144 1.307
Less
Distributions:
Dividends from
net investment
income......... 0.111 --
Dividends in
excess of net
investment income.. -- 0.026
Distributions
from capital
gains.......... 0.676 0.631
-------- ---------
Total
Distributions...... 0.787 0.657
Net Asset Value,
End of Period..... $35.39 $32.03
-------- ---------
-------- ---------
Total Return(1).... 13.34% 4.19%
Ratios/Supplemental
Data+
Net Assets, End
of Period (000
omitted)....... $260,376 $124,223
Ratio of
Expenses to
Average Net
Assets............. 2.01% 2.00%#
Ratio of Net
Investment
Income to
Average Net
Assets......... 0.02% 0.09%#
Ratio of
Expenses
without Waivers
and Assumption
of Expenses to
Average Net
Assets......... 2.02% 2.02%#
Ratio of Net
Investment
Income without
Waivers and
Assumption of
Expenses to
Average Net
Assets......... 0.01% 0.11%#
Portfolio
Turnover Rate...... -- --
</TABLE>
- ------------
# Annualized.
* Commencement of operations.
** Commencement of offering of classes of shares.
(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.
+ Ratios include the Fund's share of Portfolio income and expenses, as
appropriate.
@ Calculated based upon average shares outstanding.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
INTRODUCTION
The Trust seeks to achieve the investment objective of the Fund by investing
all the investable assets of the Fund in the Portfolio. The Trust may withdraw
the investment of the Fund from the Portfolio. The Trust may withdraw the
investment of the Fund from the Portfolio at any time, if the Board of Trustees
of the Trust determines that it is in the best interest of the Fund to do so.
Upon any such withdrawal, the Board of Trustees would consider what action might
be taken, including the investment of all the assets of the Fund in another
pooled investment entity having the same investment objective as the Fund or the
retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described below with respect to the Portfolio.
THE PORTFOLIO IS AGGRESSIVELY MANAGED AND, THEREFORE, THE VALUE OF ITS
SHARES IS SUBJECT TO GREATER FLUCTUATION AND AN INVESTMENT IN ITS SHARES
INVOLVES THE ASSUMPTION OF A HIGHER DEGREE OF RISK THAN WOULD BE THE CASE WITH
AN INVESTMENT IN A CONSERVATIVE EQUITY FUND OR A GROWTH FUND INVESTING ENTIRELY
IN PROVEN GROWTH EQUITIES. GIVEN THE ABOVE-AVERAGE INVESTMENT RISK INHERENT IN
THE FUND, INVESTMENT IN SHARES OF THE FUND SHOULD NOT BE CONSIDERED A COMPLETE
INVESTMENT PROGRAM AND MAY NOT BE APPROPRIATE FOR ALL INVESTORS.
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with long-term capital growth. Dividend income, if any, is a
consideration incidental to the Fund's objective of growth of capital.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing in the Portfolio which invests (i.e., at least 80% of its assets in
normal circumstances) in common stocks. The Portfolio will seek to invest all of
its assets in a portfolio holding stocks of issuers (including foreign issuers)
of small to mid-sized companies, with capitalization of $500 million to $1.5
billion. The Adviser intends to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change. In
addition, the Portfolio may invest up to 20% of its net assets in convertible
securities. Current income, if any, is a consideration incidental to the Fund's
objective of long term capital growth.
THE NET ASSET VALUE OF THE FUND WILL FLUCTUATE BASED ON THE VALUE OF THE
SECURITIES IN THE PORTFOLIO.
The Portfolio normally will be substantially fully invested and, in normal
circumstances, invest at least 80% of its assets in common stocks. The Portfolio
may invest up to 20% of its net assets in stocks of foreign issuers. Investments
in foreign securities are subject to certain risks to which investments in
domestic securities are not subject, including political or economic instability
of the issuer or country of issue and the possibility of the imposition of
exchange controls. However the Portfolio reserves the right to invest more than
20% of its assets in cash, cash equivalents and debt securities for temporary
defensive purposes during periods which the Adviser considers to be particularly
risky for investment in common stocks. See "Additional Information on Investment
Policies and Techniques--Non-U.S. Securities" on page 9.
The Portfolio may enter into transactions in stock index futures contracts,
options on stock index futures contracts, options on stock indexes and options
on equity securities, for the purpose of hedging its portfolio. "Additional
Information on Investment Policies and Techniques" and Appendix A contain a more
complete description of the hedging instruments to be traded, as well as further
information concerning the investment policies and techniques of the Portfolio.
In addition, the Statement of Additional Information includes a further
discussion of the transactions in futures and option contracts to be entered
into by the Portfolio. Although the Portfolio will enter into transactions in
futures and option contracts for hedging purposes only, the use of such
instruments does involve transaction costs and certain risks, which are
discussed in the Statement of Additional Information.
Shareholder approval is not required to change the investment objective or
any of the investment policies described above or in "Additional Information on
Investment Policies and Techniques". However, in the
6
<PAGE>
event of a change in the Fund's or Portfolio's investment objectives,
shareholders will be given at least 30 days' prior written notice.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Portfolio are not invested in common stocks,
they will consist of or be invested in cash, cash equivalents and short-term
debt securities, such as U.S. Government securities, bank obligations and
commercial paper, as described under "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information, and in repurchase
agreements, as described below and in greater detail under "Investment
Objectives, Policies and Restrictions" in the Statement of Additional
Information.
Among the common stocks in which the Portfolio may invest are stocks of
foreign issuers, although at present the Portfolio does not intend to invest
more than 20% of its assets in such securities. These securities may represent a
greater degree of risk (e.g., risk related to exchange rate fluctuation, tax
provisions, war or expropriation) than do securities of domestic issuers.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment
objectives of the Fund and Portfolio will be achieved.
REPURCHASE AGREEMENTS. The Portfolio may, when appropriate, enter into
repurchase agreements (a purchase of and simultaneous commitment to resell a
security at an agreed-upon price and date which is usually not more than seven
days from the date of purchase) only with member banks of the Federal Reserve
System and security dealers believed creditworthy and only if fully
collateralized by U.S. Government obligations or other securities in which the
Portfolio is permitted to invest. In the event the seller fails to pay the
agreed-to sum on the agreed-upon delivery date, the underlying security could be
sold by the Portfolio, but the Portfolio might incur a loss in doing so, and in
certain cases may not be permitted to sell the security. As an operating policy,
the Portfolio, through its custodian bank, takes constructive possession of the
collateral underlying repurchase agreements. Additionally, procedures have been
established for the Portfolio to monitor, on a daily basis, the market value of
the collateral underlying all repurchase agreements to ensure that the
collateral is at least 100% of the value of the repurchase agreements. Not more
than 10% of the total assets of the Portfolio will be invested in securities
which are subject to legal or contractual restrictions on resale, including
securities that are not readily marketable and repurchase agreements maturing in
more than seven days.
PORTFOLIO MANAGEMENT AND TURNOVER. It is not intended that the assets of the
Portfolio will be invested in securities for the purpose of short-term profits.
However, the Portfolio will dispose of portfolio securities whenever the Adviser
believes that changes are appropriate. Generally, the primary consideration in
placing portfolio securities transactions with broker-dealers for execution is
to obtain, and maintain the availability of, execution at the most favorable
prices and in the most effective manner possible. For a complete discussion of
portfolio transactions and brokerage allocation, see "Investment Objectives,
Policies and Restrictions--Investment Policies: Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Portfolio would not intend to
engage in such activity in the ordinary course of business, the 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 the Portfolio's total assets. In
connection with such loans, the 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 100% of the current market value of the
securities loaned. The Portfolio can increase its income through the investment
of such collateral. The Portfolio continues to be entitled to the interest
payable or any dividend-equivalent payments received on a loaned security and,
in addition, receive interest on the amount of the loan.
7
<PAGE>
However, the receipt of any dividend-equivalent payments by the 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. The
Portfolio might experience risk of loss if the institutions with which it has
engaged in portfolio loan transactions breach their agreements with the
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 Adviser to be of good standing and will not be
made unless, in the judgment of the Adviser, the consideration to be earned from
such loans justifies the risk.
NON-U.S. SECURITIES
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S. Government.
The values of foeign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
The Portfolio may 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. The specific amounts of currencies comprising
the ECU may be adjusted by the Council of Ministers of European Community to
reflect changes in relative values of the underlying currencies. The Portfolio's
Trustees do not believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities. European
governments and supranational organizations (discussed below), in particular,
issue ECU-denominated securities.
The Portfolio may invest in securities issued by supranational organizations
such as: the World Bank, which was chartered to finance development projects in
developing member countries: the European Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations steel
and coal industries; and the Asian Development Bank, which is an international
development bank established to land funds, promote investment and provide
technical assistance to member nations of the Asian and Pacific regions.
The Portfolio may invest its assets in securities of foreign issuers in the
form of sponsored ADRs, EDRs, or other similar securities representing
securities of foreign issuers. ADRs are receipts typically issued by an American
bank or trust company evidencing ownership of the underlying foreign securities.
EDRs are receipts issued by a European financial institution evidencing a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in U.S. securities markets and EDRs, in bearer form, are designed for use in
European securities markets.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may invest its assets in
derivative and related instruments subject only to the Portfolio's investment
objective and policies and the requirement that, to avoid leveraging the
Portfolio, the 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.
8
<PAGE>
The value of some derivative or related instruments in which the Portfolio
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and--like other investments of the Portfolio--the
ability of the Portfolio to successfully utilize these instruments may depend in
part upon the ability of the Adviser to forecast interest rates and other
economic factors correctly. If the Adviser incorrectly forecasts such factors
and has taken positions in derivative or related instruments contrary to
prevailing market trends, the Portfolio could be exposed to the risk of a loss.
THE PORTFOLIO MIGHT NOT EMPLOY ANY OR ALL OF THE INSTRUMENTS DESCRIBED HEREIN,
AND NO ASSURANCE CAN BE GIVEN THAT ANY STRATEGY USED WILL SUCCEED.
To the extent permitted by the investment objectives and policies of the
Portfolio, and as described more fully in the Fund's Statement of Additional
Information, the Portfolio may:
. purchase, write and exercise call and put options on securities,
securities indexes and foreign currencies (including using options in
combination with securities, other options or derivative instruments);
. enter into futures contracts and options on futures contracts;
. employ forward currency and interest-rate contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the 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 ADVISER MAY INCORRECTLY FORECAST INTEREST RATES, MARKET VALUES OR
OTHER ECONOMIC FACTORS IN UTILIZING A DERIVATIVES STRATEGY. In such a case,
the 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 THE FUND.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. THERE CAN BE NO ASSURANCE THAT A LIQUID MARKET WILL EXIST AT A TIME
WHEN THE 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.
. 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
9
<PAGE>
THAT A COUNTERPARTY OR BROKER MAY DEFAULT OR BE UNABLE TO PERFORM ON ITS
COMMITMENTS. In the event of such a default, the Fund may experience a loss.
. IN TRANSACTIONS INVOLVING CURRENCIES, THE VALUE OF THE CURRENCY
UNDERLYING AN INSTRUMENT MAY FLUCTUATE DUE TO MANY FACTORS, INCLUDING
ECONOMIC CONDITIONS, INTEREST RATES, GOVERNMENTAL POLICIES AND MARKET
FORCES.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of futures contracts and options thereon,
including certain percentage limitations on the use of such instruments, see
"Investment Objective, Policies and Restrictions--Investment Policies:
Additional Policies Regarding Futures and Options Transactions, Risk Factors
Associated with Futures and Options Transactions, and Restrictions on the Use of
Futures and Options Contracts" in the Statement of Additional Information.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objectives as the Fund. Therefore,
an investor'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. Investors in 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 of
institutional investors). Also, 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 investment objectives, policies or
restrictions may require the Trust to withdrawn the Fund's interest in the
Portfolio. Any cash 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, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
investable assets of the Fund in another pooled investment entity having the
same investment objectives as the Fund or retaining an investment adviser to
manage the Fund's assets in accordance with the investment policies of the
Portfolio.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Fund to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the Disinterested
Trustees of the Fund reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Trustees
of the Fund, including a majority of the
10
<PAGE>
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.
There are several domestic investment companies that invest all of their
assets in the Portfolio, as does the Fund, and that are sold primarily to
foreign investors. The Fund perceives no adverse effect to the Fund or its
shareholders as a result of such companies' investment in the Portfolio because
such companies are regulated by U.S. securities law, their investment in the
Portfolio is small as compared to the aggregate investment in the Portfolio, and
their shareholder base is diverse.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other Funds by writing the Vista Service
Center.
For more information, see "Management," "Other Information Concerning Shares
of the Fund," "Shareholder Servicing Agents, Transfer Agent and Custodian" and
"Additional Information on Investment Policies and Techniques."
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE><CAPTION>
CONTINGENT
INITIAL DEFERRED DISTRIBUTION OTHER
SALES CHARGE SALES CHARGE AND SERVICE FEES INFORMATION
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A.......... Maximum of 4.75% None Distribution Fee Initial Sales
of public of 0.25%; Service Charge reduced in
offering price Fee of 0.25% certain
circumstances
Class B.......... None Maximum Distribution Fee Shares convert to
contingent of 0.75%; Service Class A shares,
deferred sales Fee of 0.25% and
charge of 5% of thus pay lower
redemption distribution
proceeds declines fees,
to 0% after 6 in the eighth
years year
after issuance
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
SALES CHARGES--Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.75% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gains distributions. 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.
REDUCTIONS OF CLASS A SALES CHARGES--As explained more fully in "Purchase
and Redemptions of Shares," certain purchases of Class A shares in amounts
exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES--Class A and Class B each have an annual shareholder
servicing fee of 0.25% of its average daily net assets. Class A has an annual
distribution fee under Rule 12b-1 of 0.25% of its
11
<PAGE>
average daily net assets, while Class B has an annual distribution fee under
Rule 12b-1 of 0.75% of average daily net assets. Moreover, other operating
expenses borne by each class 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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT
The Fund does not have an investment adviser because the Trust seeks to
achieve the investment objectives of the Fund by investing all of the investable
assets of the Fund in the Portfolio. The Portfolio's investment adviser is
Chase, which also serves as the Fund's administrator. Chase global investment
management capabilities are supported by investment professionals located in
cities around the world, including New York, Geneva and Hong Kong. The Chase
Manhattan Trust Corporation Limited serves as administrator to the Portfolio.
THE ADVISER
The Adviser manages the assets of the Portfolio pursuant to an Investment
Advisory Agreement dated November 15, 1993 and, subject to such policies as the
Board of Trustees may determine, the Adviser makes investment decisions for the
Portfolio. Dave Klassen, Vice President of the Adviser, is responsible for the
day-to-day management of the Portfolio. Mr. Klassen joined Chase in March 1992
and, in addition to managing the Capital Growth Portfolio, is responsible for
managing several pooled equity funds. 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. For its services under the
Investment Advisory Agreement, the Adviser is entitled to receive an annual fee
computed daily and paid monthly based at an annual rate equal to 0.40% of the
Portfolio's average daily net assets. The Adviser may, from time to time,
voluntarily waive all or a portion of its fees payable under the Advisory
Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
12
<PAGE>
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers throughout
the U.S. and around the world. Effective upon consummation of the Holding
Company Merger, the Adviser will be a wholly-owned subsidiary of New Chase. Upon
consummation of the Bank Merger, the Adviser will continue to be a wholly-owned
subsidiary of New Chase.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Portfolio, including outstanding loans
to such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Portfolio's assets in any
U.S. Government obligations, municipal obligations or commercial paper purchased
from itself or any affiliate, although under certain circumstances such
securities may be purchased from other members of an underwriting syndicate in
which the Adviser or an affiliate is a non-principal member. This restriction
may limit the amount or type of U.S. Government obligations, municipal
obligations or commercial paper available to be purchased by the Portfolio. The
Adviser has informed the Portfolio that in making its investment decisions, it
does not obtain or use material inside information in the possession of any
other division or department of the Adviser, including the division that
performs services for the Portfolio as Custodian, or in the possession of any
affiliate of the Adviser. Shareholders of the Fund should be aware that, subject
to applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholder and his
account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989, as
amended September 30, 1993 (the "Administration Agreement") Chase serves as
administrator of the Fund and the Portfolio.
Chase provides certain administrative services, including, among other
responsibilities, coordinating relationships with independent contractors and
agents; preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations excluding those of
the securities laws of the various states; preparing financial statements;
arranging for the maintenance of books and records; and providing office
facilities necessary to carry out the duties thereunder. Chase is entitled to
receive from 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. Chase may, from time to time, voluntarily waive all or a portion of its
fees payable to it under the administration agreements.
13
<PAGE>
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund and/or Portfolio, as described
below, without violating the federal banking law commonly known as the
Glass-Steagall Act. The Act generally bars banks from publicly underwriting or
distributing certain securities.
Based on the advice of its counsel, Chase believes that the Court's
decision, and these other decisions of banking regulators, permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and Custodian to the Portfolio and render the
services described below and as set forth in the shareholder servicing agreement
and Custodian Agreement, as an appropriate, incidental national banking function
and as a proper adjunct to its serving as investment adviser and administrator
to the Fund and/or Portfolio.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. Chase, on the
advice of its counsel, believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund and/or Portfolio. If that
occurred, the Fund's or the Portfolio's Board of Trustees promptly would seek to
obtain for the Fund or Portfolio the services of another qualified adviser,
shareholder servicing agent, custodian or administrator, as necessary. Although
no assurances can be given, the Fund and Portfolio believe that, if necessary,
the transfer to a new adviser, shareholder servicing agent, custodian or
administrator could be accomplished without undue disruption to the their
operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge.
Class B shares of the Fund are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares in the eighth year after issuance. See "Variable
Distribution Method."
Both classes of shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time;
however, options are priced at 4:15 p.m.) on each business day during which the
Exchange is open for trading ("Fund Business Day"). (See "Other Information
Concerning Shares of the Fund-Net Asset Value"). The public offering price of
Class A shares is the next determined net asset value, plus applicable initial
sales charge. Orders received by Dealers prior to the New York Stock Exchange
closing time are confirmed at the offering price effective at the close of such
Exchange, provided the order is received by the Transfer Agent prior to its
close of business. Dealers are responsible for forwarding orders for the
purchase of shares on a timely basis. Fund shares normally will be maintained in
book entry form and only Class A share certificates will be issued only upon
request. Management reserves the right to refuse to sell shares of the Fund to
any person.
14
<PAGE>
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund Shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- --------------------------------------------------------------- --------------------------
<S> <C>
Individual..................................................... $2,500(1)
Individual Retirement Account (IRA)............................ $1,000(2)
Spousal IRA.................................................... $ 250
SEP-IRA........................................................ $1,000(2)
Purchase Accumulation Plan..................................... $ 250(3)
Payroll Deduction Program...................................... $ 100(4)
(401K, 403B, Keogh)
</TABLE>
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
15
<PAGE>
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may being a Systematic Investment Plan at any time by sending a
signed letter with SIGNATURE GUARANTEE to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
INITIAL SALES CHARGES--CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value, plus any applicable initial sales charge, which will vary with the size
of the purchase as shown in the following table:
CONCESSION
SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------ -------- -------- ----------
Less than $100,000........................ 4.75 4.99 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 1.00
$2,500,000 to $9,999,999.................. -- -- 0.75
$10,000,000 to $49,999,999................ -- -- 0.50
$50,000,000 and over...................... -- -- 0.20
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from its own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For the three-year period commencing July 19,
1993, for activities in maintaining and servicing accounts of customers invested
in the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are in
such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares 4.00% and that portion paid to selling group member
broker-dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum Contingent Deferred
Sales Charge of Class B shares generated by the Dealer during such programs to
any Dealer that sponsors sales contests or recognition programs conforming to
criteria established by the Distributor or participates in sales programs
sponsored by
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the Distributor. The Distributor may provide marketing services to Dealers with
whom it has sales agreements, consisting of written informational material
relating to sales incentive campaigns conducted by such Dealers for their
representatives.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, provided there is
no change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial charge on Class A Shares purchased by the following
"Eligible Person:"
(a) Active or retired Trustees, Directors, officers, partners or employees
(including their spouses, children, siblings and parents) of the Adviser,
Distributor, Transfer Agency or any affiliates or subsidiaries thereof.
(b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
(c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares of the
Fund by:
(a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
(b) Any qualified retirement plan with 250 or more participants.
(c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the Fund
serves as Trustee or custodian of the plan or manages some portion of the plan's
assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. 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,
including but not limited to those defined in section 401(a), 403(b) or 457 of
the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transactions through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A Shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts), provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to the Fund, the
distributor or the Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
The Fund reserves the right to cease offering Class A shares for sale at any
time or to reject any order for the purchase of Class A shares and to cease
offering any services provided by a Shareholder Servicing Agent.
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REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
any person at a reduced initial sales charge which is determined by (a)
aggregating the dollar amount of the new purchase and the greater of the
purchaser's total (i) net asset value or (ii) cost of any shares acquired and
still held in the Fund, or any other Vista Fund, including any Vista money
market Fund acquired by exchange for which a sales charge had been incurred and
(b) applying the initial sales charge applicable to such aggregate dollar value.
The privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A shares purchased
thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75%. In order to obtain such discount, the purchaser or
investment dealer must provide the Transfer Agent with sufficient information,
including the purchaser's total cost, at the time of purchase to permit
verification that the purchaser qualifies for a cumulative quantity discount,
and confirmation of the order is subject to such verification. Information
concerning the current initial sales charge applicable to a group may be
obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Fund and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced 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), including shares of any Vista money
market Fund, acquired by exchange, during a 13-month period. The sales charge is
based on the total amount to be invested in Class A shares during the 13-month
period. All Class A or other qualifying shares of these Funds currently owned by
the investor will be credited as purchases (at their current offering prices on
the date the Statement is signed) toward completion of the Statement. A 90-day
back-dating period can be used to include earlier purchases at the investor's
cost. The 13-month period would then begin on the date of the first purchase
during the 90-day period. No retroactive adjustment will be made if purchases
exceed the amount indicated in the Statement. A shareholder must notify the
Transfer Agent or Distributor whenever a purchase is being made pursuant to a
Statement.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total
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purchases pursuant to the Statement (less any dispositions and exclusive of any
distributions on such shares automatically reinvested) are less than the amount
specified, the investor will be requested to remit to the Transfer Agent an
amount equal to the difference between the sales charge paid and the sales
charge applicable to the aggregate purchases actually made. If not remitted
within 20 days after written request, an appropriate number of escrowed shares
will be redeemed in order to realize the difference. This privilege is subject
to modification or discontinuance at any time with respect to all shares
purchased thereunder.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 calendar days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See "Exchange Privilege." In addition, Class B
shareholders who have redeemed Class B shares and paid a contingent deferred
sales charge in connection with such redemption may purchase Class A shares with
no initial sales charge (in an amount not exceeding the redemption proceeds) if
the purchase occurs within 30 days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
REDEMPTION DURING NET ASSET VALUE AT REDEMPTION
- ------------------------------------------ -----------------------------
1st Year Since Purchase................... 5%
2nd Year Since Purchase................... 4%
3rd Year Since Purchase................... 3%
4th Year Since Purchase................... 3%
5th Year Since Purchase................... 2%
6th Year Since Purchase................... 1%
7th Year Since Purchase................... 0%
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a
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redemption is made first of Class B shares representing capital appreciation,
next of shares representing the reinvestment of dividends and capital gains
distributions and finally of other shares held by the shareholder for the
longest period of time.
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (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; (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, as described on page 21; (iv)
distributions from a qualified plan upon retirement; (v) a redemption resulting
from an over-contribution to an IRA; and (vi) a redemption of an account balance
under $500, as described on page 22.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth years after the date of
purchase, together with the pro rata portion of all Class B shares representing
dividends and other distributions paid in additional Class B shares. The
conversion will be effected at the relative net asset values per share of the
two classes on the first business day of the month following the seventh
anniversary of the original purchase occurs. If any exchanges of Class B shares
during the eight-year period occurred, the holding period for the shares
exchanged will be counted toward the eight-year 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.
The Fund reserves the right to cease offering Class B shares for sale at any
time or to reject any order for the purchase of Class B shares and to cease
offering any services provided by a Shareholder Servicing Agent.
Due to the conversion feature of Class B shares certificates will not be
issued and all shares will be held in book entry form.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent subject to any
applicable contingent deferred sales charges for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by
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the Fund, but in any event within seven days. The forwarding of proceeds from
redemption of shares which were recently purchased by check may be delayed up to
15 days. A shareholder may redeem his shares by authorizing his Shareholder
Servicing Agent, Dealer or its agent to redeem such shares, which the
Shareholder Servicing Agent, Dealer or its agent must do on a timely basis. The
signature of both shareholders is required for any written redemption requests
from a joint account. In addition, a redemption request may be deferred for up
to 15 calendar days if the Transfer Agent has been notified of a change in
either the address or the bank account registration previously listed in the
Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. The Fund retains the right to
pay the redemption price of shares in kind with securities (instead of cash).
However, the Trust has filed an election under Rule 18f-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") committing to pay in cash all
redemptions by a shareholder of record up to the amounts specified in the rule
(approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of at least $100
from his account. A sufficient number of full and fractional Class A shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
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No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds
which has a similar class of shares, respectively, in accordance with the terms
of the then current prospectus of the Fund being acquired. No initial sales
charge is imposed on the Class A shares being acquired, and no contingent
deferred sales charge is imposed on the Class B shares being redeemed, through
an exchange. However, contingent deferred sales charges may apply to redemption
of Class B shares acquired through an exchange. 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. Under the Exchange Privilege,
Class A or Class B shares of the Fund may be exchanged for shares of such other
Vista Funds only if those Funds and their shares are registered in the states
where the exchange may legally be made. Shares of the Fund may only be exchanged
into the same class of another Vista Fund and only if the account registrations
are identical.
With respect to exchanges from any Vista money market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
money market funds will be done at relative net asset value plus the appropriate
sales charge. An exchange of Class B shares into any of the Vista money market
Funds other than the Class B shares of Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
contingent deferred sales charge--and a subsequent purchase. Class B shares of
any Vista non-money market Fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares while maintaining a stable net asset value. This exchange will
not be subject to a Contingent Deferred Sales Charge unless those shares are
later redeemed. The Class B shares of the Prime Money Market Fund carry the same
Distribution and Sub-Administration Fee, and Shareholder and Fund Servicing Fee
as the Class B shares of the non-money market Funds. Redemptions of shares
acquired through an exchange will be subject to the contingent deferred sales
charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for
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<PAGE>
the acceptance of instructions by telephone to exchange shares if certain
preauthorizations or indemnifications are accepted and on file. Further
information and telephone exchange forms are available from the Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such reasonable procedures, it may be liable for losses due to
unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the procedures that have been established for Fund accounts
and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
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The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits. The Portfolio is not required to
pay any federal income or excise taxes.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of its share of qualifying dividends
received by the Portfolio from domestic corporations during the year) may
qualify for the 70% dividends-received deduction for corporate shareholders, but
any such dividends-received deduction will not be allowed in computing a
corporate shareholder's adjusted current earnings, upon which is based a
corporate preference item which may be subject to an alternative minimum tax or
to the environmental superfund tax. Distributions by the Fund of the excess, if
any, of its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has held
his shares. Ordinary income dividends and capital gain dividends from the Fund
may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
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Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualify for the dividends-received
deduction for corporations) and capital gains dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class A shares to Class B shares.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time,
however, options are priced at 4:15 p.m.), on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets held by the Portfolio (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 Statement of Additional Information. A share's net
asset value is effective for orders received by a Shareholder Servicing Agent
prior to its calculation and received by the Distributor prior to the close of
business, usually 4:00 p.m. Eastern time, on the Fund Business Day on which such
net asset value is determined.
The per share net asset value of Class B shares of the Fund will generally
be lower than that of the Class A shares because of the higher expenses borne by
the Class B shares. The net asset values per share of Class A and Class B may
differ slightly due to differing allocations of class-specific expenses.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net income from dividends and interest (if any) of
the Fund is paid to its shareholders semi-annually (in the months of June and
December) as a dividend. The Fund's net investment income consists of the
interest income earned, less expenses. The Fund will distribute its net realized
short-term and long-term capital gains, if any, to its shareholders at least
annually. Dividends paid on Class A and Class B shares are calculated at the
same time. In general, dividends on Class B
25
<PAGE>
shares are expected to be lower than those on Class A shares due to the higher
distribution expenses, and certain other expenses, borne by the Class B shares.
The Fund intends to make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLANS AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted Distribution Plans (the "Distribution Plans") for
both Class A and Class B shares in accordance with Rule 12b-1 under the 1940
Act, after having concluded that there is a reasonable likelihood that the
Distribution Plans for each class will benefit that class and its respective
shareholders.
The Class A Distribution Plan provides that the Fund shall pay distribution
fees, including payments to the Distributor, at annual rates not to exceed 0.20%
of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees including
payments to the Distributor, at an annual rate not to exceed 0.75% of its
average annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in an amount not to exceed 0.20% annualized of the
assets values of Class A shares, or 0.25% annualized of the average net asset
value of the Class B shares maintained in the Fund by such broker-dealers'
customers. Trail or maintenance commissions on Class B shares will be paid to
Broker-Dealers beginning in 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 the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plans. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
compensation is directly linked to its expenses). 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
paid by the Fund to the Distributor in fiscal years subsequent thereto. In
determining whether to purchase Class B shares, investors should consider that
daily compensation payments could continue until the Distributor has been fully
reimbursed for the commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
Under its Distribution Plan, the Class A shares are also permitted to pay an
additional fee at an annual rate not to exceed 0.05% of its average daily net
assets 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 assets.
26
<PAGE>
The Distribution and Sub-Administration Agreement dated April 2, 1990,
amended June 1, 1990 and September 30, 1993 (the "Distribution Agreement"),
provides that the Distributor will act as the principal underwriter of the
Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
The respective expenses of each of the Funds of the Trust and the Portfolio
include the compensation of their respective Trustees: registration fees;
interest charges; taxes; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, custodian, registrar or dividend disbursing
agent of the Trust or the Portfolio; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, the Portfolio and
shares of the Fund.
EXPENSES
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
Expenses of the Portfolio also include all fees under the Portfolio's
Administration Agreement; the expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Portfolio's
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government officers and commissions;
expenses of meetings of investors; and the advisory fees payable to the Adviser
under the Advisory Agreement.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because the Fund is "non-diversified", more of the assets
of the Fund may be concentrated in the securities of any single
27
<PAGE>
issuer than if the Fund was "diversified", which may make the value of the
shares in a fund more susceptible to certain risks than shares of a diversified
mutual fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class including Class A and Class B
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. Shares
of Class A and Class B generally vote separately, for example to approve
distribution plans, but shares of all series or classes vote together, to the
extent required under the 1940 Act, in the election or selection of Trustees and
independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B or of all series or
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class
including Class A and Class B, would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of the Fund or that series or class.
The Trust reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series).
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out
28
<PAGE>
for the exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
The Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund's
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund's investing in the Portfolio.
Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of all Fund shareholders and will cast
its vote as instructed by Fund shareholders. As with any mutual fund, other
investors in the Portfolio could control the results of voting at the Portfolio
level. In certain instances (e.g., a change in fundamental investment policies
or restrictions by the Portfolio which was not approved by the Fund's
shareholders), this could result in the Fund's redeeming its investment in the
Portfolio, which could result in increased expenses for the Trust.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange is open for
trading. At 4:00 p.m., Eastern time, on each such day, the value of each
investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of 4:00 p.m. Eastern time, on such day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the 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 4:00 p.m., Eastern time, on such day plus or minus, as the case may be,
the amount of the net additions to or reductions in the investor's investment in
the Portfolio effected as of 4:00 p.m., Eastern time, on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m., Eastern 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 4:00 p.m., Eastern time, on the following day the New York Stock
Exchange is open for trading.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services, including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
29
<PAGE>
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) quarterly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Fund, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Fund; receive, tabulate and transmit to
the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder Servicing Agents may be required to
register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. Fees relating to acting
as liaison to shareholders and providing personal services to shareholders, will
not exceed, on an annual basis, 0.25% of the average daily net assets of each
Class of the Fund represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Each Shareholder Servicing Agent may, from
time to time, voluntarily waive all or a portion of the fees payable to it. In
addition, Chase may provide other related services to the Fund and/or Portfolio
for which it may receive compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A or Class B shares, receive
dividends and distributions on Fund investments, and take advantage of any
services related to an Account offered by such Shareholder Servicing Agent from
time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
30
<PAGE>
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund and the Portfolio. In this capacity,
DST maintains the account records of all shareholders in the Funds, including
statement preparation and mailing. DST is also responsible for disbursing
dividend and capital gain distributions to shareholders, whether taken in cash
or additional shares. From time to time, DST and/or the Fund may contract with
other entities to perform certain services for the Transfer Agent. For its
services as Transfer Agent, DST receives such compensation as is from time to
time agreed upon by the Trust or the Portfolio and DST. DST's address is 210 W.
10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund i.e., cash and securities representing the Fund's interest in the
Portfolio, and as the custodian of the Portfolio's assets, for which Chase
receives compensation as is from time to time agreed upon by the Trust or the
Portfolio and Chase. The Custodian's responsibilities include safeguarding and
controlling the Portfolio's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on the
Portfolio's investments, maintaining books of original entry for portfolio and
Portfolio accounting and other required books and accounts, and calculating the
daily net asset value of beneficial interests in the Portfolio. Portfolio
securities and cash may be held by sub-custodian banks if such arrangements are
reviewed and approved by the Trustees. The internal division of Chase which
serves as the Portfolio's Custodian does not determine the investment policies
of the Portfolio or decide which securities will be bought or sold on behalf of
the Portfolio or otherwise have access to or share material inside information
with the internal division that performs advisory services for the Portfolio.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of the Fund or its classes. Additionally, the Fund may, with
31
<PAGE>
proper authorization, reprint articles written about the Fund and provide them
to prospective shareholders.
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in the
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return 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 the Fund will vary based on interest rates, the current market value
of the securities held by the Portfolio and changes in the Fund's expenses. The
Adviser, the Shareholder Servicing Agent, the Administrator and the Distributor
may voluntarily waive a portion of their fees on a month-to-month basis. In
addition, the Distributor may assume a portion of the Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of the 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 the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the yields or
total rates of return quotations for classes of shares of the Fund.
The Fund will include performance data for both classes of Fund shares in
any advertisements or promotional materials including Fund performance data.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Fund and the Portfolio, including information related to (i) the
Fund's and Portfolio's investment policies and restrictions, (ii) risk factors
associated with Fund's and Portfolio's policies and investments, (iii) the
Trust's and Portfolio's Trustees, officers and the administrators and the
Adviser, (iv) portfolio transactions, (v) the Funds' shares, including rights
and liabilities of shareholders, and (vi) additional performance information,
including the method used to calculate yield or total rate of return quotations.
32
<PAGE>
PROSPECTUS
VISTASM EQUITY FUND
March 1, 1996
VISTA EQUITY FUND (the "Fund") seeks to provide its shareholders with
long-term growth of capital by investing primarily in a diversified portfolio of
common stocks of well-known and established companies. The Fund normally will be
fully invested and, absent unusual market conditions, in normal circumstances at
least 65% of its total assets will be invested in the common stock of well-known
and established companies, which are defined as those companies with a market
capitalization of at least $200 million. Such common stocks typically have a
large number of publicly held shares and high trading volume, resulting in a
high degree of liquidity. Dividend income, if any, is a consideration incidental
to the Fund's objective of growth of capital. The Fund is a diversified series
of Mutual Fund Group (the "Trust"), an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on May 11, 1987, presently consisting of 15 separate series (the
"Funds").
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 5.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's investment
adviser, administrator (the "Administrator") and custodian (the "Custodian").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 8. Vista Broker-Dealer Services, Inc. ("VBDS") is the
Fund's distributor and is unaffiliated with Chase. INVESTMENTS IN THE FUND ARE
SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND MAY FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSTS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE
NOT FEDERALLY INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,. THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, at the
net asset value per share next determined to investors who are customers of a
financial institution, such as a federal or state-chartered bank, trust company
or savings and loan association with which the Fund has entered into a
shareholder servicing agreement (collectively, "Shareholder Servicing Agents"),
and selected securities brokers or financial institutions (collectively,
"Dealers") which have entered into Selected Dealer Agreements with the
Distributor. The Fund has a distribution plan and may incur distribution
expenses, as described herein, at an annual rate, not to exceed 0.25% of its
average daily net assets. An investor should obtain from his Shareholder
Servicing Agent, if appropriate, and should read in conjunction with this
Prospectus, the materials provided by the Shareholder Servicing Agent describing
the procedures under which the shares of the Fund may be purchased and redeemed
through such Shareholder Servicing Agent. Fund shares may be redeemed by
shareholders at the net asset value next determined on any Fund Business Day as
hereinafter defined.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the Statement of Additional Information without
charge by contacting his Shareholder Servicing Agent, the Distributor or the
Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund, simply call the Vista Service Center at the
following toll-free number: 1-800-64-VISTA. Current shareholders of the Fund may
call 1-800-34-VISTA for account information.
<PAGE>
TABLE OF CONTENTS
Expense Summary....................................................... 3
Financial Highlights.................................................. 4
Investment Objective and Policies..................................... 5
Additional Information on Investment Policies and Techniques.......... 5
Management of the Fund................................................ 8
Purchases and Redemptions of Shares................................... 11
Tax Matters........................................................... 15
Other Information Concerning Shares of the Fund....................... 16
Shareholder Servicing Agents, Transfer Agent and Custodian............ 19
Yield and Performance Information..................................... 21
2
<PAGE>
EXPENSE SUMMARY
<TABLE><CAPTION>
AS A
PERCENTAGE
ANNUAL FUND OPERATING EXPENSES OF NET ASSETS
- -------------------------------------------------------------------------------- -------------
<S> <C>
Investment Advisory Fee (After Waiver of Fees)*................................. 0.00%
Rule 12b-1 Distribution Plan Fee (After Waiver of Fees)*........................ 0.18%
Other Expenses
- --Administration Fee (After Waiver of Fees)*.................................... 0.00%
- --Sub-Administration Fee........................................................ 0.05%
- --Other Operating Expenses...................................................... 0.07%
---
Total Fund Operating Expenses................................................... 0.30%
---
---
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) 5% annual return and (2) redemption at the end of:
1 year...................................................................... $ 3
3 years..................................................................... 10
5 years..................................................................... 17
10 years.................................................................... 38
</TABLE>
- ------------
* Fees waived on a month-to-month basis.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee, and
other operating expenses expected to be incurred by the Fund after waiver of
fees. Absent such waivers, the annual investment advisory fee, distribution plan
fee, administration fee and sub-administration fee for the Fund would be 0.40%,
0.25%, 0.10% and 0.05%, respectively, of the Fund's average net assets.
Additionally, a shareholder may incur a $10.00 charge for certain wire
redemptions. A more complete description of the Fund's expenses, including any
fee waivers, is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
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 which are
incorporated by reference in the Statement of Additional Information.
<TABLE><CAPTION>
VISTA EQUITY FUND
-------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, JULY 1, 1992** NOVEMBER 30, 1990*
----------------------------- THROUGH YEAR ENDED TO
1995 1994 1993 OCTOBER 31, 1992 JUNE 30, 1992 JUNE 30, 1991
------- -------- -------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period ...................... $13.16 $ 13.65 $ 12.56 $ 12.50 $11.43 $ 10.00
Income from Investment
Operations:
Net investment income......... 0.277 0.298 0.302 0.080 0.240 0.170
Net gain or Losses 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...................... 2.659 0.290 0.304 0.140 0.290 0.090
Distributions from Capital
Gains....................... 0.282 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>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with long-term growth of capital by investing primarily in a
diversified portfolio of common stocks of well-known and established companies.
INVESTMENT POLICIES -- The Fund normally will be fully invested and, absent
unusual market conditions, in normal circumstances at least 65% of its total
assets will be invested in the common stock of well-known and established
companies, which are defined as those companies with a market capitalization of
at least $200 million. Such common stocks typically have a large number of
publicly held shares and high trading volume, resulting in a high degree of
liquidity.
The Chase Manhattan Bank, N.A. (the "Adviser") seeks to purchase the stocks
of companies that are expected to demonstrate greater long-term earnings growth
than either their industry competitors or the average company included in the
S&P Index. These companies generally tend to have strong management
organizations. The Adviser will evaluate such well-known and established
companies by assessing the strongest sectors of the market over the economic
cycle, identifying those companies with favorable earnings prospects, and then
selecting the most attractive values. The Adviser will consider industry
diversification as an important factor and will try to maintain representation
in as many market sectors as possible, although sector emphasis will shift as a
result of changes in the outlook for earnings among market sectors.
Although the Fund invests primarily in common stock, it will ordinarily
invest up to 5% of its net assets in high quality, short-term debt securities
and money market instruments, including repurchase agreements for the purpose of
maintaining a certain degree of liquidity. When a temporary defensive posture in
the market is appropriate in the Adviser's opinion, the Fund may invest up to
100% of its assets in these instruments. The Fund may also hold other types of
securities from time to time, including preferred stocks and American Depository
Receipts. In addition, the Fund may invest up to 20% of its net assets in
convertible securities.
The Fund, which invests primarily in common stock, is designed for investors
who are able to accept fluctuations in stock values and the resulting
fluctuation in the Fund's net asset value.
The Fund seeks to diversify its portfolio, but its investment limitations
allow the Fund, with respect to 25% of its total assets, to invest more than 5%
of its total assets in a single issuer. As a result, changes in the value of a
single issuer's securities, which represent more than 5% of the Fund's total
assets, could have a greater effect on the Fund's per share value.
Shareholder approval is not required to change the investment objective or
any of the investment policies described above or in "Additional Information on
Investment Policies and Techniques".
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Fund are not invested in common stocks, they
will consist of or be invested in cash, cash equivalents and high quality,
short-term debt securities and money market instruments, including repurchase
agreements for the purpose of maintaining a high degree of liquidity, as
described under "Investment Objectives, Policies and Restrictions" in the
Statement of Additional Information, and in repurchase agreements, as described
below and in greater detail under "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information.
5
<PAGE>
In addition to common stocks, the Fund may invest in preferred stocks,
secured American Depository Receipts and convertible debentures. These
securities may represent a greater degree of risk than does common stock of
domestic issuers.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment
objectives of the Fund will be achieved.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be sold by the Fund,
but the Fund might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, the Fund, through its
custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been established for the
Fund to monitor, on a daily basis, the market value of the collateral underlying
all repurchase agreements to ensure that the collateral is at least 100% of the
value of the repurchase agreements. Not more than 10% of the total assets of the
Fund will be invested in securities which are subject to legal or contractual
restrictions on resale, including securities that are not readily marketable and
repurchase agreements maturing in more than seven days.
PORTFOLIO MANAGEMENT AND TURNOVER. It is not intended that the assets of the
Fund will be invested in securities for the purpose of short-term profits.
However, the Fund will dispose of portfolio securities whenever the Adviser
believes that changes are appropriate. Generally, the primary consideration in
placing portfolio securities transactions with broker-dealers for execution is
to obtain, and maintain the availability of, execution at the most favorable
prices and in the most effective manner possible. For a complete discussion of
portfolio transactions and brokerage allocation, see "Investment Objectives,
Policies and Restrictions--Investment Policies: Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned. The Fund
can increase its income through the investment of such collateral. The Fund
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the Fund on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their agreements
with the Fund. 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
6
<PAGE>
by the Adviser to be of good standing and will not be made unless, in the
judgment of the Adviser, the consideration to be earned from such loans
justifies the risk.
FUTURES AND OPTIONS TRANSACTIONS. The Fund may invest its assets in
derivative and related instruments subject only to the Fund's investment
objective and policies and the requirement that, to avoid leveraging the Fund,
the Fund 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.
The value of some derivatives or related instruments in which the Fund
invests may be particularly sensitive to changes in the prevailing interest
rates or other economic factors, and--like other investments of the Fund--the
ability of the Fund to successfully utilize these instruments may depend in part
upon the ability of the Adviser to forecast interest rates and other economic
factors correctly. If the Adviser incorrectly forecasts such factors and has
taken positions in derivative or related instruments contrary to prevailing
market trends, the Fund could be exposed to the risk of a loss. The Fund might
not employ any or all of the instruments described herein, and no assurance can
be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
. 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):
. enter into futures contracts and options on futures contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. There can be no guarantee that there will be a correlation between
price movements in a hedging vehicle and in the portfolio assets being
hedged. As incorrect correlation could result in a loss on both the hedged
assets in the Fund and the hedging vehicle so that the 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains.
. Strategies not involving hedging may increase the risk to the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
7
<PAGE>
. There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract,
no trades may be made that day at a price beyond that limit. In addition,
certain instruments are relatively new and without a significant trading
history. As a result, there is no assurance that an active secondary market
will develop or continue to exist.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of futures contracts and options thereon,
including certain percentage limitations on the use of such instruments, see
"Investment Objectives, Policies and Restrictions--Investment Policies:
Additional Policies Regarding Futures and Options Transactions, Risk Factors
Associated with Futures and Options Transactions, and Restrictions on the Use of
Futures and Options Contracts" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
THE ADVISER
The Chase Manhattan Bank, N.A. (the "Adviser") manages the assets of the
Fund pursuant to an Investment Advisory Agreement dated October 19, 1990, as
amended July 17, 1992. Subject to such policies as the Board of Trustees may
determine, the Adviser makes investment decisions for the Fund. Mark Tincher and
Greg Adams, Vice Presidents of the Adviser, are responsible for the day-to-day
management of the Fund's portfolio. Mark Tincher began managing the Fund on
February 1, 1994 and is a member of the Chase Private Bank's in-house investment
management research team, specializing in technology and financial issues. Mr.
Tincher has been with Chase since May 1988. Mr. Adams, who joined Chase in 1987,
also manages the equity trading of the Vista Balanced Fund, as well as a number
of Chase's pooled equity funds. For its services under the Investment Advisory
Agreement, the Adviser is entitled to receive an annual fee computed daily and
paid monthly based at an annual rate equal to 0.40% of the Fund's average daily
net assets. The Adviser may, from time to time, voluntarily waive all or a
portion of its fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a
8
<PAGE>
bank holding company, pursuant to which The Chase Manhattan Corporation will
merge with and into Chemical (the "Holding Company Merger"). Under the terms of
the Merger Agreement, Chemical will be the surviving corporation in the Holding
Company Merger and will continue its corporate existence under Delaware law
under the name "The Chase Manhattan Corporation" ("New Chase"). The board of
directors of each holding company has approved the Holding Company Merger, which
will create the second largest bank holding company in the United States based
on assets. The consummation of the Holding Company Merger is subject to certain
closing conditions. On December 11, 1995, the respective shareholders of The
Chase Manhattan Corporation and Chemical voted to approve the Holding Company
Merger. The Holding Company Merger is expected to be completed on or about March
31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account.
9
<PAGE>
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989,
amended September 30, 1993 (the "Administration Agreement"), Chase (the
"Administrator") serves as administrator of the Fund. The Administrator provides
certain administrative services, including, among other responsibilities,
coordinating relationships with independent contractors and agents; preparing
for signature by officers and filing of certain documents required for
compliance with applicable laws and regulations excluding those of the
securities laws of the various states; preparing financial statements; arranging
for the maintenance of books and records; and providing office facilities
necessary to carry out the duties thereunder. The Administrator is entitled to
receive from the Fund a fee computed daily and paid monthly at an annual rate
equal to 0.10% of the Fund's average daily net assets. The Administrator may,
from time to time, voluntarily waive all or a portion of its fees payable to it
under the Administration Agreement. The Administrator shall not have any
responsibility or authority for the Fund's investments, the determination of
investment policy, or for any matter pertaining to the distribution of Fund
shares.
GLASS-STEAGALL ACT. The Adviser and the Administrator have received the
opinion of their legal counsel that they may provide the services described in
the Investment Advisory and the Administration Agreements, as described above,
and the Shareholder Servicing Agreements with the Fund, as described below,
without violating the federal banking law commonly known as the Glass-Steagall
Act. The Act generally bars banks from publicly underwriting or distributing
certain securities.
Based on the advice of its counsel, Chase believes that the Court's decision
and these other decisions of federal banking regulators permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent to the Fund and render the services described below and as set forth in
the shareholder servicing agreement, as an appropriate, incidental national
banking function and as a proper adjunct to its serving as investment adviser
and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. The Administrator,
on the advice of its counsel, believes that it may render the services described
in its Administration Agreement without violating the Glass-Steagall Act or
other applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing or other
administrative services for the Fund. If that occurred, the Fund's Board of
Trustees promptly would seek to obtain for the Fund the services of another
qualified adviser, shareholder servicing agent or administrator, as necessary.
Although no assurances can be given, the Fund believes that, if necessary, the
transfer to a new adviser, shareholder servicing agent or administrator could be
accomplished without undue disruption to the Fund's operations.
10
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with Vista Broker-Dealer Services, Inc., at the public
offering price which is computed once daily as of the close of regular trading
on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on each
business day during which the Exchange is open for trading ("Fund Business
Day"). (See "Other Information Concerning Shares of the Fund--Net Asset Value").
The public offering price of shares is the next determined net asset value, plus
applicable initial sales charge. Orders received by Dealers prior to the New
York Stock Exchange closing time are confirmed at the applicable offering price
effective at the close of such Exchange, provided the order is received by the
Transfer Agent prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Fund shares
normally will be maintained in book entry form and certificates will be issued
upon request. Management reserves the right to refuse to sell shares of the Fund
to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian-- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
Fund shares will be maintained in book entry form, and no certificates
representing shares owned will be issued to shareholders.
11
<PAGE>
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
Account Type Minimum Initial Investment
- ----------------------------------------------- --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program (401K, 403B,
Keogh)......................................... $ 100(4)
- ------------
(1) Employees of the Adviser and its affiliates, and certain qualified persons
are eligible for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN
A shareholder may establish a monthly investment plan by which investments
are automatically made to his/her Vista Fund account through Automatic Clearing
House (ACH) deductions from a checking account. The minimum monthly investment
through this plan is $100. Shareholders may choose either to have these
investments made during the first or third week each month. Please note that
your initial ACH transactions may take up to 10 days from receipt of your
request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
12
<PAGE>
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in his account on
any Fund Business Day at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to his Shareholder
Servicing Agent and transmitted by it to and received by the Fund's Transfer
Agent. Therefore, redemptions will be effected on the same day the redemption
order is received only if such order is received prior to 4:00 p.m., Eastern
time, on any Fund Business Day. The proceeds of a redemption normally will be
paid on the next Fund Business Day the redemption is effected, but in any event
within seven days. The forwarding of proceeds from redemption of shares which
were recently purchased by check may be delayed up to 15 days. A shareholder who
is a customer of a Shareholder Servicing Agent may redeem his Fund shares by
authorizing his Shareholder Servicing Agent, its agent, or the Transfer Agent to
redeem such shares. The signature of both shareholders is required for any
written redemption requests (other than those by check) from a joint account. In
addition, a redemption request may be deferred for up to 15 calendar days if the
Transfer Agent has been notified of a change in either the address or the bank
account registration previously listed in the Fund records.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 committing
to pay in cash all redemptions by a shareholder of record up to the amounts
specified in the rule (approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. However, all telephone redemption requests in excess of
$25,000 will be wired directly to such previously designated bank account, for
the protection of shareholders. Normally, redemption payments will be
transmitted on the next business day following receipt of the request (provided
it is made prior to 4:00 p.m., Eastern time on any day redemptions may be made).
Redemption payments requested by telephone may not be available in a previously
deposited bank account for up to four days. For telephone redemptions, call the
Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
AUTOMATIC REDEMPTION PLAN. A shareholder owning $10,000 or more of the
shares of the Fund as determined by the then current net asset value may provide
for the payment monthly or quarterly of any requested dollar amount (subject to
limits) from his account to his order. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is received on
approximately the 1st day of the month following the end of the selected payment
period.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is
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less than $500. In the event of any such redemption, a shareholder will receive
at least 60 days' notice prior to the redemption.
EXCHANGE PRIVILEGE
Subject to certain conditions, shares of Vista Equity Fund, Vista Bond Fund
and Vista Short-Term Bond Fund may be exchanged for shares of another of those
three Funds at the then current net asset value. The Prospectus should be
reviewed before effecting any exchange. You should note that any such exchange,
which may only be made in states where shares of the other Funds are qualified
for sale, may create a gain or loss to be recognized for federal income tax
purposes. Exchanges may be authorized by telephone. If you desire this exchange
option you must check the box on the Application which indicates that you wish
to have this privilege. The exchange privilege may be modified or discontinued
at any time.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders by completing the "Expedited Redemption" section of the Account
Application. To provide evidence of telephone instructions, the Transfer Agent
will record telephone conversations with shareholders. The Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. In the event the Fund does not employ such procedures, it may be liable
for losses due to unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the procedures that have been established for Fund accounts
and services.
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Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of qualifying dividends received by
the Fund from domestic corporations during the year) may qualify for the 70%
dividends-received deduction for corporate shareholders, but any such
dividends-received deduction will not be allowed in computing a corporate
shareholder's adjusted current earnings, upon which is based a corporate
preference item which may be subject to an alternative minimum tax or to the
environmental superfund tax. Distributions by the Fund of the excess, if any, of
its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder
15
<PAGE>
has held his shares. Ordinary income dividends and capital gain dividends from
the Fund may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualify for the dividends-received
deduction for corporations) and capital gains dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time,
however, options are priced at 4:15 p.m.), on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other fair value, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by a Shareholder
Servicing Agent prior to its calculation and received by the Distributor prior
to the close of business, usually 4:00 p.m. Eastern time, on the Fund Business
Day on which such net asset value is determined.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net investment income (if any) of the Fund is paid
to its shareholders quarterly (in the months of March, June, September and
December) as a dividend. The Fund's net investment income consists of the
dividend and interest income earned on its portfolio, less expenses.
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<PAGE>
The Fund will distribute its net realized short-term and long-term capital
gains, if any, to its shareholders at least annually.
The Fund will also make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder may elect to receive dividends and capital gains distributions from
the Fund in either cash or additional shares.
DISTRIBUTION PLAN AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act, after having concluded that there
is a reasonable likelihood that the Distribution Plan will benefit the Fund and
its shareholders.
The Distribution Plan provides that the Fund shall pay distribution fees
(the "Basic Distribution Fee"), including payments to the Distributor, at an
annual rate not to exceed 0.20% of the Fund's average daily net assets for
distribution services. The Distributor may use all or a portion of such Basic
Distribution Fee to pay for the expenses of printing prospectuses and reports
used for sales purposes, expenses related to the preparation and printing of
sales literature and other such distribution-related expenses. The Basic
Distribution Fee is not directly tied to its expenses, therefore the amount of
Basic Distribution Fee paid by the Fund during any year may be more or less than
actual expenses incurred pursuant to the Distribution Plan. For this reason,
this type of distribution fee arrangement is characterized by the staff of the
Securities and Exchange Commission as being of the "compensation variety" (in
contrast to "reimbursement" arrangements such as those described in the next
paragraph, by which a distributor's compensation is directly linked to its
expenses). The Fund is not liable for any distribution expenses incurred in
excess of the Basic Distribution Fee paid.
Under the Distribution Plan, the Fund is also permitted to pay an additional
fee at an annual rate not to exceed 0.05% of its average daily net assets in
anticipation of, or as reimbursement for, actual expenses incurred during such
year in connection with print or electronic media advertising in connection with
the sale of the Fund's shares.
The Distribution and Sub-Administration Agreement dated April 2, 1990 and
amended June 1, 1990 and August 4, 1992, (the "Distribution Agreement"),
provides that the Distributor will act as the principal underwriter of the
Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
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EXPENSES
The Fund intends to pay all of its pro rata share of the Trust's expenses,
including the compensation of the Trustees; all fees under the Distribution Plan
(see "Purchases and Redemptions of Shares -- Distribution Plan and Agreement");
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute; fees and expenses of independent accountants, of legal
counsel and of any transfer agent and dividend disbursing agent; expenses of
distributing and redeeming shares and servicing shareholder accounts; expenses
of preparing, printing and mailing prospectuses, reports, notices, proxy
statements and reports to shareholders and to governmental officers and
commissions; expenses connected with the execution, recording and settlement of
portfolio security transactions; insurance premiums; fees and expenses of the
custodian, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of the
Fund; expenses of shareholder meetings; and the advisory fee payable to the
Adviser under the Investment Advisory Agreement, the administrative fee payable
to the Administrator under the Administration Agreement and the
sub-administration fee payable to the Distributor under the Distribution and
Sub-Administration Agreement. Expenses relating to the issuance, registration
and qualification of shares of the Fund and the preparation, printing and
mailing of prospectuses for such purposes are borne by the Fund except that the
Distribution and Sub-Administration Agreement with the Distributor requires the
Distributor to pay for prospectuses which are to be used for sales to
prospective investors.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. On December 4, 1992, the shareholders of Trinity Equity
Fund approved the reorganization of such Fund into a new series of the Trust,
effective January 1, 1993.
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 series or class generally vote
separately, for example to approve investment advisory agreements, but shares of
all series or classes vote together, to the extent required under the 1940 Act,
in the election or selection of Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of each series or class or of all series
or classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose.
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In addition, the Trustees will promptly call a meeting of shareholders to remove
a Trustee(s) when requested to do so in writing by record holders of not less
than 10% of the outstanding shares of the Trust. Finally, the Trustees shall, in
certain circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class would
be entitled to share pro rata in the net assets of that series or class
available for distribution to shareholders upon liquidation of that series or
class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
among other things: answer customer inquiries regarding account status, history,
the manner in which purchases and redemptions of shares may be effected for the
Fund as to which the Shareholder Servicing Agent is so acting and certain other
matters pertaining to the Fund; assist shareholders in designating and changing
dividend options, account designations and addresses; provide necessary
personnel and facilities to establish and maintain shareholder accounts and
records; assist in processing purchase and redemption transactions; arrange for
the wiring of funds; transmit and receive funds in connection with customer
orders to purchase or redeem shares; verify and guarantee shareholder signatures
in connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an integrated
basis with other reports sent to a shareholder by a Shareholder Servicing Agent)
monthly and year-end statements and confirmations of purchases and redemptions;
transmit, on behalf of the Fund, proxy statements, annual reports, updated
prospectuses and other communications to shareholders of the Fund; receive,
tabulate and transmit to the Fund proxies executed by shareholders with respect
to meetings of
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<PAGE>
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.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Fund shares, receive dividends and
distributions on Fund investments, and take advantage of any services related to
an Account offered by such Shareholder Servicing Agent from time to time. All
Accounts any any related privileges or services shall be governed by the laws of
the State of New York, without regard to its conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the
20
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investment policies of the Fund or decide which securities will be bought or
sold on behalf of the Fund or otherwise have access to or share material inside
information with the internal division that performs advisory services for the
Fund.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Call or write the
Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of the Fund in the future. From time to time,
the performance and yield of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products, and to stock or
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of the Fund may be compared to data prepared by
Lipper Analytical Services, Inc. or Morningstar Mutual Funds on Disc, widely
recognized independent services which monitor the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in local or regional publications, may also
be used in comparing the performance and yield of the Fund. Additionally, the
Fund may, with proper authorization, reprint articles written about the Fund and
provide them to prospective shareholders.
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains are reinvested; annualized total rates
of return will be slightly higher than period total rates of return (if the
periods are shorter than one year) because of the compounding effect of the
assumed reinvestment.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of the Fund will vary
based on interest rates, the current market value of the securities held in the
Fund's portfolio and changes in the Fund's expenses. These actions have the
effect of increasing the net income (and therefore the yield and total rate of
return) of the Fund during the period such waivers are in effect. These factors
and possible differences in the methods used to
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<PAGE>
calculate the yield and total rate of return should be considered when comparing
the yield or total rate of return of the Fund to yields and total rates of
return published for other investment companies and other investment vehicles.
The Fund is advised that certain Shareholder Servicing Agents may credit to the
accounts of their customers from whom they are already receiving other fees
amounts (see "Purchases and Redemptions of Shares -- Purchases"), which will
have the effect of increasing the net return on the investment of customers of
those Shareholder Servicing Agents. Such customers may be able to obtain through
their Shareholder Servicing Agents quotations reflecting such increased return.
See the Statement of Additional Information for further information concerning
the calculation of the Fund's yield or total rate of return quotations.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
Administrator and the Adviser, (iv) portfolio transactions, (v) the Fund's
shares, including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or total
rate of return quotations of the Fund.
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<PAGE>
EQUITY
FUND
- ---------------------------------- ----------------------------------
INVESTMENT ADVISER & ADMINISTRATOR PROSPECTUS
The Chase Manhattan Bank, N.A. AND APPLICATION
DISTRIBUTOR
Vista Broker-Dealer Services, Inc.
TRANSFER AGENT
Investors Fiduciary Trust Company
CUSTODIAN
The Chase Manhattan Bank, N.A.
LEGAL COUNSEL
Reid & Priest
INDEPENDENT ACCOUNTANTS
Price Waterhouse
SHAREHOLDER SERVICING AGENT
The Chase Manhattan Bank, N.A.
VEF-1 MARCH 1, 1994
<PAGE>
PROSPECTUS
VISTASM BOND FUND
March 1, 1996
VISTA BOND FUND (the "Fund") seeks to provide as high a level of income as
is consistent with reasonable risk by investing primarily in a broad range of
government bonds, investment-grade corporate bonds as well as other fixed income
securities. In addition the Fund seeks to provide capital preservation and will,
where appropriate, take advantage of opportunities to realize capital
appreciation. The Fund is a diversified series of Mutual Fund Group (the
"Trust"), an open-end management investment company organized as a business
trust under the laws of the Commonwealth of Massachusetts on May 11, 1987,
presently consisting of 15 separate series (the "Funds").
Of course, there can be no assurance that the Fund will achieve its
investment objectives. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective and
Policies" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 6.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's investment
adviser, administrator (the "Administrator"), and custodian (the "Custodian").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 10. Vista Broker-Dealer Services, Inc. ("VBDS") is
the Fund's distributor and is unaffiliated with Chase. INVESTMENTS IN THE FUND
ARE SUBJECT TO RISK-- INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND MAY FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE
NOT FEDERALLY INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS at the net
asset value per share next determined to investors who are customers of a
financial institution, such as a federal or state-chartered bank, trust company
or savings and loan association with which the Fund has entered into a
shareholder servicing agreement (collectively, "Shareholder Servicing Agents"),
and selected securities brokers or financial institutions (collectively,
"Dealers") which have entered into Selected Dealer Agreements with the
Distributor. The Fund has a distribution plan and may incur distribution
expenses, as described herein, at an annual rate, not to exceed 0.25% of its
average daily net assets. An investor should obtain from his Shareholder
Servicing Agent, if appropriate, and should read in conjunction with this
Prospectus, the materials provided by the Shareholder Servicing Agent describing
the procedures under which the shares of the Fund may be purchased and redeemed
through such Shareholder Servicing Agent. Fund shares may be redeemed by
shareholders at the net asset value next determined on any Fund Business Day as
hereinafter defined.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the Statement of Additional Information without
charge by contacting his Shareholder Servicing Agent, the Distributor or the
Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund, simply call the Vista Service Center at the
following toll-free number: 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary...................................................... 3
Financial Highlights................................................. 4
Investment Objective and Policies.................................... 5
Additional Information on Investment Policies and Techniques......... 6
Management of the Fund............................................... 10
Purchases and Redemptions of Shares.................................. 13
Tax Matters.......................................................... 17
Other Information Concerning Shares of the Fund...................... 18
Shareholder Servicing Agents, Transfer Agent and Custodian........... 21
Yield and Performance Information.................................... 22
Appendix A
Description of Ratings........................................... A-1
2
<PAGE>
EXPENSE SUMMARY
<TABLE><CAPTION>
AS A
PERCENTAGE
ANNUAL FUND OPERATING EXPENSES OF NET ASSETS
- -------------------------------------------------------------------------------- -------------
<S> <C>
Investment Advisory Fee (After Waiver of Fees)*................................. 0.00%
Rule 12b-1 Distribution Plan (After Waiver of Fees)*............................ 0.13%
Other Expenses
- --Administration Fee (After Waiver of Fees)*.................................... 0.00%
- --Sub-Administration Fee (After Waiver of Fees)*................................ 0.05%
- --Other Operating Expenses...................................................... 0.12%
-----
Total Fund Operating Expenses................................................... 0.30%
-----
-----
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) 5% annual return and (2) redemption at the end of:
1 year...................................................................... $ 3
3 years..................................................................... 10
5 years..................................................................... 17
10 years.................................................................... 38
</TABLE>
- ------------
* Fees waived on a month-to-month basis.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administration fee, sub-administration fee and other
operating expenses expected to be incurred by the Fund after waiver of fees.
Absent such waivers, the annual investment advisory fee, distribution plan fee,
administration fee and sub-administration fee for the Fund would be 0.30%,
0.25%, 0.10% and 0.05%, respectively, of the Fund's average net assets.
Additionally, a shareholder may incur a $10.00 charge for certain wire
redemptions. A more complete description of the Fund's expenses, including any
fee waivers, is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
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 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 which are
incorporated by reference in the Statement of Additional Information.
<TABLE><CAPTION>
VISTA BOND FUND
----------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, JULY 1, 1992** NOVEMBER 30, 1990*
PER SHARE OPERATING ----------------------------- TO YEAR ENDED TO
PERFORMANCE: 1995 1994 1993 OCTOBER 31, 1992 JUNE 30, 1992 JUNE 30, 1991
- ----------------------- ------- ------- ------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
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 $10.700 $ 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>
- ------------
# Short periods have been annualized.
* Commencement of operations.
** In 1992, the Fund's fiscal year-end was changed from June 30 to October 31.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide a
high level of income, consistent with reasonable risk, by investing at least 80%
of its net assets in a broad range of bonds. In addition, the Fund seeks to
protect capital. Where appropriate, the Fund will take advantage of
opportunities to realize capital appreciation.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing a major portion of its portfolio (at least 50% of its assets in normal
market conditions) in debt obligations of the U.S. Treasury, its agencies and
instrumentalities and investment-grade corporate bonds, which are considered to
be those rated Baa-3 or higher by Moody's Investors Service, Inc. ("Moody's") or
BBB- or higher by Standard & Poor's Corporation ("S&P"). Accordingly, the Fund
will not invest in securities judged by the Adviser to be of poor quality,
although it may invest in unrated securities if the Adviser determines that such
securities present attractive investment opportunities and are of comparable
quality to the other securities in which the Fund may invest. Bonds rated Baa by
Moody's or BBB by S&P lack certain investment characteristics and may be deemed
to be speculative in nature. When a temporary defensive posture in the market is
appropriate in the Adviser's opinion, the Fund may invest up to 100% of its
assets in high-quality, short-term debt securities and money market instruments,
including repurchase agreements.
The Fund also may invest in all types of debt securities in any proportion,
including debt obligations of the U.S. Treasury, its agencies and
instrumentalities, bonds, notes, mortgage-backed securities, government and
government agency obligations, zero coupon securities, convertible securities
and repurchase agreements. The Fund's portfolio will ordinarily hold up to 10%
of its net assets in very short-term obligations (with remaining maturities of
12 months or less), such as bankers' acceptances, certificates of deposit,
repurchase agreements, short-term government or government agency obligations,
and prime commercial paper and other short-term corporate obligations when the
Adviser believes the issuer has a sound financial structure.
Fixed-income securities (except for securities with floating or variable
interest rates) are generally considered to be interest rate sensitive, which
means that their value (and the Fund's share price) will tend to decrease when
interest rates rise and increase when interest rates fall. Securities with
shorter maturities generally provide greater price stability than longer-term
securities and are less affected by changes in interest rates.
Mortgage-backed securities issued or guaranteed by certain agencies of the
U.S. Government such as GNMA, FNMA or FHLMC typically may be prepaid by the
issuer without penalty; thus, when prevailing interest rates decline, the value
of these securities is not likely to rise on a comparable basis with other debt
securities that are not so prepayable. The proceeds of prepayments and scheduled
payments of principal of these securities will be reinvested by the Fund at then
prevailing interest rates, which may be lower than the rate of interest on the
securities on which these payments are received.
In making investment decisions for the Fund, the Adviser will consider many
factors in addition to current yield, including the preservation of capital,
maturity and yield to maturity. The Adviser will adjust the Fund's investments
in particular securities or in types of debt securities in response to its
appraisal of changing economic conditions and trends. The Adviser may sell
securities in anticipation of a market decline or purchase securities in
anticipation of a market rise. In addition, the Adviser may sell one security
and purchase another security of comparable quality and maturity to take
advantage of what
5
<PAGE>
the Adviser believes to be short-term differentials in market values or yield
disparities. The frequency of the Fund's portfolio transactions--a fund's
portfolio turnover rate--will vary from year to year depending upon market
conditions. The Fund will engage in portfolio trading if the Adviser believes a
transaction, net of costs (including custodian charges), will help it achieve
its investment objective. Generally, the primary consideration in placing
portfolio securities transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the most favorable prices
and the most effective manner possible. The Fund's investments, other than those
backed by the U.S. Government, are subject to the ability of the issuer to make
payment at maturity.
The Fund may invest in "when-issued" securities and futures contracts. For a
description of these types of investments, and further information regarding the
investment policies and techniques of the Fund, see "Additional Information on
Investment Policies and Techniques". In addition, the Statement of Additional
Information includes a further discussion of futures and option contracts to be
entered into by the Fund. Although the Fund will enter into futures and option
contracts for hedging purposes only, the use of such instruments does involve
transaction costs and certain risks, which are discussed in the Statement of
Additional Information.
Shareholder approval is not required to change the Fund's investment
objective or any of the investment policies discussed above or in "Additional
Information on Investment Policies and Techniques".
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Fund are not invested in fixed-income
securities, they will consist of or be invested in cash, cash equivalents and
high-quality, short-term debt securities and money market instruments as
described under "Investment Objectives, Policies and Restrictions" in the
Statement of Additional Information, and in "Repurchase Agreements," as
described below and in greater detail under "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information.
The Fund also may invest in all types of debt securities in any proportion,
including bonds, notes, mortgage-backed securities, government and government
agency obligations, zero coupon securities, convertible securities and
repurchase agreements. The Fund's portfolio will ordinarily hold up to 10% of
its net assets in very short-term obligations (with remaining maturities of 12
months or less), such as bankers' acceptances, certificates of deposit,
repurchase agreements, short-term government or government agency obligations,
and prime commercial paper and other short-term corporate obligations when the
Adviser believes the issuer has a sound financial structure.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment
objectives of the Fund will be achieved.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be
6
<PAGE>
sold by the Fund, but the Fund might incur a loss in doing so, and in certain
cases may not be permitted to sell the security. As an operating policy, the
Fund, through its custodian bank, takes constructive possession of the
collateral underlying repurchase agreements. Additionally, procedures have been
established for the Fund to monitor, on a daily basis, the market value of the
collateral underlying all repurchase agreements to ensure that the collateral is
at least 100% of the value of the repurchase agreements. Not more than 10% of
the total assets of the Fund will be invested in securities which are subject to
legal or contractual restrictions on resale, including securities that are not
readily marketable and repurchase agreements maturing in more than seven days.
WHEN-ISSUED OR FORWARD DELIVERY PURCHASES. The Fund may purchase new issues
of securities in which it is permitted to invest on a "when-issued" or, with
respect to existing issues, on a "forward delivery" basis, which means that the
securities will be delivered at a future date beyond the customary settlement
time. Although there is no limit as to the amount of the commitments which may
be made by the Fund to purchase securities on a "when-issued" or "forward
delivery" basis, it is expected that under normal circumstances not more than
30% of the Fund's total assets will be committed to such purchases. The Fund
does not pay for such obligations or start earning interest on them until the
contractual settlement date. Although commitments to purchase "when-issued" or
"forward delivery" securities will only be made with the intention of actually
acquiring them, these securities may be sold before the settlement date if
deemed advisable by the Adviser.
While it is not intended that such purchases would be made for speculative
purposes, purchases of securities on a "when-issued" or "forward delivery" basis
can involve more risk than other types of purchases. For example, when the time
comes to pay for a "when-issued" or "forward delivery" security, the Fund's
portfolio securities may have to be sold in order to meet payment obligations,
and a sale of securities to meet such obligations carries with it a greater
potential for the realization of capital gain or loss. Also, if it is necessary
to sell the "when-issued" or "forward delivery" security before delivery, the
Fund may incur a loss because of market fluctuations since the time the
commitment to purchase the "when-issued" or "forward delivery" security was
made. For additional information concerning these risks and other risks
associated with the purchase of "when-issued" or "forward delivery" securities
as well as other aspects of the purchase of securities on a "when-issued" or
"forward delivery" basis, see "Investment Objective, Policies and
Restrictions--Investment Policies: When-Issued and Forward Delivery Purchases"
in the Statement of Additional Information.
VARIABLE RATE SECURITIES AND PARTICIPATION CERTIFICATES. The variable rate
demand instruments that may be purchased by the Fund are obligations (including
bonds, notes, certificates of deposit and commercial paper) that provide for a
periodic adjustment in the interest rate paid on the instrument and/or permit
the holder to demand payment upon a specified number of days' notice of the
principal balance plus accrued interest either from the issuer or by drawing on
a bank letter of credit, a guarantee or insurance issued with respect to such
instrument. The variable rate securities in which the Fund's portfolio may be
invested include participation certificates issued by a bank, insurance company
or other financial institution, and in variable rate securities owned by such
institutions or affiliated organizations. Participation certificates are pro
rata interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. Participation Certificates may be deemed illiquid securities
(see "Investment Objectives, Policies and Restrictions-- Investment Policies:
Variable Rate Securities and Participation Certificates" in the Statement of
Additional Information).
7
<PAGE>
The Advisor will monitor on an on-going basis the ability of the underlying
issuers to meet their demand obligations. Although variable rate securities may
be sold by the Fund, it is intended that they be held until maturity, except
under certain specified circumstances (see "Investment Objectives, Policies and
Restrictions--Investment Policies: Variable Rate Securities and Participation
Certificates" in the Statement of Additional Information).
As a result of the variable rate nature of these investments, the Fund's
yield will decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined.
Conversely, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
PORTFOLIO MANAGEMENT AND TURNOVER. It is intended that the portfolio of the
Fund will be fully managed by buying and selling securities, as well as holding
securities to maturity. In managing the portfolio of the Fund, the Adviser seeks
to take advantage of market developments, yield disparities and variations in
the creditworthiness of issuers. For a description of the strategies that may be
used by the Adviser in managing the portfolio of the Fund, which may include
adjusting the average maturity of a portfolio in anticipation of a change in
interest rates, see "Investment Objectives, Policies and
Restrictions--Investment Policies: Portfolio Management" in the Statement of
Additional Information.
Generally, the primary consideration in placing portfolio securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. For a complete discussion of portfolio transactions
and brokerage allocation, see "Investment Objectives, Policies and
Restrictions--Investment Policies; Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned. The Fund
can increase its income through the investment of such collateral. The Fund
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the Fund on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their agreements
with the Fund. 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 Adviser to be of good standing and will not
be made unless, in the judgment of the Adviser, the consideration to be earned
from such loans justifies the risk.
FUTURES AND OPTIONS TRANSACTIONS. The Fund may invest its assets in
derivative and related instruments subject only to the Fund's investment
objective and policies and the requirement that, to avoid leveraging the Fund,
the Fund 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
8
<PAGE>
regulation, enter into certain offsetting positions) to cover its obligations
under such instruments with respect to positions where there is no underlying
portfolio asset.
The value of some derivatives or related instruments in which the Fund
invests, may be particularly sensitive to changes in prevailing interest rates
or other economic factors, and--like other investments of the Fund--the ability
of the Fund to successfully utilize these instruments may depend in part upon
the ability of the Adviser to forecast interest rates and other economic factors
correctly. If the Adviser incorrectly forecasts such factors and has taken
positions in derivative or related instruments contrary to prevailing market
trends, the Fund could be exposed to the risk of a loss. The Fund might not
employ any or all of the instruments described herein, and no assurance can be
given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
. 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);
. enter into futures contracts and options on futures contracts;
. purchase and sell mortgage-backed and asset-backed securities: and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the Fund 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains.
. Strategies not involving hedging may increase the risk to the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract,
no trades may be
9
<PAGE>
made that day at a price beyond that limit. In addition, certain instruments
are relatively new and without a significant trading history. As a result,
there is no assurance that an active secondary market will develop or
continue to exist.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of futures contracts and options thereon,
including certain percentage limitations on the use of such instruments, see
"Investment Objectives, Policies and Restrictions--Investment Policies:
Additional Policies Regarding Futures and Options Transactions, Risk Factors
Associated with Futures and Options Transactions, and Restrictions on the Use of
Futures and Options Contracts" in the Statement of Additional Information.
MANAGEMENT OF THE FUND
THE ADVISER
The Chase Manhattan Bank, N.A. (the "Adviser") manages the assets of the
Fund pursuant to an Investment Advisory Agreement dated October 19, 1990, as
amended July 17, 1992. Subject to such policies as the Board of Trustees may
determine, the Adviser makes investment decisions for the Fund. The Fund has
been managed by Mark Buonaugurio since February, 1992. For the four years prior
to managing the Fund, Mr. Buonaugurio managed fixed-income commingled trust
funds, and provided credit research services for Chase. For its services under
the Investment Advisory Agreement, the Adviser is entitled to receive an annual
fee computed daily and paid monthly based at an annual rate equal to 0.30% of
the Fund's average daily net assets. The Adviser may, from time to time,
voluntarily waive all or a portion of its fees payable under the Advisory
Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
10
<PAGE>
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers throughout
the U.S. and around the world. Effective upon consummation of the Holding
Company Merger, the Adviser will be a wholly-owned subsidiary of New Chase. Upon
consummation of the Bank Merger, the Adviser will continue to be a wholly-owned
subsidiary of New Chase.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser, or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, the Adviser and its affiliates may exchange among
themselves certain information about the shareholder and his account.
11
<PAGE>
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989,
amended September 30, 1993 (the "Administration Agreement"), Chase (the
"Adminstrator") serves as administrator of the Fund. The Administrator provides
certain administrative services, including, among other responsibilities,
coordinating relationships with independent contractors and agents; preparing
for signature by officers and filing of certain documents required for
compliance with applicable laws and regulations excluding those of the
securities laws of the various states; preparing financial statements; arranging
for the maintenance of books and records; and providing office facilities
necessary to carry out the duties thereunder. The Administrator is entitled to
receive from the Fund a fee computed daily and paid monthly at an annual rate
equal to 0.10% of the Fund's average daily net assets. The Administrator may,
from time to time, voluntarily waive all or a portion of its fees payable to it
under the Administration Agreement. The Administrator shall not have any
responsibility or authority for the Fund's investments, the determination of
investment policy, or for any matter pertaining to the distribution of Fund
shares.
GLASS-STEAGALL ACT. The Adviser and the Administrator have received the
opinion of their legal counsel that they may provide the services described in
the Investment Advisory and the Administration Agreements, as described above,
and the Shareholder Servicing Agreements with the Fund, as described below,
without violating the federal banking law commonly known as the Glass-Steagall
Act. The Act generally bars banks from publicly underwriting or distributing
certain securities.
Based on the advice of its counsel, Chase believes that the Court's
decisions, and these other decisions of federal banking regulators, permit it to
serve as investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent to the Fund and render the services described below and as set forth in
the shareholder servicing agreement, as an appropriate, incidental national
banking function and as a proper adjunct to its serving as investment adviser
and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. The Administrator,
on the advice of its counsel, believes that it may render the services described
in its Administration Agreement without violating the Glass-Steagall Act or
other applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, or other
administrative services for the Fund. If that occurred, the Fund's Board of
Trustees promptly would seek to obtain for the Fund the services of another
qualified adviser, shareholder servicing agent, or administrator, as necessary.
Although no assurances can be given, the Fund believes that, if necessary, the
transfer to a new adviser, shareholder servicing agent, or administrator could
be accomplished without undue disruption to the Fund's operations.
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PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with Vista Broker-Dealer Services, Inc., at the public
offering price which is computed once daily as of the close of regular trading
on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on each
business day during which the Exchange is open for trading ("Fund Business
Day"). (See "Other Information Concerning Shares of the Fund--Net Asset Value").
The public offering price of shares is the next determined net asset value, plus
applicable initial sales charge. Orders received by Dealers prior to the New
York Stock Exchange closing time are confirmed at the applicable offering price
effective at the close of such Exchange, provided the order is received by the
Transfer Agent prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Fund shares
normally will be maintained in book entry form and certificates will be issued
upon request. Management reserves the right to refuse to sell shares of the Fund
to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check or periodic automatic investment, redemptions will not allowed
until the investment being redeemed has been in the account for 15 business
days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian-- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
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MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ----------------------------------------------- --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program...................... $ 100(4)
(401K, 403B, Keogh)
- ------------
(1) Employees of the Adviser and its affiliates, and certain qualified persons
are eligible for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly
investment plan by which investments are automatically made to his/her Vista
Fund account through Automatic Clearing House (ACH) deductions from a checking
account. The minimum monthly investment through this plan is $100. Shareholders
may choose either to have these investments made during the first or third week
each month. Please note that your initial ACH transactions may take up to 10
days from the receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with SIGNATURE GUARANTEE to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in his account on
any Fund Business Day at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to his Shareholder
Servicing Agent and transmitted by it to and received by the Fund's Transfer
Agent. Therefore, redemptions will be effected on the same day the redemption
order is
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received only if such order is received prior to 4:00 p.m., Eastern time, on any
Fund Business Day. Shares which are redeemed earn dividends up to and including
the day prior to the day the redemption is effected. The proceeds of a
redemption normally will be paid on the next Fund Business Day after the
redemption is effected, but in any event within seven days. The forwarding of
proceeds from redemption of shares which were recently purchased by check may be
delayed up to 15 days. A shareholder who is a customer of a Shareholder
Servicing Agent may redeem his Fund shares by authorizing his Shareholder
Servicing Agent, its agent, or the Transfer Agent to redeem such shares. The
signature of both shareholders is required for any written redemption requests
(other than those by check) from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund records.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 committing
to pay in cash all redemptions by a shareholder of record up to the amounts
specified in the rule (approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. However, all telephone redemption requests in excess of
$25,000 will be wired directly to such previously designated bank account, for
the protection of shareholders. Normally, redemption payments will be
transmitted on the next business day following receipt of the request (provided
it is made prior to 4:00 p.m., Eastern time on any day redemptions may be made).
Redemption payments requested by telephone may not be available in a previously
deposited bank account for up to four days. For telephone redemptions, call the
Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
AUTOMATIC REDEMPTION PLAN. A shareholder owning $10,000 or more of the
shares of the Fund as determined by the then current net asset value may provide
for the payment monthly or quarterly of any requested dollar amount (subject to
limits) from his account. A sufficient number of full and fractional shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days' notice prior to the
redemption.
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EXCHANGE PRIVILEGE
Subject to certain conditions, shares of Vista Equity Fund, Vista Bond Fund
and Vista Short-Term Bond Fund may be exchanged for shares of another of those
three Funds at the then current net asset value. The Prospectus should be
reviewed before effecting any exchange. You should note that any such exchange,
which may only be made in states where shares of the other Funds are qualified
for sale, may create a gain or loss to be recognized for federal income tax
purposes. Exchanges may be authorized by telephone. If you desire this exchange
option you must check the box on the Application which indicates that you wish
to have this privilege. The exchange privilege may be modified or discontinued
at any time.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders by completing the "Expedited Redemption" section of the Account
Application. To provide evidence of telephone instructions, the Transfer Agent
will record telephone conversations with shareholders. The Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. In the event the Fund does not employ such procedures, it may be liable
for losses due to unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the reasonable procedures that have been established for Fund
accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
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The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes, but
do not qualify for the dividends-received deduction for corporations.
Distributions by the Fund of the excess, if any, of its net long-term capital
gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time a shareholder has held his shares. Ordinary income
dividends and capital gain dividends from the Fund may also be subject to state
and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which
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constitute ordinary income dividends and capital gains dividends, will be sent
to the Fund's shareholders promptly after the end of each year.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time,
however, options are priced at 4:15 p.m.) on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other fair value, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by a Shareholder
Servicing Agent prior to its calculation and received by the Distributor prior
to the close of business, usually 4:00 p.m. Eastern time, on the Fund Business
Day on which such net asset value is determined.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends are declared daily and paid monthly. The Fund's net
investment income consists of the interest income earned on its portfolio, less
expenses. The Fund will distribute its net realized short-term and long-term
capital gains, if any, to its shareholders at least annually.
The Fund will also make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder may elect to receive dividends and capital gains distributions from
the Fund in either cash or additional shares.
DISTRIBUTION PLAN AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act, after having concluded that there
is a reasonable likelihood that the Distribution Plan will benefit the Fund and
its shareholders.
The Distribution Plan provides that the Fund shall pay distribution fees
(the "Basic Distribution Fee"), including payments to the Distributor, at an
annual rate not to exceed 0.20% of the Fund's average daily net assets for
distribution services. The Distributor may use all or a portion of such Basic
Distribution Fee to pay for the expenses of printing prospectuses and reports
used for sales purposes, expenses related to the preparation and printing of
sales literature and other such distribution-related
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expenses. The Basic Distribution Fee is not directly tied to its expenses,
therefore the amount of Basic Distribution Fee paid by the Fund during any year
may be more or less than actual expenses incurred pursuant to the Distribution
Plan. For this reason, this type of distribution fee arrangement is
characterized by the staff of the Securities and Exchange Commission as being of
the "compensation variety" (in contrast to "reimbursement" arrangements such as
those described in the next paragraph, by which a distributor's compensation is
directly linked to its expenses). The Fund is not liable for any distribution
expenses incurred in excess of the Basic Distribution Fee paid.
Under the Distribution Plan, the Fund is also permitted to pay an additional
fee at an annual rate not to exceed 0.05% of its average daily net assets in
anticipation of, or as reimbursement for, actual expenses incurred during such
year in connection with print or electronic media advertising in connection with
the sale of the Fund's shares.
The Distribution and Sub-Administration Agreement dated April 2, 1990 and
amended June 1, 1990 and August 4, 1992 (the "Distribution Agreement"), provides
that the Distributor will act as the principal underwriter of the Fund's shares
and bear the expenses of printing, distributing and filing prospectuses and
statements of additional information and reports used for sales purposes, and of
preparing and printing sales literature and advertisements not paid for by the
Distribution Plan. In addition, the Distributor will provide certain
sub-administration services, including providing officers, clerical staff and
office space. The Distributor currently receives a fee for sub-administration
from the Fund at an annual rate equal to 0.05% of the Fund's average daily net
assets, on an annualized basis for the Fund's then-current fiscal year.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The Fund intends to pay all of its pro rata share of the Trust's expenses,
including the compensation of the Trustees; all fees under the Distribution Plan
(see "Purchases and Redemptions of Shares -- Distribution Plan and Agreement");
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute; fees and expenses of independent accountants, of legal
counsel and of any transfer agent and dividend disbursing agent; expenses of
distributing and redeeming shares and servicing shareholder accounts; expenses
of preparing, printing and mailing prospectuses, reports, notices, proxy
statements and reports to shareholders and to governmental officers and
commissions; expenses connected with the execution, recording and settlement of
portfolio security transactions; insurance premiums; fees and expenses of the
custodian, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of the
Fund; expenses of shareholder meetings; and the advisory fee payable to the
Adviser under the Investment Advisory Agreement, the administrative fee payable
to the Administrator under the Administration Agreement and the
sub-administration fee payable to the Distributor under the Distribution and
Sub-Administration Agreement. Expenses relating to the issuance, registration
and qualification of shares of the Fund and the preparation, printing and
mailing of prospectuses for such purposes are borne by the Fund except that the
Distribution and Sub-Administration Agreement with the Distributor requires the
Distributor to pay for prospectuses which are to be used for sales to
prospective investors.
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DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. On December 4, 1992, the shareholders of Trinity Bond
Fund approved the reorganization of such fund into a new series of the Trust,
effective January 1, 1993.
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 series or class generally vote
separately, for example to approve investment advisory agreements, but shares of
all series or classes vote together, to the extent required under the 1940 Act,
in the election or selection of Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of each series or class or of all series
or classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of the
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class would
be entitled to share pro rata in the net assets of that series or class
available for distribution to shareholders upon liquidation of that series or
class.
The Trust reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series).
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
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The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
among other things: answer customer inquiries regarding account status, history,
the manner in which purchases and redemptions of shares may be effected for the
Fund as to which the Shareholder Servicing Agent is so acting and certain other
matters pertaining to the Fund; assist shareholders in designating and changing
dividend options, account designations and addresses; provide necessary
personnel and facilities to establish and maintain shareholder accounts and
records; assist in processing purchase and redemption transactions; arrange for
the wiring of funds; transmit and receive funds in connection with customer
orders to purchase or redeem shares; verify and guarantee shareholder signatures
in connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an integrated
basis with other reports sent to a shareholder by a Shareholder Servicing Agent)
monthly and year-end statements and confirmations of purchases and redemptions;
transmit, on behalf of the Fund, proxy statements, annual reports, updated
prospectuses and other communications to shareholders of the Fund; receive,
tabulate and transmit to the Fund proxies executed by shareholders with respect
to meetings of shareholders of the Fund; and provide such other related services
as the Fund or a shareholder may request. Shareholder Servicing Agents may be
required to register pursuant to state securities law.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Fund shares, receive dividends and
distributions on Fund investments, and take advantage of any services related to
an Account offered by such Shareholder Servicing Agent from time to time. All
Accounts and any related privileges or services shall be governed by the laws of
the State of New York, without regard to its conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail
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himself of any automatic investment or other services then being provided by
such bank. The Fund does not expect that shareholders would suffer any adverse
financial consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Call or write the
Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of the Fund in the future. From time to time,
the performance and yield of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products, and to stock or
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of the Fund may be compared to data prepared by
Lipper Analytical Services, Inc., or the 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
22
<PAGE>
of the Fund. Additionally, the Fund may, with proper authorization, reprint
articles written about the Fund and provide them to prospective shareholders.
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains are reinvested; annualized total rates
of return will be slightly higher than period total rates of return (if the
periods are shorter than one year) because of the compounding effect of the
assumed reinvestment.
The Fund may provide "yield" quotations in addition to total rate of return
quotations. The "yield" quotations of the Fund will be based upon a hypothetical
net investment income earned by the Fund over a thirty day or one month period
(which period shall be stated in any advertisement or communication with a
shareholder). The "yield" is then "annualized" by assuming that the income
generated over the period will be generated over a one year period. A "yield"
quotation, unlike a total rate of return quotation, does not reflect changes in
net asset value.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of the Fund will vary
based on interest rates, the current market value of the securities held in the
Fund's portfolio and changes in the Fund's expenses. These variables affect the
net income (and therefore the yield and total rate of return) of the Fund during
the period such waivers are in effect. These factors and possible differences in
the methods used to calculate the yield and total rate of return should be
considered when comparing the yield or total rate of return of the Fund to
yields and total rates of return published for other investment companies and
other investment vehicles. The Fund is advised that certain Shareholder
Servicing Agents may credit to the accounts of their customers from whom they
are already receiving other fees amounts (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the Fund's
yield or total rate of return quotations.
OTHER INFORMATION
The net asset value of shares of the Fund changes as the general levels of
interest rates fluctuate. When interest rates decline, the value of a portfolio
can be expected to rise. Conversely, when interest rates rise, the value of a
portfolio can be expected to decline. Although changes in the value of the
portfolio securities of the Fund subsequent to their acquisition are reflected
in their net asset values, such changes will not affect the income received by
them from such securities. Debt securities with longer maturities such as those
intended for investment by the Fund generally tend to produce higher yields and
are subject to greater market fluctuation as a result of changes in interest
rates than debt securities with shorter maturities. Since available yields vary
over time, no specific level of income can ever be assured. The dividends paid
on shares of the Fund will increase or decrease in relation to the income
received by the Fund from its investments, which will in any case be reduced by
the Fund's expenses before being distributed to its shareholders.
23
<PAGE>
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
Administrator and the Adviser, (iv) portfolio transactions, (v) the Fund's
shares, including rights and liabilities of shareholders, and (vi) additional
performance information, including the method used to calculate yield or total
rate of return quotations of the Fund.
24
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS*
The ratings of Moody's and Standard & Poor's represent their opinions as to
the quality of various debt securities. It should be emphasized, however, that
ratings are not absolute standards of quality. Consequently, debt securities
with the same maturity, coupon and rating may have different yields while debt
securities of the same maturity and coupon with different ratings may have the
same yield.
DESCRIPTION OF MOODY'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". 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 attributes
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 and 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.
- ------------
* As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time
revise such ratings, they undertake no obligation to do so.
A-1
<PAGE>
DESCRIPTION OF STANDARD & POOR'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal 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 pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
<PAGE>
PROSPECTUS
March 1, 1996
VISTASM SHORT-TERM BOND FUND
VISTA SHORT-TERM BOND FUND (the "Fund") is a diversified series of Mutual
Fund Group (the "Trust"), an open-end, management investment company organized
as a business trust under the laws of the Commonwealth of Massachusetts on May
11, 1987. The Trust presently consists of 15 separate series (the "Funds"). The
Fund seeks to provide a high level of current income, consistent with
preservation of capital by investing primarily in a broad range of short-term
investment-grade bonds and other fixed income securities. The dollar weighted
average maturity of the Fund's portfolio securities will not exceed three years.
Portfolio securities with put features will measure their maturity based on the
next put date, which must fall within the three year limit.
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with investment in the Fund. For further discussion on the risks
associated with investment in the Fund, see "Investment Objectives and Policies"
in this Prospectus. Investors should also refer to "Additional Information on
Investment Policies and Techniques" on page 6.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's investment
adviser, administrator (the "Administrator") and custodian (the "Custodian").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 10. VISTA BROKER-DEALER SERVICES, INC. ("VBDS") IS
THE FUND'S DISTRIBUTOR AND IS UNAFFILIATED WITH CHASE. INVESTMENTS IN THE FUND
ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILITATES AND ARE
NOT FEDERALLY INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale without a sales load
through VBDS, the Fund's distributor (the "Distributor"), to customers of a
financial institution, such as a federal or state-chartered bank, trust company
or savings and loan association with which the Fund has entered into a
shareholder servicing agreement (collectively, "Shareholder Servicing Agents")
or to customers of a securities broker or certain financial institutions who
have entered into Selected Dealer Agreements with the Distributor. The Fund has
a distribution plan and may incur distribution expenses, at an annual rate, not
to exceed 0.25% of average daily net assets. An investor should obtain from his
Shareholder Servicing Agent, and should read in conjunction with this Prospectus
the materials provided by the Shareholder Servicing Agent describing the
procedures under which the shares may be purchased and redeemed through such
Shareholder Servicing Agent. Shares of the Fund may be redeemed by shareholders
at the net asset value next determined on any Fund Business Day as hereinafter
defined.
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.
This Prospectus sets forth concisely information concerning the Fund that a
prospective investor ought to know before investing. A Statement of Additional
Information for the Fund dated March 1, 1996, containing more detailed
information about the Fund has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. An investor
may obtain a copy of the Statement of Additional Information without charge by
contacting his Shareholder Servicing Agent or the Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
For information about the Fund simply call the Vista Service Center at
1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
PAGE
----
Expense Summary..................................................... 3
Financial Highlights................................................ 4
Investment Objectives and Policies.................................. 5
Additional Information on Investment Policies and Techniques........ 6
Management of the Fund.............................................. 10
Purchases and Redemptions of Shares................................. 12
Tax Matters......................................................... 16
Other Information Concerning Shares of the Fund..................... 17
Shareholder Servicing Agents, Transfer Agent and Custodian.......... 20
Yield and Performance Information................................... 22
Appendix A--Description of Ratings.................................. A-1
2
<PAGE>
EXPENSE SUMMARY
<TABLE><CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------
<S> <C>
Investment Advisory Fee (After Waiver of Fees)*........................... 0.00%
Rule 12b-1 Distribution Plan Fee (After Waiver of Fees)*.................. 0.06%
Other Expenses
--Administration Fee (After Waiver of Fees)*........................... 0.00%
--Sub-Administrative Fee (After Waiver of Fees)*....................... 0.05%
--Other Operating Expenses............................................. 0.19%
----
Total Fund Operating Expenses............................................. 0.30%
----
----
Example:
You would pay the following expenses on a $1,000 investment in a Fund,
assuming (1) 5% annual return and (2) redemption at the end of:
1 year............................................................ $ 3
3 years........................................................... 10
5 years........................................................... 17
10 years........................................................... 38
</TABLE>
- ------------
* Fees waived on a month-to-month basis.
The expense summary is intended to assist investors in understanding the
various costs and expenses that a shareholder in the Fund will bear directly or
indirectly. The expense summary shows the investment advisory fee, distribution
fee, administrative fee and sub-administration fee expected to be incurred by
the Fund after certain waivers of fees. Absent certain waivers, the annual
investment advisory fees, distribution fees, administrative fees and
sub-administration fees for the Fund would be 0.25%, 0.25%, 0.10% and 0.05%,
respectively, of the Fund's average net assets. Additionally, a shareholder may
incur a $10.00 charge for certain wire redemptions. A more complete description
of the Fund's expenses, including any fee waivers, is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
FUTURE EXPENSES OF A SHARE OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS
THAN THOSE SHOWN.
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 which are
incorporated by reference in the Statement of Additional Information.
VISTA SHORT-TERM BOND FUND
<TABLE><CAPTION>
JULY 1, 1992** YEAR NOVEMBER 30,
YEAR ENDED OCTOBER 31, TO ENDED 1990*
--------------------------------------- OCTOBER 31, JUNE 30, TO
PER SHARE OPERATING PERFORMANCE 1995 1994 1993 1992 1992 JUNE 30, 1991
----------- ----------- ----------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
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 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 0.010 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>
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVE-- The investment objective of the Fund is to provide a
high level of current income, consistent with preservation of capital. The
investment objective of the Fund may not be changed unless approved by the
holders of a majority of the Fund's outstanding shares.
INVESTMENT POLICIES-- The Fund seeks to provide a high level of current
income, consistent with preservation of capital, by investing primarily in a
broad range of short-term, investment-grade bonds and other fixed-income
securities. The Fund will invest at least 65% of its net assets in bonds which
have a maturity of less than three years. In addition, all of the Fund's assets
will have dollar weighted average maturities which do not exceed three years.
Securities with put features will measure their maturity based on the next put
date, which must fall within the three year limit.
The Fund normally will invest substantially all of its assets in
investment-grade, fixed-income securities of all types. Investment-grade,
fixed-income securities are considered to be securities rated Baa or higher by
Moody's or BBB or higher by S&P, and unrated securities that are of equivalent
quality in the Adviser's opinion. Securities rated Baa by Moody's or BBB by S&P
lack certain investment characteristics and may be deemed to be "speculative" in
nature. Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset-backed securities,
government and government agency obligations, zero coupon securities and
convertible securities, and short-term obligations such as bankers' acceptances,
certificates of deposit, repurchase agreements and commercial paper. For a
description of these types of securities, see "Additional Information on
Investment Policies and Techniques" in the Prospectus and "Investment
Objectives, Policies and Restrictions" in the Statement of Additional
Information. When a temporary defensive posture in the market is appropriate in
the Adviser's opinion, the Fund may invest up to 100% of its assets in high
quality, short-term debt securities and money market instruments, including
repurchase agreements.
Fixed-income securities (except for securities with floating or variable
interest rates) are generally considered to be interest rate sensitive, which
means that their value (and the Fund's share prices) will tend to decrease when
interest rates rise and increase when interest rates fall. Securities with
shorter maturities generally provide greater price stability than longer-term
securities and are less affected by changes in interest rates.
Mortgage-backed securities issued or guaranteed by certain agencies of the
U.S. Government such as GNMA, FNMA or FHLMC typically may be prepaid by the
issuer without penalty; thus, when prevailing interest rates decline, the value
of these securities is not likely to rise on a comparable basis with other debt
securities that are not so prepayable. The proceeds of prepayments and scheduled
payments of principal of these securities will be reinvested by the Fund at then
prevailing interest rates, which may be lower than the rate of interest on the
securities on which these payments are received.
In making investment decisions for the Fund, the Adviser will consider many
factors in addition to current yield, including the preservation of capital,
maturity and yield to maturity. The Adviser will adjust the Fund's investments
in particular securities or in types of debt securities in response to its
appraisal of changing economic conditions and trends. The Adviser may sell
securities in anticipation of a market decline or purchase securities in
anticipation of a market rise. In addition, the Adviser may sell
5
<PAGE>
one security and purchase another security of comparable quality and maturity to
take advantage of what the Adviser believes to be short-term differentials in
market values or yield disparities. The frequency of the Fund's portfolio
transactions--the Fund's portfolio turnover rate--will vary from year to year
depending upon market conditions. A high portfolio turnover rate involves
greater costs to the Fund, and could involve a higher proportion of short-term
capital gains which are taxable at ordinary income tax rates (see "Tax
Matters"). The Fund will engage in portfolio trading if the Adviser believes a
transaction, net of costs (including custodian charges), will help it achieve
its investment objective. Generally, the primary consideration in placing
portfolio securities transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the most favorable prices
and in the most effective manner possible. The Fund's investments, other than
those backed by the U.S. Government, are subject to the ability of the issuer to
make payment at maturity.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Fund are not invested in short-term
fixed-income securities, they will consist of or be invested in cash, cash
equivalents and high-quality short-term debt securities and money market
instruments as described under "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information, and in repurchase
agreements, as described below and in greater detail under "Investment
Objectives, Policies and Restrictions" in the Statement of Additional
Information.
The Fund also may invest in all types of debt securities, including, in any
proportion, bonds, notes, mortgage-backed securities, asset-backed securities,
government and government agency obligations, zero coupon securities and
convertible securities, and short-term obligations such as bankers' acceptances,
certificates of deposit, repurchase agreements and commercial paper.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment
objectives of the Fund will be achieved.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be sold by the Fund,
but the Fund might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, the Fund, through its
custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been established for the
Fund to monitor, on a daily basis, the market value of the collateral underlying
all repurchase agreements to ensure that the collateral is at least 100% of the
value of the repurchase agreements. Not more than 10% of the total assets of the
Fund will be invested in securities which are subject to legal or contractual
restrictions on resale, including securities that are not readily marketable and
repurchase agreements maturing in more than seven days.
6
<PAGE>
WHEN-ISSUED OR FORWARD DELIVERY PURCHASES. The Fund may purchase new issues
of securities in which it is permitted to invest on a "when-issued" or, with
respect to existing issues, on a "forward delivery" basis, which means that the
securities will be delivered at a future date beyond the customary settlement
time. Although there is no limit as to the amount of the commitments which may
be made by the Fund to purchase securities on a "when-issued" or "forward
delivery" basis, it is expected that under normal circumstances not more than
30% of the Fund's total assets will be committed to such purchases. The Fund
does not pay for such obligations or start earning interest on them until the
contractual settlement date. Although commitments to purchase "when-issued" or
"forward delivery" securities will only be made with the intention of actually
acquiring them, these securities may be sold before the settlement date if
deemed advisable by the Adviser.
While it is not intended that such purchases would be made for speculative
purposes, purchases of securities on a "when-issued" or "forward delivery" basis
can involve more risk than other types of purchases. For example, when the time
comes to pay for a "when-issued" or "forward delivery" security, the Fund's
portfolio securities may have to be sold in order to meet payment obligations,
and a sale of securities to meet such obligations carries with it a greater
potential for the realization of capital gain or loss. Also, if it is necessary
to sell the "when-issued" or "forward delivery" security before delivery, the
Fund may incur a loss because of market fluctuations since the time the
commitment to purchase the "when-issued" or "forward delivery" security was
made. For additional information concerning these risks and other risks
associated with the purchase of "when-issued" or "forward delivery" securities
as well as other aspects of the purchase of securities on a "when-issued" or
"forward delivery" basis, see "Investment Objective, Policies and
Restrictions--Investment Policies: When-Issued and Forward Delivery Purchases"
in the Statement of Additional Information.
VARIABLE RATE SECURITIES AND PARTICIPATION CERTIFICATES. The variable rate
demand instruments that may be purchased by the Fund are obligations (including
bonds, notes, certificates of deposit and commercial paper) that provide for a
periodic adjustment in the interest rate paid on the instrument and/or permit
the holder to demand payment upon a specified number of days' notice of the
principal balance plus accrued interest either from the issuer or by drawing on
a bank letter of credit, a guarantee or insurance issued with respect to such
instrument. The variable rate securities in which the Fund's portfolio may be
invested include participation certificates issued by a bank, insurance company
or other financial institution, and in variable rate securities owned by such
institutions or affiliated organizations. Participation certificates are pro
rata interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. Participation Certificates may be deemed illiquid securities
(see "Investment Objectives, Policies and Restrictions-- Investment Policies:
Variable Rate Securities and Participation Certificates" in the Statement of
Additional Information).
The Advisor will monitor on an on-going basis the ability of the underlying
issuers to meet their demand obligations. Although variable rate securities may
be sold by the Fund, it is intended that they be held until maturity, except
under certain specified circumstances (see "Investment Objectives, Policies and
Restrictions--Investment Policies: Variable Rate Securities and Participation
Certificates" in the Statement of Additional Information).
7
<PAGE>
As a result of the variable rate nature of these investments, the Fund's
yield will decline and its shareholders will forego the opportunity for capital
appreciation during periods when prevailing interest rates have declined.
Conversely, during periods where prevailing interest rates have increased, the
Fund's yield will increase and its shareholders will have reduced risk of
capital depreciation.
PORTFOLIO MANAGEMENT AND TURNOVER. It is intended that the portfolio of the
Fund will be fully managed by buying and selling securities, as well as holding
securities to maturity. In managing the portfolio of the Fund, the Adviser seeks
to take advantage of market developments, yield disparities and variations in
the creditworthiness of issuers. For a description of the strategies that may be
used by the Adviser in managing the portfolio of the Fund, which may include
adjusting the average maturity of a portfolio in anticipation of a change in
interest rates, see "Investment Objectives, Policies and
Restrictions--Investment Policies: Portfolio Management" in the Statement of
Additional Information.
Generally, the primary consideration in placing portfolio securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the most favorable prices and in the most
effective manner possible. For a complete discussion of portfolio transactions
and brokerage allocation, see "Investment Objectives, Policies and
Restrictions--Investment Policies; Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned. The Fund
can increase its income through the investment of such collateral. The Fund
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the Fund on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their agreements
with the Fund. 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 Adviser to be of good standing and will not
be made unless, in the judgment of the Adviser, the consideration to be earned
from such loans justifies the risk.
FUTURES AND OPTIONS. The Fund may invest its assets in derivative and
related instruments subject only to the Fund's investment objective and policies
and the requirement that, to avoid leveraging the Fund, the Fund 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.
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The value of some derivative or related instruments in which the Fund
invests may be particularly sensitive to changes in the prevailing interest
rates or other economic factors, and--like other investments of the Fund--the
ability of the Fund to successfully utilize these instruments may depend in part
upon the ability of the Adviser to forecast interest rates and other economic
factors correctly. If the Adviser incorrectly forecasts such factors and has
taken positions in derivative or related instruments contrary to prevailing
market trends, the Fund could be exposed to the risk of a loss. The Fund might
not employ any or all of the instruments described herein, and no assurance can
be given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
. 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);
. enter into futures contracts and options on futures contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the Fund 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains.
. Strategies not involving hedging may increase the risk to the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract,
no trades may be made that day at a price beyond that limit. In addition,
certain instruments are relatively new and
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<PAGE>
without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
MANAGEMENT OF THE FUND
ADVISER
The Chase Manhattan Bank, N.A. (the "Adviser") manages the assets of the
Fund pursuant to an Investment Advisory Agreement dated October 19, 1990, as
amended July 17, 1992. Subject to such policies as the Board of Trustees may
determine, the Adviser makes investment decisions for the Fund. The Fund has
been managed since its inception on November 30, 1990 by Linda Struble. Ms.
Struble has been with Chase since 1968 performing various investment services,
including managing individual accounts. For its services under the Investment
Advisory Agreement, the Adviser is entitled to receive an annual fee computed
daily and paid monthly at an annual rate equal to 0.25% of the Fund's average
daily net assets. The Adviser may, from time to time, voluntarily waive all or a
portion of the fees payable to it under the Investment Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
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Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased on behalf of the Fund. The Adviser
has informed the Fund that in making its investment decisions, it does not
obtain or use material inside information in the possession of any other
division or department of the Adviser or in the possession of any affiliate of
such Adviser. Shareholders of the Fund should be aware that, subject to legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholders and their accounts.
ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989, as
amended September 30, 1993 (the "Administration Agreement"), Chase (the
"Administrator") serves as Administrator of the Fund. The Administrator provides
certain administrative services, including, among other responsibilities,
coordinating relationships with independent contractors and agents; preparing
for signature by officers and filing of certain documents required for
compliance with applicable laws and regulations excluding those of the
securities laws of the various states; preparing financial statements; arranging
for the maintenance of books and records; and providing office facilities
necessary to carry out the duties thereunder. The Administrator is entitled to
receive from the Fund a fee computed daily and paid monthly at an annual rate
equal to 0.10% of the Fund's average daily net assets. However, the
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Administrator may, from time to time, voluntarily waive all or a portion of its
fees payable under the Administration Agreement. The Administrator, pursuant to
the terms of the Administration Agreement, shall not have any responsibility or
authority for the Fund's investments, the determination of investment policy, or
for any matter pertaining to the distribution of Fund shares.
GLASS-STEAGALL ACT. The Adviser and the Administrator have received the
opinion of their legal counsel that they may provide the services described in
the Investment Advisory and the Administration Agreements, as described above,
and the Shareholder Servicing Agreements described below without violating the
federal banking law commonly known as the Glass-Steagall Act. The Act generally
bars banks from publicly underwriting or distributing certain securities.
Based on the advice of its counsel, Chase believes that the Court's decision
and these other decisions of federal banking regulators permit it to serve as
investment adviser to a registered, open-end investment company, such as the
Trust.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of its counsel, that it may serve as shareholder
servicing agent to the Fund and render the service described in the shareholder
servicing agreement, as appropriate, incidental national banking functions and
as proper adjuncts to it serving as investment adviser and Administrator to the
Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. The Administrator,
on the advice of its counsel, believes that it may render the services described
in its Administration Agreement with the Trust without violating the
Glass-Steagall Act or other applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser and
the Administrator from continuing to perform investment advisory, shareholder
servicing or other administrative services for the Fund. If that occurred, the
Trust's Board of Trustees promptly would seek to obtain for the Fund the
services of another qualified adviser, shareholder servicing agent, or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the switch to a new adviser, shareholder servicing
agent, or administrator could be accomplished without undue disruption to the
Fund's operations.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with Vista Broker-Dealer Services, Inc., at the public
offering price which is computed once daily as of the close of regular trading
on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on each
business day during which the Exchange is open for trading ("Fund Business
Day"). (See "Other Information Concerning Shares of the Fund--Net Asset Value").
The public offering price of shares is the next determined net asset value, plus
applicable initial sales charge. Orders received by Dealers prior to the New
York Stock Exchange closing time are confirmed at the applicable offering price
effective at the close of such Exchange,
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<PAGE>
provided the order is received by the Transfer Agent prior to its close of
business. Dealers are responsible for forwarding orders for the purchase of
shares on a timely basis. Fund shares normally will be maintained in book entry
form and certificates will be issued upon request. Management reserves the right
to refuse to sell shares of the Fund to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian-- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ----------------------------------------------- --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program...................... $ 100(4)
(401K,403B,Keogh)
- ------------
(1) Employees of the Advisor and its affiliates, and certain qualified persons
are eligible for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
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SYSTEMATIC INVESTMENT PLAN
A shareholder may establish a monthly investment plan by which investments
are automatically made to his/her Vista Fund account through Automatic Clearing
House (ACH) deductions from a checking account. The minimum monthly investment
through this plan is $100. Shareholders may choose either to have these
investments made during the first or third week each month. Please note that
your initial ACH transactions may take up to 10 days from the receipt of your
request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in his account on
any Fund Business Day at the net asset value next determined after a redemption
request in proper form is furnished by the shareholder to his Shareholder
Servicing Agent and transmitted by it to and received by the Fund's Transfer
Agent. Therefore, redemptions will be effected on the same day the redemption
order is received only if such order is received prior to 4:00 p.m., Eastern
time, on any Fund Business Day. Shares which are redeemed earn dividends up to
and including the day prior to the day the redemption is effected. The proceeds
of a redemption normally will be paid on the next Fund Business Day after the
redemption is effected, but in any event within seven days. The forwarding of
proceeds from redemption of shares which were recently purchased by check may be
delayed up to 15 days. A shareholder who is a customer of a Shareholder
Servicing Agent may redeem his Fund shares by authorizing his Shareholder
Servicing Agent, its agent, or the Transfer Agent to redeem such shares. The
signature of both shareholders is required for any written redemption requests
(other than those by check) from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund records.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 committing
to pay in cash all redemptions by a shareholder of record up to the amounts
specified in the rule.
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. However, all telephone redemption requests in excess of
$25,000 will be wired directly to such previously designated bank account, for
the protection of shareholders. Normally, redemption payments will be
transmitted on the next business day following receipt of the request (provided
it is made prior to 4:00 p.m., Eastern time on any day redemptions may be made).
Redemption payments requested by telephone may not be
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<PAGE>
available in a previously deposited bank account for up to four days. For
telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
AUTOMATIC REDEMPTION PLAN. A shareholder owning $10,000 or more of the
shares of the Fund as determined by the then current net asset value may provide
for the payment monthly or quarterly of any requested dollar amount (subject to
limits) from his account to his order. A sufficient number of full and
fractional shares will be redeemed so that the designated payment is received on
approximately the 1st day of the month following the end of the selected payment
period.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days' notice prior to the
redemption.
EXCHANGE PRIVILEGE
Subject to certain conditions, shares of Vista Equity Fund, Vista Bond Fund
and Vista Short-Term Bond Fund may be exchanged for shares of another of those
three Funds at the then current net asset value. The Prospectus should be
reviewed before effecting any exchange. You should note that any such exchange,
which may only be made in states where shares of the other Funds are qualified
for sale, may create a gain or loss to be recognized for federal income tax
purposes. Exchanges may be authorized by telephone. If you desire this exchange
option you must check the box on the Application which indicates that you wish
to have this privilege. The exchange privilege may be modified or discontinued
at any time.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the Fund's
Transfer Agent. Telephone transaction privileges are made available to
shareholders by completing the "Expedited Redemption" section of the Account
Application. To provide evidence of telephone instructions, the Transfer Agent
will record telephone conversations with shareholders. The Fund will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine. In the event the Fund does not employ such procedures, it may be liable
for losses due to unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agents are 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
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<PAGE>
shareholders in his or their latest account application or other written request
for services, including purchasing, exchanging, or redeeming shares of the Fund
and depositing and withdrawing monies from the bank account specified in the
Bank Account Registration section of the shareholder's latest account
application or as otherwise properly specified to the Fund in writing.
Shareholders agree to hold the Fund and its agents harmless from any claim,
liability, loss, and expense arising in connection with written or oral
instructions or requests to it concerning shareholder accounts, or any written
or oral instructions or requests from someone claiming to be a shareholder if
the Fund acted in good faith by complying with the reasonable procedures that
have been established for Fund accounts and services.
The Fund may also establish and revise from time to time account minimums
and transactions or amount restrictions on purchases, exchanges, redemptions,
checkwriting services, or other transactions permitted in connection with
shareholder accounts. The Fund may also require signature guarantees for changes
that shareholders request be made in Fund records with respect to their
accounts, including but not limited to, changes in the bank account specified in
the Bank Account Registration, or for any written requests for additional
account services made after a shareholder has submitted an initial account
application to the Fund. The Fund may refuse to accept or carry out any
transaction that does not satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and substantially all of its taxable income is distributed
to its shareholders in accordance with the timing requirements imposed by the
Code, it will not be subject to federal income tax on the amounts so
distributed. If for any taxable year the Fund does not qualify for the treatment
as a regulated investment company, all of its taxable income will be subject to
tax at regular corporate rates without any deduction for distributions to its
shareholders, and such distributions will be taxable to shareholders to the
extent of the Fund's current and accumulated earnings and profits.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes, but
do not qualify for the dividends-received deduction for corporations.
Distributions by the Fund of the excess, if any, of its net long-term capital
gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time a
16
<PAGE>
shareholder has held his shares. Ordinary income dividends and capital gain
dividends from the Fund may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends and capital gains dividends, will be sent to the Fund's shareholders
promptly after the end of each year.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time,
however, options are priced at 4:15 p.m.) on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets in the Fund's portfolio are determined on the basis of their market or
other fair value, as described in the Statement of Additional Information. A
share's net asset value is effective for orders received by a Shareholder
Servicing Agent prior to its calculation and received by the Distributor prior
to the close of business, usually 4:00 p.m. Eastern time, on the Fund Business
Day on which such net asset value is determined.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Income dividends are declared daily and paid monthly. The Fund's net
investment income consists of the interest income earned on its portfolio, less
expenses. The Fund will distribute its net realized short-term and long-term
capital gains, if any, to its shareholders at least annually.
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<PAGE>
The Fund will also make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder may elect to receive dividends and capital gains distributions from
the Fund in either cash or additional shares.
DISTRIBUTION PLAN AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act, after having concluded that there
is a reasonable likelihood that the Distribution Plan will benefit the Fund and
its shareholders.
The Distribution Plan provides that the Fund shall pay distribution fees
(the "Basic Distribution Fee"), including payments to the Distributor, at an
annual rate not to exceed 0.20% of the Fund's average daily net assets for
distribution services. The Distributor may use all or a portion of such Basic
Distribution Fee to pay for the expenses of printing prospectuses and reports
used for sales purposes, expenses related to the preparation and printing of
sales literature and other such distribution-related expenses. The Basic
Distribution Fee is not directly tied to its expenses, therefore the amount of
Basic Distribution Fee paid by the Fund during any year may be more or less than
actual expenses incurred pursuant to the Distribution Plan. For this reason,
this type of distribution fee arrangement is characterized by the staff of the
Securities and Exchange Commission as being of the "compensation variety" (in
contrast to "reimbursement" arrangements such as those described in the next
paragraph, by which a distributor's compensation is directly linked to its
expenses). The Fund is not liable for any distribution expenses incurred in
excess of the Basic Distribution Fee paid.
Under the Distribution Plan, the Fund is also permitted to pay an additional
fee at an annual rate not to exceed 0.05% of its average daily net assets in
anticipation of, or as reimbursement for, actual expenses incurred during such
year in connection with print or electronic media advertising in connection with
the sale of the Fund's shares.
The Distribution and Sub-Administration Agreement dated April 2, 1990, as
amended June 1, 1990 and September 30, 1993, (the "Distribution Agreement")
provides that the Distributor will act as the principal underwriter of shares of
each Fund and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. While there is no sales load, the Distributor is
entitled to a fee from each Fund at an annual rate equal to 0.05% of each Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses incurred in connection with
organizing new series or classes of the Trust and certain other ongoing expenses
of the Trust.
18
<PAGE>
EXPENSES
The Fund intends to pay all of its pro rata share of the Trust's expenses,
including the compensation of the Trustees; all fees under the Distribution
Plan; governmental fees; interest charges; taxes; membership dues in the
Investment Company Institute; fees and expenses of independent accountants, of
legal counsel and of any transfer agent or dividend disbursing agent; expenses
of redeeming shares and servicing shareholder accounts; expenses of preparing,
printing and mailing prospectuses, reports, notices, proxy statements and
reports to shareholders and to governmental officers and commissions; expenses
connected with the execution, recording and settlement of portfolio security
transactions; insurance premiums; fees and expenses of the Fund's custodian
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating its net asset value; expenses of shareholder
meetings; and the advisory fees payable to the Adviser under the Investment
Advisory Agreement, the administration fee payable to the Administrator under
the Administration Agreement and the sub-administration fee payable to the
Distributor under the Distribution and Sub-Administration Agreement. Expenses
relating to the issuance, registration and qualification of shares of the Fund
and the preparation, printing and mailing of prospectuses for such purposes are
borne by the Fund except that the Distribution and Sub-Administration Agreement
with the Distributor requires the Distributor to pay for prospectuses which are
to be used for sales to prospective investors.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. On December 4, 1992, the shareholders of Trinity
Short-Term Bond Fund approved the reorganization of such fund into a new series
of the Trust, effective January 1, 1993.
The Trust has reserved the right to create and issue additional series or
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Expenses of the Trust
which are not attributable to a specific series or class are allocated among all
the series in a manner believed by management of the Trust to be fair and
equitable. Shares have no pre-emptive or conversion rights. Shares when issued
are fully paid and non-assessable, except as set forth below. Shareholders are
entitled to one vote for each whole share held, and each fractional share shall
be entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each series or class
generally vote separately, for example to approve an investment advisory
agreement or distribution plan, but shares of all series and classes vote
together, to the extent required under the 1940 Act, in the election or
selection of Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class or of all series and
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Trust's Custodian or vote in
person or by proxy at a meeting called for this purpose.
19
<PAGE>
In addition, the Trustees will promptly call a meeting of shareholders to remove
a trustee(s) when requested to do so in writing by record holders of not less
than 10% of the outstanding shares of the Trust. Finally, the Trustees shall, in
certain circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same series otherwise represented at the meeting in person or by proxy as to
which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class would
be entitled to share pro rata in the net assets of that series or class
available for distribution to shareholders upon liquidation of that series or
class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
among other things: answer customer inquiries regarding account status, history,
the manner in which purchases and redemptions of shares may be effected for each
Fund or class of shares as to which the Shareholder Servicing Agent is so acting
and certain other matters pertaining to the Fund; assist shareholders in
designating and changing dividend options, account designations and addresses;
provide necessary personnel and facilities to establish and maintain shareholder
accounts and records; assist in processing purchase and redemption transactions;
arrange for the wiring of funds; transmit and receive funds in connection with
customer orders to purchase or redeem shares; verify and guarantee shareholder
signatures in connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an integrated
basis with other reports sent to a shareholder by a Shareholder Servicing Agent)
monthly and year-end statements and confirmations of purchases and redemptions;
transmit, on behalf of the Fund, proxy statements, annual reports, updated
prospectuses and other communications to shareholders; receive, tabulate and
transmit to the Fund proxies executed by shareholders with respect to meetings
of shareholders of the Fund; vote the outstanding shares of the Fund whose
shareholders do not transmit executed proxies or attend shareholder meetings in
the same proportion as the votes cast by
20
<PAGE>
other shareholders of the Fund represented at the shareholder meeting as to
which such Shareholder Servicing Agent is the agent of record and provide such
other related services as the Fund or a shareholder may request. Shareholder
Servicing Agents may be required to register pursuant to state securities law.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Fund shares, receive dividends and
distributions on Fund investments, and take advantage of any services related to
an Account offered by such Shareholder Servicing Agent from time to time. All
Accounts and any related privileges or services shall be governed by the laws of
the State of New York, without regard to its conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents only to perform advisory, custodian, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
the management of the Trust believes that such laws should not preclude a bank,
including a bank which acts as investment adviser, custodian or administrator,
or in all such capacities for the Trust, from acting as a Shareholder Servicing
Agent. However, possible future changes in federal law or administrative or
judicial interpretations of current or future law, could prevent a bank from
continuing to perform all or a part of its servicing activities. If that
occurred, the bank's shareholder clients would be permitted to remain as
shareholders and alternative means for continuing the servicing of such
shareholders would be sought. In such event, changes in the operation of each
Fund might occur and a shareholder serviced by such bank might no longer be able
to avail himself of any automatic investment or other services then being
provided by such bank. The Trust does not expect that shareholders would suffer
any adverse financial consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
21
<PAGE>
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
TAX SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, and 403(b) Retirement Plans. Call or write the
Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of the Fund in the future. From time to time,
the performance and yield of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products, and to stock or
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of the Fund may be compared to data prepared by
Lipper Analytical Services, Inc., or the Morningstar Mutual Funds on Disc,
widely recognized independent services which monitor the performance of mutual
funds. Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in local or regional publications, may also
be used in comparing the performance and yield of the Fund. Additionally, the
Fund may, with proper authorization, reprint articles written about the Fund and
provide them to prospective shareholders.
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains are reinvested; annualized total rates
of return will be slightly higher than period total rates of return (if the
periods are shorter than one year) because of the compounding effect of the
assumed reinvestment.
The Fund may provide "yield" quotations in addition to total rate of return
quotations. The "yield" quotations of the Fund will be based upon a hypothetical
net investment income earned by the Fund over a thirty day or one month period
(which period shall be stated in any advertisement or communication with a
shareholder). The "yield" is then "annualized" by assuming that the income
generated over the period will be generated over a one year period. A "yield"
quotation, unlike a total rate of return quotation, does not reflect changes in
net asset value.
22
<PAGE>
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of the Fund will vary
based on interest rates, the current market value of the securities held in the
Fund's portfolio and changes in the Fund's expenses. These varial affect the net
income (and therefore the yield and total rate of return) of the Fund during the
period such waivers are in effect. These factors and posible differences in the
methods used to calculate the yield and total rate of return should be
considered when comparing the yield or total rate of return of the Fund to
yields and total rates of return published for other investment companies and
other investment vehicles. The Fund is advised that certain Shareholder
Servicing Agents may credit to the accounts of their customers from whom they
are already receiving other fees amounts (see "Purchases and Redemptions of
Shares-- Purchases"), which will have the effect of increasing the net return on
the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Informaiton for further information concerning the calculation of the Fund's
yield or total rate of return quotations.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with the
Fund's policies and investments, (iii) the Trust's Trustees, officers and the
Administrator and the Advisers, (iv) portfolio transactions and brokerage
allocation, (v) the Fund's shares, including rights and liabilities of
shareholders, and (vi) additional performance information, including the method
used to calculate yield or total rate of return quotations of such Shares.
23
<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS*
The ratings of Moody's and Standard & Poor's represent their opinions as to
the quality of various debt securities. It should be emphasized, however, that
ratings are not absolute standards of quality. Consequently, debt securities
with the same maturity, coupon and rating may have different yields while debt
securities of the same maturity and coupon with different ratings may have the
same yield.
DESCRIPTION OF MOODY'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". 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 attributes
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 and 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.
- ------------
* As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time
revise such ratings, they undertake no obligation to do so.
A-1
<PAGE>
DESCRIPTION OF STANDARD & POOR'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal 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 pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A-2
<PAGE>
PROSPECTUS
IEEE BALANCED FUND
March 1, 1996
IEEE BALANCED FUND (the "Fund") seeks to provide its shareholders with
maximum total return through a combination of long-term growth of capital and
current income by investing in a diversified portfolio of equity and debt
securities, including common stocks, convertible securities and government and
corporate fixed-income obligations. Under normal market conditions, between
40%-70% of the Fund's total assets will be invested in common stocks and other
equity investments and at least 30% of the Fund's assets will be invested in
fixed-income senior securities, defined for this purpose to include
non-convertible corporate debt securities and government obligations. The
Sub-Adviser considers both the opportunity for gain and the risk of loss in
making investments, and may alter the relative percentages of assets invested in
equity and fixed income senior securities from time to time, depending on the
judgment of the Sub-Adviser as to general market and economic conditions, trends
and yields and interest rates and changes in fiscal monetary policies. The Fund
is a diversified series of Mutual Fund Group (the "Trust"), an open-end
management investment company organized as a business trust under the laws of
the Commonwealth of Massachusetts on May 11, 1987, presently consisting of 15
separate series (the "Funds").
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective, Policies
and Risk Considerations" in this Prospectus. Investors should also refer to
"Additional Information on Investment Policies and Techniques" on page 6.
The merger of the IEEE Balanced Fund into the Vista Balanced Fund was
approved at the October 13, 1995 Trustees' meeting, subject to the approval of
the shareholders of the respective fund. It is expected that shareholders will
be solicited for their vote during the first quarter of 1996.
The Chase Manhattan Bank, N.A. (the "Adviser") is the Fund's overall
investment adviser, administrator (the "Administrator") and custodian (the
"Custodian"). The parent company of the Adviser, The Chase Manhattan Corporation
has entered into an agreement and Plan of Merger with Chemical Banking
Corporation which, if affected will have certain effects upon the Adviser, see
"Management of the Fund--The Adviser" on page 10. Atlanta Capital Management
Company (the "Sub-Adviser") is the Fund's sub-adviser and manages the Fund's
portfolio. The Institute of Electrical and Electronics Engineers, Inc. ("IEEE")
will provide portfolio management services to the Sub-Adviser in connection with
the Fund's fixed-income securities and related derivative securities.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL--AND MAY FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OTHER
FINANCIAL INSTITUTION, NOR ARE THEY INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale only to investors who
are IEEE members, without a sales load, through Vista Broker-Dealer Services,
Inc. ("VBDS"), the Fund's distributor (the "Distributor"), or to IEEE members
some of whom are customers of a financial institution, such as a federal or
state-chartered bank, trust company or savings and loan association with which
the Fund has entered into a shareholder servicing agreement (collectively,
"Shareholder Servicing Agents"), and selected securities brokers or financial
institutions (collectively, "Dealers") which have entered into Selected Dealer
Agreements with the Distributor. The Fund has a distribution plan and may incur
basic distribution expenses, as described herein, at an annual rate, not to
exceed 0.25% of its average daily net assets. An investor should obtain from his
Shareholder Servicing Agent, if appropriate, and should read in conjunction with
this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Fund shares may be
redeemed by shareholders at the net asset value next determined on any Fund
Business Day as hereinafter defined.
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund, has been filed with the Securities and
Exchange Commission and is incorporated into this Prospectus by reference. An
investor may obtain a copy of the Statement of Additional Information without
charge by contacting his Shareholder Servicing Agent, the Distributor or the
Fund.
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.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
For information about the Fund simply call the Vista Service Center at the
following toll-free number: 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary........................................................ 3
Financial Highlights................................................... 4
Investment Objectives, Policies and Risk Considerations................ 5
Additional Information on Investment Policies and Techniques........... 6
Management of the Fund................................................. 10
Purchases and Redemptions of Shares.................................... 13
Tax Matters............................................................ 17
Other Information Concerning Shares of the Fund........................ 19
Shareholder Servicing Agents, Transfer Agent and Custodian............. 21
Yield and Performance Information...................................... 23
Appendix A--Description of Futures Contracts and Options Thereon....... A-1
Appendix B--Description of Ratings..................................... B-1
2
<PAGE>
EXPENSE SUMMARY
<TABLE><CAPTION>
AS A
PERCENTAGE
ANNUAL FUND OPERATING EXPENSES OF NET ASSETS
- ------------------------------ -------------
<S> <C>
Investment Advisory (After Waiver of Fees)*..................................... .60%
Rule 12b-1 Distribution Plan Fee+............................................... .25%
Administrative Service Fee...................................................... .10%
Other Expenses
- --Sub-Administrative Service Fee................................................ .05%
- --Shareholder Servicing Agent Fee++............................................. .25%
- --Other Operating Expenses+++ (After reimbursement of expenses)................. .00%
-----
Total Fund Operating Expenses................................................... 1.25%
-----
-----
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming (1) 5% annual return and (2) redemption at the end of:
1 year...................................................................... $ 13
3 years..................................................................... 40
</TABLE>
- ------------
* Fees waived on a month-to-month basis.
+ As a result of 12b-1 fees, a long-term shareholder in the Fund may pay more
than the economic equivalent of the maximum sales charge permitted by the
rules of the National Association of Securities Dealers, Inc.
++ Shareholder Servicing Agents may provide various services to their customers
and charge fees for these services.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative service fee, sub-administrative
service fee, shareholder servicing agent fee and other operating expenses
expected to be incurred by the Fund over the next fiscal year after waiver of
fees and reimbursement of expenses. Absent such waivers, the annual investment
advisory fee, distribution plan fee, administrative service fee,
sub-administration service fee and shareholder servicing agent fees for the Fund
would be 0.65%, 0.25%, 0.10%, .05% and 0.25% respectively, of the Fund's average
net assets. A more complete description of the Fund's expenses, including any
fee waivers, is set forth herein.
THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN
THOSE SHOWN.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
the 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 are incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as well
as the financial information set forth in the table below have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is also
included in the annual report to shareholders. This information should be read
in conjunction with the financial statements. Shareholders can obtain a copy of
this annual report by contacting the Fund or their Shareholder Servicing Agent.
<TABLE><CAPTION>
IEEE BALANCED FUND
-------------------------------
<S> <C> <C> <C>
YEAR ENDED 9/15/93*
------------------- THROUGH
10/31/95 10/31/94 10/31/93
-------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period........................... $ 9.38 $10.05 $10.00
Income from Investment Operations:
Net investment income.......................................... 0.240 0.237 0.050
Net gains on securities (both realized and unrealized) on
investments..................................................... 1.610 (0.614 ) 0.014
-------- -------- --------
Total from investment operations............................. 1.850 (0.377 ) 0.064
-------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income........................... 0.246 0.240 (0.014 )
Distributions in excess of net realized capital losses......... -- 0.053 0.000
-------- -------- --------
Total Distributions.......................................... 0.246 0.293 (0.014 )
-------- -------- --------
NET ASSET VALUE, END OF PERIOD.................................. $10.98 $ 9.38 $10.05
======== ======== ========
TOTAL RETURN.................................................... 19.93% (3.78% ) 0.64%
======== ======== ========
RATIOS/SUPPLEMENTAL DATA**
Net Assets, End of Period (000 omitted)........................ $10,772 $8,777 $6,091
Ratio of Expenses to Average Net Assets #...................... 1.25% 1.12% 0.00%
Ratio of Net investment income to Average Net Assets #......... 2.38% 2.48% 3.08%
Ratio of Expenses without waivers and assumption of expenses to
Average Net Assets #............................................ 2.36% 3.15% 3.36%
Ratio of Net investment income without waivers and assumption
of expenses to Average Net Assets #.......................... 1.27% 0.45% (0.28% )
Portfolio turnover rate........................................ 30% 28% 0%
</TABLE>
- ------------
* Commencement of operations.
# Short periods have been annualized.
4
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK CONSIDERATIONS
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to maximize
total return through a combination of long-term growth of capital and a high
level of current income.
INVESTMENT POLICIES -- The Fund seeks to achieve this objective through a
policy of diversified investments in equity and debt securities, including
common stocks, convertible securities and government and corporate fixed-income
senior securities. The Sub-Adviser and IEEE consider both the opportunity for
gain and the risk of loss in selecting investments, and the Sub-Adviser may
alter the relative percentages of assets invested in equity and fixed income
senior securities from time to time, depending on the judgment of the
Sub-Adviser as to general market and economic conditions, trends and yields and
interest rates and changes in fiscal monetary policies.
Under normal market conditions, between 40%-70% of the Fund's total assets
will be invested in common stocks and other equity investments (including
preferred stocks, convertible debt, warrants and other securities convertible
into or exchangeable for common stocks). The majority of the Fund's common stock
and other equity investments will be invested in companies with a market
capitalization of at least $200 million. Investors should be aware that equity
securities fluctuate in value, often based on factors unrelated to the value of
the issuer of the securities, and that fluctuations can be pronounced. The
securities of smaller cap companies may be subject to more abrupt or erratic
market movements than larger cap companies, both because the securities
typically are traded in lower volumes and because the issuers typically are
subject to a greater degree to changes in earnings and prospects. Changes in the
value of equity securities in the Fund's portfolio will result in changes in the
value of the Fund's shares and thus the Fund's yield and total return to
investors.
In addition, at least 30% of the Fund's assets will be invested in
fixed-income senior securities, defined for this purpose to include
non-convertible corporate debt securities and government obligations. The
average maturity of these investments will vary from time to time depending on
the Sub-Adviser's and IEEE's assessments of the relative yields available on
securities of different maturities. It is currently anticipated that the average
maturity of the fixed-income senior securities in the Fund's portfolio will be
between two and fifteen years under normal market conditions. Non-convertible
corporate debt obligations held in the Fund's portfolio will be rated, at the
time of purchase, BBB or higher by Standard & Poor's Corporation ("S&P") or Baa
or higher by Moody's Investor Service, Inc. ("Moody's") or, if unrated,
determined to be of comparable quality by the Sub-Adviser or IEEE under criteria
approved by the Adviser and the Board of Trustees. Bonds rated BBB by S&P or Baa
by Moody's may possess speculative characteristics and may be sensitive to
changes in the economy and the financial condition of issuers.
Investors should be aware that even though interest-bearing securities are
investments which promise a stable stream of income, the price of such
securities are inversely affected by changes in interest rates, and therefore,
are subject to risk of market price fluctuations.
The Fund may also purchase obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, and may invest in high quality
short-term debt securities such as commercial paper rated A-1 by S&P or P-1 by
Moody's.
Under normal market conditions, 60% of the Fund's total assets will be
invested in equity securities and 40% will be invested in fixed-income senior
securities. Under normal market conditions, between 60-75% of the fixed-income
assets will be in Treasuries and other U.S. government securities. Treasury
securities include Treasury bills, Treasury notes and Treasury bonds. Other U.S.
government
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securities in which the Fund intends to invest include, but are not limited to,
the securities issued or guaranteed by the Department of Housing and Urban
Development, the Government National Mortgage Association, the Farmer's Home
Administration, the Small Business Administration, the Federal Farm Credit
System, the Federal Intermediate Credit Banks, the Bank for Cooperatives, the
Federal Home Loan Banks, the Export-Import Bank, the Federal National Mortgage
Association, the Student Loan Marketing Association and the Federal Home Loan
Mortgage Corporation.
THE NET ASSET VALUE OF THE FUND WILL FLUCTUATE BASED ON THE VALUE OF THE
SECURITIES IN ITS PORTFOLIO.
The Fund normally will be substantially fully invested. However, the Fund
reserves the right to invest up to 100% of its assets in cash, cash equivalents,
high quality short-term money market instruments, and in bills, notes or bonds
issued by the U.S. Treasury Department or by other agencies of the U.S.
Government for temporary defensive purposes during periods that the Sub-Adviser
considers to be unsuitable for the Fund's normal investment strategies.
The Fund may write covered call options on its equity securities and
fixed-income senior securities for the purpose of hedging its portfolio. The
Fund may also write or sell options on its fixed income transactions in an
amount not to exceed 25% of its total assets. Futures and related options may be
employed so long as the aggregate initial margin and premium on such contracts
does not exceed 5% of the Fund's total assets. "Additional Information on
Investment Policies and Techniques", "Options on Portfolio Securities" and
Appendix A contain a more complete description of futures and option contracts,
as well as further information concerning the investment policies and techniques
of the Fund.
Shareholder approval is required to change the Fund's investment objective
which is considered to be fundamental. However, shareholder approval is not
required to change any of the investment policies as described above or in
"Additional Information on Investment Policies and Techniques" below.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Fund are not invested in common stocks, they
will consist of or be invested in cash, cash equivalents, high quality
short-term money market instruments, and in bills, notes or bonds issued by the
U.S. Treasury Department or by other agencies of the U.S. Government, as
described under "Investment Objective, Policies and Restrictions" in the
Statement of Additional Information, and in repurchase agreements, as described
below and in greater detail under "Investment Objective, Policies and
Restrictions" in the Statement of Additional Information.
The Fund may invest up to 15% of its assets in sponsored American Depositary
Receipts, which are U.S. exchange listed interests in securities of foreign
companies, and in debt and equity securities issued by foreign corporate and
government issuers when the Sub-Adviser believes that such investments provide
good opportunities for achieving income and capital gains without undue risk.
These securities may represent a greater degree of risk (e.g., risk related to
exchange rate fluctuation, tax provisions, war or expropriation) than do
securities of domestic issuers.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment
objectives of the Fund will be achieved.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal
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Reserve System and security dealers believed creditworthy and only if fully
collateralized by U.S. Government obligations or other securities in which the
Fund is permitted to invest. In the event the seller fails to pay the agreed-to
sum on the agreed-upon delivery date, the underlying security could be sold by
the Fund, but the Fund might incur a loss in doing so, and in certain cases may
not be permitted to sell the security. As an operating policy, the Fund, through
its custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been established for the
Fund to monitor, on a daily basis, the market value of the collateral underlying
all repurchase agreements to ensure that the collateral is at least 100% of the
value of the repurchase agreements. Not more than 15% of the total assets of the
Fund will be invested in illiquid securities (i.e., securities which cannot be
sold in the ordinary course of business within 7 days without the Fund selling
at a discount from book value). This limitation may be subject to additional
restrictions imposed by jurisdictions in which the Fund's shares are offered for
sale. See "Investment Restrictions" in the Statement of Additional Information.
PORTFOLIO MANAGEMENT AND TURNOVER. It is not intended that the assets of the
Fund will be invested in securities for the purpose of short-term profits.
However, the Fund will dispose of portfolio securities whenever the Sub-Adviser
believes that changes are appropriate. Generally, the primary consideration in
placing portfolio securities transactions with broker-dealers for execution is
to obtain, and maintain the availability of, execution at the most favorable
prices and in the most effective manner possible. It is anticipated that the
annual turnover rate for both the equity and fixed-income portions of the Fund's
portfolio will be approximately 100%. For a complete discussion of portfolio
transactions and brokerage allocation, including the Fund's overall portfolio
turnover rate, the turnover rate for the portion of the Fund's portfolio
consisting of common stock and the turnover rate for the portion of the Fund's
portfolio consisting of non-equity investments, see "Investment Objective,
Policies and Restrictions--Investment Policies: Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.
PORTFOLIO SECURITIES LENDING. Although the Fund would not intend to engage
in such activity in the ordinary course of business, the Fund 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 the Fund's total assets. In connection with such loans, the
Fund will receive collateral consisting of cash, cash equivalents, U.S.
Government securities or irrevocable letters of credit issued by financial
institutions. Such collateral will be maintained at all times in an amount equal
to at least 100% of the current market value of the securities loaned. The Fund
can increase its income through the investment of such collateral. The Fund
continues to be entitled to the interest payable or any dividend-equivalent
payments received on a loaned security and, in addition, receive interest on the
amount of the loan. However, the receipt of any dividend-equivalent payments by
the Fund on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. The Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their agreements
with the Fund. 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 Sub-Adviser to be of good standing and will
not be made unless, in the judgment of the Sub-Adviser, the consideration to be
earned from such loans justifies the risk.
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OPTIONS ON PORTFOLIO SECURITIES
The Fund, for the purpose of hedging its portfolio, will "write" or sell
covered call and put option contracts on its portfolio securities in an amount
not to exceed 25% of its net assets. For so long as the Fund remains obligated
as the writer of the option, it will be covered on call options by owning the
underlying security; and, in the case of a put options, segregates an amount of
cash or high-grade liquid debt securities equal to the exercise price of the
option. Currently, the principal exchanges on which such options may be written
are the Chicago Board Option Exchange and the American, Philadelphia and Pacific
Stock Exchanges. In addition, and in certain instances, the Fund may write
covered call and put options in the over-the-counter market ("OTC Options").
A call option gives the purchaser of the option the right, but not the
obligation, to buy the underlying security from the writer at the exercise price
at any time prior to the expiration of the contract, regardless of the market
price of the security during the option period. The premium paid to the writer
is the consideration for undertaking the obligations under the option contract.
The writer foregoes the opportunity to profit from an increase in the market
price of the underlying security above the exercise price so long as the option
remains open and covered, except insofar as the premium represents such a
profit.
A put option gives the purchaser of the option the right, but not the
obligation, to sell the underlying security to the writer at the exercise price
at any time prior to the expiration of the contract, regardless of the market
price of the security during the option period. The premium paid to the writer
is the consideration for undertaking the obligation under the option contract.
The writer foregoes the opportunity to profit, and may incur losses, from a
decrease in the market price of the underlying security below the exercise price
so long as the option remains open and covered, except insofar as the premium
represents such a profit.
The Fund may purchase exchange traded or OTC Options on portfolio securities
only to close out a position, or offset, an existing call or put option that it
has written. In order to close out a position, the Fund will make a "closing
purchase transaction"--the purchase of a call or put option on the same security
with the same exercise price and expiration date as the call or put option which
it has previously written on any particular security. The Fund will effect a
closing purchase transaction so as to close out any existing call option on a
security that it intends to sell. The Fund will effect a closing purchase
transaction so as to close out any existing put option on a security that it
intends to buy. The Fund will realize a profit or loss from a closing purchase
transaction if the amount paid to execute a closing purchase transaction is less
or more than the amount received from the sale thereof.
The staff of the SEC has taken the position that purchased Options and the
assets used as cover for written OTC Options are illiquid securities. The Fund
will write OTC Options only with primary U.S. Government Securities dealers
recognized by the Board of Governors of the Federal Reserve System or member
banks of the Federal Reserve System ("primary dealers"). In connection with
these special arrangements, the Fund intends to establish standards for the
creditworthiness of the primary dealers with which it may enter into OTC Option
contracts and those standards, as modified from time to time, will be
implemented and monitored by the Sub-Adviser. Under these special arrangements,
the Fund will enter into contracts with primary dealers which provide that the
Fund has the absolute right to repurchase an option it writes at any time at a
repurchase price which represents the fair market value, as determined in good
faith through negotiation between the parties, but which in no event will exceed
a price determined pursuant to a formula contained in the contract. Although the
specific details of the formula may vary between contracts with different
primary dealers, the formula will generally be based
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on a multiple of the premium received by the Fund for writing the option, plus
the amount, if any, by which the option is "in-the-money." The formula will also
include a factor to account for the difference between the price of the security
and the strike price of the option if the option is written "out-of-the-money".
Under such circumstances, the Fund will treat as illiquid that amount of the
"cover" assets equal to the amount by which the formula price for the repurchase
of the option is greater than the amount by which the market value of the
security subject to the option exceeds the exercise price of the option (the
amount by which the option is "in-the-money"). Although each agreement will
provide that the Fund's repurchase price shall be determined in good faith (and
that it shall not exceed the maximum determined pursuant to the formula) the
formula price will not necessarily reflect the market value of the option
written, therefore, the Fund might pay more to repurchase the OTC Option
contract than the Fund would pay to close out a similar exchange traded option.
In determining the Fund's net asset value, the current market value of any
option written by the Fund is subtracted from net asset value. If the current
market value of the option exceeds the premium received by the Fund, the excess
represents an unrealized loss, and, conversely, if the premium exceeds the
current market value of the option, such excess would be unrealized gain.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of options contracts, including certain
percentage limitations on the use of such instruments, see "Investment
Objective, Policies and Restrictions--Investment Policies: Additional Policies
Regarding Options Transactions, Risk Factors Associated with Options
Transactions, and Restrictions on the Use of Options Contracts" in the Statement
of Additional Information.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The Fund will enter into futures contracts solely for the purpose of hedging
against changes in the value of its portfolio securities due to anticipated
changes in interest rates and market conditions and not for purposes of
speculation. A futures contract provides for the future sale by one party and
the purchase by the other party of a certain amount of a specified financial
instrument or index at a specified price, date, time and place. The Fund would
not be permitted to enter into futures contracts and options on futures for
which aggregate initial margin deposits and premiums exceed 5% of the fair
market value of the Fund's total assets after taking into account unrealized
profits and unrealized losses on futures contracts into which it has entered.
With respect to each long position in a futures contract or option thereon, the
underlying commodity value of such contract always will be covered by cash and
cash equivalents equal to the market value of the underlying commodity set aside
in a segregated account with the Fund's custodian or sub-custodian.
The Fund may purchase put options on interest rate futures contracts to
hedge its portfolio securities against the risk of rising interest rates, and
may purchase call options on interest rate futures contracts when it believes
that interest rates will decline, in anticipation of purchases or portfolio
securities at a higher price, but may not enter into these transactions for
purposes of speculation. The Fund will write put or call options on futures
contracts as part of closing purchase transactions to terminate its option
positions, although there is no guarantee that such closing transactions can be
effected. The Fund may write put and call options on interest rate futures
contracts other than as a part of closing sale transactions, in order to
increase its ability to hedge against the effect of changes in interest rates.
The Fund will write put and call options only on futures contracts which are
traded on a domestic exchange or board of trade. A call option give the
purchaser of such option the right to buy (assume a long position) and obliges
the Fund as its writer to sell, a specified underlying futures contract at a
stated
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<PAGE>
exercise price at any time prior to the expiration date of the option. A
purchaser of a put option has the right to sell (assume a short position), and
obliges the Fund as the writer to buy such contract at the exercise price during
the option period.
The Fund represents that it will operate in a manner such that:
(i) the Fund will use futures or options contracts solely for bona fide
hedging purposes within the meaning and intent of Commodity Futures Trading
Commission ("CFTC") Rule 1.3(z)(1); provided, however, that in addition,
with respect to positions in commodity futures or commodity options
contracts which do not come within the meaning and intent of CFTC Rule
1.3(z)(1), the aggregate initial margin and premiums required to establish
such positions will not exceed five percent of the liquidation value of the
Fund, after taking into account unrealized profits and unrealized losses on
any such contracts the Fund has entered into; and provided further, that in
the case of an option that is in-the-money at the time of purchase, the
in-the-money amount as defined in CFTC Rule 190.01(x) may be excluded in
computing such five percent;
(ii) the Fund will not be, and has not been, marketing participations to
the public as or in a pool or otherwise as or in a vehicle for trading in
the futures or options markets;
(iii) the Fund will disclose in writing to each prospective participant
the purpose of and the limitations on the scope of the futures and options
trading in which the Fund intends to engage; and
(iv) the Fund will submit to such special calls as the CFTC may make to
require the Fund to demonstrate compliance with the provisions of CFTC Rule
4.5(c).
MANAGEMENT OF THE FUND
THE ADVISER
The Chase Manhattan Bank, N.A. (the "Adviser") acts as investment adviser to
the Fund pursuant to an Investment Advisory Agreement dated August 4, 1992. The
Adviser has delegated the full portfolio management responsibility for the
day-to-day management of the Fund's portfolio to the Sub-Adviser, whose
personnel, investment experience and philosophy are described on the following
page. Subject to such policies as the Board of Trustees may determine, the
Adviser furnishes or procures on behalf of the Fund all services necessary for
the proper conduct of the Fund's business. In addition to the foregoing, the
Adviser selects, monitors and evaluates the Fund's Sub-Adviser. The primary
factor in the Adviser's selection process in identifying qualified Sub-Advisers
is demonstrable long-term, above average performance, as verified by independent
performance measurement services. The Adviser will review the Sub-Adviser's
performance records periodically, and will make changes if necessary, subject to
trustee and shareholder approval. For its services under the Investment Advisory
Agreement, the Adviser is entitled to receive an annual fee computed daily and
paid monthly based at an annual rate equal to .65% of the Fund's average daily
net assets. The Adviser may, from time to time, waive all or a portion of its
fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also
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included among the Adviser's accounts are commingled trust funds and a broad
spectrum of individual trust and investment management portfolios. These
accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser, including the division that performs services for the
Fund as Custodian, or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account.
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THE SUB-ADVISER
The Adviser has retained the "Sub-Adviser" to provide portfolio advisory
services. The Sub-Adviser is Atlanta Capital Management Company ("Atlanta
Capital" or the "Sub-Adviser"), an investment advisory firm in operation since
1969. The Sub-Adviser currently manages over $2.5 billion and has 25 years
experience in equity management. The Sub-Adviser is registered as an investment
adviser with the Securities and Exchange Commission.
The Adviser has retained the Sub-Adviser to provide portfolio management
services pursuant to a Sub-Advisory Agreement ("Agreement") dated July 26, 1993.
Pursuant further to this Agreement the Adviser has agreed to pay the Sub-Adviser
a monthly fee at the annual rate of .65% of the average daily net assets of the
Fund less any amount of the advisory fee waived by the Adviser.
Under the terms of the Agreement, the Sub-Adviser has discretion to purchase
and sell securities for the Fund, except as limited by the Fund's investment
objective, policies and restrictions. Although the Sub-Adviser's activities are
subject to general oversight by the Adviser and the Fund's trustees, specific
portfolio securities decisions are made by the Sub-Adviser.
Atlanta Capital, founded in 1969, manages institutional funds for a limited
number of corporate sponsors, governments and foundations. The firm was acquired
in April 1990 by London-based Hill Samuel Investment Management Group Limited,
but operates as an independent subsidiary. Atlanta Capital has managed the
equity portion of the IEEE General Fund since January 1972.
Frederick L. Muller is primarily responsible for the day-to-day management
of the IEEE Balanced Fund. He joined Atlanta Capital in 1972 and became
President and Chief Executive Officer in 1975. Mr. Muller was graduated from the
University of Pennsylvania and holds an MBA from George Washington University.
He is a past Chairman of the Association for Investment Management and Research,
a Chartered Financial Analyst and is Series 3 registered.
IEEE
The Sub-Adviser has entered into a Fixed Income Management Agreement with
IEEE, dated as of August 30, 1993, pursuant to which IEEE will provide advice
and recommendations with respect to fixed income instruments, futures contracts
and options on fixed income instruments for the Fund's portfolio. In
compensation for IEEE's services to the Fund, IEEE will receive from the
Sub-Adviser 50% of the sub-advisory fee (after waivers, if any). IEEE is a
professional organization and is registered as an investment adviser with the
Commission. Michael J. Sosa, Director of Finance and Investments for IEEE for
the past seven years, will be primarily responsibile for making day-to-day
decisions and recommendations regarding the Fund's fixed-income investments
(including futures and options thereon).
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989 (the
"Administration Agreement"), The Chase Manhattan Bank, N.A. serves as
administrator to the Trust. The Administrator provides certain administrative
services, including, among other responsibilities, coordinating relationships
with independent contractors and agents; preparing for signature by officers and
filing of certain documents required for compliance with applicable laws and
regulations excluding those of the securities laws of the various states;
preparing financial statements; arranging for the maintenance of books and
records; and providing office facilities necessary to carry out the duties
thereunder. The Administrator is entitled to receive from the Fund a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets. The Administrator may, from time to time, voluntarily
waive all or a portion of its fees payable to it under the Administration
Agreement. The
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Administrator shall not have any responsibility or authority for the Fund's
investments, the determination of investment policy, or for any matter
pertaining to the distribution of Fund shares.
GLASS-STEAGALL ACT. The Adviser and the Administrator have received the
opinion of their legal counsel that they may provide the services described in
the Investment Advisory and the Administration Agreements, as described above,
and the Shareholder Servicing Agreements and Custodian Agreement with the Fund,
as described below, without violating the federal banking law commonly known as
the Glass-Steagall Act. The Act generally bars banks from publicly underwriting
or distributing certain securities.
Based on the advice of its counsel, Chase believes that the Court's decision
and these other decisions of federal banking regulators permit it to serve as
investment adviser to a registered, open-end investment company such as the
Fund.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and render the services described below and
as set forth in the shareholder servicing agreement and Custodian Agreement, as
an appropriate, incidental national banking function and as a proper adjunct to
it serving as investment adviser and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. The Administrator,
on the advice of its counsel believes that it may render the services described
in its Administration Agreement without violating the Glass-Steagall Act or
other applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the transfer to a new adviser, shareholder
servicing agent, custodian or administrator could be accomplished without undue
disruption to the Fund's operations.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Shares of the Fund may be purchased through selected financial service firms
such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with Vista Broker-Dealer Services, Inc. at the net
asset value which is computed once daily as of the close of trading on the New
York Stock Exchange (normally 4:00 p.m. Eastern time; however, options are
priced after 4:15 p.m.) on each business day during which the Exchange is open
for trading ("Fund Business Day"). (See "Other Information Concerning Shares of
the Fund-Net Asset Value"). The net asset value becomes effective at the New
York Stock Exchange closing time. Orders received by Dealers prior to the New
York Stock Exchange closing time are confirmed at the offering price effective
at the close of such Exchange, provided the order is received by the Transfer
Agent prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Fund shares normally will
be
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<PAGE>
maintained in book entry form and share certificates will be issued only on
request. Management reserves the right to refuse to sell shares of the Fund to
any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds, Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers,including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption
programs and "sweep" checking programs. Each Shareholder Servicing Agent may
establish its own terms and conditions, including reduced minimum initial
purchase amounts and limitations on the amounts of subsequent transactions, with
respect to such services. Certain Shareholder Servicing Agents may (although
they are not required by the Trust to do so) credit to the accounts of their
customers from whom they are already receiving other fees an amount not
exceeding the fees for their services as Shareholder Servicing Agents (see
"Shareholder Servicing Agents, Transfer Agent and Custodian -- Shareholder
Servicing Agents"), which will have the effect of increasing the net return on
the investment of customers of that Shareholder Servicing Agent.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
------------ --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program...................... $ 100(4)
(401K, 403B, Keogh)
- ------------
(1) Employees of the Adviser and its affiliates, and certain qualified persons
are eligible for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN
A shareholder may establish a monthly investment plan by which investments
are automatically made to his/her Vista Fund account through Automatic Clearing
House (ACH) deductions from a checking account. The minimum monthly investment
through this plan is $100. Shareholders may
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choose either to have these investments made during the first or third week each
month. Please note that your initial ACH transactions may take up to 10 days
from the receipt of your request to be established.
Shareholders electing to star this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Fund account number, the
desired amount and cycle of the systematic investment, and must include a voided
check from the checking account from which debits are to be made. A signature
guarantee may be obtained from a bank, trust company, broker-dealer or other
member of the national securities exchange. Please note that notaries public
cannot provide signature guarantees.
REDEMPTIONS
A shareholder may redeem all or any portion of the shares in his account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
Fund shares by authorizing his Shareholder Servicing Agent, Dealer or its agent,
or the Transfer Agent to redeem such shares, which the Shareholder Servicing
Agent, Dealer or its agent, or the Transfer Agent must do on a timely basis. The
signature of both shareholders is required for any written redemption requests
from a joint account. In addition, proceeds from a redemption of shares may be
deferred for up to 15 calendar days if the Transfer Agent has been notified of a
change in either the address or the bank account registration previously listed
in the Fund's records.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 committing
to pay in cash all redemptions by a shareholder of record up to the amounts
specified in the rule. However, in the event the Fund pays redemption proceeds
in kind with securities, such securities would be selected solely by the Fund
and valued consistent with the Fund's net asset value. In such event, a
shareholder would probably incur a brokerage charge in selling the securities
received from the Fund and there can be no assurance that the price realized by
the shareholder upon the sale of such securities will not be less than the value
used in computing net asset value for the purpose of such redemption. In the
event the Fund pays redemption proceeds in kind with securities, it is possible,
although unlikely, that some or all of the securities received by a shareholder
may be illiquid. In such event, a shareholder may be subject to restrictions
upon resale of such security and the value of such security may be adversely
affected.
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the Shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by
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telephone or wire to the Vista Service Center. For telephone redemptions, call
the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the Investment Company Act of 1940, as amended
(the "1940 Act"), if an emergency exists.
SYSTEMATIC REDEMPTION PLAN. A shareholder owning $10,000 or more of the
shares of the Fund as determined by the then current net asset value may provide
for the payment monthly or quarterly of any requested dollar amount (subject to
limits) from his account. A sufficient number of full and fractional shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
REDEMPTIONS OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder if at such time the aggregate net asset value of the shares in
such shareholders' account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, shares of the Fund
for shares of the other Vista Mutual Funds, in accordance with the terms of the
then current prospectus of the Fund being acquired. The prospectus of the other
Vista Fund into which shares are being exchanged should be read carefully prior
to any exchange and retained for future reference. Under the Exchange Privilege,
shares of the Fund may be exchanged for shares of such other Vista Funds only if
those Funds are registered in the states where the exchange may legally be made.
Shares of the Fund may only be exchanged into another Vista Fund if the account
registrations are identical. 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 up to five business days if the Fund determines that it would be
disadvantaged by an immediate transfer of the proceeds. This privilege may be
amended or terminated at any time without notice. Arrangements have been made
for the acceptance of instructions by telephone to exchange shares if certain
preauthorizations or indemnifications are accepted and on file. Further
information and telephone exchange forms are available from the Transfer Agent.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephonic transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 5 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such procedures, it may be liable for losses due to unauthorized or
fraudulent instructions.
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Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the reasonable procedures that have been established for Fund
accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits.
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The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of qualifying dividends received by
the Fund from domestic corporations during the year) may qualify for the 70%
dividends-received deductions for corporate shareholders, but any such
dividends-received deduction will not be allowed in computing a corporate
shareholder's adjusted current earnings, upon which is based a corporate
preference item which may be subject to an alternative minimum tax or to the
environmental superfund tax. Distributions by a Fund of the excess, if any, of
its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has held
his shares. Ordinary income dividends and capital gain dividends from the Fund
may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualify for the dividends-received
deduction for corporations) and capital gain dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
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OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time, however, options
are priced at 4:15 p.m.) on each Fund Business Day, by deducting the amount of
the Fund's liabilities from the value of its assets and dividing the difference
by the number of its shares outstanding. Values of assets in the Fund's
portfolio are determined on the basis of their market or other fair value, as
described in the Statement of Additional Information. A share's net asset value
is effective for orders received by a Shareholder Servicing Agent prior to its
calculation and received by the Distributor prior to the close of business,
usually 4:00 p.m. Eastern time, on the Fund Business Day on which such net asset
value is determined.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net income from dividends and interest (if any) of
the Fund is paid to its shareholders quarterly (in the months of March, June,
September and December) as a dividend. The Fund's net investment income consists
of the dividends and interest income earned on its portfolio, less expenses. The
Fund will distribute its net realized short-term and long-term capital gains, if
any, to its shareholders annually after the close of its fiscal year.
The Fund will also make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains imposed by Section 4982 of the Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder may elect to receive dividends and capital gains distributions from
the Fund in either cash or additional shares.
DISTRIBUTION PLAN AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act, after having concluded that there
is a reasonable likelihood that the Distribution Plan will benefit the Fund and
its shareholders.
The Distribution Plan provides that the Fund shall pay distribution fees
(the "Distribution Fee"), including payments to the Distributor, at an annual
rate not to exceed 0.25% of its average daily net assets for distribution
services. Some payments under the Plan may be used to compensate broker-dealers
with trail or maintenance commissions in an amount not to exceed 0.25%
annualized, of the assets maintained in the Fund by such broker-dealers'
customers. Because the Distribution Fee is not directly tied to expenses, the
amount of Distribution Fee paid by the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plan. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
compensation is directly linked to its expenses). However, the Fund is not
liable for any distribution expenses incurred in excess of the Distribution Fee
paid.
The Distribution and Sub-Administration Agreement dated April 2, 1990 as
amended June 1, 1990 (the "Distribution Agreement"), provides that the
Distributor will act as the principal underwriter of the Fund's shares and bear
the expenses of printing, distributing and filing prospectuses and statements of
additional information and reports used for sales purposes, and of preparing and
printing sales literature and advertisements not paid for by the Distribution
Plan. In addition, the Distributor
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will provide certain sub-administration services, including providing officers,
clerical staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The Fund intends to pay its pro rata share of the Trust's expenses,
including the compensation of the Trustees; all fees under the Distribution Plan
(see "Purchases and Redemptions of Shares-- Distribution Plan and Agreement");
governmental fees; interest charges; taxes; membership dues in the Investment
Company Institute; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, shareholder servicing agent and dividend
disbursing agent; expenses of distributing and redeeming shares and servicing
shareholder accounts; expenses of preparing, printing and mailing prospectuses,
reports, notices, proxy statements and reports to shareholders and to
governmental officers and commissions; expenses connected with the execution,
recording and settlement of portfolio security transactions; insurance premiums;
fees and expenses of the custodian, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of calculating
its net asset value; expenses of shareholder meetings; and the advisory fee
payable to the Adviser under the Investment Advisory Agreement, the
administrative fee payable to the Administrator under the Administration
Agreement and the sub-administration fee payable to the Distributor under the
Distribution and Sub-Administration Agreement. Expenses relating to the
issuance, registration and qualification of shares of the Fund and the
preparation, printing and mailing of prospectuses for such purposes are borne by
the Fund except that the Distribution and Sub-Administration Agreement with the
Distributor requires the Distributor to pay for prospectuses which are to be
used for sales to prospective investors.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end, non-diversified management investment
company organized as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts in 1987. 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 series or class generally vote separately, for example to approve
investment advisory agreements, but shares of all series or classes vote
together, to the extent required under the 1940 Act, in the election or
selection of Trustees and independent accountants. With respect to shares
purchased through a Shareholder Servicing Agent and, in the event written proxy
instructions are not received by the Fund or its designated agent prior to a
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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 as to which such Shareholder Servicing Agent is the agent of
record.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of each series or class or of all series
or classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a Trustee(s)
when requested to do so in writing by record holders of not less than 10% of the
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class would
be entitled to share pro rata in the net assets of that series or class
available for distribution to shareholders upon liquidation of that series or
class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services including but not limited to: answer customer inquiries
regarding account status, history, and procedures for purchasing and redeeming
shares of the Fund to which the Shareholder Servicing Agent is so acting; 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
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funds in connection with customer orders to purchase or redeem shares; verify
and guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts; furnish (either
separately or on an integrated basis with other reports sent to a shareholder by
a Shareholder Servicing Agent) monthly and year-end statements and confirmations
of purchases and redemptions; transmit, on behalf of the Fund, proxy statements,
annual reports, updated prospectuses and other communications to shareholders of
the Fund; receive, tabulate and transmit to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and provide
such other related services as the Fund or a shareholder may request.
Shareholder Servicing Agents may be required to register pursuant to state
securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liason to shareholders and providing personal services to shareholders
will not exceed, on an annual basis, 0.25% of the average daily net assets of
the Fund represented by shares owned during the period for which payment is
being made by investors for whom such Shareholder Servicing Agent maintains a
servicing relationship. Each Shareholder Servicing Agent may, from time to time,
voluntarily waive all or a portion of the fees payable to it. In addition, Chase
may provide other related services to the Fund for which it may receive
compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Fund shares, receive dividends and
distributions on Fund investments, and take advantage of any services related to
an Account offered by such Shareholder Servicing Agent from time to time. All
Accounts and any related privileges or services shall be governed by the laws of
the State of New York, without regard to its conflicts of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser and the Administrator as
Shareholder Servicing Agents, only to perform advisory, custodial,
administrative and shareholder servicing functions as described above. While the
matter is not free from doubt, Trust management believes that such laws should
not preclude a bank, including a bank which acts as investment adviser,
custodian or administrator, or in all such capacities, for the Fund, from acting
as a Shareholder Servicing Agent. However, possible future changes in federal
law or administrative or judicial interpretations of current or future law,
could prevent a bank from continuing to perform all or part of its servicing
activities. If that occurred, the bank's shareholder clients would be permitted
to remain Fund shareholders and alternative means for continuing the servicing
of such shareholders would be sought. In such event, changes in the operation of
the Fund might occur and a shareholder serviced by such bank might no longer be
able to avail himself of any automatic investment or other services then being
provided by such bank. The Fund does not expect that shareholders would suffer
any adverse financial consequences as a result of these occurrences.
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TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of shares of the Fund. Portfolio securities and cash may be held
by sub-custodian banks if such arrangements are reviewed and approved by the
Trustees. The internal division of Chase which serves as the Fund's Custodian
does not determine the investment policies of the Fund or decide which
securities will be bought or sold on behalf of the Fund or otherwise have access
to or share material inside information with the internal division that performs
advisory services for the Fund.
With respect to transactions involving futures or options on futures, Chase
may use an unaffiliated sub-custodian with respect to margin and collateral upon
approval or ratification of the Board.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of the Fund in the future. From time to time,
the performance and yield of the Fund may be quoted and compared to those of
other mutual funds with similar investment objectives, unmanaged investment
accounts, including savings accounts, or other similar products and to stock or
other relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual funds.
For example, the performance of the Fund may be compared to data prepared by
Lipper Analytical Services, Inc. or Morningstar Mutual Funds on Disc, widely
recognized independent services which monitor the performance of mutual funds.
Performance and yield data as reported in national financial publications
including, but not limited to, Money Magazine, Forbes, Barron's, The Wall Street
Journal and The New York Times, or in local or regional publications, may also
be used in comparing the performance and yield of the Fund. Additionally, the
Fund may, with proper authorization, reprint articles written about the Fund and
provide them to prospective shareholders.
23
<PAGE>
The Fund may provide period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment in
the Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. Period
total rates of return may be annualized. An annualized total rate of return
assumes that the period total rate of return is generated over a 52-week period,
and that all dividends and capital gains are reinvested; annualized total rates
of return will be slightly higher than period total rates of return (if the
periods are shorter than one year) because of the compounding effect of the
assumed reinvestment.
The Fund may provide annualized "yield" quotations in addition to total rate
of return quotations. The annualized "yield" quotations of the Fund will be
based on net investment income and refer to the income generated by an
investment in the Fund over a stated period (which period shall be stated in any
advertisement or communication with a shareholder). The "yield" is then
"annualized" by assuming that the income generated over the period will be
generated over a 52-week period. A "yield" quotation, unlike a total rate of
return quotation, does not reflect changes in net asset value.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yield and the net asset value of the Fund will vary
based on interest rates, the current market value of the securities held in the
Fund's portfolio and changes in the Fund's expenses. In addition, the Adviser
has voluntarily agreed to waive a portion of its fees on a month-to-month basis.
In addition, the Distributor may assume a portion of the Fund's operating
expenses on a month-to-month basis. These actions have the effect of increasing
the net income (and therefore the yield and total rate of return) of the Fund
during the period such waivers are in effect. These factors and possible
differences in the methods used to calculate the yield and total rate of return
should be considered when comparing the yield or total rate of return of the
Fund to yields and total rates of return published for other investment
companies and other investment vehicles. The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the Fund's
yield or total rate of return quotations.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Trust and the Fund, including information related to (i) the Fund's
investment policies and restrictions, (ii) risk factors associated with Fund's
policies and investments, (iii) the Trust's Trustees, officers and the
Administrator, the Adviser, the Sub-Adviser and IEEE (iv) portfolio
transactions, (v) the Funds' shares, including rights and liabilities of
shareholders, and (vi) additional performance information, including the method
used to calculate yield or total rate of return quotations of the Fund.
24
<PAGE>
APPENDIX A
DESCRIPTION OF FUTURES CONTRACTS AND OPTIONS THEREON
FUTURES CONTRACTS. A futures contract is a bilateral agreement providing for
the purchase and sale of a specified type and amount of a financial instrument,
or, in the case of futures contracts on indexes of securities, for the making
and acceptance of a cash settlement, at a stated time in the future for a fixed
price. By its terms, a futures contract provides for a specified settlement date
on which, in the case of the majority of interest rate futures contracts, the
fixed income securities underlying a contract are delivered by the seller and
paid for by the purchaser, or on which, in the case of a stock index futures
contract, an amount equal to a dollar amount multiplied by the difference
between the value of a stock index at the close of the last trading day of the
contract and the value of such index at the time the futures contract was
originally entered into is settled between the purchaser and seller in cash. The
purchase or sale of a futures contract differs from the purchase or sale of a
security in that no purchase price is paid or received at the time the contract
is entered into. Instead, an amount of cash or cash equivalents, the value of
which may vary but is generally equal to 2% or less of the value of the
contract, must be deposited with the broker as initial deposit or "margin".
Subsequent payments to and from the broker, referred to as "variation margin",
are made on a daily basis as the value of the index underlying the futures
contract fluctuates, making positions in the futures contract more or less
valuable, a process known as "marking to the market".
At any time prior to the expiration of a futures contract, a trader may
elect to close out its position by taking an opposite position, subject to the
availability of a secondary market, which will operate to terminate the initial
position. At that time, a final determination of variation margin is made and
any loss experienced by a party is required to be paid to the exchange clearing
corporation, while any profit due to a party must be delivered to it.
Futures contracts differ from options (which are described below) in that
they are bilateral agreements, with both the purchaser and the seller equally
obligated to complete the transaction. Futures contracts call for settlement
only on the expiration date, and cannot be "exercised" at any other time during
their term.
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract gives the
purchaser (the "holder") the right, but not the obligation, to enter into a
"long" position in the underlying futures contract (i.e., a purchase of such
futures contract) in the case of an option to purchase (a "call" option), or a
"short" position in the underlying futures contract (i.e., a sale of such
futures contract) in the case of an option to sell (a "put" option), at a fixed
price (the "strike price") up to a stated expiration date. The holder pays a
non-refundable purchase price for the option, known as the "premium". The
maximum amount of risk the purchaser of the option assumes is equal to the
premium plus related transaction costs, although this entire amount may be lost.
Upon exercise of the option by the holder, the exchange clearing corporation
establishes a corresponding short position for the seller (the "writer") of the
option in the case of a call option, or a corresponding long position in the
case of a put option. In the event that an option is exercised, the parties will
be subject to all the risks associated with the trading of futures contracts,
such as payment of variation margin deposits. In addition, the writer of an
option on a futures contract, unlike the holder, is subject to initial and
variation margin requirements on the option position.
An option, whether based on a futures contract, a stock index or an equity
security, becomes worthless to the holder when it expires. A position in an
option may be terminated by the purchaser or seller prior to expiration by
effecting a closing purchase or sale transaction subject to the availability of
a secondary market, which is the purchase or sale of an option of the same
series (i.e., the same exercise price and expiration date) as the option
previously purchased or sold. The difference between the premiums paid and
received represents the party's profit or loss on the transaction.
A-1
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS*
The ratings of Moody's and Standard & Poor's represent their opinions as to
the quality of various debt securities. It should be emphasized, however, that
ratings are not absolute standards of quality. Consequently, debt securities
with the same maturity, coupon and rating may have different yields while debt
securities of the same maturity and coupon with different ratings may have the
same yield.
DESCRIPTION OF MOODY'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge". 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 attributes
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 and 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.
- ------------
* As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time
revise such ratings, they undertake no obligation to do so.
B-1
<PAGE>
DESCRIPTION OF STANDARD & POOR'S FOUR HIGHEST DEBT SECURITIES RATINGS:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal 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 pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
B-2
<PAGE>
PANTONE/361U
[LOGO]
VISTA IEEE
[LOGO] BALANCED FUND
Vista Service Center
P.o. Box 419392
Kansas City, MO 64141-6392
======================================= ===========================
INVESTMENT ADVISER AND ADMININSTRATOR Prospectus
The Chase Manhattan Bank, N.A. and Application
Sub-Advisors
Atlanta Capital Management Company
(with the Instiute of Electrical and
Electronics Engineers, Inc.)
Distributor
Vista Broker-Dealer Services, Inc.
Transfer Agent
DST Systems, Inc.
Legal Counsel
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
Independent Accountants
Price Waterhouse LLP
Shareholder Servicing Agent & Custodian
The Chase Manhattan Bank, N.A.
IEEE/FINANCIAL/ADVANTAGE
[LOGO]
------------------------
March 1, 1996
<PAGE>
PROSPECTUS MARCH 1, 1996
VISTASM GLOBAL FIXED INCOME FUND
VISTA GLOBAL FIXED INCOME FUND (the "Fund") seeks to provide its
shareholders with a high total return, achieving such through current income and
capital appreciation, through investment in a portfolio of high quality fixed
income securities of U.S. and foreign issuers and through transactions in
foreign currencies. The Fund is a series of Mutual Fund Group (the "Trust"), an
open-end management investment company organized as a business trust under the
laws of the Commonwealth of Massachusetts on May 11, 1987, presently consisting
of 15 separate series (the "Funds"). Because the fund is "non-diversified", more
of the Fund's assets may be concentrated in the securities of any single issuer
than if the Fund was "diversified", which may make the value of shares of the
Fund more susceptible to certain risks than shares of a diversified mutual fund.
THE FUND, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND
MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS ITS INVESTMENT OBJECTIVES BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN GLOBAL FIXED INCOME PORTFOLIO (THE
"PORTFOLIO"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY THE CHASE
MANHATTAN BANK, N.A. ("CHASE" OR THE "ADVISER"), WITH INVESTMENT OBJECTIVES THAT
ARE 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 INVESTMENT
STRUCTURE" ON PAGE 15.
Of course, there can be no assurance that the Fund and the Portfolio will
achieve their investment objective. Prospective investors should carefully
consider the risks associated with an investment in the Fund, including the fact
that up to 25% of the Portfolio's assets may be invested in issuers based in
developing countries. For a further discussion on the risks associated with an
investment in the Fund, see "Investment Objective and Policies" in this
Prospectus. Investors should also refer to "Additional Information on Investment
Policies and Techniques" on page 8.
Chase is the Portfolio's investment adviser and the Fund's and the
Portfolio's custodian (the "Custodian") and administrator (the "Administrator").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 18. VISTA BROKER-DEALER SERVICES, INC. ("VBDS") IS
THE FUND'S DISTRIBUTOR AND IS UNAFFILIATED WITH CHASE. INVESTMENTS IN THE FUND
ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILITATES AND ARE
NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Class B shares, each with a public offering price that reflects
different sales charges and expense levels. Class A shares are offered at net
asset value plus the applicable sales charge (maximum of 4.50% of public
offering price). Class B shares are offered at net asset value without an
initial sales charge, with a maximum contingent deferred sales charge of 5% of
redemption proceeds imposed on certain redemptions made within six years of the
date of purchase. This charge will decline to zero for redemptions more than six
years after initial purchase. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert into Class A shares approximately
eight years after purchase. Salespersons and any other person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different compensation with respect to one particular class of shares over
another in the Fund.
For more information on the differences in these classes, see "Variable
Distribution Method," "Purchases and Redemptions of Shares" and "Conversion of
Class B Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund including the trustees and officers of
the Fund and Portfolio, has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. An investor
may obtain a copy of the Statement of Additional Information without charge by
contacting his or her Shareholder Servicing Agent, the Distributor or the Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund, simply call the Vista Service Center at:
1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary................................................... 3
Financial Highlights.............................................. 4
Investment Objective and Policies................................. 5
Additional Information on Investment Policies and Techniques...... 8
Variable Distribution Method...................................... 17
Management........................................................ 18
Purchases and Redemptions of Shares............................... 21
Tax Matters....................................................... 32
Other Information Concerning Shares of the Fund................... 34
Shareholder Servicing Agents, Transfer Agent and Custodian........ 38
Yield and Performance Information................................. 40
2
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of estimated expenses relating to
purchases and sales of Class A and Class B shares of the Fund, and the estimated
aggregate annual operating expenses of the Fund and the Portfolio as a
percentage of average net assets of the Fund, and (ii) an example illustrating
the dollar cost of such estimated expenses on a $1,000 investment in Class A or
Class B shares of the Fund. The Trustees of the Trust believe that the aggregate
per share expenses of the Fund and the Portfolio will be less than or
approximately equal to the expenses which the Fund would incur if the Trust
retained the services of an investment adviser and the assets of the Fund were
invested directly in the type of securities to be held by the Portfolio.
<TABLE><CAPTION>
Shareholder Transaction Expenses CLASS A CLASS B
------- -------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases (as a percentage of offering
price)*.............................................................................. 4.50% None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None None
Exchange Fee......................................................................... None None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)+........................................... None 5.00%
<CAPTION>
AS A PERCENTAGE
Annual Fund Operating Expenses OF NET ASSETS
------------------
<S> <C> <C>
Investment Advisory Fee.............................................................. .00% .00%
Rule 12b-1 Distribution Plan Fee++................................................... .25% .75%
Administration Fee................................................................... .00% .00%
Other Expenses (After waiver of Fees and assumption of expenses)
- --Sub-administration Fee (after waiver of fees)...................................... .00% .00%
- --Shareholder Servicing Fee (after waiver of fees)................................... .11% .25%
- --Other Operating Expenses+++........................................................ 1.50% 1.50%
Total Fund Operating Expenses........................................................ 1.86% 2.50%
EXAMPLE:
You would pay the following expenses on a $1,000 investment in the Fund,
assuming a 5% annual rate of return:
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1)......................................................... $63 $101 $ 141 $ 253
Class B Shares:
Assuming complete redemption at end of period(2)(3)....................... 77 110 156 261
Assuming no redemption(3)................................................. 25 78 133 261
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may
pay more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.50% intitial
sales charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of eighth year.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee,
shareholder servicing fee and other operating expenses expected to be incurred
by the Fund and/or the Portfolio during the fiscal year after waiver of fees.
Absent such waivers, the annual investment advisory fee, distribution plan fee,
administrative fee, sub-administrative fee, and shareholder servicing agent fee
would be 0.75%, 0.25% (0.75% for Class B Shares), 0.05%, 0.05% and 0.25%,
respectively, of the Fund's and/or Portfolio's average net assets. Absent such
waivers, the Total Fund Operating Expenses would be 2.86% for Class A shares and
3
<PAGE>
3.36% for Class B shares. A more complete description of the Fund's and
Portfolio's expenses, including any potential fee waivers, is set forth herein
on pages 18-20, 34-36 and 38-39.
The "Example" set forth above assumes all dividends and other distributions
are reinvested and that the percentages under "Annual Fund Operating Expenses,"
remain the same in the years shown. The "Example" should not be considered a
representation of past or future expenses of the Fund and/or Portfolio; actual
expenses may be greater or less than shown. The actual expenses incurred and
attributable to each class of shares will depend on several factors, including
the level of average net assets and the extent to which a class incurs variable
expenses, such as transfer agency costs.
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares for the 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 are incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as well
as the financial information, set forth in the table below have been audited by
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>
11/1/94 11/1/93 12/31/92+ 11/1/94 11/5/93++
THROUGH THROUGH THROUGH THROUGH THROUGH
10/31/95 10/31/94 10/31/93 10/31/95 10/31/94
--------- -------- --------- -------- ---------
CLASS A CLASS A CLASS A CLASS B CLASS B
SHARES SHARES SHARES SHARES SHARES
--------- -------- --------- -------- ---------
<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 0.30 0.298 0.339
Net realized and unrealized gain (loss) on
investments....................................... 0.610 (0.495) 0.55 0.590 (0.382)
--------- -------- --------- -------- ---------
Total from investment Operations.................. 0.963 (0.031) 0.85 0.888 (0.043)
--------- -------- --------- -------- ---------
Less distributions:
From net investment income.......................... 0.523 0.279 0.30 0.463 0.237
From paid in capital................................ -- -- 0.03 -- --
--------- -------- --------- -------- ---------
Total Distributions............................... 0.523 0.279 0.33 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 (000 omitted)*............ $ 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% (0.09%) 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 front-end sales load.
# Based upon the maximum statutory expense.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INTRODUCTION
The Trust seeks to achieve the investment objective of the Fund by investing
all the investable assets of the Fund in the Portfolio. The Trust may withdraw
the investment of the Fund from the Portfolio at any time, if the Board of
Trustees of the Trust determines that it is in the best interest of the Fund to
do so. Upon any such withdrawal, the Board of Trustees would consider what
action might be taken, including the investment of all the assets of the Fund in
another pooled investment entity having the same investment objective as the
Fund or the retaining of an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Portfolio.
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with a high total return, i.e., current income and capital
appreciation, through investment in a portfolio of high quality fixed income
securities of U.S. and foreign issuers and through transactions in foreign
currencies. The investment objective of the Fund is fundamental and may not be
changed without shareholder approval.
INVESTMENT POLICIES -- The Portfolio will seek to meet its investment
objective by pursuing investment opportunities in foreign and domestic fixed
income securities markets and by engaging in currency transactions to enhance
returns and for the purpose of hedging its portfolio. In determining the
countries and currencies in which the Portfolio will invest, the Adviser will
form an opinion including information relating to factors such as interest
rates, inflation, monetary and fiscal policies, taxation, and political climate.
The Portfolio could have 100% of its total assets, adjusted to reflect the
Portfolio's net exposure after giving effect to currency transactions and
positions, denominated in U.S. dollars. It is expected that the Portfolio will
use currency transactions both to enhance returns for a given level of risk and
to hedge its exposure to foreign currencies. While the Portfolio will have both
long and short currency positions, neither its net long foreign currency
exposure nor its net short foreign currency exposure will exceed the value of
the Portfolio's total assets. The Portfolio may, for temporary defensive
purposes, invest up to 100% of its total assets in dollar-denominated fixed
income securities or securities of U.S. issuers.
The Portfolio may use various techniques to shorten or lengthen the dollar
weighted average duration of its Portfolio, including the acquisition of debt
obligations at a premium or discount, transactions in options, futures contracts
and options on futures (in accordance with certain regulations of the Commodity
Futures Trading Commission ("CFTC") that permit the principals of a registered
investment company to engage in certain transactions without registering as
commodity pool operators) and interest rate swaps. The Portfolio's ability to
achieve its objective of high total return may be limited by its investment in
fixed income securities, since higher returns may be available from equity
securities.
The Portfolio will employ certain active currency and interest rate
management techniques involving risks different from those associated with
investing solely in dollar-denominated fixed income securities of U.S. issuers.
Such active management techniques include 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 its total asset value. However, to the extent that the Portfolio is fully
5
<PAGE>
invested in fixed income securities while also maintaining currency positions,
it may be exposed to greater combined risk.
The fixed income securities in which the Portfolio may invest are as
follows: (i) securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities") and custodial
receipts therefor; (ii) securities issued or guaranteed by a foreign government
or any of its political subdivisions, authorities, agencies or instrumentalities
or by supranational entities (i.e., international organizations designated or
supported by governmental entities to promote economic reconstruction or
development, such as the World Bank) rated in one of the two highest rating
categories by a recognized rating service such as Standard & Poor's Corporation
or Moody's Investors Service, Inc. ("High Quality Rating") or, if unrated,
determined by the Adviser to be of comparable credit quality; (iii) corporate
debt securities having at least one High Quality Rating or, if unrated,
determined by the Adviser to be of comparable credit quality; (iv) certificates
of deposit and bankers' acceptances issued or guaranteed by, or time deposits
maintained at, banks (including U.S. or foreign branches of U.S banks or U.S. or
foreign branches of foreign banks) having total assets of more than $1 billion
and determined by the Adviser to be of comparable credit quality to securities
with a High Quality Rating; (v) commercial paper rated A-1 or better by S&P,
Prime-1 or better by Moody's, Fitch-1 or better by Fitch Investors Service,
Inc., or Duff 1 or better by Duff & Phelps, Inc. or, if not rated, issued by
U.S. or foreign companies having outstanding debt securities with a High Quality
Rating and determined by the Adviser to be of comparable credit quality to
securities with a High Quality Rating; and (vi) mortgage related securities
having at least one High Quality Rating, or, if unrated, determined by the
Adviser to be of comparable credit quality to securities with a High Quality
Rating. At least 65% of the Portfolio's total assets will be invested in fixed
income securities that meet the High Quality Rating criteria described herein
and will be invested in at least three countries.
Under normal circumstances, the Portfolio will invest in securities of
issuers in at least three countries, including the United States. No more than
25% of the Portfolio's total assets will be invested in securities of issuers
located in a single country other than Canada, France, Germany, Japan, the
United Kingdom and the United States. Investing the Portfolio's assets in
securities of issuers located outside the United States will subject the
Portfolio to the risks of adverse social, political or economic events which may
occur in such foreign countries. See "Additional information on Investment
Policies and Techniques--Non-U.S. Securities".
The Portfolio may, for temporary defensive purposes as determined by the
Adviser (such as when instability or unfavorable conditions exist in foreign
countries), invest 100% of its total assets in dollar-denominated securities or
securities of U.S. issuers.
The Portfolio may also invest in debt securities denominated in the European
Currency Unit ("ECU"), which is a "basket" consisting of specified amounts in
the currencies of certain of the twelve member states of the European Community.
The specific amounts of currencies comprising the ECU may be adjusted by the
Council of Ministers of the European Community from time to time to reflect
changes in relative values of the underlying currencies. In addition, the
Portfolio may invest in securities denominated in other currency "baskets."
Currency "baskets" will be of comparable quality, as determined by the Adviser,
to other debt securities purchased by the Portfolio.
Although the Portfolio generally invests in investment grade fixed income
securities, up to 25% of the total assets of the Portfolio may be invested in
issuers based in developing countries; such securities may not be investment
grade. Investment in securities of issuers based in such countries entails
certain risks which include (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less
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social, political and economic stability; (ii) the small current size of markets
for securities of issuers based in developing countries and the currently low or
non-existent volume of trading, resulting in a lack of liquidity and in price
volatility; (iii) certain national policies which may restrict the investment
opportunities including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests; (iv) the absence of developed
legal structures governing private or foreign investment and private property;
(v) currency blockage; and (vi) withholding of interest payments at the source.
In addition to investing in non-dollar denominated securities, the Portfolio
may engage in active foreign currency management techniques. 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 as to a percentage of
its assets forward foreign currency exchange contracts as another investment
strategy when the Adviser anticipates 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 Adviser determines that
there is a pattern of correlation between the two currencies. See "Additional
Information on Investment Policies and Techniques--Forward Foreign Currency
Exchange Contracts".
The Portfolio may enter into contracts to purchase foreign currencies to
protect against an anticipated rise in the U.S. dollar price of securities it
intends to purchase. The Portfolio may enter into contracts to sell foreign
currencies to protect against the decline in value of its non-dollar denominated
securities due to a decline in the value of foreign currencies against the U.S.
dollar. Contracts to sell foreign currency could limit any potential gain which
might be realized by the Portfolio, if the value of the underlying currency
increased.
The Portfolio may purchase and write put and call options on currencies for
the purpose of protecting against declines in the U.S. dollar value of foreign
portfolio securities and against increases in the U.S. dollar cost of foreign
securities to be acquired. The Portfolio may use options on currency to
cross-hedge, which involves writing or purchasing options on one currency to
hedge against changes in exchange rates for a different currency with a pattern
of correlation.
In addition, the Portfolio may purchase call or put options on currency when
it is anticipated that the currency will appreciate or depreciate in value, but
the securities denominated in that currency do not present attractive investment
opportunities and are not held by the Portfolio.
Up to 2% of the total assets of the Portfolio may be invested in warrants to
purchase debt or equity securities. See the Statement of Additional Information
for a description of warrants.
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 rights to make or receive payments in specified currencies.
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<PAGE>
The Portfolio may purchase securities that are not registered or are offered
in an exempt non-public offering ("restricted securities") under the Securities
Act of 1933 ("1933 Act"), including securities offered and sold to "qualified
institutional buyers" under Rule 144A under the 1933 Act.
The Portfolio may invest in zero coupon bonds and deferred interest bonds.
The Portfolio may enter into repurchase agreements with "primary dealers" in
U.S. Government securities and member banks of the Federal Reserve System which
furnish collateral at least equal in value or market price to the amount of
their repurchase obligation. See "Additional Information on Investment Policies
and Techniques--Repurchase Agreements".
The Portfolio may purchase securities on a when-issued or delayed delivery
basis. See "Additional Information on Investment Policies and
Techniques--When-Issued and Delayed Delivery Securities".
The Portfolio may not borrow money except from banks and only for temporary
or short-term purposes. Temporary or short-term purposes may include: (i)
short-term (i.e. no longer than five business days) credits for clearance of
portfolio transactions; (ii) borrowing in order to meet redemption requests or
to finance failed settlements of portfolio trades without immediately
liquidating portfolio securities or other assets; and (iii) borrowing in order
to fulfill commitments or plans to purchase additional securities pending the
anticipated sale of other portfolio securities or assets in the near future. The
Portfolio will not borrow for leveraging purposes. See "Investment Restrictions"
in the Statement of Additional Information.
The Portfolio may also seek to increase its income by lending portfolio
securities, provided that the value of the securities loaned would not exceed
30% of the value of the total assets of the Portfolio.
Shareholder approval is not required to change any of the investment
policies described above or in "Additional Information on Investment Policies
and Techniques". However, in the event of a change in the Fund's or Portfolio's
investment objectives, shareholders will be given at least 30 days prior written
notice.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
HOW THE PORTFOLIO INVESTS ITS ASSETS
The Portfolio expects to achieve its investment objective by investing in a
portfolio of debt securities denominated either in the U.S. Dollar or in a range
of foreign currencies. Accordingly, the Portfolio will seek investment
opportunities in foreign, as well as domestic, securities markets. The Portfolio
normally will maintain a substantial portion of its assets in debt securities
denominated in foreign currencies.
The Fund's price and yield will change with market conditions. The Fund's
net asset value will generally rise and fall, in an inverse relationship, in
response to changes in interest rates.
The Portfolio's Adviser will actively manage the Portfolio's investment
portfolio in accordance with a global investment strategy, allocating the
Portfolio's investments among securities denominated either in the U.S. Dollar
or in the currencies of a number of foreign countries and supranational
entities. The Adviser may adjust the Portfolio's exposure to each currency based
on its perception of the most favorable markets and issuers. In this regard, the
percentage of assets invested in securities of a
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particular country or denominated in a particular currency will vary in
accordance with the Adviser's 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 Adviser
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. 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, British Pound Sterling, Canadian Dollar, French Franc,
German Mark and Japanese Yen, nor invest more than 25% of its net assets in debt
securities issued by a single foreign government or supranational organization.
The Portfolio invests in fixed income securities of issuers located in and
denominated in the currencies of various countries. In addition to the U.S.
Dollar, such countries' currencies include, among others, the Australian Dollar,
Austrian Schilling, British Pound Sterling, Canadian Dollar, Dutch Guilder,
French Franc, German Mark, Japanese Yen, New Zealand Dollar, Spanish Peseta,
Swedish Krona and Swiss Franc. An issuer of securities purchased by the
Portfolio may be domiciled in a country other than the country in whose currency
the securities are denominated. The Portfolio will, under normal market
conditions, invest in the securities of issuers in at least three countries, one
of which may be the United States. Country selection will vary over time based
on several factors, including economic factors which may affect a particular
country or region of the world and anticipated currency price movements for
specific countries.
U.S. GOVERNMENT SECURITIES
U.S. Government Securities include (1) U.S. Treasury obligations, which
differ in their interest rates, maturities and times of issuance: 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 limited 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. The Portfolio may also invest in any other security or
agreement collateralized or otherwise secured by U.S. Government Securities.
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 purchased by the Portfolio, including
U.S. Treasury bills, notes and bonds, Government National Mortgage Association
("GNMA") 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
Federal Home Loan Banks, and obligations that are supported by the
creditworthiness of
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the particular instrumentality, such as obligations of Federal National Mortgage
Association ("FNMA") or Federal Home Loan Mortgage Corporation ("FHLMC").
MORTGAGE-BACKED SECURITIES
The Portfolio may purchase mortgage-backed securities which are securities
which represent 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 may be insured by GNMA or the
Federal Housing Administration or guaranteed by FNMA, FHLMC or the Veterans
Administration. Mortgage-backed securities provide investors such as the
Portfolio with payments consisting of both interest and principal as the
mortgages in the underlying mortgage pools are paid off. 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 yield of a mortgage-backed
security may be affected by the prepayment of mortgages included in the mortgage
pool underlying the security. Principal which is so prepaid will be invested,
although possibly at a lower rate. Although the market for such securities is
becoming increasingly liquid, securities issued by certain private organizations
may not be readily marketable.
The 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 loans, such as
automobile and credit card loans. A CMO is a hybrid between a mortgage-backed
bond and a mortgage pass-through security. Similar to a bond, interest and
prepaid principal are paid, in most cases, semiannually. 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 not necessarily guaranteed and should the CMO collateral prove insufficient
to meet payments, holders may sustain a loss. The Portfolio invests in CMOs
rated AA or higher by Moody's or Aa or higher by S&P or which, if unrated, are
determined by the Adviser pursuant to criteria established by the Board of
Trustees of the Portfolio to be of comparable quality. The Moody's and the S&P
ratings described above describe the creditworthiness of the issuers of the
securities within the CMO and does not reflect the measure of any market risk
associated with investing in CMOs.
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. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially protected against a sooner than desired return
of principal because of the sequential payments.
REMICs, which were authorized under the Tax Reform Act of 1986, 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
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secured by the underlying collateral of the private issuer. The Portfolio will
invest in privately issued REMICs only if they meet the quality criteria
described above for CMOs.
ZERO COUPON AND STRIPPED GOVERNMENT OBLIGATIONS
The Portfolio may invest in zero coupon bonds, deferred interest bonds, and
U.S. Treasury bonds or notes and their unmatured interest coupons which have
been separated or stripped. Zero coupon and deferred interest bonds are debt
obligations which are issued at a significant discount from face value. The
discount approximates the total amount of interest the bonds will accrue and
compound over the period until maturity or the first interest accrual date at a
rate of interest reflecting the market rate of the security at the time of
issuance. While zero coupon bonds do not require the periodic payment of
interest, deferred interest bonds provide for a period of delay before the
regular payment of interest begins. Although this period of delay is different
for each deferred interest bond, a typical period is approximately one-third of
the bond's term to maturity. Such investments experience greater volatility in
market value due to changes in interest rates than debt obligations which
provide for regular payments of interest. The 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 Portfolio's distribution obligations. Stripped obligations are created when
the holder of U.S. Treasury bonds or notes, typically a custodian bank or
investment brokerage firm, strips their unmatured interest coupons and resells
each component separately. Stripped interest coupons have been marketed in
custodial receipt programs under such names as "TIGRS" and "CATS." The
underlying bonds and notes are sold and either held in book-entry form at a
Federal Reserve Bank or, in the case of bearer securities, in trust on behalf of
the owners thereof.
NON-U.S. SECURITIES
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S. Government.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. Costs are incurred in connection with conversions
between various currencies. In addition, foreign securities markets may be less
liquid, more volatile and less subject to governmental supervision than in the
United States. Investments in foreign countries could be affected by other
factors not present in the United States, including expropriation, confiscatory
taxation, lack of uniform accounting and auditing standards and potential
difficulties in enforcing contractual obligations and could be subject to
extended settlement periods.
The Portfolio may invest up to 25% of its total assets in securities issued
by supranational organizations such as: the World Bank, which was chartered to
finance development projects in developing member countries; the European
Community, which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union of
various European nations steel and coal industries; and the Asian Development
Bank, which is an international development bank established to lend funds,
promote investment and provide technical assistance to member nations of the
Asian and Pacific regions.
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<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. While such indexed investments
entail the risk of loss of principal and/or interest payments from currency
movements in addition to principal risk, the potential for realizing gains as a
result of changes in foreign currency exchange rates enables the Portfolio to
hedge against a decline in the U.S. Dollar value of investments denominated in
foreign currencies while providing an attractive current return. The Portfolio
will purchase such indexed investments for hedging purposes only, not for
speculation.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio may invest its assets in derivative and related instruments
subject only to the Portfolio's investment objective and policies and the
requirement that, to avoid leveraging the Portfolio, the 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.
The value of some derivative or related instruments in which the Portfolio
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and -- like other investments of the Portfolio -- the
ability of the Portfolio to successfully utilize these instruments may depend in
part upon the ability of the Adviser to forecast interest rates and other
economic factors correctly. If the Adviser incorrectly forecasts such factors
and has taken positions in derivative or related instruments contrary to
prevailing market trends, the Portfolio could be exposed to the risk of a loss.
The Portfolio might not employ any or all of the instruments described herein,
and no assurance can be given that any strategy used will succeed.
To the extent permitted by the investment objectives and policies of the
Portfolio, and as described more fully in the Fund's Statements of Additional
Information, the Portfolio may:
. purchase, write and exercise call and put options on securities,
securities indexes and foreign currencies (including using options in
combination with securities, other options or derivative instruments);
. enter into futures contracts and options on futures contracts;
. employ forward currency and interest-rate contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
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. 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. Incorrect correlation could result in a loss on both the hedged
assets in the 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the 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 the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. There can be no assurance that a liquid market will exist at a time
when the 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.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
. In certain instances, particularly those involving over-the-counter
transactions, forward contracts, foreign exchanges or foreign boards of
trade, there is a greater potential that a counterparty or broker may
default or be unable to perform on its commitments. In the event of such a
default, the Fund may experience a loss.
. In transactions involving currencies, the value of the currency
underlying an instrument may fluctuate due to many factors, including
economic conditions, interest rates, governmental policies and market
forces.
INTEREST RATE AND CURRENCY SWAPS
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.
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WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
Securities may be purchased on a when-issued or delayed delivery basis. For
example, delivery and payment may take place a month or more after the date of
the transaction. The purchase price and the interest rate payable on the
securities, if any, are fixed on the transaction date. The securities so
purchased are subject to market fluctuation and no income accrues until delivery
and payment take place. At the time of its acquisition, a when-issued or delayed
delivery security may be valued at less than the purchase price. Commitments for
such when-issued or delayed delivery securities, which have the effect of
borrowing, will be made only when there is an intention of actually acquiring
the securities. On delivery dates for such transactions, such obligations will
be met from maturities or sales of securities and/or from cash flow.
CERTAIN INVESTMENT POLICIES
The Portfolio will not invest in illiquid securities if immediately after
such investment more than 10% of the Portfolio's net assets (taken at market
value) would be invested in such securities. The Portfolio reserves the right to
increase this limit to 15% if and when certain state securities regulators
acquiesce in such higher limit recently adopted by the Securities and Exchange
Commission. For this purpose, illiquid securities include (a) private placements
other than Rule 144A securities (Rule 144A securities may not, however, be as
liquid as similar securities registered under the Securities Act of 1933 if, for
example, qualified Rule 144A purchasers are not interested in purchasing
particular Rule 144A securities from the Portfolio), (b) other securities which
are subject to legal or contractual restrictions on resale or for which there is
no readily available market (e.g., trading in the security is suspended or, in
the case of unlisted securities, market makers do not exist or will not
entertain bids or offers), (c) options purchased by the Portfolio
over-the-counter and the cover for options written by the Portfolio over-the-
counter, except with respect to such transactions entered into with primary
dealers in U.S. Government securities pursuant to an agreement requiring a
closing purchase transaction at a formula price, and (d) repurchase agreements
not terminable within seven days. See "Repurchase Agreements" below.
SECURITIES LENDING
The Portfolio may seek to increase its income by lending securities held by
it. Securities loans may be made to banks, broker-dealers and other recognized
institutional borrowers of securities and are required to be secured
continuously by collateral consisting of cash, U.S. Government securities and
high quality debt obligations or an irrevocable letter of credit in favor of the
Portfolio, each to be maintained on a current basis at an amount at least equal
to the market value and accrued interest of the securities loaned. The Portfolio
would have the right to call a loan and obtain the securities loaned on no more
than five days' notice. During the existence of a loan, the Portfolio would
continue to receive the equivalent of the interest, dividends or other
distributions paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the Adviser to be of good standing
and when, in the judgment of the Adviser, the consideration which can be earned
currently from securities loans of this type justifies the attendant risk. The
value of the securities loaned by the Portfolio will not exceed 30% of the value
of the Portfolio's total assets at the time any loan is made.
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REPURCHASE AGREEMENTS
The Portfolio may enter into "repurchase agreements" pertaining to debt
securities with domestic banks or broker-dealers ("counterparties"). There is no
percentage restriction on the Portfolio's ability to enter into repurchase
agreements, which are considered to be loans by the Securities and Exchange
Commission. A repurchase agreement arises when a buyer such as the Portfolio
purchases a security and simultaneously agrees to resell it to the counterparty
at an agreed upon future date, normally one day or a few days later. The resale
price is greater than the purchase price, reflecting an agreed upon interest
rate which is effective for the period of time the buyer's money is invested in
the security and which is related to the current market rate rather than the
coupon rate on the purchased security. Such agreements permit the Portfolio to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. In the event a counterparty
defaulted on its repurchase obligation, the Portfolio might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. In the event of a counterparty's bankruptcy, the Portfolio
might be delayed in, or prevented from, selling the collateral for the
Portfolio's benefit. The Portfolio's Board of Trustees has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Portfolio's Adviser monitors the creditworthiness of the counterparties with
which the Portfolio enters into repurchase agreement transactions.
PORTFOLIO TURNOVER
The Adviser is unable to predict what the annual portfolio turnover rate of
the Portfolio will be, but anticipates that it will not exceed 350%. A rate of
350% would be considered to be rather high and may involve additional costs.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions which constitute
fundamental policies. Fundamental policies cannot be changed without the
approval of the holders of a majority of the Portfolio's outstanding voting
securities, as defined in the Investment Company Act of 1940. See "Investment
Restrictions" in the Statement of Additional Information.
PORTFOLIO MANAGEMENT
It is not intended that the assets of the Portfolio will be invested in
securities for the purpose of short-term profits. However, the Portfolio will
dispose of portfolio securities whenever the Adviser believes that changes are
appropriate. Generally, the primary consideration in placing portfolio
securities transactions with broker-dealers for execution is to obtain, and
maintain the availability of, execution at the most favorable prices and in the
most effective manner possible. For a complete discussion of portfolio
transactions and brokerage allocation, see "Investment Objectives, Policies and
Restrictions-- Investment Policies: Portfolio Transactions and Brokerage
Allocation" in the Statement of Additional Information.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objective as the Fund. Therefore, an
15
<PAGE>
investor'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, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
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.) Also, 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 investment objective, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such 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, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
investable assets of the Fund in another pooled investment entity having the
same investment objective as the Fund or retaining an investment adviser to
manage the Fund's assets in accordance with the investment policies of the
Portfolio.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Fund to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the Disinterested
Trustees of the Fund reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Trustees
of the Fund, 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.
There are several domestic investment companies that invest all of their
assets in the Portfolio, as does the Fund, and that are sold primarily to
foreign investors. The Fund perceives no adverse effect to the Fund or its
shareholders as a result of such companies' investment in the Portfolio because
such companies are regulated by U.S. securities law, their investment in the
Portfolio is small as compared to the aggregate investment in the Portfolio, and
their shareholder base is diverse.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other Funds by writing the Vista Service
Center.
For more information, see "Management," "Other Information Concerning Shares
of the Fund," "Shareholder Servicing Agents, Transfer Agent and Custodian" and
"Additional Information on Investment Policies and Techniques."
16
<PAGE>
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE><CAPTION>
CONTINGENT
INITIAL DEFERRED DISTRIBUTION OTHER
SALES CHARGE SALES CHARGE AND SERVICE FEES INFORMATION
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Class A......... Maximum of 4.50% None Distribution Fee Initial Sales
of public of 0.25%; Charge reduced
offering price Service Fee of in certain
0.25% circumstances
Class B......... None Maximum Distribution Fee Shares convert
contingent of 0.75%; to Class A
deferred sales Service Fee of shares, and thus
charge of 5% of 0.25% pay lower
redemption distribution
proceeds fees, in the
declines to 0% eighth year
after 6 years after issuance
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
SALES CHARGES -- Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.50% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gains distributions. In almost all cases, investors planning to purchases
$250,000 or more of the Fund shares will pay lower aggregate charges and
expenses by purchasing Class A shares.
REDUCTIONS OF CLASS A SALES CHARGES -- As explained more fully in
"Purchases and Redemptions of Shares," certain purchases of Class A shares in
amounts exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES -- Class A and Class B each have an annual
shareholder servicing fee of 0.25% of average daily net assets. Class A has an
annual distribution fee under Rule 12b-1 of 0.25% of its average daily net
assets, while Class B has an annual distribution fee under Rule 12b-1 of 0.75%
of its average daily net assets. Moreover, other operating expenses borne by
each class may differ
17
<PAGE>
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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT
The Fund does not have an investment adviser because the Trust seeks to
achieve the investment objectives of the Fund by investing all of the investable
assets of the Fund in the Portfolio. The Portfolio's investment adviser is Chase
which also serves as the Fund's administrator. Chase global investment
management capabilities are supported by investment professionals located in
cities around the world, including New York, Geneva and Hong Kong.
THE ADVISER
The Adviser manages the assets of the Portfolio pursuant to an Investment
Advisory Agreement dated December 21, 1992 and, subject to such policies as the
Board of Trustees of the Portfolio may determine, makes investment decisions for
the Portfolio. Madis Senner, Vice President of the Adviser, is responsible for
the day-to-day management of the Portfolio. Mr. Senner, who has managed the
Portfolio since its inception on December 31, 1992, also manages offshore funds
and helps set the allocation of the Chase Private Bank's global assets. Prior to
joining Chase, Mr. Senner was president of Sunray Securities, Inc., a
money-management firm he founded in 1989. From 1986 to 1989, Mr. Senner was
global bond portfolio manager and head of trading for Clemente Capital, Inc. For
its services under the Investment Advisory Agreement, the Adviser is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.75% of the Portfolio's average daily net assets. The combined fees
paid to the Adviser or an affiliate thereof are higher than the fees paid by
many other investment companies; however, the Board of Trustees believes that
these fees are comparable to those of other investment companies with similar
investment objectives. The Adviser may, from time to time, voluntarily waive all
or a portion of its fees payable under the Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
18
<PAGE>
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Portfolio, including outstanding loans
to such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Portfolio's assets in any
U.S. Government obligations, municipal obligations or commercial paper purchased
from itself or any affiliate, although under certain circumstances such
securities may be purchased from other members of an underwriting syndicate in
which the Adviser or an affiliate is a non-principal member. This restriction
may limit the amount or type of U.S. Government obligations, municipal
obligations or commercial paper available to be purchased by the Portfolio. The
Adviser has informed the Portfolio that in making its investment decisions, it
does not obtain or use material inside information in the possession of any
other division or department of the Adviser, including the division that
performs services for the Fund and the Portfolio
19
<PAGE>
as Custodian, or in the possession of any affiliate of the Adviser. Shareholders
of the Fund should be aware that, subject to applicable legal or regulatory
restrictions, Chase and its affiliates may exchange among themselves certain
information about the shareholder and his account.
THE ADMINISTRATORS
Pursuant to an Administration Agreement, Chase serves as administrator of
the Fund and the Portfolio and Chase provides certain administrative services,
including, among other responsibilities, coordinating relationships with
independent contractors and agents; preparing for signature by officers and
filing of certain documents required for compliance with applicable laws and
regulations excluding those of the securities laws of the various states;
preparing financial statements; arranging for the maintenance of books and
records; and providing office facilities necessary to carry out the duties
thereunder. Chase is entitled to receive from 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. Chase may, from time to time, voluntarily
waive all or a portion of its fees payable to it under the Administration
Agreements.
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, without violating the federal
banking law commonly known as the Glass-Steagall Act. The Act generally bars
banks from publicly underwriting or distributing certain securities.
Based on the advice of its counsel, Chase believes that the Court's
decision, and these other decisions of banking regulators, permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and Custodian to the Portfolio and render the
services described below and as set forth in the shareholder servicing agreement
and Custodian Agreement, as an appropriate, incidental national banking function
and as a proper adjunct to its serving as investment adviser and administrator
to the Fund and/or Portfolio.
Industry practice and reglatory decisions also support a bank's authority to
act as administrator for a registered investment company. Chase, on the advice
of its counsel, believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory or administrative services for
the Fund and/or the Portfolio. If that occurred, the Fund's or the Portfolio's
Board of Trustees promptly would seek to obtain the services of another
qualified adviser, shareholder servicing agent, custodian or administrator, as
necessary. Although no assurances can be given, the Fund
20
<PAGE>
and the Portfolio believe that, if necessary, the transfer to a new adviser,
shareholder servicing agent, custodian or administrator could be accomplished
without undue disruption to their operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge. Class B
shares of the Fund are sold without an initial sales charge but are subject to
higher ongoing expenses than Class A shares and a contingent deferred sales
charge payable upon certain redemptions. Class B shares automatically convert to
Class A shares approximately eight years after issuance. See "Variable
Distribution Method."
Both classes of shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time; however, options are priced at 4:15 p.m.) on each business day during
which the Exchange is open for trading ("Fund Business Day"). (See "Other
Information Concerning Shares of the Fund-Net Asset Value"). The public offering
price of Class A shares is the next determined net asset value, plus applicable
initial sales charge. Orders received by Dealers prior to the New York Stock
Exchange closing time are confirmed at the offering price effective at the close
of such Exchange, provided the order is received by the Transfer Agent prior to
its close of business. Dealers are responsible for forwarding orders for the
purchase of shares on a timely basis. Fund shares normally will be maintained in
book entry form and only Class A share certificates will be issued upon request.
Management reserves the right to refuse to sell shares of the Fund to any
person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check or periodic automatic investment, redemptions will not be allowed
until the investment being redeemed has been in the account for 15 business
days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption
programs and "sweep" checking programs. Each Shareholder Servicing Agent may
establish its own terms and conditions, including reduced minimum initial
purchase amounts and limitations on the amounts of subsequent transactions, with
respect to such services. Certain Shareholder Servicing Agents may (although
they are not required by the Trust to do so) credit to the accounts of their
customers from whom they are already receiving other fees an amount not
exceeding the fees for their services as Shareholder Servicing Agents (see
"Shareholder Servicing Agents, Transfer Agent and
21
<PAGE>
Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
- ----------------------------------------------- --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program...................... $ 100(4)
(401K, 403B, Keogh)
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
22
<PAGE>
INITIAL SALES CHARGES--CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value, plus any applicable initial sales charge, which will vary with the size
of the purchase as shown in the following table:
CONCESSION
SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------------------------------ -------- -------- ----------
Less than $100,000........................ 4.50 4.71 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 0.75
$2,500,000 to $9,999,999.................. -- -- 0.50
$10,000,000 to $49,999,999................ -- -- 0.25
$50,000,000 and over...................... -- -- 0.15
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from it own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For the three-year period commencing July 19,
1993, for activities in maintaining and servicing accounts of customers invested
in the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are in
such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares 4.00%, and that portion paid to selling group member broker-
dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash or awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum Contingent Deferred
Sales Charge of Class B shares generated by the Dealer during such programs to
any Dealer that sponsors
23
<PAGE>
sales contests or recognition programs conforming to criteria established by the
Distributor or participates in sales programs sponsored by the Distributor. The
Distributor may provide marketing services to Dealers with whom it has sales
agreements, consisting of written informational material relating to sales
incentive campaigns conducted by such Dealers for their representatives.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, provided there is
no change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or employees
(including their spouses, children, siblings and parents) of the Adviser,
Distributor, Transfer Agency or any affiliates or subsidiaries thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares of the
Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants.
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the Fund
serves as Trustee or custodian of the plan or manages some portion of the plan's
assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. Purchases of Class A
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<PAGE>
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, including but not limited to those defined in
section 401(a), 403(b) or 457 of the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transactions through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A Shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts), provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to the Fund, the
distributor or the Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
Purchases of Class A shares of the Fund may be made with no initial sales
charge (a) through a registered investment adviser who has registered with the
SEC or appropriate state authorities and who (i) clears such Fund share
transaction through a broker/dealer, bank or trust company, (each of which may
impose transaction fees with respect to such transaction), or (ii) purchases
Class A shares for its own account, or an account for which the investment
adviser is authorized to make investment decisions, or (b) on accounts opened by
a bank, trust company or thrift institution which is acting as a fiduciary with
investment discretion with respect to such accounts, provided that appropriate
notification of such fiduciary relationship is reported at the time of
investment to the Fund, the Distributor, or the Transfer Agent.
The Fund reserves the right to cease offering Class A shares for sale at any
time or to reject any order for the purchase of Class A shares and to cease
offering any services provided by a Shareholder Servicing Agent.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
any person at a reduced initial sales charge which is determined by (a)
aggregating the dollar amount of the new purchase and the greater of the
purchaser's total (i) net asset value or (ii) cost of any shares acquired and
still held in the Fund, or any other Vista Fund, including any Vista money
market Fund acquired by exchange for which a sales charge had been incurred and
(b) applying the initial sales charge applicable to such aggregate dollar value.
The privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A shares purchased
thereafter.
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<PAGE>
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75%. In order to obtain such discount, the purchaser or
investment dealer must provide the Transfer Agent with sufficient information,
including the purchaser's total cost, at the time of purchase to permit
verification that the purchaser qualifies for a cumulative quantity discount,
and confirmation of the order is subject to such verification. Information
concerning the current initial sales charge applicable to a group may be
obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Fund and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced initial sales charges by signing a Statement of Intention (the
"Statement"). This enables the investor to aggregate purchases of Class A shares
in the Fund with purchases of Class A shares of any other fund in the Trust (or
if a fund has only one class, shares of such fund), including shares of any
Vista money market Fund acquired by exchange, during a 13-month period. The
sales charge is based on the total amount to be invested in Class A shares
during the 13-month period. All Class A or other qualifying shares of these
Funds currently owned by the investor will be credited as purchases (at their
current offering prices on the date the Statement is signed) toward completion
of the Statement. A 90-day back-dating period can be used to include earlier
purchases at the investor's cost. The 13-month period would then begin on the
date of the first purchase during the 90-day period. No retroactive adjustment
will be made if purchases exceed the amount indicated in the Statement. A
SHAREHOLDER MUST NOTIFY THE TRANSFER AGENT OR DISTRIBUTOR WHENEVER A PURCHASE IS
BEING MADE PURSUANT TO A STATEMENT.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
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difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 calendar days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See "Exchange Privilege." In addition, Class B
shareholders who have redeemed Class B shares and paid a contingent deferred
sales charge in connection with such redemption may purchase Class A shares with
no initial sales charge (in an amount not exceeding the redemption proceeds) if
the purchase occurs within 30 days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF NET
REDEMPTION DURING ASSET VALUE AT REDEMPTION
- ------------------------------------------- -----------------------------
1st Year Since Purchase.................... 5%
2nd Year Since Purchase.................... 4%
3rd Year Since Purchase.................... 3%
4th Year Since Purchase.................... 3%
5th Year Since Purchase.................... 2%
6th Year Since Purchase.................... 1%
7th Year Since Purchase.................... 0%
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a redemption is made first of Class B
shares representing capital appreciation, next of shares representing
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the reinvestment of dividends and capital gains distributions and finally of
other shares held by the shareholder for the longest period of time.
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (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; (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, as described on page 30; (iv)
distributions from a qualified plan upon retirement; (v) a redemption resulting
from an over-contribution to an IRA; and (vi) a redemption of an account balance
under $500, as described on page 30.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth year after the date of purchase,
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares. The conversion will
be effected at the relative net asset values per share of the two classes on the
first business day of the month following the seventh anniversary of the
original purchase occurs. If any exchanges of Class B shares during the
eight-year period occurred, the holding period for the shares exchanged will be
counted toward the eight-year 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.
The Fund reserves the right to cease offering Class B shares for sale at any
time or reject any order for the purchase of Class B shares and to cease
offering any services provided by a Shareholder Servicing Agent.
Due to the conversion feature of Class B shares, certificates will not be
issued and all shares will be held in book entry form.
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REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent, subject to any
applicable contingent deferred sales charges for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
shares by authorizing his Shareholder Servicing Agent, Dealer or its agent to
redeem such shares, which the Shareholder Servicing Agent, Dealer or its agent
must do on a timely basis. The signature of both shareholders is required for
any written redemption requests from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
Investment Company Act of 1940, as amended (the "1940 Act") committing to pay in
cash all redemptions by a shareholder of record up to the amounts specified by
the rule (approximately $250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
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The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of at least $100
from his account. A sufficient number of full and fractional Class A shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS AT LESS THAN $500. The Fund may redeem the shares of
any class of shareholder, if at such time, the aggregate net asset value of the
shares in such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds
which has a similar class of shares, respectively, in accordance with the terms
of the then current prospectus of the Fund being acquired. No initial sales
charge is imposed on the Class A shares being acquired, and no contingent
deferred sales charge is imposed on the Class B shares being redeemed through an
exchange. However, contingent deferred sales charges may apply to redemptions of
Class B shares acquired through an exchange. 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. Under the Exchange Privilege, Class
A or Class B shares of the Fund may be exchanged for shares of such other Vista
Funds only if those Funds and their shares are registered in the states where
the exchange may legally be made. Shares of the Fund may only be exchanged into
the same class of another Vista Fund and only if the account registrations are
identical.
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<PAGE>
With respect to exchanges from any Vista money market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
Vista money market Funds will be done at relative net asset value plus the
appropriate sales charge. An exchange of Class B shares into any of the Vista
money market Funds other than the Class B shares of Prime Money Market Fund will
be treated as a redemption--and therefore subject to the conditions of the
contingent deferred sales charge--and a subsequent purchase. Class B shares of
any Vista non-money market Fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares while maintaining a stable net asseet value. This exchange will
not initially be subject to a Contingent Deferred Sales Charge unless those
shares are later redeemed. The Class B shares of the Prime Money Market Fund
carry the same Distribution and Sub-Administration Fee, and Shareholder and Fund
Servicing Fee as the Class B shares of the non-money market Funds. Redemptions
of shares acquired through an exchange will be subject to the applicable
contingent deferred sales charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such procedures, it may be liable for losses due to unauthorized or
fraudulent instructions.
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Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the reasonable procedures that have been established for Fund
accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions
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will be taxable to shareholders to the extent of the Fund's current and
accumulated earnings and profits. The Portfolio is not required to pay any
federal income or excise taxes.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes, but
such distributions will not qualify for the 70% dividends-received deduction due
to the fact that the Portfolio does not intend to invest in stock of domestic
issuers. Distributions by the Fund of the excess, if any, of its net long-term
capital gain over its net short-term capital loss are designated as capital gain
dividends and are taxable to shareholders as long-term capital gains, regardless
of the length of time a shareholder has held his shares. Ordinary income
dividends and capital gain dividends from the Fund may also be subject to state
and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends and capital gains dividends, will be sent to the Fund's shareholders
promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class B shares to Class A shares.
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OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time;
however, options are priced at 4:15 p.m.), on each Fund Business Day, by
deducting the amount of the Fund's liabilities, including expenses payable or
accrued, from the value of its assets (i.e., the value of its investment in the
Portfolio and other assets) and dividing the difference by the number of its
shares outstanding. Values of securities held by the Portfolio are determined on
the basis of their market or other fair value, as described in the Statement of
Additional Information. A share's net asset value is effective for orders
received by a Shareholder Servicing Agent prior to its calculation and received
by the Distributor prior to the close of business, usually 4:00 p.m. Eastern
time, on the Fund Business Day on which such net asset value is determined.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Each month dividends substantially equal to all of the net investment income
of the Fund will be distributed to its shareholders. The net investment income
consists of all income accrued on the assets of the Fund (i.e., the Fund's pro
rata share of the net investment income of the Portfolio), less expenses. The
Fund will distribute its net realized capital gains, if any, to its shareholders
annually after the close of its fiscal year. 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.
The Fund will also make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLAN AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees of the Trust have adopted Distribution Plans (the "Distribution
Plans") for both Class A and Class B shares in accordance with Rule 12b-1 under
the 1940 Act, after having concluded that there is a reasonable likelihood that
the Distribution Plans for each class will benefit that class and its respective
shareholders.
The Class A Distribution Plan provides that the Fund shall pay distribution
fees including payments to the Distributor, at annual rates not to exceed 0.25%
of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees including
payments to the Distributor, at an annual rate not to exceed 0.75% of its
average annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in amounts not to exceed 0.25% annualized of the average
net asset value of the Class A shares, or 0.25% annualized of the average net
asset value of the Class B shares maintained in the Fund by such broker-dealers'
customers. Trail or maintenance
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<PAGE>
commissions on Class B shares will be paid to Broker-Dealers beginning in 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
the Fund during any year may be more or less than actual expenses incurred
pursuant to the Distribution Plans. For this reason, this type of distribution
fee arrangement is characterized by the staff of the Securities and Exchange
Commission as being of the "compensation" variety (in contrast to
"reimbursement" arrangements by which a distributor's compensation is directly
linked to its expenses). With respect to Class B shares, because of the 0.75%
limitation on the daily compensation paid to the Distributor during a fiscal
year, a large portion of the commissions attributable to sales of Class B shares
will be accrued and paid by the Fund to the Distributor in fiscal years
subsequent to the year in which the Class B shares are sold. In determining
whether to purchase Class B shares, investors should consider that daily
compensation payments could continue until the Distributor has been fully
reimbursed for the commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
The Distribution and Sub-Administration Agreement (the "Distribution
Agreement"), provides that the Distributor will act as the principal underwriter
of the Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plans. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for sub-
administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The respective expenses of the Trust and the Portfolio include the
compensation of their respective Trustees; registration fees; interest charges;
taxes; fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Trust
or the Portfolio; insurance premiums; and expenses of calculating the net asset
value of, and the net income on, the Portfolio and shares of the Fund.
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses
35
<PAGE>
of shareholder meetings; expenses relating to the registration and qualification
of shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
Expenses of the Portfolio also include all fees under the Portfolio's
Administration Agreement; the expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Portfolio's
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to governmental officers and commissions;
expenses of meetings of investors; and the advisory fees payable to the Adviser
under the Advisory Agreement.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because the Fund is "non-diversified", more of the assets
of the Fund may be concentrated in the securities of any single issuer than if
the Fund was "diversified", which may make the value of the shares in a fund
more susceptible to certain risks than shares of a diversified mutual fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class, including Class A and Class B,
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. Shares
of Class A and Class B generally vote separately, for example to approve
distribution plans, but vote together, to the extent required under the 1940
Act, in the election or selection of Trustees and independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B each series or class
or of all series or classes when in the judgment of the Trustees it is necessary
or desirable to submit matters for a shareholder vote. A Trustee of the Trust
may, in accordance with certain rules of the Securities and Exchange Commission,
be removed from office when the holders of record of not less than two-thirds of
the outstanding shares either present a written declaration to the Funds'
Custodian or vote in person or by proxy at a meeting called for this purpose. In
addition, the Trustees will promptly call a meeting of shareholders to remove a
Trustee(s) when requested to do so in writing by record holders of not less than
10% of all outstanding shares of the Trust. Finally, the Trustees shall, in
certain circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the
36
<PAGE>
meeting for purposes of quorum requirements. Shareholders of each series or
class, including Class A or Class B, would be entitled to share pro rata in the
net assets of that series or class available for distribution to shareholders
upon liquidation of series or class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
The Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund's
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe that neither the Fund nor its shareholders will be adversely
affected by reason of the Fund's investing in the Portfolio.
Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of all shareholders and will cast its
vote as instructed by Fund shareholders. As with any mutual fund, other
investors in the Portfolio could control the results of voting at the Portfolio
level. In certain instances (e.g., a change in fundamental investment policies
or restrictions by the Portfolio which was not approved by the Fund's
shareholders), this could result in the Fund's redeeming its investment in the
Portfolio, which could result in increased expenses for the Trust.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange is open for
trading. At 4:00 p.m., Eastern time, on each such day, the value of each
investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of 4:00 p.m. Eastern time, on such day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the 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 4:00 p.m., Eastern time, on such day plus or minus, as the case may be,
the amount of the net additions to or reductions in the investor's investment in
the Portfolio effected as of 4:00 p.m., Eastern time, on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m., Eastern 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 4:00 p.m., Eastern time, on the following day the New York Stock
Exchange is open for trading.
37
<PAGE>
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services, including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) quarterly and year-end
statements and confirmations of purchases and redemptions; transmit, on behalf
of the Fund, proxy statements, annual reports, updated prospectuses and other
communications to shareholders of the Fund; receive, tabulate and transmit to
the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder Servicing Agents may be required to
register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liason to shareholders and providing personal services to shareholders
will not exceed, on an annual basis, 0.25% of the average daily net assets of
each class of the Fund represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Each Shareholder Servicing Agent may, from
time to time, voluntarily waive all or a portion of the fees payable to it. In
addition, Chase may provide other related services to the Fund and/or Portfolio
for which it may receive compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A and Class B Fund shares,
receive dividends and distributions on Fund investments, and take advantage of
any services related to an Account offered by such Shareholder Servicing Agent
from time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents,
38
<PAGE>
only to perform advisory, custodial, administrative and shareholder servicing
functions as described above. While the matter is not free from doubt, Trust
management believes that such laws should not preclude a bank, including a bank
which acts as investment adviser, custodian or administrator, or in all such
capacities, for the Fund, from acting as a Shareholder Servicing Agent. However,
possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund and the Portfolio. In this capacity,
DST maintains the account records of all shareholders in the Funds, including
statement preparation and mailing. DST is also responsible for disbursing
dividend and capital gain distributions to shareholders, whether taken in cash
or additional shares. From time to time, DST and/or the Fund may contract with
other entities to perform certain services for the Transfer Agent. For its
services as Transfer Agent, DST receives such compensation as is from time to
time agreed upon by the Trust or the Portfolio and DST. DST's address is 210 W.
10th Street, Kansas City, MO 64105.
Pursuant to Custodian Agreements, Chase acts as the custodian of the assets
of the Fund, i.e., cash and securities representing the Fund's interest in the
Portfolio, and as the custodian of the Portfolio's assets, for which Chase
receives such compensation as is from time to time agreed upon by the Trust or
the Portfolio and Chase. The Custodian's responsibilities include safeguarding
and controlling the Portfolio's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on the
Portfolio's investments, maintaining books of original entry for Portfolio
accounting and other required books and accounts, and calculating the daily net
asset value of beneficial interests in the Portfolio. Portfolio securities and
cash may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees. The internal division of Chase which serves as the
Custodian does not determine the investment policies of the Portfolio or decide
which securities will be bought or sold on behalf of the Portfolio or otherwise
have access to or share material inside information with the internal division
that performs advisory services for the Portfolio.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Transfer Agent for more information.
39
<PAGE>
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund may be
compared to data prepared by Lipper Analytical Services, Inc. or Morningstar
Mutual Funds on Disc, widely recognized independent services which monitor the
performance of mutual funds. Performance and yield data as reported in national
financial publications including, but not limited to, Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in local or
regional publications, may also be used in comparing the performance and yield
of the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in the
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares the average annual total rate of return 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.
The Fund may provide "yield" quotations in addition to total rate of return
quotations. The "yield" quotations of the Fund will be based upon a hypothetical
net investment income earned by the Fund over a thirty day or one month period
(which period shall be stated in any advertisement or communication with a
shareholder). The "yield" is then "annualized" by assuming that the income
generated over the period will be generated over a one year period. A "yield"
quotation, unlike a total rate of return quotation, does not reflect changes in
net asset value.
Unlike some bank deposits or other investments which pay a fixed yield for a
stated period of time, the yields and the net asset values of classes of shares
of the Fund will vary based on interest rates, the current market value of the
securities held by the Portfolio and changes in the Fund's expenses. In
addition, the Distributor may assume a portion of the Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of 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 classes of shares of the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not
40
<PAGE>
exceeding the Shareholder Servicing Agent fees received (see "Purchases and
Redemptions of Shares -- Purchases"), which will have the effect of increasing
the net return on the investment of customers of those Shareholder Servicing
Agents. Such customers may be able to obtain through their Shareholder Servicing
Agents quotations reflecting such increased return. See the Statement of
Additional Information for further information concerning the calculation of the
yields or total rates of return quotations for the classes of shares of the
Fund.
The Fund will generally include performance data for both classes of Fund
shares in any advertisements or promotional materials including Fund performance
data.
-------------------
THE STATEMENT OF ADDITIONAL INFORMATION contains more detailed information
about the Fund and the Portfolio, including information related to (i) the
investment policies and restrictions of the Fund and the Portfolio, (ii) the
Trustees, officers, investment adviser (if any) and administrator of the Trust
and the Portfolio, (iii) portfolio transactions and brokerage commissions, (iv)
the Fund's shares, including rights and liabilities of shareholders, (v)
additional performance information, including the method used to calculate total
rate of return and (vi) the determination of the net asset value of shares of
the Fund.
41
<PAGE>
MARCH 1, 1996
PROSPECTUS
VISTA(SM) INTERNATIONAL EQUITY FUND
VISTA INTERNATIONAL EQUITY FUND (the "Fund") seeks to provide its
shareholders with a total return on assets from long-term growth of capital and
from income principally through a broad portfolio of marketable equity
securities of established foreign companies organized in countries other than
the United States and companies participating in foreign economies with
prospects for growth. The Fund is a series of Mutual Fund Group (the "Trust"),
an open-end management investment company organized as a business trust under
the laws of the Commonwealth of Massachusetts on May 11, 1987, presently
consisting of 15 separate series (the "Funds"). Because the Fund is
"non-diversified", more of the Fund's assets may be concentrated in the
securities of any single issuer than if the Fund was "diversified", which may
make the value of shares of the Fund more susceptible to certain risks than
shares of a diversified mutual fund.
THE FUND, UNLIKE MANY OTHER INVESTMENT COMPANIES WHICH DIRECTLY ACQUIRE AND
MANAGE THEIR OWN PORTFOLIOS OF SECURITIES, SEEKS ITS INVESTMENT OBJECTIVES BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN INTERNATIONAL EQUITY PORTFOLIO (THE
"PORTFOLIO"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY MANAGED BY THE CHASE
MANHATTAN BANK, N.A. ("CHASE" OR THE "ADVISER"), WITH INVESTMENT OBJECTIVES THAT
ARE IDENTICAL TO THOSE OF THE FUND. INVESTORS SHOULD CAREFULLY CONSIDER THIS
INVESTMENT APPROACH. FOR ADDITIONAL INFORMATION REGARDING THIS UNIQUE INVESTMENT
STRUCTURE, SEE "UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND INVESTMENT
STRUCTURE" ON PAGE 12.
Of course, there can be no assurance that the Fund and the Portfolio will
achieve their investment objectives. Prospective investors should carefully
consider the risks associated with an investment in the Fund. For a further
discussion on the risks associated with an investment in the Fund, see
"Investment Objective and Policies" in this Prospectus. Investors should also
refer to "Additional Information on Investment Policies and Techniques" on page
6.
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") is the Portfolio's
investment adviser and the Fund's and the Portfolio's custodian (the
"Custodian") and administrator (the "Administrator"). The parent company of the
Adviser, The Chase Manhattan Corporation has entered into an agreement and Plan
of Merger with Chemical Banking Corporation which, if affected will have certain
effects upon the Adviser, see "Management of the Fund--The Adviser" on page 14.
Vista Broker-Dealer Services, Inc. ("VBDS") is the Fund's distributor and is
unaffiliated with Chase. INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING
POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE
NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE
MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY,
OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent. Investors may select
Class A or Class B shares, each with a public offering price that reflects
different sales charges and expense levels. Class A shares are offered at net
asset value plus the applicable sales charge (maximum of 4.75% of public
offering price). Class B shares are offered at net asset value without an
initial sales charge, with a maximum contingent deferred sales charge of 5% of
redemption proceeds imposed on certain redemptions made within six years of the
date of purchase. This charge will decline to zero for redemptions more than six
years after initial purchase. Class B shares have higher ongoing expenses than
Class A shares, but automatically convert into Class A shares approximately
eight years after purchase. Salespersons and any other person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different compensation with respect to one particular class of shares over
another in the Fund.
For more information on the differences in these classes, see "Variable
Distribution Method," "Purchases and Redemptions of Shares" and "Conversion of B
Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund including the trustees and officers of
the Fund and Portfolio, has been filed with the Securities and Exchange
Commission and is incorporated into this Prospectus by reference. An investor
may obtain a copy of the Statement of Additional Information without charge by
contacting his or her Shareholder Servicing Agent, the Distributor or the Fund.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
For information about the Fund or your account, simply call the Vista
Service Center toll-free at 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary...................................................... 3
Financial Highlights................................................. 4
Investment Objective and Policies.................................... 5
Additional Information on Investment Policies and Techniques......... 6
Variable Distribution Method......................................... 13
Management........................................................... 14
Purchases and Redemptions of Shares.................................. 16
Tax Matters.......................................................... 27
Other Information Concerning Shares of the Fund...................... 28
Shareholder Servicing Agents, Transfer Agent and Custodian........... 32
Yield and Performance Information.................................... 34
2
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of estimated expenses relating to
purchases and sales of Class A and Class B shares of the Fund, and the estimated
aggregate annual operating expenses of the Fund and the Portfolio, as a
percentage of average net assets of the Fund, and (ii) an example illustrating
the dollar cost of such estimated expenses on a $1,000 investment in Class A or
Class B shares of the Fund. THE TRUSTEES OF THE TRUST BELIEVE THAT THE AGGREGATE
PER SHARE EXPENSES OF THE FUND AND THE PORTFOLIO WILL BE LESS THAN OR
APPROXIMATELY EQUAL TO THE EXPENSES WHICH THE FUND WOULD INCUR IF THE TRUST
RETAINED THE SERVICES OF AN INVESTMENT ADVISER AND THE ASSETS OF THE FUND WERE
INVESTED DIRECTLY IN THE TYPE OF SECURITIES TO BE HELD BY THE PORTFOLIO.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES CLASS A CLASS B
- -------------------------------- ------- -------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases (as a percentage of
offering price)*............................................................ 4.75% None
Maximum Sales Charge Imposed on Reinvested Dividends........................ None None
Exchange Fee................................................................ None None
Maximum Contingent Deferred Sales Charge (as a percentage of redemption
proceeds)+.................................................................. None 5.00%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
- ------------------------------
<S> <C> <C>
(AS A PERCENTAGE OF NET ASSETS)
Investment Advisory Fee (After waiver of fees).............................. .00% .00%
Rule 12b-1 Distribution Plan Fee++.......................................... .25% .75%
Administrative Fee (After waiver of fees)................................... .00% .00%
Other Expenses
- --Sub-administrative Fee (After waiver of fees)............................. .05% .05%
- --Shareholder Servicing Fee................................................. .25% .25%
- --Other Operating Expenses+++............................................... 1.45% 1.45%
------- -------
Total Fund Operating Expenses............................................... 2.00% 2.50%
------- -------
------- -------
</TABLE>
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
EXAMPLE: YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------- ---- ----- ----- -----
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment in
the Fund, assuming a 5% annual rate of return:
Class A Shares (1)............................................. $67 $107 $ 150 $ 269
Class B Shares:
Assuming complete redemption at end of period(2)(3).......... 77 110 156 266
Assuming no redemption(3).................................... 25 78 133 266
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may
pay more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum 4.75% initial
sales charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the eighth year.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee,
shareholder servicing fee and other operating expenses incurred by the Fund
and/or Portfolio during the fiscal year after waiver of fees. Absent such
waivers, the annual investment advisory fee, distribution plan fee,
administrative fee, sub-administrative fee, and shareholder servicing agent fee
would be 1.00%, 0.25% (0.75% for Class B shares), 0.10%, 0.05% and 0.25%,
respectively, of the Fund's and/or Portfolio's average net assets. Absent such
waivers, the Total Fund
3
<PAGE>
Operating Expenses would be 2.65% for Class A shares and 3.15% for Class B
shares. A more complete description of the Fund's and Portfolio's expenses,
including any potential fee waivers, is set forth herein on pages 14-16, 29-30
and 32-34.
THE "EXAMPLE" SET FORTH ABOVE ASSUMES ALL DIVIDENDS AND OTHER DISTRIBUTIONS
ARE REINVESTED AND THAT THE PERCENTAGES UNDER "ANNUAL FUND OPERATING EXPENSES"
REMAIN THE SAME IN THE YEARS SHOWN. THE "EXAMPLE" SET FORTH ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND AND/OR
PORTFOLIO; ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THESE SHOWN. THE ACTUAL
EXPENSES INCURRED AND ATTRIBUTABLE TO EACH CLASS OF SHARES WILL DEPEND ON
SEVERAL FACTORS, INCLUDING THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT TO
WHICH A CLASS INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
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 are incorporated by reference into the
Statement of Additional Information. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
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>
YEAR YEAR 12/31/92+ YEAR 11/4/93++
ENDED ENDED THROUGH ENDED THROUGH
10/31/95 10/31/94 10/31/93 10/31/95 10/31/94
-------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
CLASS A CLASS A CLASS A CLASS B CLASS B
SHARES SHARES SHARES SHARES SHARES
-------- -------- --------- -------- ----------
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) (0.01 ) (0.026 ) (0.053)
Net realized and unrealized gain on
investments............................... (0.190 ) 0.566 1.83 (0.180 ) 0.647
-------- -------- --------- -------- ----------
Total from Investment Operations....... (0.151 ) 0.544 1.82 (0.206 ) 0.594
-------- -------- --------- -------- ----------
Less distributions:
From net investment income............... 0.137 0.054 -- 0.137 0.054
-------- -------- --------- -------- ----------
Total Distributions.................... 0.137 0.054 -- 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 to Average
Net Assets*.............................. (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 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.
# Not to exceed the maximum statutory expense ratio.
4
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
INTRODUCTION
The Trust seeks to achieve the investment objective of the Fund by investing
all the investable assets of the Fund in the Portfolio. The Trust may withdraw
the investment of the Fund from the Portfolio at any time, if the Board of
Trustees of the Trust determines that it is in the best interest of the Fund to
do so. Upon any such withdrawal, the Board of Trustees would consider what
action might be taken, including the investment of all the assets of the Fund in
another pooled investment entity having the same investment objective as the
Fund or the retaining of an investment adviser to manage the Fund's assets in
accordance with the investment policies described below with respect to the
Portfolio.
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with a total return on assets from long-term growth of capital
and from income principally through a broad portfolio of marketable equity
securities of established foreign companies organized in countries other than
the United States, foreign companies or foreign subsidiaries of U.S. companies
participating in foreign economies with prospects for growth. The investment
objective of the Fund is fundamental and may not be changed without shareholder
approval.
INVESTMENT POLICIES -- The Portfolio will invest its assets primarily in
common stocks of established non-United States companies which have potential
for growth of capital or income or both. However, there will be no requirement
that the Portfolio invest exclusively in common stocks or other equity
securities. The Portfolio may invest in any other type of investment grade
security including, but not limited to, convertible securities, preferred
stocks, bonds, notes and other debt securities of foreign issuers (Euro-dollar
securities), warrants, obligations of the United States or foreign governments
and their political subdivisions, securities purchased directly or in the form
of sponsored American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs") or other similar securities representing common stock of foreign
issuers, and various derivative securities of such securities. At least 65% of
the Portfolio's assets will be invested in equity securities, i.e., common
stocks and securities convertible into common stocks.
The Portfolio may establish and maintain temporary cash balances for
defensive purposes or to enable it to take advantage of buying opportunities.
The Portfolio's temporary cash balances may be invested in United States, as
well as foreign, short-term, high quality money market instruments, including,
but not limited to, government obligations, certificates of deposit, bankers'
acceptances, commercial paper, short-term corporate debt securities and
repurchase agreements meeting the quality standards described under "Additional
Information on Investment Policies and Techniques--High Quality Debt
Securities."
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 United
States. The Portfolio may invest all or a substantial portion of its assets in
one or more of such countries.
The Portfolio may purchase or sell forward foreign currency exchange
contracts ("forward contracts") to attempt to minimize the risk to the Portfolio
from adverse changes in the relationship between the U.S. Dollar and other
currencies. The Portfolio's dealings in forward contracts will be limited to
hedging involving either specific transactions or portfolio positions. The
Portfolio will not speculate in forward contracts and, therefore, will not be
subject to the risks frequently associated with the speculative use of such
transactions. The Portfolio may not position hedge with respect to the currency
of a particular country to an extent greater than the aggregate market value (at
the time of making such sale) of the securities held by the Portfolio
denominated or quoted in that particular foreign currency. In addition, the
Portfolio may enter into forward 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
5
<PAGE>
a different currency if the Adviser determines that there is a pattern of
correlation between the two currencies.
The Portfolio may seek to increase income by lending Portfolio securities
and the value of the securities loaned will not exceed 30% of the value of the
Portfolio's total assets.
The Portfolio intends to invest in companies based in (or governments of or
within) 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 Adviser 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. In view of
the planned integration of Hong Kong into China after 1997, there may be special
risks of investing in Hong Kong issuers. However, the planned integration also
calls for Hong Kong's capitalist system to remain intact for an additional 50
years after 1997.
Investment in securities of issuers based in developing countries entails
certain risks which include (i) greater risks of expropriation, confiscatory
taxation, nationalization, and less social, political and economic stability;
(ii) the small current size of markets for securities of issuers based in
developing countries and the currently low or non-existent volume of trading,
resulting in a lack of liquidity and in price volatility; (iii) certain national
policies which may restrict the investment opportunities including restrictions
on investing in issuers or industries deemed sensitive to relevant national
interests; (iv) the absence of developed legal structures governing private or
foreign investment and private property; (v) currency blockage; and (vi)
withholding of dividends at the source.
The Portfolio may enter into repurchase agreements, which are instruments
through which the Portfolio purchases a security from a bank or well established
securities dealer, with an agreement by the seller to repurchase the security at
the same price, plus interest at a specified rate. The underlying securities
will be limited to those which would otherwise qualify for investment by the
Portfolio. See "Additional Information on Investment Policies and
Techniques--Repurchase Agreements".
Shareholder approval is not required to change any of the investment
policies described above or in "Additional Information on Investment Policies
and Techniques". However, in the event of a change in the Fund's or Portfolio's
investment objectives, shareholders will be given at least 30 days' prior
written notice.
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
HOW THE PORTFOLIO INVESTS ITS ASSETS
The Portfolio expects to achieve its investment objective by investing at
least 65% of its net assets in equity securities throughout the world. Equity
securities include common stocks, preferred stocks, securities convertible into
common stocks and warrants to purchase common stocks.
The Portfolio seeks to identify those countries and industries where
economic and political factors, including currency movements, are likely to
produce above-average growth rates. The Portfolio further attempts 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 may invest in securities of companies having various levels of
net worth, including smaller companies whose securities may be more volatile and
less liquid than securities issued by larger companies with higher levels of net
worth. The Portfolio may invest up to 10% of its net assets in securities for
which no readily available market exists. 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. Investment in other investment companies will be limited to 10%
of assets and is also limited in amount by the Investment Company Act of 1940,
will involve the indirect
6
<PAGE>
payment of a portion of the expenses, including advisory fees, of such other
investment companies and may result in a duplication of fees and expenses.
The Portfolio 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 equity securities by increasing the level of its
investments in non-equity securities which may include debt instruments issued
in various currencies by companies, governments and supranational entities
located throughout the world. Additionally, the Portfolio may enter into hedging
transactions involving the use of stock index futures, interest rate and
currency futures along with related options, forward foreign currency exchange
contracts, currency options, and indexed commercial paper.
The Portfolio's Adviser will actively manage the Portfolio's investment
portfolio in accordance with a global investment strategy, allocating the
Portfolio's investments among securities denominated either in the U.S. Dollar
or in the currencies of a number of foreign countries and supranational
entities. The Adviser may adjust the Portfolio's exposure to each currency based
on its perception of the most favorable markets and issuers. In this regard, the
percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with the Adviser's
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 Adviser 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. 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.
The Portfolio invests in securities of issuers located in and denominated in
the currencies of various countries. In addition to the U.S. Dollar, such
countries' currencies include, among others, the Australian Dollar, Austrian
Schilling, British Pound Sterling, Canadian Dollar, Dutch Guilder, French Franc,
German Mark, Japanese Yen, New Zealand Dollar, Spanish Peseta, Swedish Krona and
Swiss Franc. An issuer of securities purchased by the Portfolio may be domiciled
in a country other than the country in whose currency the securities are
denominated. Country selection will vary over time based on several factors,
including economic factors which may affect a particular country or region of
the world and anticipated currency price movements for specific countries.
HIGH QUALITY DEBT SECURITIES
The Portfolio seeks to minimize investment risk by limiting its portfolio
investments in debt securities to high quality debt securities. Accordingly,
that portion of the Portfolio's investment in debt securities consists only of:
(i) debt securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities ("U.S. Government Securities"); (ii) obligations issued or
guaranteed by a foreign government or any of its political subdivisions,
authorities, agencies or instrumentalities, or by supranational entities, all of
which are rated AAA or AA by Standard & Poor's Corporation ("S&P") or Aaa or Aa
by Moody's Investors Services, Inc. ("Moody's") ("High Quality Ratings") or, if
unrated, determined by the Adviser to be of equivalent quality; (iii) corporate
debt securities having at least one High Quality Rating or, if unrated,
determined by the Adviser to be of equivalent quality; (iv) certificates of
deposit and bankers acceptances issued or guaranteed by, or time deposits
maintained at, banks (including foreign branches of U.S. banks or U.S. or
foreign branches of foreign banks) having total assets of more than $500 million
and determined by the Adviser to be of high quality; and (v) commercial paper
rated A1 or A2 by S&P, Prime-1 or Prime-2 by Moody's, Fitch-1 or Fitch-2 by
Fitch Investors Service, Inc., or Duff 1 or Duff 2 by Duff and Phelps Inc. or,
if not rated, issued by U.S. or foreign companies having outstanding debt
securities rated AAA or AA by S&P, or Aaa or Aa by Moody's or determined by the
Adviser to be of high quality.
7
<PAGE>
U.S. GOVERNMENT SECURITIES
U.S. Government Securities include (1) U.S. Treasury obligations, which
differ in their interest rates, maturities and times of issuance: 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 limited 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. The Portfolio may also invest in any other security or
agreement collateralized or otherwise secured by U.S. Government Securities.
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 purchased by the Portfolio, including
U.S. Treasury bills, notes and bonds, Government National Mortgage Association
("GNMA") 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
Federal Home Loan Banks, and obligations that are supported by the
creditworthiness of the particular instrumentality, such as obligations of
Federal National Mortgage Association or Federal Home Loan Mortgage Corporation.
NON-U.S. SECURITIES
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S. Government.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
The Portfolio may 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. 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 Portfolio's
Trustees do not believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities. European
governments and supranational organizations (discussed below), in particular,
issue ECU-denominated securities.
The Portfolio may invest in securities issued by supranational organizations
such as: the World Bank, which was chartered to finance development projects in
developing member countries; the European Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations steel
8
<PAGE>
and coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations of the Asian and Pacific regions.
The Portfolio may invest its assets in securities of foreign issuers in the
form of sponsored ADRs, EDRs, or other similar securities representing
securities of foreign issuers. ADRs are receipts typically issued by an American
bank or trust company evidencing ownership of the underlying foreign securities.
EDRs are receipts issued by a European financial institution evidencing a
similar arrangement. Generally, ADRs, in registered form, are designed for use
in U.S. securities markets and EDRs, in bearer form, are designed for use in
European securities markets.
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. While such indexed investments
entail the risk of loss of principal and/or interest payments from currency
movements in addition to principal risk, the potential for realizing gains as a
result of changes in foreign currency exchange rates enables the Portfolio to
hedge against a decline in the U.S. Dollar value of investments denominated in
foreign currencies while providing an attractive current return. The Portfolio
will purchase such indexed investments for hedging purposes only, not for
speculation.
The Portfolio may invest in instruments which are indexed to securities
indexes, such as the Standard & Poor's 500 Composite Stock Price Index, or to
foreign securities markets or exchanges, and may purchase and sell options on
such instruments. Such instruments are designed to track closely the underlying
index or securities market and to be traded like shares of common stocks.
FUTURES AND OPTIONS TRANSACTIONS
The Portfolio may invest its assets in derivative and related instruments
subject only to the Portfolio's investment objective and policies and the
requirement that, to avoid leveraging the Portfolio, the 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.
The value of some derivative or related instruments in which the Portfolio
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and--like other investments of the Portfolio--the
ability of the Portfolio to successfully utilize these instruments may depend in
part upon the ability of the Adviser to forecast interest rates and other
economic factors correctly. If the Adviser incorrectly forecasts such factors
and has taken positions in derivative or related instruments contrary to
prevailing market trends, the Portfolio could be exposed to the risk of a loss.
THE PORTFOLIO MIGHT NOT EMPLOY ANY OR ALL OF THE INSTRUMENTS DESCRIBED HEREIN,
AND NO ASSURANCE CAN BE GIVEN THAT ANY STRATEGY USED WILL SUCCEED.
To the extent permitted by the investment objectives and policies of the
Portfolio, and as described more fully in the Fund's Statement of Additional
Information, the Portfolio may:
- purchase, write and exercise call and put options on securities,
securities indexes and foreign currencies (including using options in
combination with securities, other options or derivative instruments);
. enter into futures contracts and options on futures contracts;
. employ forward currency and interest-rate contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
9
<PAGE>
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the 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 ADVISER MAY INCORRECTLY FORECAST INTEREST RATES, MARKET VALUES OR
OTHER ECONOMIC FACTORS IN UTILIZING A DERIVATIVES STRATEGY. In such a case,
the 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 THE FUND.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. THERE CAN BE NO ASSURANCE THAT A LIQUID MARKET WILL EXIST AT A TIME
WHEN THE 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.
. ACTIVITIES OF LARGE TRADERS IN THE FUTURES AND SECURITIES MARKETS
INVOLVING ARBITRAGE, "PROGRAM TRADING," AND OTHER INVESTMENT STRATEGIES MAY
CAUSE PRICE DISTORTIONS IN THESE MARKETS.
. IN CERTAIN INSTANCES, PARTICULARLY THOSE INVOLVING OVER-THE-COUNTER
TRANSACTIONS, FORWARD CONTRACTS, FOREIGN EXCHANGES OR FOREIGN BOARDS OF
TRADE, THERE IS A GREATER POTENTIAL THAT A COUNTERPARTY OR BROKER MAY
DEFAULT OR BE UNABLE TO PERFORM ON ITS COMMITMENTS. In the event of such a
default, the Fund may experience a loss.
. IN TRANSACTIONS INVOLVING CURRENCIES, THE VALUE OF THE CURRENCY
UNDERLYING AN INSTRUMENT MAY FLUCTUATE DUE TO MANY FACTORS, INCLUDING
ECONOMIC CONDITIONS, INTEREST RATES, GOVERNMENTAL POLICIES AND MARKET
FORCES.
CERTAIN INVESTMENT POLICIES
The Portfolio will not invest in illiquid securities if immediately after
such investment more than 10% of the Portfolio's net assets (taken at market
value) would be invested in such securities. The Portfolio reserves the right to
increase this limit to 15% if and when certain state securities regulators
acquiesce in such higher limit recently adopted by the Securities and Exchange
Commission. For this purpose, illiquid securities include (a) private placements
other than Rule 144A securities (Rule 144A securities may not, however, be as
liquid as similar securities registered under the Securities Act of 1933 if, for
example, qualified Rule 144A purchasers are not interested in purchasing
particular Rule 144A securities from the Portfolio), (b) other securities which
are subject to legal or contractual restrictions on resale or for which there is
no readily available market (e.g., trading in the security is suspended or, in
the case of unlisted securities, market makers do not exist or will not
entertain bids or offers), (c) options purchased by the Portfolio
over-the-counter and the cover for options written by the Portfolio over-the-
counter, except with respect to such transactions entered into with primary
dealers in U.S. Government securities pursuant to an agreement requiring a
closing purchase transaction at a formula price, and (d) repurchase agreements
not terminable within seven days. See "Repurchase Agreements" below.
10
<PAGE>
SECURITIES LENDING
The Portfolio may seek to increase its income by lending securities held by
it. Securities loans may be made to banks, broker-dealers and other recognized
institutional borrowers of securities and are required to be secured
continuously by collateral consisting of cash, U.S. Government securities and
high quality debt obligations or an irrevocable letter of credit in favor of the
Portfolio, each to be maintained on a current basis at an amount at least equal
to the market value and accrued interest of the securities loaned. The Portfolio
would have the right to call a loan and obtain the securities loaned on no more
than five days' notice. During the existence of a loan, the Portfolio would
continue to receive the equivalent of the interest, dividends or other
distributions paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans would be made only to firms deemed by the Adviser to be of good standing
and when, in the judgment of the Adviser, the consideration which can be earned
currently from securities loans of this type justifies the attendant risk. The
value of the securities loaned by the Portfolio will not exceed 30% of the value
of the Portfolio's total assets at the time any loan is made.
REPURCHASE AGREEMENTS
The Portfolio may enter into "repurchase agreements" pertaining to debt
securities with domestic banks or broker-dealers ("counterparties"). There is no
percentage restriction on the Portfolio's ability to enter into repurchase
agreements. A repurchase agreement arises when a buyer such as the Portfolio
purchases a security and simultaneously agrees to resell it to the counterparty
at an agreed upon future date, normally one day or a few days later. The resale
price is greater than the purchase price, reflecting an agreed upon interest
rate which is effective for the period of time the buyer's money is invested in
the security and which is related to the current market rate rather than the
coupon rate on the purchased security. Such agreements permit the Portfolio to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of investments of a longer-term nature. In the event a counterparty
defaulted on its repurchase obligation, the Portfolio might suffer a loss to the
extent that the proceeds from the sale of the collateral were less than the
repurchase price. In the event of a counterparty's bankruptcy, the Portfolio
might be delayed in, or prevented from, selling the collateral for the
Portfolio's benefit. The Portfolio's Board of Trustees has established
procedures, which are periodically reviewed by the Board, pursuant to which the
Portfolio's Adviser monitors the creditworthiness of the counterparties with
which the Portfolio enters into repurchase agreement transactions.
PORTFOLIO TURNOVER
The Adviser is unable to predict what the annual portfolio turnover rate of
the Portfolio will be, but anticipates that it will not exceed 150%.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions which constitute
fundamental policies. Fundamental policies cannot be changed without the
approval of the holders of a majority of the Portfolio's outstanding voting
securities, as defined in the Investment Company Act of 1940. See "Investment
Restrictions" in the Statement of Additional Information.
PORTFOLIO MANAGEMENT
It is not intended that the assets of the Portfolio will be invested in
securities for the purpose of short-term profits. However, the Portfolio will
dispose of portfolio securities whenever the Adviser believes that changes are
appropriate. Generally, the primary consideration in placing portfolio
securities transactions with broker-dealers for execution is to obtain, and
maintain the availability of, execution at the most favorable prices and in the
most effective manner possible. For a complete discussion of portfolio
transactions and brokerage allocation, see "Investment Objectives, Policies and
Restrictions--
11
<PAGE>
Investment Policies: Portfolio Transactions and Brokerage Allocation" in the
Statement of Additional Information.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund seeks to achieve its investment objective by
investing all of its investable assets in the Portfolio, a separate registered
investment company with the same investment objectives as the Fund. Therefore,
an investor'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, the other investors
investing in the Portfolio are not required to sell their shares at the same
public offering price as the Fund. Investors in the Fund should be aware that
these differences may result in differences in returns experienced by investors
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.) Also, 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 investment objectives, policies or
restrictions may require the Trust to withdraw the Fund's interest in the
Portfolio. Any such 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, the distribution in kind may result in a less
diversified portfolio of investments or adversely affect the liquidity of the
Fund.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interest of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
investable assets of the Fund in another pooled investment entity having the
same investment objectives as the Fund or retaining an investment adviser to
manage the Fund's assets in accordance with the investment policies of the
Portfolio.
State securities regulations generally do not permit the same individuals
who are disinterested Trustees of the Fund to be Trustees of the Portfolio
absent the adoption of written procedures by a majority of the Disinterested
Trustees of the Fund reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Trustees
of the Fund, 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.
There are several domestic investment companies that invest all of their
assets in the Portfolio, as does the Fund, and that are sold primarily to
foreign investors. The Fund perceives no adverse effect to the Fund or its
shareholders as a result of such companies' investment in the Portfolio because
such companies are regulated by U.S. securities law, their investment in the
Portfolio is small as compared to the aggregate investment in the Portfolio, and
their shareholder base is diverse.
12
<PAGE>
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other Funds by writing the Vista Service
Center.
For more information, see "Management," "Other Information Concerning Shares
of the Fund," "Shareholder Servicing Agents, Transfer Agent and Custodian" and
"Additional Information on Investment Policies and Techniques."
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE>
<CAPTION>
CONTINGENT
INITIAL SALES DEFERRED SALES DISTRIBUTION AND
CHARGE CHARGE SERVICE FEES OTHER INFORMATION
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A.... Maximum of 4.75% None Distribution Fee Initial Sales
of public of 0.25%; Service Charge reduced in
offering price Fee of 0.25% certain
circumstances
Class B.... None Maximum Distribution Fee Shares convert to
contingent of 0.75%; Service Class A shares,
deferred sales Fee of 0.25% and thus pay
charge of 5% of lower
redemption distribution
proceeds declines fees, in the
to 0% after 6 eighth year after
years issuance
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
SALES CHARGES -- Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.75% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gains distributions. In almost all cases, investors planning to purchase
$250,000 or more of the Fund shares will pay lower aggregate charges and
expenses by purchasing Class A shares.
REDUCTIONS OF CLASS A SALES CHARGES -- As explained more fully in "Purchases
and Redemptions of Shares," certain purchases of Class A shares in amounts
exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES -- Class A and Class B each have an annual
shareholder servicing fee of 0.25% of average daily net assets. Class A has an
annual distribution fee under Rule 12b-1 of 0.25% of its average daily net
assets, while Class B has an annual distribution fee under Rule 12b-1 of 0.75%
of its average daily net assets. Moreover, other operating expenses borne by
each class 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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
13
<PAGE>
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT
The Fund does not have an investment adviser because the Trust seeks to
achieve the investment objectives of the Fund by investing all of the investable
assets of the Fund in the Portfolio. The Portfolio's investment adviser is
Chase, which also serves as the Fund's administrator. Chase global investment
management capabilities are supported by investment professionals located in
cities around the world, including New York, Geneva and Hong Kong. The Chase
Manhattan Trust Corporation Limited serves as administrator to the Portfolio.
THE ADVISER
The Adviser manages the assets of the Portfolio pursuant to an Investment
Advisory Agreement dated and, subject to such policies as the Board of Trustees
of the Portfolio may determine, makes investment decisions for the Portfolio.
Joe DeSantis, Vice President of the Adviser, is responsible for the day-to-day
management of the Portfolio, and has managed the Portfolio since its inception
on December 31, 1992. 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 and director of Strategic Research International, Inc.; and a
credit analyst at Moody's Investors Services, Municipal Research Department.
For its services under the Investment Advisory Agreement, the Adviser is
entitled to receive an annual fee computed daily and paid monthly based at an
annual rate equal to 1.00% of the Portfolio's average daily net assets. The
combined fees paid to the Adviser or an affiliate thereof are higher than the
fees paid by most other investment companies; however, the Board of Trustees
believes that these fees are comparable to those of other investment companies
with similar investment objectives. The Adviser may, from time to time,
voluntarily waive all or a portion of its fees payable under the Advisory
Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also included among the Adviser's accounts are commingled trust funds
and a broad spectrum of individual trust and investment management portfolios.
These accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the
14
<PAGE>
Holding Company Merger. The Holding Company Merger is expected to be completed
on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Portfolio, including outstanding loans
to such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Portfolio's assets in any
U.S. Government obligations, municipal obligations or commercial paper purchased
from itself or any affiliate, although under certain circumstances such
securities may be purchased from other members of an underwriting syndicate in
which the Adviser or an affiliate is a non-principal member. This restriction
may limit the amount or type of U.S. Government obligations, municipal
obligations or commercial paper available to be purchased by the Portfolio. The
Adviser has informed the Portfolio that in making its investment decisions, it
does not obtain or use material inside information in the possession of any
other division or department of the Adviser, including the division that
performs services for the Fund and the Portfolio as Custodian, or in the
possession of any affiliate of the Adviser. Shareholders of the Fund should be
aware that, subject to applicable legal or regulatory restrictions, Chase and
its affiliates may exchange among themselves certain information about the
shareholder and his account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, Chase serves as administrator of
the Fund and the Portfolio. Chase provides certain administrative services,
including, among other responsibilities, coordinating relationships with
independent contractors and agents; preparing for signature by officers and
filing of certain documents required for compliance with applicable laws and
regulations excluding those of the securities laws of the various states;
preparing financial statements; arranging for the maintenance of books and
records; and providing office facilities necessary to carry out the duties
thereunder. Chase is entitled to receive from 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. Chase may, from time to time, voluntarily
waive all or a portion of its fees payable to it under the Administration
Agreements.
15
<PAGE>
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, without violating the federal
banking law commonly known as the Glass-Steagall Act. The Act generally bars
banks from publicly underwriting or distributing certain securities.
Based on the advice of its counsel, Chase believes that the Court's
decision, and these other decisions of banking regulators, permit it to serve as
investment adviser to a registered, open-end investment company
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefor, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and Custodian to the Portfolio and render the
services described below and as set forth in the shareholder servicing agreement
and Custodian Agreement, as an appropriate, incidental national banking function
and as a proper adjunct to its serving as investment adviser and administrator
to the Fund and/or Portfolio.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. Chase, on the
advice of its counsel, believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory or administrative services for
the Fund and/or the Portfolio. If that occurred, the Fund's or the Portfolio's
Board of Trustees promptly would seek to obtain the services of another
qualified adviser, shareholder servicing agent, custodian or administrator, as
necessary. Although no assurances can be given, the Fund and the Portfolio
believe that, if necessary, the transfer to a new adviser, shareholder servicing
agent, custodian or administrator could be accomplished without undue disruption
to their operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge.
Class B shares of the Fund are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares in the eighth year after issuance. See "Variable
Distribution Method."
Both classes of shares of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of regular trading on the New York Stock Exchange (normally 4:00 p.m. Eastern
time; however, options are priced at 4:15 p.m.) on each business day during
which the Exchange is open for trading ("Fund Business Day"). (See "Other
Information Concerning Shares of the Fund-Net Asset Value"). The
16
<PAGE>
public offering price of Class A shares is the next determined net asset value,
plus applicable initial sales charge. Orders received by Dealers prior to the
New York Stock Exchange closing time are confirmed at the offering price
effective at the close of such Exchange, provided the order is received by the
Transfer Agent prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Fund shares
normally will be maintained in book entry form and only Class A share
certificates will be issued upon request. Management reserves the right to
refuse to sell shares of the Fund to any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption
programs and "sweep" checking programs. Each Shareholder Servicing Agent may
establish its own terms and conditions, including reduced minimum initial
purchase amounts and limitations on the amounts of subsequent transactions, with
respect to such services. Certain Shareholder Servicing Agents may (although
they are not required by the Trust to do so) credit to the accounts of their
customers from whom they are already receiving other fees an amount not
exceeding the fees for their services as Shareholder Servicing Agents (see
"Shareholder Servicing Agents, Transfer Agent and Custodian -- Shareholder
Servicing Agents"), which will have the effect of increasing the net return on
the investment of customers of that Shareholder Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
------------ --------------------------
Individual..................................... $2,500(1)
Individual Retirement Account (IRA)............ $1,000(2)
Spousal IRA.................................... $ 250
SEP-IRA........................................ $1,000(2)
Purchase Accumulation Plan..................... $ 250(3)
Payroll Deduction Program...................... $ 100(4)
(401K, 403B, Keogh)
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
17
<PAGE>
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN. A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
singed letter with SIGNATURE GUARANTEE to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
INITIAL SALES CHARGES--CLASS A SHARES
The public offering price of Class A shares is the next determined net asset
value, plus any applicable initial sales charge, which will vary with the size
of the purchase as shown in the following table:
CONCESSION
SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------- -------- -------- ----------
Less than $100,000........................ 4.75 4.99 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 1.00
$2,500,000 to $9,999,999.................. -- -- 0.75
$10,000,000 to $49,999,999................ -- -- 0.50
$50,000,000 and over...................... -- -- 0.20
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from its own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For the three-year period commencing July 19,
1993, for activities in maintaining and servicing accounts of customers invested
in the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista
18
<PAGE>
funds) in the accounts of shareholders attributable to Associated Securities and
the length of time such assets are in such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares 4.00%, and that portion paid to selling group member broker-
dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash or awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum Contingent Deferred
Sales Charge of Class B shares generated by the Dealer during such programs to
any Dealer that sponsors sales contests or recognition programs conforming to
criteria established by the Distributor or participates in sales programs
sponsored by the Distributor. The Distributor may provide marketing services to
Dealers with whom it has sales agreements, consisting of written informational
material relating to sales incentive campaigns conducted by such Dealers for
their representatives.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own shares of any Vista Fund, provided there is
no change in account registration. However, once a shareholder closes his or her
account by redeeming all shares, he or she will lose this privilege after 30
days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A Shares purchased by the
following "Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or employees
(including their spouses, children, siblings and parents) of the Adviser,
Distributor, Transfer Agency or any affiliates or subsidiaries thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealers agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A Shares of the
Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants.
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the Fund
serves as Trustee or custodian of the plan or manages some portion of the plan's
assets.
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<PAGE>
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. 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,
including but not limited to those defined in section 401(a), 403(b) or 457 of
the Internal Revenue Code or rabbi trusts.
Investors may incur a fee if they effect transactions through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A Shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts), provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to the Fund, the
distributor or the Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
The Fund reserves the right to cease offering Class A shares for sale at any
time or to reject any order for the purchase of Class A shares and to cease
offering any services provided by a Shareholder Servicing Agent.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
any person at a reduced initial sales charge which is determined by (a)
aggregating the dollar amount of the new purchase and the greater of the
purchaser's total (i) net asset value or (ii) cost of any shares acquired and
still held in the Fund, or any other Vista Fund, including any Vista money
market Fund acquired by exchange for which a sales charge had been incurred and
(b) applying the initial sales charge applicable to such aggregate dollar value.
The privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A shares purchased
thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75%. In order to obtain such discount, the purchaser or
investment dealer must provide the Transfer Agent with sufficient information,
including the purchaser's total cost, at the time of purchase to permit
verification that the purchaser qualifies for a cumulative quantity discount,
and confirmation of the order is subject to such verification. Information
concerning the current initial sales charge applicable to a group may be
obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A
20
<PAGE>
qualified group must have more than 10 members, must be available to arrange for
group meetings between representatives of the Fund and the members, must agree
to include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced initial sales charges by signing a Statement of Intention (the
"Statement"). This enables the investor to aggregate purchases of Class A shares
in the Fund with purchases of Class A shares of any other fund in the Trust (or
if a fund has only one class, shares of such fund), including shares of any
Vista money market Fund acquired by exchange, during a 13-month period. The
sales charge is based on the total amount invested in Class A shares during the
13-month period. All Class A or other qualifying shares of these Funds currently
owned by the investor will be credited as purchases (at their current offering
prices on the date the Statement is signed) toward completion of the Statement.
A 90-day back-dating period can be used to include earlier purchases at the
investor's cost. The 13-month period would then begin on the date of the first
purchase during the 90-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the Statement. A SHAREHOLDER MUST
NOTIFY THE TRANSFER AGENT OR DISTRIBUTOR WHENEVER A PURCHASE IS BEING MADE
PURSUANT TO A STATEMENT.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 calendar days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See "Exchange Privilege." In addition, Class B
shareholders who have redeemed Class B shares and paid a contingent deferred
sales charge in connection with such redemption may purchase Class A shares with
no initial sales charge (in an amount not exceeding the redemption proceeds) if
the purchase occurs within 30 days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
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The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF NET
REDEMPTION DURING ASSET VALUE AT REDEMPTION
- ----------------------------------- -----------------------------
1st Year Since Purchase............ 5%
2nd Year Since Purchase............ 4%
3rd Year Since Purchase............ 3%
4th Year Since Purchase............ 3%
5th Year Since Purchase............ 2%
6th Year Since Purchase............ 1%
7th Year Since Purchase............ 0%
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a redemption is made first of Class B
shares representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time.
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (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; (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, as discussed on page 24; (iv)
distributions from a qualified plan upon retirement; (v) a redemption resulting
from an over-contribution to an IRA; and (vi) a redemption of an account balance
under $500, as described on page 24.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth year after the
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date of purchase, together with the pro rata portion of all Class B shares
representing dividends and other distributions paid in additional Class B
shares. The conversion will be effected at the relative net asset values per
share of the two classes on the first business day of the month following the
seventh anniversary of the original purchase occurs. If any exchanges of Class B
shares during the eight-year period occurred, the holding period for the shares
exchanged will be counted toward the eight-year 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.
The Fund reserves the right to cease offering Class B shares for sale at any
time or reject any order for the purchase of Class B shares and to cease
offering any services provided by a Shareholder Servicing Agent.
Due to the conversion feature of Class B shares, certificates will not be
issued and all shares will be held in book entry form.
REDEMPTIONS
Shareholder may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent, subject to any
applicable contingent deferred sales charges for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
shares by authorizing his Shareholder Servicing Agent, Dealer or its agent to
redeem such shares, which the Shareholder Servicing Agent, Dealer or its agent
must do on a timely basis. The signature of both shareholders is required for
any written redemption requests from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. Although the Fund generally
retains the right to pay the redemption price of shares in kind with securities
(instead of cash), the Trust has filed an election under Rule 18f-1 under the
Investment Company Act of 1940, as
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amended (the "1940 Act") committing to pay in cash all redemptions by a
shareholder of record up to the amounts specified by the rule (approximately
$250,000).
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
Funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of any requested
dollar amount (subject to limits) from his account. A sufficient number of full
and fractional Class A shares will be redeemed so that the designated payment is
received on approximately the 1st day of the month following the end of the
selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS AT LESS THAN $500. The Fund may redeem the shares of
any class of shareholder, if at such time, the aggregate net asset value of the
shares in such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
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<PAGE>
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds,
respectively, in accordance with the terms of the then current prospectus of the
Fund being acquired. No initial sales charge is imposed on the Class A shares
being acquired, and no contingent deferred sales charge is imposed on the Class
B shares being redeemed, through an exchange. However, contingent deferred sales
charges may apply to redemptions of Class B shares acquired through an exchange.
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. Under the Exchange Privilege, Class A or Class B shares of the Fund
may be exchanged for shares of such other Vista Funds only if those Funds and
their shares are registered in the states where the exchange may legally be
made. Shares of the Fund may only be exchanged into the same class of another
Vista Fund and only if the account registrations are identical.
With respect to exchanges from any Vista Money Market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
Vista money market Funds will be done at relative net asset value plus the
appropriate sales charge. An exchange of Class B shares into any of the Vista
money market Funds other than the Class B shares of Vista Prime Money Market
Fund will be treated as a redemption--and therefore subject to the conditions of
the contingent deferred sales charge--and a subsequent purchase. Class B shares
of any Vista non-money market Fund may be exchanged into the Class B shares of
the Prime Money Market Fund in order to continue the aging of the initial
purchase of such shares while maintaining a stable net asset value. This
exchange will not be subject to a Contingent Deferred Sales Charge unless those
shares are later redeemed. The Class B shares of the Prime Money Market Fund
carry the same Distribution and Sub-Administration Fee, and Shareholder and Fund
Servicing Fee as the Class B shares of the non-money market Funds. Redemptions
of shares acquired through an exchange will be subject to the applicable
contingent deferred sales charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange-transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged $5.00 administration fee per
each such exchange.
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GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To provide evidence of
telephone instructions, the Transfer Agent will record telephone conversations
with shareholders. The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. In the event the Fund does
not employ such procedures, it may be liable for losses due to unauthorized or
fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the administrators, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follows
instructions which they reasonably believe to be genuine and act in good faith
by complying with the reasonable procedures that have been established for Fund
accounts and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
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TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for the treatment as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to its shareholders, and
such distributions will be taxable to shareholders to the extent of the Fund's
current and accumulated earnings and profits. The Portfolio is not required to
pay any federal income or excise taxes.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes.
Because the Portfolio intends to invest all of its assets in stock of foreign
issuers, no portion of the ordinary income dividends paid by the Fund is
anticipated to qualify for the 70% dividends-received deduction for corporate
shareholders. Distributions by the Fund of the excess, if any, of its net
long-term capital gain over its net short-term capital loss are designated as
capital gain dividends and are taxable to shareholders as long-term capital
gains, regardless of the length of time a shareholder has held his shares.
Ordinary income dividends and capital gain dividends from the Fund may also be
subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualifies for the dividends-received
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deduction for corporations) and capital gains dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
No gain or loss will be recognized by a shareholder as a result of a
conversion from Class B shares to Class A shares.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of a class of shares of the Fund is determined as of the
close of regular trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time), on each Fund Business Day, by dividing the net assets
attributable to that class by the number of its shares outstanding in that
class. Values of securities held by the Portfolio are determined on the basis of
their market or other fair value, as described in the Statement of Additional
Information. A share's net asset value is effective for orders received by a
Shareholder Servicing Agent prior to its calculation and received by the
Distributor prior to the close of business, usually 4:00 p.m. Eastern time, on
the Fund Business Day on which such net asset value is determined.
The per share net asset value of Class B shares of the Fund will generally
be lower than that of the Class A shares because of the higher expenses borne by
the Class B shares, however these net asset values will tend to converge
immediately after the payment of dividends.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net investment income of the Fund is paid to its
shareholders semi-annually (in the months of June and December) as a dividend.
The net investment income consists of all income accrued on the assets of the
Fund (i.e., the Fund's pro rata share of the net investment income of the
Portfolio), less expenses. The Fund will distribute its net realized short-term
and long-term capital gains, if any, to its shareholders annually after the
close of its fiscal year. 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.
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The Fund will also make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLANS AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees of the Trust have adopted Distribution Plans (the "Distribution
Plans") for both Class A and Class B shares in accordance with Rule 12b-1 under
the 1940 Act, after having concluded that there is a reasonable likelihood that
the Distribution Plans for each class will benefit that class and its respective
shareholders.
The Class A Distribution Plan provides that the Fund shall pay distribution
fees, including payments to the Distributor, at annual rates not to exceed 0.25%
of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees, including
payments to the Distibutor, at an annual rate not to exceed 0.75% of its average
annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in amounts not to exceed 0.25% annualized of the average
net asset value of the Class A shares, or 0.25% annualized of the average net
asset value of the Class B shares maintained in the Fund by such broker-dealers'
customers. Trail or maintenance commissions on Class B shares will be paid to
Broker-Dealers beginning in 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 the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plans. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements such as those described in the next
paragraph, by which a distributor's compensation is directly linked to its
expenses). With respect to Class B shares, because of 0.75% limitation on the
daily compensation paid to the Distributor during a fiscal year, a large portion
of the commissions attributable to sales of Class B shares will be accrued and
paid by the Fund to the Distributor in fiscal years subsequent to the year in
which the Class B shares are sold. In determining whether to purchase Class B
shares, investors should consider that daily compensation payments could
continue until the Distributor has been fully reimbursed for the commission paid
on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
The Distribution and Sub-Administration Agreement (the "Distribution
Agreement"), provides that the Distributor will act as the principal underwriter
of the Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for sub-
administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on
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an annualized basis for the Fund's then-current fiscal year. Other funds which
have investment objectives similar to those of the Fund, but which do not pay
some or all of such fees from their assets, may offer a higher return, although
investors would, in some cases, be required to pay a sales charge or a
redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain other ongoing
expenses of the Trust. The Distributor may, from time to time, waive all or a
portion of the fees payable to it under the Distribution Agreement.
EXPENSES
The respective expenses of the Trust and the Portfolio include the
compensation of their respective Trustees; registration fees; interest charges;
taxes; fees and expenses of independent auditors, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Trust
or the Portfolio; insurance premiums; and expenses of calculating the net asset
value of, and the net income on, the Portfolio and shares of the Fund.
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
Expenses of the Portfolio also include all fees under the Portfolio's
Administration Agreement; the expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Portfolio's
custodian for all services to the Portfolio, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to governmental officers and commissions;
expenses of meetings of investors; and the advisory fees payable to the Adviser
under the Advisory Agreement.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because the Fund is "non-diversified", more of the assets
of the Fund may be invested in the obligations of any single issuer, which may
make the value of the shares in a Fund more susceptible to certain risks than
shares of a diversified mutual fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class, including Class A and Class B,
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
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the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of Class A and Class B generally vote
separately, for example to approve distribution plans, but vote together, to the
extent required under the 1940 Act, in the election or selection of Trustees and
independent accountants.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B or of all series or
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class,
including Class A or Class B, would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of that series or class.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Code of Ethics of the Trust prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of a Fund's planned portfolio transactions. The objective of the Code
of Ethics is to ensure that the operations of a Fund be carried out for the
exclusive benefit of a Fund's shareholders. The Trust maintains careful
monitoring of Compliance with the Code of Ethics. See "General Information" in
the Fund's Statement of Additional Information.
The Portfolio is organized as a trust under the laws of the State of New
York. The Portfolio's Declaration of Trust provides that the Fund and other
entities investing in the Portfolio (e.g., other investment companies, insurance
company separate accounts and common and commingled trust funds) will each be
liable for all obligations of the Portfolio. However, the risk of the Fund's
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. Accordingly, the Trustees of the
Trust believe
31
<PAGE>
that neither the Fund nor its shareholders will be adversely affected by reason
of the Fund's investing in the Portfolio.
Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of all Fund shareholders and will cast
its vote as instructed by Fund shareholders. As with any mutual fund, other
investors in the Portfolio could control the results of voting at the Portfolio
level. In certain instances (e.g., a change in fundamental investment policies
or restrictions by the Portfolio which was not approved by the Fund's
shareholders), this could result in the Fund's redeeming its investment in the
Portfolio, which could result in increased expenses for the Trust.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange is open for
trading. At 4:00 p.m., Eastern time, on each such day, the value of each
investor's beneficial interest in the Portfolio will be determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of aggregate beneficial
interests in the Portfolio. Any additions or reductions, which are to be
effected as of 4:00 p.m. Eastern time, on such day, will then be effected. The
investor's percentage of the aggregate beneficial interests in the 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 4:00 p.m., Eastern time, on such day plus or minus, as the case may be,
the amount of the net additions to or reductions in the investor's investment in
the Portfolio effected as of 4:00 p.m., Eastern time, on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
4:00 p.m., Eastern 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 4:00 p.m., Eastern time, on the following day the New York Stock
Exchange is open for trading.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services, including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) monthly and year-end statements
and confirmations of purchases and redemptions; transmit, on behalf of the Fund,
proxy statements, annual reports, updated prospectuses and other communications
to shareholders of the Fund; receive, tabulate and transmit to the Fund
32
<PAGE>
proxies executed by shareholders with respect to meetings of shareholders of the
Fund; and provide such other related services as the Fund or a shareholder may
request. Shareholder Servicing Agents may be required to register pursuant to
state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. The fees relating to
acting as liaison to shareholders and providing personal services to
shareholders will not exceed, on an annual basis, 0.25% of the average daily net
assets of each class of the Fund represented by shares owned during the period
for which payment is being made by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship. Each Shareholder Servicing Agent may,
from time to time, voluntarily waive all or a portion of the fees payable to it.
In addition, Chase may provide other related services to the Fund and/or
Portfolio for which it may receive compensation.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A and Class B shares, receive
dividends and distributions on Fund investments, and take advantage of any
services related to an Account offered by such Shareholder Servicing Agent from
time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund and the Portfolio. In this capacity,
DST maintains the account records of all shareholders in the Funds, including
statement preparation and mailing. DST is also responsible for
33
<PAGE>
disbursing dividend and capital gain distributions to shareholders, whether
taken in cash or additional shares. From time to time, DST and/or the Fund may
contract with other entities to perform certain services for the Transfer Agent.
For its services as Transfer Agent, DST receives such compensation as is from
time to time agreed upon by the Trust or the Portfolio and DST. DST's address is
210 W. 10th Street, Kansas City, MO 64105.
Pursuant to Custodian Agreements, Chase acts as the custodian of the assets
of the Fund, i.e., cash and securities representing the Fund's interest in the
Portfolio, and as the custodian of the Portfolio's assets, for which Chase
receives such compensation as is from time to time agreed upon by the Trust or
the Portfolio and Chase. The Custodian's responsibilities include safeguarding
and controlling the Portfolio's cash and securities, handling the receipt and
delivery of securities, determining income and collecting interest on the
Portfolio's investments, maintaining books of original entry for Portfolio
accounting and other required books and accounts, and calculating the daily net
asset value of beneficial interests in the Portfolio. Portfolio securities and
cash may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees. The internal division of Chase which serves as the
Custodian does not determine the investment policies of the Portfolio or decide
which securities will be bought or sold on behalf of the Portfolio or otherwise
have access to or share material inside information with the internal division
that performs advisory services for the Portfolio.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
34
<PAGE>
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in the
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return 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 the Fund will vary based on interest rates, the current market value
of the securities held by the Portfolio and changes in the Fund's expenses. The
Distributor may assume a portion of the Fund's operating expenses on a
month-to-month basis. These actions would have the effect of increasing the net
income (and therefore the yield and total rate of return) of the 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 the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of Shares --
Purchases"), which will have the effect of increasing the net return on the
investment of customers of those Shareholder Servicing Agents. Such customers
may be able to obtain through their Shareholder Servicing Agents quotations
reflecting such increased return. See the Statement of Additional Information
for further information concerning the calculation of the yields or total rates
of return quotations for the classes of shares of the Fund.
The Fund generally will include performance data for both classes of Fund
shares in any advertisements or promotional materials including Fund performance
data.
-------------------
THE STATEMENT OF ADDITIONAL INFORMATION contains more detailed information
about the Fund and the Portfolio, including information related to (i) the
investment policies and restrictions of the Fund and the Portfolio, (ii) the
Trustees, officers, investment adviser (if any) and administrator of the Trust
and the Portfolio, (iii) portfolio transactions and brokerage commissions, (iv)
the Fund's shares, including rights and liabilities of shareholders of both
classes, (v) additional performance information, including the method used to
calculate total rate of return and (vi) the determination of the net asset value
,O,of shares of the Fund.
35
<PAGE>
Vista Service Center
P.O. Box 419392
Kansas City, Missouri 64179
International
Equity Fund
- --------------------------------- ---------------------------------
INVESTMENT ADVISER & ADMINISTRATOR
Prospectus
The ChaseMQM
Application
DISTRIBUTOR
Vista Broker-Dealer Services, Inc.
TRANSFER AGENT
Investors Fiduciary Trust Company
LEGAL COUNSEL
Reid & Priest
INDEPENDENT ACCOUNTANTS
Price Waterhouse
SHAREHOLDER SERVICING AGENT & CUSTODIAN
The Chase Manhattan Bank, N.A.
VIE-1
MARCH 1, 1996
<PAGE>
PROSPECTUS
VISTASM SMALL CAP EQUITY FUND
March 1, 1996
VISTA SMALL CAP EQUITY FUND (the "Fund") seeks to provide its shareholders
with long-term capital growth primarily through a broad portfolio (i.e., at
least 80% of its assets in normal circumstances) in common stocks. Under
ordinary circumstances, the Fund will invest at least 65% of its assets in
small-sized companies, with capitalization of $750 million or less. The Adviser
intends to utilize both quantitative and fundamental research to identify
undervalued stocks with a catalyst for positive change. Current income, if any,
is a consideration incidental to the Fund's objective of growth of capital.
There can be no assurance that the methodology employed will satisfy the Fund's
objective of long term capital growth. To retain investment flexibility, the
Fund may determine to discontinue selling new shares of the Fund when the net
assets of the Fund reach approximately $500 million. Were the Fund to do so,
existing shareholders of the Fund would be permitted to continue making
additional purchases of Fund shares. The Fund is a non-diversified series of
Mutual Fund Group (the "Trust"), an open-end, management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on May 11, 1987, presently consisting of 15 separate series (the
"Funds"). Because the Fund is "non-diversified", more of the Fund's assets may
be concentrated in the securities of any single issuer, than if the Fund was
"diversified" which may make the value of shares of the Fund more susceptible to
certain risks than shares of a diversified mutual fund.
Of course, there can be no assurance that the Fund will achieve its
investment objective. Prospective investors should carefully consider the risks
associated with an investment in the Fund. For a further discussion on the risks
associated with an investment in the Fund, see "Investment Objective, Policies
and Risk Factors" in this Prospectus. Investors should also refer to "Additional
Information on Investment Policies and Techniques" on page 6.
The Chase Manhattan Bank, N.A. ("Chase" or the "Adviser") is the investment
adviser, custodian (the "Custodian") and administrator (the "Administrator").
The parent company of the Adviser, The Chase Manhattan Corporation has entered
into an agreement and Plan of Merger with Chemical Banking Corporation which, if
affected will have certain effects upon the Adviser, see "Management of the
Fund--The Adviser" on page 10. Vista Broker-Dealer Services, Inc. ("VBDS") is
the Fund's distributor and is unaffiliated with Chase. INVESTMENTS IN THE FUND
ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF PRINCIPAL--AND WILL FLUCTUATE IN
VALUE. SHARES OF THE FUND ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, THE CHASE MANHATTAN BANK, N.A. OR ANY OF ITS AFFILIATES AND ARE
NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER AGENCY.
Shares of the Fund are continuously offered for sale through VBDS, the
Fund's distributor (the "Distributor"). An investor should obtain from his or
her Shareholder Servicing Agent, if appropriate, and should read in conjunction
with this Prospectus, the materials provided by the Shareholder Servicing Agent
describing the procedures under which the shares of the Fund may be purchased
and redeemed through such Shareholder Servicing Agent.
Investors may select Class A or Class B shares, each with a public offering
price that reflects different sales charges and expense levels. Class A shares
are offered at net asset value plus the applicable sales charge (maximum of
4.75% of public offering price). Class B shares are offered at net asset value
without an initial sales charge, with a maximum contingent deferred sales charge
of 5% of redemption proceeds imposed on certain redemptions made within six
years of the date of purchase. This charge will decline to zero for redemptions
more than six years after initial purchase. Class B shares have higher ongoing
expenses than Class A shares, but automatically convert into Class A shares in
the eighth year after purchase. Salespersons and any other person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different compensation with respect to one particular class of shares over
another in the Fund. For more information on the differences in these classes,
see "Variable Distribution Method," "Purchases and Redemptions of Shares" and
"Conversion of Class B Shares."
This Prospectus sets forth concisely the information concerning the Fund
that a prospective investor should know before investing. A Statement of
Additional Information for the Fund, dated March 1, 1996, which contains more
detailed information concerning the Fund including the trustees and officers of
the Fund, has been filed with the Securities and Exchange Commission and is
incorporated into this Prospectus by reference. An investor may obtain a copy of
the Statement of Additional Information without charge by contacting his or her
Shareholder Servicing Agent, the Distributor or by calling the Vista Service
Center at 1-800-34-VISTA.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
For information about the Fund or your account, simply call the Vista
Service Center at the following toll-free number: 1-800-34-VISTA.
<PAGE>
TABLE OF CONTENTS
Expense Summary....................................................... 3
Financial Highlights.................................................. 4
Investment Objective, Policies and Risk Factors....................... 5
Additional Information on Investment Policies and Techniques.......... 6
Variable Distribution Method.......................................... 9
Management............................................................ 10
Purchases and Redemptions of Shares................................... 13
Tax Matters........................................................... 23
Other Information Concerning Shares of the Fund....................... 25
Shareholder Servicing Agents, Transfer Agent and Custodian............ 28
Yield and Performance Information..................................... 30
2
<PAGE>
EXPENSE SUMMARY
The following table provides (i) a summary of expenses relating to purchases
and sales of Class A and Class B shares of the Fund, and the aggregate annual
operating expenses of the Fund, as a percentage of average net assets of the
Fund, and (ii) an example illustrating the dollar cost of such expenses on a
$1,000 investment in Class A or Class B shares of the Fund.
<TABLE><CAPTION>
CLASS A CLASS B
SHARES SHARES
------- -------
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on Purchases*
(as a percentage of offering price)...................................... 4.75% None
Maximum Contingent Deferred Sales Charge
(as a percentage of redemption proceeds)+................................ None 5.00%
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
- ---------------------------------
<S> <C> <C>
Investment Advisory Fee.................................................... 0.65% 0.65%
Rule 12b-1 Distribution Plan Fee++......................................... 0.25% 0.75%
Administration Fee......................................................... 0.10% 0.10%
Other Expenses
--Sub-Administration Fee................................................. 0.05% 0.05%
--Shareholder Servicing Fee.............................................. -- 0.25%
--Other Operating Expenses+++............................................ 0.45% 0.45%
------- -------
Total Fund Operating Expenses.............................................. 1.50% 2.25%
======= =======
</TABLE>
EXAMPLE:
You would pay the following expenses on a $1,000 invested in the Fund,
assuming a 5% annual total return:
<TABLE><CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Class A Shares(1):................................................. $62 $ 93 $ 125 $ 218
Class B Shares:
Assuming complete redemption at the end of the period(2)(3)...... 74 103 143 231
Assuming no redemptions(3)....................................... 23 70 120 231
</TABLE>
- ------------
* The rules of the Securities and Exchange Commission require that the Fund's
maximum sales charge be reflected in the expense summary.
+ The maximum 5% contingent 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 "Purchases."
++ As a result of distribution fees, a long-term shareholder in the Fund may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the rules of the National Association of Securities Dealers,
Inc.
+++ A shareholder may incur a $10.00 charge for certain wire redemptions.
(1) Assumes deduction at the time of purchase of the maximum initial sales
charge, as applicable.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of eighth year.
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in the Fund will
bear directly or indirectly. The expense summary shows the investment advisory
fee, distribution plan fee, administrative fee, sub-administrative fee,
shareholder servicing agent fee and other operating expenses expected to be
incurred by the Fund during the fiscal year. A more complete description of the
Fund's expenses, including any potential fee waivers, is set forth herein on
pages 10-12, 25-27 and 28-30.
THE "EXAMPLE" SET FORTH ABOVE ASSUMES ALL DIVIDENDS AND OTHER DISTRIBUTIONS
ARE REINVESTED AND THAT THE PERCENTAGES UNDER "ANNUAL FUND OPERATING EXPENSES"
REMAIN THE SAME IN THE YEARS SHOWN. THE "EXAMPLE" SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND; ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN SHOWN. THE ACTUAL EXPENSES INCURRED AND ATTRIBUTABLE TO
EACH CLASS OF SHARES WILL DEPEND ON SEVERAL FACTORS, INCLUDING THE LEVEL OF
AVERAGE NET ASSETS AND THE EXTENT TO WHICH A CLASS INCURS VARIABLE EXPENSES,
SUCH AS TRANSFER AGENCY COSTS.
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 the periods shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the period from
commencement of operations (see respective dates below) through October 31,
1995, which is incorporated by reference into the Statement of Additional
Information. Shareholders may obtain a copy of this Annual Report by contacting
the Fund or their Shareholder Servicing Agent. The statements and financial
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 included in the Annual Report to Shareholders.
<TABLE>
<CAPTION>
12/20/94* 3/28/95**
THROUGH THROUGH
10/31/95 10/31/95+
--------- ---------
<S> <C> <C>
A B
SHARES SHARES
--------- ---------
<CAPTION>
PER SHARE OPERATING PERFORMANCE
- -----------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period............................. $ 10.00 $ 11.39
--------- ---------
Income From Investment Operations..............................
Net Investment Income.......................................... 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 Assets #.............................. (0.64%) (1.24%)
Portfolio Turnover Rate.......................................... 75% 75%
</TABLE>
- ------------
# Short periods have been annualized.
* Commencement of operations.
** Commencement of offering shares.
(1) Total rates of return are calculated before taking into any sales load for
Class A shares, or any contingent deferred sales charge for Class B shares.
+ Calculated based upon weighted average shares outstanding during the period.
4
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
INTRODUCTION
THE FUND IS AGGRESSIVELY MANAGED AND, THEREFORE, THE VALUE OF ITS SHARES IS
SUBJECT TO GREATER FLUCTUATION AND AN INVESTMENT IN ITS SHARES INVOLVES THE
ASSUMPTION OF A HIGHER DEGREE OF RISK THAN WOULD BE THE CASE WITH AN INVESTMENT
IN A CONSERVATIVE EQUITY FUND OR A GROWTH FUND INVESTING ENTIRELY IN PROVEN
GROWTH EQUITIES. GIVEN THE ABOVE-AVERAGE INVESTMENT RISK INHERENT IN THE FUND,
INVESTMENT IN SHARES OF THE FUND SHOULD NOT BE CONSIDERED A COMPLETE INVESTMENT
PROGRAM AND MAY NOT BE APPROPRIATE FOR ALL INVESTORS.
INVESTMENT OBJECTIVE -- The investment objective of the Fund is to provide
its shareholders with long-term capital growth. Current income, if any, is a
consideration incidental to the Fund's objective of growth of capital.
INVESTMENT POLICIES -- The Fund seeks to achieve its investment objective by
investing (i.e., at least 80% of its total assets in normal circumstances) in
common stocks. Under ordinary circumstances, the Fund will invest at least 65%
of its assets in small sized-companies, with capitalization of $750 million or
less. The Adviser intends to utilize both quantitative and fundamental research
to identify undervalued stocks with a catalyst for positive change. Dividend
income, if any, is a consideration incidental to the Fund's objective of growth
of capital. There can be no assurance that the methodology employed will satisfy
the Fund's objective of long term capital growth. An investor should be aware
that investment in small capitalization issuers may be more volatile than
investments in issuers with market capitalizations greater than $750 million due
to the lack of diversification in the business activities, limited product
lines, markets or financial resources, and corresponding greater susceptibility
to changes in the business cycle of small capitalization issuers. Small
capitalization stocks as a group may not respond to general market rallies or
downturns as much as other types of equity securities. This investment policy
involves the risks that the changes or trends identified by the Adviser will not
occur or will not be as significant as projected and that, even if the changes
or trends develop, the particular issues held by the Fund will not benefit as
anticipated from such changes or trends.
THE NET ASSET VALUE OF THE FUND WILL FLUCTUATE BASED ON THE VALUE OF THE
SECURITIES IN THE FUND'S PORTFOLIO.
The Fund normally will be substantially fully invested and, in normal
circumstances, invest at least 80% of its total assets in common stocks. The
Fund may invest up to 20% of its total assets in stocks of foreign issuers.
Investments in foreign securities are subject to certain risks to which
investments in domestic securities are not subject, including political or
economic instability of the issuer or country of issue and the possibility of
the imposition of exchange controls. However, the Fund reserves the right to
invest more than 20% of its total assets in cash, cash equivalents and debt
securities such as commercial paper, bank obligations and obligations issued by
the U.S. Government or its agencies and instrumentalities which have a remaining
maturity of one year or less for temporary defensive purposes during periods
which the Adviser considers to be particularly risky for investment in common
stocks. See "Additional Information on Investment Policies and
Techniques--Foreign Securities" on page 7. The Fund may also enter into
repurchase agreements and engage in the lending of portfolio securities. See
"Additional Information on Investment Policies and Techniques--Repurchase
Agreements, Portfolio Securities Lending on page 6.
The Fund may enter into transactions in stock index futures contracts,
options on stock index futures contracts, options on stock indexes and options
on equity securities. "Additional Information on
5
<PAGE>
Investment Policies and Techniques" contains a more complete description of the
hedging instruments to be traded, as well as further information concerning the
investment policies and techniques of the Fund. In addition, the Statement of
Additional Information includes a further discussion of the transactions in
futures and option contracts which may be entered into by the Fund. Although the
Fund may enter into transactions in futures and option contracts for hedging
purposes only, the use of such instruments does involve transaction costs and
certain risks, which are discussed in the Statement of Additional Information.
Shareholder approval is required to change the Fund's investment objective
which is considered to be fundamental. However, shareholder approval is not
required to change any of the investment policies described above or in
"Additional Information on Investment Policies and Techniques".
ADDITIONAL INFORMATION ON INVESTMENT POLICIES AND TECHNIQUES
To the extent the assets of the Fund are not invested in common stocks, they
will consist of or be invested in cash, cash equivalents and short-term debt
securities, such as U.S. Government securities, bank obligations and commercial
paper, as described under "Investment Objectives, Policies and Restrictions" in
the Statement of Additional Information, and in repurchase agreements, as
described below and in greater detail under "Investment Objectives, Policies and
Restrictions" in the Statement of Additional Information.
Because the value of securities and the income derived therefrom may
fluctuate according to the earnings of the issuers and changes in economic and
money market conditions, there can be no assurance that the investment objective
of the Fund will be achieved.
REPURCHASE AGREEMENTS. The Fund may, when appropriate, enter into repurchase
agreements (a purchase of and simultaneous commitment to resell a security at an
agreed-upon price and date which is usually not more than seven days from the
date of purchase) only with member banks of the Federal Reserve System and
security dealers believed creditworthy and only if fully collateralized by U.S.
Government obligations or other securities in which the Fund is permitted to
invest. In the event the seller fails to pay the agreed-to sum on the
agreed-upon delivery date, the underlying security could be sold by the Fund,
but the Fund might incur a loss in doing so, and in certain cases may not be
permitted to sell the security. As an operating policy, the Fund, through its
custodian bank, takes constructive possession of the collateral underlying
repurchase agreements. Additionally, procedures have been established for the
Fund to monitor, on a daily basis, the market value of the collateral underlying
all repurchase agreements to ensure that the collateral is at least 100% of the
value of the repurchase agreements. Not more than 10% of the total assets of the
Fund will be invested in securities which are subject to legal or contractual
restrictions on resale, including securities that are not readily marketable and
repurchase agreements maturing in more than seven days. Repurchase agreements
may be deemed to be loans by the Fund.
PORTFOLIO MANAGEMENT AND TURNOVER. It is not intended that the assets of the
Fund will be invested in securities for the purpose of short-term profits.
However, the Fund will dispose of portfolio securities whenever the Adviser
believes that changes are appropriate. Generally, the primary consideration in
placing portfolio securities transactions with broker-dealers for execution is
to obtain, and maintain the availability of, execution at the most favorable
prices and in the most effective manner possible. For a complete discussion of
portfolio transactions and brokerage allocation, see "Investment Objectives,
Policies and Restrictions--Investment Policies: Portfolio Transactions and
Brokerage Allocation" in the Statement of Additional Information.
6
<PAGE>
FOREIGN SECURITIES
Among the common stocks in which the Fund may invest are stocks of foreign
issuers, although at present the Fund does not intend to invest more than 20% of
its total assets in such securities. These securities may represent a greater
degree of risk (e.g., risk related to exchange rate fluctuation, tax provisions,
war or expropriation) than do securities of domestic issuers.
Investing in securities issued by foreign corporations and governments
involves considerations and possible risks not typically associated with
investing in securities issued by domestic corporations and the U.S. Government.
The values of foreign investments are affected by changes in currency rates or
exchange control regulations, application of foreign tax laws, including
withholding taxes, changes in governmental administration or economic or
monetary policy (in the U.S. or other countries) or changed circumstances in
dealings between countries. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations and could be subject
to extended settlement periods.
The Fund may 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. The specific amounts of currencies comprising
the ECU may be adjusted by the Council of Ministers of European Community to
reflect changes in relative values of the underlying currencies. The Fund's
Trustees do not believe that such adjustments will adversely affect holders of
ECU-denominated securities or the marketability of such securities. European
governments and supranational organizations (discussed below), in particular,
issue ECU-denominated securities.
The Fund may invest in securities issued by supranational organizations such
as: the World Bank, which was chartered to finance development projects in
developing member countries; the European Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations steel
and coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations of the Asian and Pacific regions.
The Fund may invest its assets in securities of foreign issuers in the form
of sponsored ADRs, EDRs, or other similar securities representing securities of
foreign issuers. ADRs are receipts typically issued by an American bank or trust
company evidencing ownership of the underlying foreign securities. EDRs are
receipts issued by a European financial institution evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs, in bearer form, are designed for use in European
securities markets.
FUTURES AND OPTIONS TRANSACTIONS. The Fund may invest its assets in
derivative and related instruments subject only to the Fund's investment
objective and policies and the requirement that to avoid leveraging the Fund,
the Fund 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
that is no underlying portfolio assets.
7
<PAGE>
The value of some derivative or related instruments in which the Fund
invests may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and -- like other investments of the Fund -- the ability
of the Fund to successfully utilize these instruments may depend in part upon
the ability of the Adviser to forecast interest rates and other economic factors
correctly. If the Adviser incorrectly forecasts such factors and has taken
positions in derivative or related instruments contrary to prevailing market
trends, the Fund could be exposed to the risk of a loss. The Fund might not
employ any or all of the instruments described herein, and no assurance can be
given that any strategy used will succeed.
To the extent permitted by the investment objective and policies of the
Fund, and as described more fully in the Fund's Statement of Additional
Information, the Fund may:
. 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);
. enter into futures contracts and options on futures contracts;
. purchase and sell mortgage-backed and asset-backed securities; and
. purchase and sell structured products.
RISK FACTORS
As explained more fully in the Statement of Additional Information, there
are a number of risks associated with the use of derivatives and related
instruments, including:
. 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. Incorrect correlation could result in a loss on both the hedged
assets in the Fund 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 Adviser may incorrectly forecast interest rates, market values or
other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy.
. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains.
. Strategies not involving hedging may increase the risk to the Fund.
Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to the Fund than hedging
strategies using the same instruments.
. There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on a particular
contract, no trades may be made that day at a price beyond that limit. In
addition, certain instruments are relatively new and without a significant
trading history. As a result, there is no assurance that an active secondary
market will develop or continue to exist.
. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets.
8
<PAGE>
. 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 or be unable to perform on its
commitments. In the event of such a default, the Fund may experience a loss.
For additional information concerning the use and risks involved in the
acquisition, ownership or sale of futures contracts and options thereon,
including certain percentage limitations on the use of such instruments, see
"Investment Objective, Policies and Restrictions--Investment Policies:
Additional Policies Regarding Futures and Options Transactions, Risk Factors
Associated with Futures and Options Transactions, and Restrictions on the Use of
Futures and Options Contracts" in the Statement of Additional Information.
Shareholder approval is not required to change the investment objective or
any of the investment policies described above. However, in the event of a
change in the Fund's investment objectives, shareholders will be given at least
30 days' prior written notice.
VARIABLE DISTRIBUTION METHOD
The primary differences between the classes lie in their sales charge
structures, and ongoing expenses, as summarized below. Each class has distinct
advantages and disadvantages depending on the investor. Investors should
carefully consider the attributes of a class before investing.
<TABLE>
<CAPTION>
CONTINGENT
INITIAL DEFERRED DISTRIBUTION OTHER
SALES CHARGE SALES CHARGE AND SERVICE FEES INFORMATION
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Class A.......... Maximum of 4.75% None Distribution Fee Initial Sales
of public of 0.25% Charge reduced in
offering price certain
circumstances
Class B.......... None Maximum Distribution Fee Shares convert to
contingent of 0.75%; Service Class A shares,
deferred sales Fee of 0.25% and
charge of 5% of thus pay lower
redemption distribution
proceeds declines fees,
to 0% after 6 in the eighth
years year
after issuance
</TABLE>
FACTORS TO CONSIDER
The classes of shares have several different attributes relating to sales
charges and expenses. These attributes are discussed more fully below. In
choosing a class of shares to purchase, investors should consider the sales
charges and ongoing expenses of each class.
SALES CHARGES--Class A shares are sold at net asset value plus an initial
sales charge of up to a maximum of 4.75% of the public offering price.
Class B shares have no initial sales charge; however, a contingent deferred
sales charge will be imposed on redemptions made within six years of purchase.
The amount of this contingent deferred sales charge will be 5% of the redemption
proceeds on redemptions in the first year after purchase, declining to zero for
redemptions made more than six years after purchase. However, this contingent
deferred sales charge will not apply to redemptions of shares representing
capital appreciation on Fund assets and reinvestment of dividends or capital
gains distributions. 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.
9
<PAGE>
REDUCTIONS OF CLASS A SALES CHARGES--As explained more fully in "Purchase
and Redemptions of Shares," certain purchases of Class A shares in amounts
exceeding $100,000 are eligible for reduced initial sales charges. In
determining which classes to purchase, investors should consider any reductions
in initial sales charges on Class A shares for which they may be eligible.
ONGOING ANNUAL EXPENSES--Class B has an annual shareholder servicing fee of
0.25% of its average daily net assets. Class A has an annual distribution fee
under Rule 12b-1 of 0.25% of its average daily net assets, while Class B has an
annual distribution fee under Rule 12b-1 of 0.75% of average daily net assets.
Moreover, other operating expenses borne by each class 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.
Investors should carefully consider these ongoing annual expenses, along
with initial or contingent deferred sales charges in choosing between classes.
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.
OTHER INFORMATION
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of Fund shares rather than
another.
MANAGEMENT
The Fund's investment adviser is Chase, which also serves as the Fund's
administrator. Chase global investment management capabilities are supported by
investment professionals located in cities around the world, including New York,
Geneva and Hong Kong.
THE ADVISER
The Adviser manages the assets of the Fund pursuant to an Investment
Advisory Agreement dated November 17, 1994 and, subject to such policies as the
Board of Trustees may determine, the Adviser makes investment decisions for the
Fund. Dave Klassen and Jill Greenwald, Vice Presidents of the Adviser, are
responsible for the day-to-day management of the Portfolio. Mr. Klassen joined
Chase in March 1992 and, in addition to co-managing the Capital Growth
Portfolio, is responsible for managing several pooled equity funds. 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. with
concentrations in consumer, technology and transportation issues. For its
services under the Investment Advisory Agreement, the Adviser is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.65% of the Fund's average daily net assets. The Adviser may, from
time to time, voluntarily waive all or a portion of its fees payable under the
Advisory Agreement.
The Adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Its headquarters is at One Chase Manhattan Plaza, New York, NY
10081. The Adviser, including its predecessor organizations, has over 100 years
of money management experience and renders investment advisory services to
others. Also
10
<PAGE>
included among the Adviser's accounts are commingled trust funds and a broad
spectrum of individual trust and investment management portfolios. These
accounts have varying investment objectives.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into
an Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the second largest bank
holding company in the United States based on assets. The consummation of the
Holding Company Merger is subject to certain closing conditions. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger. The Holding Company Merger
is expected to be completed on or about March 31, 1996.
Subsequent to the Holding Company Merger, it is expected that the adviser to
the Funds, The Chase Manhattan Bank, N.A., will be merged with and into Chemical
Bank, a New York State chartered bank ("Chemical Bank") (the "Bank Merger" and
together with the Holding Company Merger, the "Mergers"). The surviving bank
will continue operations under the name The Chase Manhattan Bank (as used
herein, the term "Chase"refers to The Chase Manhattan Bank, N.A. and its
successor in the Bank Merger, and the term "Adviser" means Chase (including its
successor in the Bank Merger) in its capacity as investment adviser to the
Fund). The consummation of the Bank Merger is subject to certain closing
conditions, including the receipt of certain regulatory approvals. The Bank
Merger is expected to occur in July 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly owned subsidiary of Chemical and is a New York State
chartered bank.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities purchased on behalf of the Fund, including outstanding loans to
such issuers which may be repaid in whole or in part with the proceeds of
securities so purchased. The Adviser and its affiliates deal, trade and invest
for their own accounts in U.S. Government obligations, municipal obligations and
commercial paper and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to, and purchase
them from, other investment companies sponsored by the Distributor or affiliates
of the Distributor. The Adviser will not invest the Fund's assets in any U.S.
Government obligations, municipal obligations or commercial paper purchased from
itself or any affiliate, although under certain circumstances such securities
may be purchased from other members of an underwriting syndicate in which the
Adviser or an affiliate is a non-principal member. This restriction may limit
the amount or type of U.S. Government obligations, municipal obligations or
commercial paper available to be purchased by the Fund. The Adviser has informed
the Fund that in making its investment decisions, it does not obtain or use
material inside information in the possession of any other division or
department of the Adviser, including the division that performs services for the
Fund as Custodian, or in the possession of any affiliate of the Adviser.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions,
11
<PAGE>
Chase and its affiliates may exchange among themselves certain information about
the shareholder and his account.
THE ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989, as
amended September 30, 1993 (the "Administration Agreement") Chase serves as
administrator of the Fund.
Chase provides certain administrative services, including, among other
responsibilities, coordinating relationships with independent contractors and
agents; preparing for signature by officers and filing of certain documents
required for compliance with applicable laws and regulations excluding those of
the securities laws of the various states; preparing financial statements;
arranging for the maintenance of books and records; and providing office
facilities necessary to carry out the duties thereunder. Chase is entitled to
receive from the Fund a fee computed daily and paid monthly at an annual rate
equal to 0.10% of the Fund's average daily net assets. Chase may, from time to
time, voluntarily waive all or a portion of its fees payable to it under the
administration agreements.
GLASS-STEAGALL ACT. Chase has received the opinion of its legal counsel that
it may provide the services described in the Investment Advisory and the
Administration Agreements, as described above, and the Shareholder Servicing
Agreements and Custodian Agreement with the Fund, as described below, without
violating the federal banking law commonly known as the Glass-Steagall Act. The
Act generally bars banks from publicly underwriting or distributing certain
securities.
Based on the advice of its counsel, the Adviser believes that the Court's
decision, and these other decisions of banking regulators, permit it to serve as
investment adviser to a registered, open-end investment company.
Regarding the performance of shareholder servicing and custodial activities,
the staff of the Office of the Comptroller of the Currency, which supervises
national banks, has issued opinion letters stating that national banks may
engage in shareholder servicing and custodial activities. Therefore, the Adviser
believes, based on advice of counsel, that it may serve as Shareholder Servicing
Agent and/or Custodian to the Fund and render the services described below and
as set forth in the shareholder servicing agreement and Custodian Agreement, as
an appropriate, incidental national banking function and as a proper adjunct to
its serving as investment adviser and administrator to the Fund.
Industry practice and regulatory decisions also support a bank's authority
to act as administrator for a registered investment company. Chase, on the
advice of its counsel, believes that it may render the services described in its
Administration Agreement without violating the Glass-Steagall Act or other
applicable banking laws.
Possible future changes in federal law or administrative or judicial
interpretations of current or future law, however, could prevent the Adviser
from continuing to perform investment advisory, shareholder servicing, custodial
or other administrative services for the Fund. If that occurred, the Fund's
Board of Trustees promptly would seek to obtain for the Fund the services of
another qualified adviser, shareholder servicing agent, custodian or
administrator, as necessary. Although no assurances can be given, the Fund
believes that, if necessary, the transfer to a new adviser, shareholder
servicing agent, custodian or administrator could be accomplished without undue
disruption to its operations.
In addition, state securities laws on this issue may differ from the
interpretations of federal law expressed herein and banks and financial
institutions may be required to register as dealers pursuant to state law.
12
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES
PURCHASES
Class A shares are sold to investors subject to an initial sales charge.
Class B shares of the Fund are sold without an initial sales charge but are
subject to higher ongoing expenses than Class A shares and a contingent deferred
sales charge payable upon certain redemptions. Class B shares automatically
convert to Class A shares in the eighth year after issuance. See "Variable
Distribution Method." Both classes of the Fund may be purchased through selected
financial service firms, such as broker-dealer firms and banks ("Dealers") who
have entered into a selected dealer agreement with Vista Broker-Dealer Services,
Inc., at the public offering price which is computed once daily as of the close
of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time;
however, options are priced at 4:15 p.m.) on each business day during which the
Exchange is open for trading ("Fund Business Day"). (See "Other Information
Concerning Shares of the Fund-Net Asset Value"). The public offering price of
Class A shares is the next determined net asset value, plus applicable initial
sales charge. Orders received by Dealers prior to the New York Stock Exchange
closing time are confirmed at the offering price effective at the close of such
Exchange, provided the order is received by the Transfer Agent prior to its
close of business. Dealers are responsible for forwarding orders for the
purchase of shares on a timely basis. Fund shares normally will be maintained in
book entry form and only Class A share certificates will be issued only upon
request. Management reserves the right to refuse to sell shares of the Fund to
any person.
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days.
Shareholder Servicing Agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund Shares, such as pre-authorized or systematic purchase and redemption plans.
Each Shareholder Servicing Agent may establish its own terms and conditions,
including reduced minimum initial purchase amounts and limitations on the
amounts of subsequent transactions, with respect to such services. Certain
Shareholder Servicing Agents may (although they are not required by the Trust to
do so) credit to the accounts of their customers from whom they are already
receiving other fees an amount not exceeding the fees for their services as
Shareholder Servicing Agents (see "Shareholder Servicing Agents, Transfer Agent
and Custodian -- Shareholder Servicing Agents"), which will have the effect of
increasing the net return on the investment of customers of that Shareholder
Servicing Agent.
WHEN PLACING ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS
A OR CLASS B SHARES. ALL SHARE PURCHASES THAT FAIL TO SPECIFY A CLASS WILL
AUTOMATICALLY BE INVESTED IN CLASS A SHARES.
13
<PAGE>
MINIMUM INVESTMENTS
The Fund has established minimum initial and additional investments for the
purchase of Fund Shares. The minimums detailed below vary by the type of account
being established:
<TABLE>
<CAPTION>
ACCOUNT TYPE MINIMUM INITIAL INVESTMENT
------------ --------------------------
<S> <C>
Individual..................................................... $2,500(1)
Individual Retirement Account (IRA)............................ $1,000(2)
Spousal IRA.................................................... $ 250
SEP-IRA........................................................ $1,000(2)
Purchase Accumulation Plan..................................... $ 250(3)
Payroll Deduction Program...................................... $ 100(4)
(401K, 403B, Keogh)
</TABLE>
- ------------
(1) Employees of the Adviser and its affiliates, and Qualified Persons as
defined in "Purchases of Class A Shares at Net Asset Value", are eligible
for a $1,000 minimum initial investment.
(2) A $250 minimum initial investment is allowed if the new account is
established with a $100 minimum monthly Systematic Investment Plan as
described below.
(3) Account must be established with a $200 minimum monthly Systematic
Investment Plan as described below.
(4) A $25 minimum monthly investment must be established through an automated
payroll cycle.
The minimum additional investment is $100 for all types of accounts.
SYSTEMATIC INVESTMENT PLAN A shareholder may establish a monthly investment
plan by which investments are automatically made to his/her Vista Fund account
through Automatic Clearing House (ACH) deductions from a checking account. The
minimum monthly investment through this plan is $100. Shareholders may choose
either to have these investments made during the first or third week each month.
Please note that your initial ACH transactions may take up to 10 days from the
receipt of your request to be established.
Shareholders electing to start this Systematic Investment Plan when opening
an account should complete Section 8 of the account application. Current
shareholders may begin a Systematic Investment Plan at any time by sending a
signed letter with SIGNATURE GUARANTEE to the Vista Service Center, P.O. Box
419392, Kansas City, MO 64141-6392. The letter should contain your Vista Fund
account number, the desired amount and cycle of the systematic investment, and
must include a voided check from the checking account from which debits are to
be made. A signature guarantee may be obtained from a bank, trust company,
broker-dealer or other member of the national securities exchange. Please note
that a notary public cannot provide signature guarantees.
14
<PAGE>
INITIAL SALES CHARGES--CLASS A SHARES
The public offering price of shares is the next determined net asset value,
plus any applicable initial sales charge, which will vary with the size of the
purchase as shown in the following table:
<TABLE>
<CAPTION>
CONCESSION
SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
- ------------------- -------- -------- ----------
<S> <C> <C> <C>
Less than $100,000........................ 4.75 4.99 4.00
$100,000 to $249,999...................... 3.75 3.90 3.25
$250,000 to $499,999...................... 2.50 2.56 2.25
$500,000 to $999,999...................... 2.00 2.04 1.75
$1,000,000 to $2,499,999.................. -- -- 1.00
$2,500,000 to $9,999,999.................. -- -- 0.75
$10,000,000 to $49,999,999................ -- -- 0.50
$50,000,000 and over...................... -- -- 0.20
</TABLE>
The initial sales charge on Class A shares varies with the size of the
purchase as shown above. The reduced charges apply to the aggregate of purchases
of Class A shares of the Fund made at one time by "any person", which term
includes, among others, an individual, spouse and children under the age of 21,
or a Trustee or other fiduciary of a Trust estate or fiduciary account. The
Distributor may compensate Dealers for sales of $1,000,000 or more from its own
resources and/or the Distribution Plan.
Upon notice to Dealers with whom it has sales agreements, VBDS may reallow
up to the full applicable initial sales charge on Class A shares and such Dealer
may therefore be deemed an "underwriter" under the Securities Act of 1933, as
amended, during such periods. For a three-year period concluding July 19, 1996
for activities in maintaining and servicing accounts of customers invested in
the Fund, Associated Securities Corp. ("Associated Securities") may receive
payments from the Adviser based, in part, on the amount of the aggregate asset
values of the Fund (and other Vista funds) in the accounts of shareholders
attributable to Associated Securities and the length of time such assets are in
such accounts.
In addition, under an arrangement between Associated Securities and the
Distributor, Associated Securities will be entitled to receive either 50% or 70%
of the difference between the total front-end sales load, or in the case of
Class B shares 4.00% and that portion paid to selling group member broker-
dealers.
To the extent permitted by applicable SEC and NASD regulations, the
Distributor may, from time to time, provide promotional incentives to certain
Dealers whose representatives have sold or are expected to sell significant
amounts of the Fund or other Funds in the Trust. At various times the
Distributor may implement programs under which a Dealer's sales force may be
eligible to win cash awards for certain sales efforts or under which the
Distributor will reallow an amount not exceeding the total applicable initial
sales charges on the sales of Class A shares or the Maximum Contingent Deferred
Sales Charge of Class B shares generated by the Dealer during such programs to
any Dealer that sponsors sales contests or recognition programs conforming to
criteria established by the Distributor or participates in sales programs
sponsored by the Distributor. The Distributor may provide marketing services
15
<PAGE>
to Dealers with whom it has sales agreements, consisting of written
informational material relating to sales incentive campaigns conducted by such
Dealers for their representatives.
PURCHASES OF SHARES AT NET ASSET VALUE--CLASS A SHARES
SHAREHOLDERS AS OF NOVEMBER 30, 1990
Shareholders of record of any Vista Fund as of November 30, 1990, may
purchase shares of the Fund at Net Asset Value without an initial sales charge
for as long as they continue to own Class A shares of any Vista Fund, provided
there is no change in account registration. However, once a shareholder closes
his or her account by redeeming all shares, he or she will lose this privilege
after 30 days. This provision applies to accounts registered in the name of the
shareholder and his or her spouse and children under 21 and for IRAs in their
names.
SHAREHOLDERS WHO ARE ELIGIBLE PERSONS
There is no initial sales charge on Class A shares purchased by the
following "Eligible Persons:"
a) Active or retired Trustees, Directors, officers, partners or
employees (including their spouses, children, siblings and parents) of the
Adviser, Distributor, Transfer Agent or any affiliates or subsidiaries
thereof.
b) Employees (including their spouses and children under 21) of Dealers
having a selected dealer agreement with the distributor.
c) Any qualified retirement plan or IRA established for the benefit of a
person in (a) or (b).
QUALIFIED AND OTHER RETIREMENT PLANS
No initial sales charge will apply to the purchase of Class A shares of the
Fund by:
a) An investor seeking to invest the proceeds of a qualified retirement
plan, where a portion of the plan was invested in Vista.
b) Any qualified retirement plan with 250 or more participants.
c) An individual participant in a tax-qualified plan making a tax-free
rollover or transfer of assets from the plan in which the adviser of the
Fund serves as Trustee or custodian of the plan or manages some portion of
the plan's assets.
PURCHASES THROUGH INVESTMENT ADVISERS, BROKERS OR FINANCIAL PLANNERS
Purchases of Class A Shares of the Fund may be made with no initial sales
charge through an investment adviser, broker, or financial planner who charges a
fee for their services. 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,
including but not limited to those defined in section 401(a), 403(b) or 457 of
the Internal Revenue Code or rabbi trusts.
16
<PAGE>
Investors may incur a fee if they effect transactions through a broker or
agent.
PURCHASES THROUGH A BANK AS FIDUCIARY
Purchases of Class A shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary (i.e., exercises investment authority with respect to
such accounts), provided that appropriate notification of such fiduciary
relationship is reported at the time of the investment to the Fund, the
Distributor or the Transfer Agent.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares of the Fund may be purchased by
any person at a reduced initial sales charge which is determined by (a)
aggregating the dollar amount of the new purchase and the greater of the
purchaser's total (i) net asset value or (ii) cost of any shares acquired and
still held in the Fund, or any other Vista Fund, including any Vista money
market Fund acquired by exchange for which a sales charge had been incurred and
(b) applying the initial sales charge applicable to such aggregate dollar value.
The privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all Class A shares purchased
thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
hereinafter defined) may also purchase Class A shares of the Fund at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group plus the securities currently being
purchased and is determined as stated above under "Cumulative Quantity
Discount". For example, if members of the group had previously invested and
still held $90,000 of Class A shares and now were investing $15,000, the initial
sales charge would be 3.75%. In order to obtain such discount, the purchaser or
investment dealer must provide the Transfer Agent with sufficient information,
including the purchaser's total cost, at the time of purchase to permit
verification that the purchaser qualifies for a cumulative quantity discount,
and confirmation of the order is subject to such verification. Information
concerning the current initial sales charge applicable to a group may be
obtained by contacting the Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares at a discount and
(iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing Class A shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of the Fund and the members, must agree to
include sales and other materials related to the Fund in its publications and
mailings to members at reduced or no cost to the Distributor, and must seek to
arrange for payroll deduction or other bulk transmission of investments of the
Fund. This privilege is subject to modification or discontinuance at any time
with respect to all Class A shares purchased thereafter.
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<PAGE>
STATEMENT OF INTENTION. Investors in Class A shares may also qualify for
reduced sales charges by signing a Statement of Intention (the "Statement").
This enables the investor to aggregate purchases of Class A shares in the 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), including shares of any Vista money
market Fund, acquired by exchange, during a 13-month period. The sales charge is
based on the total amount to be invested in Class A shares during the 13-month
period. All Class A or other qualifying shares of these Funds currently owned by
the investor will be credited as purchases (at their current offering prices on
the date the Statement is signed) toward completion of the Statement. A 90-day
back-dating period can be used to include earlier purchases at the investor's
cost. The 13-month period would then begin on the date of the first purchase
during the 90-day period. No retroactive adjustment will be made if purchases
exceed the amount indicated in the Statement. A shareholder must notify the
Transfer Agent or Distributor whenever a purchase is being made pursuant to a
Statement.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares
registered in the shareholder's name in order to assure payment of the proper
sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their investment in the Fund, subject to the terms of exchange (see
"Exchange Privilege") at net asset value next determined. A written request for
reinstatement must be received by the Transfer Agent within 30 calendar days of
the redemption, accompanied by payment for the shares (not in excess of the
redemption). This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereafter.
EXCHANGES FOR CLASS A SHARES OF OTHER VISTA FUNDS. Class A shares of the
Fund may be obtained without an initial sales charge through exchanges for Class
A shares of other Vista Funds. See "Exchange Privilege." In addition, Class B
shareholders who have redeemed Class B shares and paid a contingent deferred
sales charge in connection with such redemption may purchase Class A shares with
no initial sales charge (in an amount not exceeding the redemption proceeds) if
the purchase occurs within 30 days of the redemption of the Class B shares.
CONTINGENT DEFERRED SALES CHARGES--CLASS B SHARES
The public offering price of Class B shares is the next determined net asset
value, and no initial sales charge is imposed. However, a contingent deferred
sales charge is imposed upon certain redemptions of Class B shares.
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<PAGE>
The amount of any applicable contingent deferred sales charge will be
calculated by multiplying the net asset value of such shares at the time of
redemption by the applicable percentage shown in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED SALES
CHARGE AS A PERCENTAGE OF
REDEMPTION DURING NET ASSET VALUE AT REDEMPTION
----------------- -----------------------------
<S> <C>
1st Year Since Purchase...................................... 5%
2nd Year Since Purchase...................................... 4%
3rd Year Since Purchase...................................... 3%
4th Year Since Purchase...................................... 3%
5th Year Since Purchase...................................... 2%
6th Year Since Purchase...................................... 1%
7th Year Since Purchase...................................... 0%
</TABLE>
Redemptions of Class B shares are not subject to a contingent deferred sales
charge to the extent that the value of such shares represents: (i) capital
appreciation of Fund assets; (ii) reinvestment of dividends or capital gain
distributions; or (iii) shares redeemed more than six years after their
purchase. In determining the applicability and rate of any contingent deferred
sales charge, it will be assumed that a redemption is made first of Class B
shares representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time.
The holding period of Class B shares acquired through an exchange with
another Vista Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Vista Funds and those Class B shares
being redeemed will be considered to represent capital appreciation or dividend
and capital gain distribution reinvestments in other funds to the extent
applicable and then of shares held for the longest period of time. As a result,
the contingent deferred sales charge imposed should be at the lowest possible
rate. The amount of any contingent deferred sales charge imposed will reduce the
gain or increase the loss on the amount realized on redemption for purposes of
federal income taxes.
The amount of any contingent deferred sales charge will be paid to VBDS.
SALES CHARGE WAIVERS--CLASS B SHARES. The contingent deferred sales charge
for Class B shares will be waived for certain exchanges and for redemptions in
connection with the Fund's systematic redemption plan. 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 death of the shareholder; (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; (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, as described on page 21; (iv)
distributions from a qualified plan upon retirement; (v) a redemption resulting
from an over-contribution to an IRA; and (vi) a redemption of an account balance
under $500, as described on page 21.
CONVERSION OF CLASS B SHARES. A shareholder's Class B shares will
automatically convert to Class A shares (and thus be subject to the lower
expenses borne by Class A shares) in the eighth year after the date of purchase,
together with the pro rata portion of all Class B shares representing dividends
19
<PAGE>
and other distributions paid in additional Class B shares. The conversion will
be effected at the relative net asset values per share of the two classes on the
first business day of the month following the seventh anniversary of the
original purchase. If any exchanges of Class B shares during the eight-year
period occurred, the holding period for the shares exchanged will be counted
toward the eight-year 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.
The Fund reserves the right to cease offering Class B shares for sale at any
time or to reject any order for the purchase of Class B shares and to cease
offering any services provided by a Shareholder Servicing Agent.
Due to the conversion feature of Class B shares certificates will not be
issued and all shares will be held in book entry form.
REDEMPTIONS
Shareholders may redeem all or any portion of the shares in their account at
any time at the net asset value next determined after a redemption request in
proper form is furnished by the shareholder to his Shareholder Servicing Agent
or Dealer and transmitted to and received by the Transfer Agent subject to any
applicable contingent deferred sales charges for Class B shares. The proceeds of
a redemption normally will be paid on the next Fund Business Day after a
redemption request has been received by the Fund, but in any event within seven
days. The forwarding of proceeds from redemption of shares which were recently
purchased by check may be delayed up to 15 days. A shareholder may redeem his
shares by authorizing his Shareholder Servicing Agent, Dealer or its agent to
redeem such shares, which the Shareholder Servicing Agent, Dealer or its agent
must do on a timely basis. The signature of both shareholders is required for
any written redemption requests from a joint account. In addition, a redemption
request may be deferred for up to 15 calendar days if the Transfer Agent has
been notified of a change in either the address or the bank account registration
previously listed in the Fund's records.
Class B shares are sold without an initial sales charge but are subject to a
contingent deferred sales charge if shares are redeemed within six years of
purchase. Class B shares are redeemed in the following order: (i) shares
representing capital appreciation; (ii) shares acquired by reinvestment of
dividends and capital gains distributions; and (iii) shares purchased and held
on a first-in/first-out basis. As a result, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of the shares being redeemed.
If a redeeming shareholder owns shares of both Class A and Class B, unless
the shareholder specifically requests otherwise, the Class A shares will be
redeemed before any Class B shares.
The value of shares of the Fund redeemed may be more or less than the
shareholder's cost, depending on portfolio performance during the period the
shareholder owned his shares. Redemptions of shares are taxable events on which
the shareholder may recognize a gain or a loss. The Fund retains the right to
pay the redemption price of shares in kind with securities (instead of cash).
However, the Trust has filed an election under Rule 18f-1 under the Investment
Company Act of 1940, as amended (the "1940 Act") committing to pay in cash all
redemptions by a shareholder of record up to the amounts specified in the rule
(approximately $250,000).
20
<PAGE>
The payment of redemption requests may be wired directly to a previously
designated domestic commercial bank account or mailed to the shareholder's
address of record. For the protection of shareholders, all telephone redemption
requests in excess of $25,000 will be wired directly to such previously
designated bank account. Normally, redemption payments will be transmitted on
the next business day following receipt of the request (provided it is made
prior to 4:00 p.m. Eastern time on any day redemptions may be made). Redemption
payments requested by telephone may not be available in a previously designated
bank account for up to four days. There is a $10.00 charge for each federal
funds wire transaction. If no share certificates have been issued, a wire
redemption may be requested by telephone or wire to the Vista Service Center.
For telephone redemptions, call the Vista Service Center at (800) 34-VISTA.
The right of any shareholder to receive payment with respect to any
redemption may be suspended or the payment of the redemption proceeds postponed
during any period in which the New York Stock Exchange is closed (other than
weekends or holidays) or trading on such Exchange is restricted or, to the
extent otherwise permitted by the 1940 Act, if an emergency exists.
SYSTEMATIC REDEMPTION PLAN--CLASS A SHARES. A shareholder owning $10,000 or
more of the Class A shares of the Fund as determined by the then current net
asset value may provide for the payment monthly or quarterly of at least $100
from his account. A sufficient number of full and fractional Class A shares will
be redeemed so that the designated payment is received on approximately the 1st
day of the month following the end of the selected payment period.
SYSTEMATIC REDEMPTION PLAN--CLASS B SHARES. A shareholder owning $20,000 or
more of the Class B shares of the Fund as determined by the then current net
asset value may also provide for the payment monthly or quarterly of amounts
from his account, subject to limits described below.
No contingent deferred sales charge will be imposed on such withdrawals for
Class B shares. The minimum monthly or quarterly withdrawal amounts will be $200
and $400 for Class B shares. In addition, a Class B shareholder may not withdraw
an amount exceeding 12% annually of his or her "Initial Account Value" for Class
B shares--i.e., the value of the Fund account at the time the shareholder elects
to participate in the systematic redemption plan. A Class B shareholder's
participation in the systematic redemption plan will terminate automatically if
the shareholder's Initial Account Value (adjusted upward for the net asset value
of Class B shares acquired after the election to participate in the systematic
redemption plan) less aggregate redemptions other than under the systematic
redemption plan falls below $20,000.
REDEMPTION OF ACCOUNTS OF LESS THAN $500. The Fund may redeem the shares of
any shareholder, if at such time, the aggregate net asset value of the shares in
such shareholder's account is less than $500. In the event of any such
redemption, a shareholder will receive at least 60 days notice prior to the
redemption. In the event the Fund redeems Class B shares pursuant to this
provision, no contingent deferred sales charge will be imposed.
EXCHANGE PRIVILEGE
Shareholders may exchange, at respective net asset value, Class A and Class
B shares of the Fund for Class A and Class B shares of the other Vista Funds
which have a similar class of shares, respectively, in accordance with the terms
of the then current prospectus of the Fund being acquired. No initial sales
charge is imposed on the Class A shares being acquired and no contingent
deferred sales charge is imposed on the Class B shares being redeemed, through
an exchange. However, contingent deferred
21
<PAGE>
sales charges may apply to redemption of Class B shares acquired through an
exchange. 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. Under the Exchange Privilege, Class A or Class B shares of the Fund
may be exchanged for shares of such other Vista Funds only if those Funds and
their shares are registered in the states where the exchange may legally be
made. Shares of the Fund may only be exchanged into the same class of another
Vista Fund and only if the account registrations are identical.
With respect to exchanges from any Vista money market Fund, shareholders
must have acquired their shares in such Vista money market Fund by exchange from
one of the other Funds in the Trust, or any exchange directly from one of such
money market funds will be done at relative net asset value plus the appropriate
sales charge. An exchange of Class B shares into any of the Vista money market
Funds other than the Class B shares of Vista Prime Money Market Fund will be
treated as a redemption--and therefore subject to the conditions of the
contingent deferred sales charge--and a subsequent purchase. Class B shares of
any Vista non-money market Fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares while maintaining a stable net asset value. This exchange will
not be subject to a Contingent Deferred Sales Charge unless those shares are
later redeemed. The Class B shares of the Prime Money Market Fund carry the same
Distribution and Sub-Administration Fee, and Shareholder and Fund Servicing Fee
as the Class B shares of the non-money market Funds. Redemptions of shares
acquired through an exchange will be subject to the contingent deferred sales
charge.
Any such exchange may create a gain or loss to be recognized for federal
income tax purposes. Normally, shares of the Fund to be acquired through an
exchange transaction are purchased on the Redemption Date, but such purchase may
be delayed by either Fund up to five business days if the Fund determines that
it would be disadvantaged by an immediate transfer of the proceeds. This
privilege may be amended or terminated at any time without notice. Arrangements
have been made for the acceptance of instructions by telephone to exchange
shares if certain preauthorizations or indemnifications are accepted and on
file. Further information and telephone exchange forms are available from the
Transfer Agent.
MARKET TIMING. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and other circumstances where the Trustees, or
Adviser believes doing so would be in the best interest of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged a $5.00 administration fee
for each such exchange.
GENERAL
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application. To
22
<PAGE>
provide evidence of telephone instructions, the Transfer Agent will record
telephone conversations with shareholders. The Fund will employ reasonable
procedures to confirm that instructions communicated by telephone are genuine.
In the event the Fund does not employ such reasonable procedures, it may be
liable for losses due to unauthorized or fraudulent instructions.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing. Shareholders agree to release and hold
harmless the Fund, the Adviser, the Administrator, any Shareholder Servicing
Agent or sub-agent and broker-dealer, and the officers, directors, employees and
agents thereof against any claim, liability, loss, damage and expense for any
act or failure to act in connection with Fund shares, any related investment
account, any privileges or services selected in connection with such investment
account, or any written or oral instructions or requests with respect thereto,
or any written or oral instructions or requests from someone claiming to be a
shareholder if the Fund or any of the above-described parties follow
instructions which they reasonably believe to be genuine and act in good faith
by complying with the procedures that have been established for Fund accounts
and services.
Shareholders purchasing their shares through a Shareholder Servicing Agent
may not assign, transfer or pledge any rights or interest in any Fund shares or
any investment account established with a Shareholder Servicing Agent to any
other person without the prior written consent of such Shareholder Servicing
Agent, and any attempted assignment, transfer or pledge without such consent may
be disregarded.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in the bank account specified in the Bank Account
Registration, or for any written requests for additional account services made
after a shareholder has submitted an initial account application to the Fund.
The Fund may also refuse to accept or carry out any transaction that does not
satisfy any restrictions then in effect.
TAX MATTERS
The following discussion is addressed primarily to noncorporate investors
and is for general information only. A prospective investor, including a
corporate investor, should also review the more detailed discussion of federal
income tax considerations relevant to the Fund that is contained in the
Statement of Additional Information. In addition, each prospective investor
should consult with his own tax advisers as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund in
his own state and locality.
The Fund intends to qualify each year and elect to be treated as a separate
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). If the Fund is treated as a "regulated
investment company" and all of its taxable income is distributed to its
shareholders in accordance with the timing requirements imposed by the Code, it
will not be subject to federal income tax on the amounts so distributed. If for
any taxable year the Fund does not qualify for
23
<PAGE>
the treatment as a regulated investment company, all of its taxable income will
be subject to tax at regular corporate rates without any deduction for
distributions to its shareholders, and such distributions will be taxable to
shareholders to the extent of the Fund's current and accumulated earnings and
profits. The Portfolio is not required to pay any federal income or excise
taxes.
The Trust is organized as a Massachusetts business trust and, under current
law, is not liable for any income or franchise tax in the Commonwealth of
Massachusetts as long as the Fund (and each other series of the Trust) qualifies
as a regulated investment company under the Code.
Distributions by the Fund of its taxable ordinary income (net of expenses)
and the excess, if any, of its net short-term capital gain over its net
long-term capital loss are generally taxable to shareholders as ordinary income.
Such distributions are treated as dividends for federal income tax purposes. A
portion of the ordinary income dividends paid by the Fund with respect to a year
(which cannot exceed the aggregate amount of its share of qualifying dividends
received by the Portfolio from domestic corporations during the year) may
qualify for the 70% dividends-received deduction for corporate shareholders, but
any such dividends-received deduction will not be allowed in computing a
corporate shareholder's adjusted current earnings, upon which is based a
corporate preference item which may be subject to an alternative minimum tax or
to the environmental superfund tax. Distributions by the Fund of the excess, if
any, of its net long-term capital gain over its net short-term capital loss are
designated as capital gain dividends and are taxable to shareholders as
long-term capital gains, regardless of the length of time a shareholder has held
his shares. Ordinary income dividends and capital gain dividends from the Fund
may also be subject to state and local taxes.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those investors purchasing shares just prior to an
ordinary income dividend or capital gain dividend will be taxed on the entire
amount of the dividend received, even though the net asset value per share on
the date of such purchase reflected the amount of such dividend.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of the Fund. In general, distributions by the Fund are taken into account by
shareholders in the year in which they are made. However, certain distributions
made during January will be treated as having been paid by the Fund and received
by the shareholders on December 31 of the preceding year. A statement setting
forth the federal income tax status of all distributions made (or deemed made)
during the fiscal year, including any portions which constitute ordinary income
dividends (and any portion thereof which qualify for the dividends-received
deduction for corporations) and capital gains dividends, will be sent to the
Fund's shareholders promptly after the end of each year.
Any loss realized upon a taxable disposition of shares within six months
from the date of their purchase will be treated as a long-term capital loss to
the extent of any capital gain dividends received on such shares. All or a
portion of any loss realized upon a taxable disposition of shares of the Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% withholding of federal income tax on distributions and redemption
payments made by the Fund. Generally, shareholders are subject to backup
withholding if they have not provided the Fund with a correct taxpayer
identification number and certain required certifications.
24
<PAGE>
No gain or loss will be recognized by a shareholder as a result of
conversion from Class A shares to Class B shares.
OTHER INFORMATION CONCERNING SHARES OF THE FUND
NET ASSET VALUE
The net asset value of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time,
however, options are priced at 4:15 p.m.), on each Fund Business Day, by
deducting the amount of the Fund's liabilities from the value of its assets and
dividing the difference by the number of its shares outstanding. Values of
assets held by the Fund (i.e., the value of its investment in the Fund and its
other assets) are determined on the basis of their market or other fair value,
as described in the Statement of Additional Information. A share's net asset
value is effective for orders received by a Shareholder Servicing Agent prior to
its calculation and received by the Distributor prior to the close of business,
usually 4:00 p.m. Eastern time, on the Fund Business Day on which such net asset
value is determined.
The per share net asset value of Class B shares of the Fund will generally
be lower than that of the Class A shares because of the higher expenses borne by
the Class B shares. The net asset values per share of Class A and Class B may
differ slightly due to differing allocations of class-specific expenses.
NET INCOME, DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
Substantially all of the net income from dividends and interest (if any) of
the Fund is paid to its shareholders annually (in the month of December) as a
dividend. The Fund's net investment income consists of the interest income
earned, less expenses. The Fund will distribute its net realized short-term and
long-term capital gains, if any, to its shareholders at least annually.
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, and certain other
expenses, borne by the Class B shares.
The Fund intends to make additional distributions to the extent necessary to
avoid application of the 4% nondeductible excise tax on certain undistributed
income and net capital gains of mutual funds imposed by Section 4982 of the
Code.
Subject to the policies of the shareholder's Shareholder Servicing Agent, a
shareholder of either class may elect to receive dividends and capital gains
distributions from the Fund in either cash or additional shares of that class.
DISTRIBUTION PLANS AND DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trustees have adopted Distribution Plans (the "Distribution Plans") for
both Class A and Class B shares in accordance with Rule 12b-1 under the 1940
Act, after having concluded that there is a reasonable likelihood that the
Distribution Plan for each class will benefit that class and its respective
shareholders.
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The Class A Distribution Plan provides that the Fund shall pay distribution
fees, including payments to the Distributor, at annual rates not to exceed 0.20%
of its average daily net assets for distribution services. The Class B
Distribution Plan provides that the Fund shall pay distribution fees including
payments to the Distributor, at an annual rate not to exceed 0.75% of its
average annual net assets for distribution services. Some payments under the
Distribution Plans may be used to compensate broker-dealers with trail or
maintenance commissions in an amount not to exceed 0.20% annualized of the
assets values of Class A shares, or 0.25% annualized of the average net asset
value of the Class B shares maintained in the 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 the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plans. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange Commission as being of the "compensation variety"
(in contrast to "reimbursement" arrangements by which a distributor's
compensation is directly linked to its expenses). 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
paid by the Fund to the Distributor in fiscal years subsequent thereto. In
determining whether to purchase Class B shares, investors should consider that
daily compensation payments could continue until the Distributor has been fully
reimbursed for the commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
Under its Distribution Plan, the Class A shares are also permitted to pay an
additional fee at an annual rate not to exceed 0.05% of its average daily net
assets 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 assets.
The Distribution and Sub-Administration Agreement dated April 2, 1990,
amended June 1, 1990 and September 30, 1993 (the "Distribution Agreement"),
provides that the Distributor will act as the principal underwriter of the
Fund's shares and bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. In addition, the Distributor will provide
certain sub-administration services, including providing officers, clerical
staff and office space. The Distributor currently receives a fee for
sub-administration from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets, on an annualized basis for the Fund's then-current
fiscal year. Other funds which have investment objectives similar to those of
the Fund, but which do not pay some or all of such fees from their assets, may
offer a higher return, although investors would, in some cases, be required to
pay a sales charge or a redemption fee.
The Distributor has agreed to use a portion of its distribution and
sub-administration fee to pay for certain expenses of the Fund incurred in
connection with organizing new series of the Trust and certain
26
<PAGE>
other ongoing expenses of the Trust. The Distributor may, from time to time,
waive all or a portion of the fees payable to it under the Distribution
Agreement.
The respective expenses of each of the Funds of the Trust include the
compensation of their respective Trustees: registration fees; interest charges;
taxes; fees and expenses of independent accountants, of legal counsel and of any
transfer agent, custodian, registrar or dividend disbursing agent of the Trust;
insurance premiums; and expenses of calculating the net asset value of, and the
net income on, shares of the Fund.
EXPENSES
The Fund will pay all of its pro rata share of the foregoing expenses of the
Trust, including membership dues in the Investment Company Institute,
administrative fees payable under the Fund's Administration Agreement, and
sub-administration fees payable under the Distribution and Sub-Administration
Agreement. In addition, each class will pay those expenses allocable to the
class, including: shareholder servicing fees and expenses; expenses of
preparing, printing and mailing prospectuses, reports, notices, and proxy
statements to shareholders and government offices or agencies; expenses of
shareholder meetings; expenses relating to the registration and qualification of
shares of the particular class and the preparation, printing and mailing of
prospectuses for such purposes (except that the Distribution and
Sub-Administration Agreement requires the Distributor to pay for prospectuses
which are to be used for sales to prospective investors).
Expenses of the Fund also include all fees under the Fund's Administration
Agreement; the 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 officers and commissions; expenses of
meetings of investors; and the advisory fees payable to the Adviser under the
Advisory Agreement.
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end management investment company organized as
a Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because the Fund is "non-diversified", more of the assets
of the Fund may be concentrated in the securities of any single issuer than if
the Fund was "diversified", which may make the value of the shares in a fund
more susceptible to certain risks than shares of a diversified mutual fund.
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class including Class A and Class B
represents an equal proportionate interest in that series or class with each
other share of that series or class. The shares of each series or class
participate equally in the earnings, dividends and assets of the particular
series or class. Shares have no pre-emptive or conversion rights. Shares when
issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each whole share held, and each
fractional share shall be entitled to a proportionate fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. Shares
of Class A and Class B generally vote separately, for example to approve
distribution plans, but shares of all series or classes vote together, to the
extent required under the 1940 Act, in the election or selection of Trustees and
independent accountants.
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<PAGE>
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of Class A or Class B of all series or
classes when in the judgment of the Trustees it is necessary or desirable to
submit matters for a shareholder vote. A Trustee of the Trust may, in accordance
with certain rules of the Securities and Exchange Commission, be removed from
office when the holders of record of not less than two-thirds of the outstanding
shares either present a written declaration to the Funds' Custodian or vote in
person or by proxy at a meeting called for this purpose. In addition, the
Trustees will promptly call a meeting of shareholders to remove a trustee(s)
when requested to do so in writing by record holders of not less than 10% of all
outstanding shares of the Trust. Finally, the Trustees shall, in certain
circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request. The Trust's Declaration of Trust provides
that, at any meeting of shareholders, a Shareholder Servicing Agent may vote any
shares as to which such Shareholder Servicing Agent is the agent of record and
which are otherwise not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
the same portfolio otherwise represented at the meeting in person or by proxy as
to which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shareholders of each series or class
including Class A and Class B, would be entitled to share pro rata in the net
assets of that series or class available for distribution to shareholders upon
liquidation of the Fund or that series or class.
The Trust reserves the right to create and issue a number of series of
shares, in which case the shares of each series would participate equally in the
earnings, dividends and assets of the particular series (except for differences
among any classes of shares of any series).
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
SHAREHOLDER SERVICING AGENTS
The shareholder servicing agreement with each Shareholder Servicing Agent
provides that such Shareholder Servicing Agent will, as agent for its customers,
perform various services, including but not limited to the following: answer
customer inquiries regarding account status and history, the manner in which
purchases and redemptions of shares may be effected for the Fund as to which the
Shareholder Servicing Agent is so acting and certain other matters pertaining to
the Fund; assist shareholders in designating and changing dividend options,
account designations and addresses; provide necessary personnel and facilities
to establish and maintain shareholder accounts and records; assist in processing
purchase and redemption transactions; arrange for the wiring of funds; transmit
and receive funds in connection with customer orders to purchase or redeem
shares; verify and guarantee shareholder signatures in connection with
redemption orders and transfers and changes in shareholder-designated accounts;
furnish (either separately or on an integrated basis with other reports sent to
a shareholder by a Shareholder Servicing Agent) quarterly and year-end
statements and confirmations of purchases and
28
<PAGE>
redemptions; transmit, on behalf of the Fund, proxy statements, annual reports,
updated prospectuses and other communications to shareholders of the Fund;
receive, tabulate and transmit to the Fund proxies executed by shareholders with
respect to meetings of shareholders of the Fund; and provide such other related
services as the Fund or a shareholder may request. Shareholder servicing agents
may be required to register pursuant to state securities law.
For performing these services, each Shareholder Servicing Agent receives
certain fees, which may be paid periodically, determined by a formula based upon
the number of accounts serviced by such Shareholder Servicing Agent during the
period for which payment is being made, the level of activity in accounts
serviced by such Shareholder Servicing Agent during such period, and the
expenses incurred by such Shareholder Servicing Agent. Fees relating to acting
as liaison to shareholders and providing personal services to shareholders, will
not exceed, on an annual basis, 0.25% of the average daily net assets of the
Class B shares of the Fund represented by shares owned during the period for
which payment is being made by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship. Each Shareholder Servicing Agent may,
from time to time, voluntarily waive all or a portion of the fees payable to it.
In addition, Chase may provide other related services to the Fund for which it
may receive compensation. There is no shareholder servicing agreement for the
Class A shares of the Fund.
The Shareholder Servicing Agent, and its affiliates, agents and
representatives acting as Shareholder Servicing Agents, may establish custodial
investment accounts ("Accounts"), known as Chase Investment Accounts or by any
other name designated by a Shareholder Servicing Agent. Through such Accounts,
customers can purchase, exchange and redeem Class A and Class B shares, receive
dividends and distributions on Fund investments, and take advantage of any
services related to an Account offered by such Shareholder Servicing Agent from
time to time. All Accounts and any related privileges or services shall be
governed by the laws of the State of New York, without regard to its conflicts
of laws provisions.
The Glass-Steagall Act and other applicable laws generally prohibit
federally chartered or supervised banks from publicly underwriting or
distributing certain securities, such as the Fund's shares. The Trust, on behalf
of the Fund, will engage banks, including the Adviser, as Shareholder Servicing
Agents, only to perform advisory, custodial, administrative and shareholder
servicing functions as described above. While the matter is not free from doubt,
Trust management believes that such laws should not preclude a bank, including a
bank which acts as investment adviser, custodian or administrator, or in all
such capacities, for the Fund, from acting as a Shareholder Servicing Agent.
However, possible future changes in federal law or administrative or judicial
interpretations of current or future law, could prevent a bank from continuing
to perform all or part of its servicing activities. If that occurred, the bank's
shareholder clients would be permitted to remain Fund shareholders and
alternative means for continuing the servicing of such shareholders would be
sought. In such event, changes in the operation of the Fund might occur and a
shareholder serviced by such bank might no longer be able to avail himself of
any automatic investment or other services then being provided by such bank. The
Fund does not expect that shareholders would suffer any adverse financial
consequences as a result of these occurrences.
29
<PAGE>
TRANSFER AGENT AND CUSTODIAN
DST Systems, Inc. ("DST") acts as transfer agent and dividend disbursing
agent (the "Transfer Agent") for the Fund. In this capacity, DST maintains the
account records of all shareholders in the Funds, including statement
preparation and mailing. DST is also responsible for disbursing dividend and
capital gain distributions to shareholders, whether taken in cash or additional
shares. From time to time, DST and/or the Fund may contract with other entities
to perform certain services for the Transfer Agent. For its services as Transfer
Agent, DST receives such compensation as is from time to time agreed upon by the
Trust and DST. DST's address is 210 W. 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of the Fund, for which Chase receives compensation as is from time to time
agreed upon by the Trust and Chase. The Custodian's responsibilities include
safeguarding and controlling the Fund's cash and securities, handling the
receipt and delivery of securities, determining income and collecting interest
on the Fund's investments, maintaining books of original entry for portfolio and
Fund accounting and other required books and accounts, and calculating the daily
net asset value of beneficial interests in the Fund. Fund securities and cash
may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees. The internal division of Chase which serves as the
Fund's Custodian does not determine the investment policies of the Fund or
decide which securities will be bought or sold on behalf of the Fund or
otherwise have access to or share material inside information with the internal
division that performs advisory services for the Fund.
TAX-SHELTERED RETIREMENT PLANS
Shares of the Fund are offered in connection with the following qualified
prototype retirement plans: IRA, Rollover IRA, SEP-IRA, Profit-Sharing, and
Money Purchase Pension Plans which can be adopted by self-employed persons
("Keogh") and by corporations, 401(k) and 403(b) Retirement Plans. Call or write
the Transfer Agent for more information.
YIELD AND PERFORMANCE INFORMATION
From time to time, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
historical earnings, it should not be considered as an indication or
representation of the performance of any classes of the Fund in the future. From
time to time, the performance and yield of classes of the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of the Fund or its classes. Additionally, the Fund may, with proper
authorization, reprint articles written about the Fund and provide them to
prospective shareholders.
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<PAGE>
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in the
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return 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 the Fund will vary based on interest rates, the current market value
of the securities held by the Fund and changes in the Fund's expenses. The
Adviser, the Shareholder Servicing Agent, the Administrator and the Distributor
may voluntarily waive a portion of their fees on a month-to-month basis. In
addition, the Distributor may assume a portion of the Fund's operating expenses
on a month-to-month basis. These actions would have the effect of increasing the
net income (and therefore the yield and total rate of return) of the 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 the Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Fund is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received (see "Purchases and Redemptions of
Shares -- Purchases"), which will have the effect of increasing the net return
on the investment of customers of those Shareholder Servicing Agents. Such
customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return. See the Statement of Additional
Information for further information concerning the calculation of the yields or
total rates of return quotations for classes of shares of the Fund.
The Fund will include performance data for both classes of Fund shares in
any advertisements or promotional materials including Fund performance data.
OTHER INFORMATION
The Statement of Additional Information contains more detailed information
about the Fund, including information related to (i) the Fund's investment
policies and restrictions, (ii) risk factors associated with Fund's policies and
investments, (iii) the Trust's Trustees, officers and the administrators and the
Adviser, (iv) portfolio transactions, (v) the Fund's shares, including rights
and liabilities of shareholders, and (vi) additional performance information,
including the method used to calculate yield or total rate of return quotations.
The Code of Ethics of the Fund prohibits all affiliated personnel from
engaging in personal investment activities which compete with or attempt to take
advantage of the Fund's planned portfolio transactions. The objective of the
Code of Ethics of the Fund is that its operations be carried out for the
exclusive benefit of the Fund's shareholders. The Fund maintains careful
monitoring of compliance with the Code of Ethics.
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INVESTMENT ADVISER AND ADMINISTRATOR
The Chase Manhattan Bank, N.A.
DISTRIBUTOR
Vista Broker-Dealer Services, Inc.
TRANSFER AGENT
DST Systems, Inc.
LEGAL COUNSEL
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
SHAREHOLDER SERVICING AGENT & CUSTODIAN
The Chase Manhattan Bank, N.A.
JUNE 19, 1995
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
March 1, 1996
VISTA(SM) BALANCED FUND
VISTA(SM) BOND FUND
VISTA(SM) CAPITAL GROWTH FUND
VISTA(SM) EQUITY FUND
VISTA(SM) EQUITY INCOME FUND
VISTA(SM) GROWTH AND INCOME FUND
VISTA(SM) SHORT-TERM BOND FUND
VISTA(SM) SMALL CAP EQUITY FUND
VISTA(SM) U.S. GOVERNMENT INCOME FUND
125 WEST 55TH STREET, NEW YORK, NEW YORK 10019
Table of Contents Page
The Funds..................................................................3
Investment Objective, Policies and Restrictions............................4
Performance Information...................................................19
Determination of Net Asset Value..........................................22
Tax Matters.............................................................. 24
Management of the Funds and Portfolios....................................30
Independent Accountants...................................................39
Financial Statements......................................................
General Information.......................................................39
Appendix A -Description of Ratings.......................................A-1
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Prospectus offering each Fund or class of shares. This Statement of Additional
Information should be read in conjunction with the individual Prospectuses
offering shares of each of Vista U.S. Government Income Fund, Vista Bond Fund
and Vista Short-Term Bond Fund (the "Income Funds"), Vista Balanced Fund, Vista
Equity Income Fund, Vista Growth and Income Fund, Vista Capital Growth Fund,
Vista Equity Fund and the Vista Small Cap Equity Fund (the "Equity Funds"). Any
references to the "Prospectus" in this Statement of Additional Information is a
reference to the Prospectus or Prospectuses offering a Fund, Funds or class of
shares of certain of the Funds to which this Statement pertains. In each
instance, the specific Prospectus or Prospectuses referred to are referenced by
the surrounding text, which identifies a specific Fund, Funds, or class of
shares. Copies of each Prospectus may be obtained by an investor without charge
by contacting Vista Broker-Dealer Services, Inc., the Funds' 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 the Vista Service Center at
our toll-free number:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141 MFG-SAI
<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
15 separate series (a "Fund" or the "Funds"). Certain of the Funds are
diversified and other Funds are non-diversified, as such term is defined in the
Investment Company Act of 1940, as amended (the "1940 Act"). Those Income Funds
and Equity Funds offered through two classes of shares may issue Class A shares
(which are subject to an initial sales load) and Class B shares (which are
subject to a contingent deferral sales load). The shares of the Income Funds and
Equity Funds are collectively referred to in this Statement of Additional
Information as the "Shares."
In addition, 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, non-diversified
management investment company which has the same investment objective as that
Fund. The Growth and Income Fund invests in the Growth and Income Portfolio
("Income Portfolio") and the Capital Growth Fund invests in the Capital Growth
Portfolio ("Growth Portfolio"). The Growth and Income Portfolio and the Capital
Growth Portfolio are referred to collectively as the "Portfolios."
Each of these 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 Funds' Shares are continuously offered for sale through Vista
Broker-Dealer Services, Inc. ("VBDS"), the Funds' distributor (the
"Distributor"), which is not affiliated with Chase Manhattan Bank, N.A. or its
affiliates, to investors who are customers of a financial institution, such as a
federal or state-chartered bank, trust company, or savings and loan association
that has entered into a shareholder servicing agreement with the Trust on behalf
of the Funds (collectively, "Shareholder Servicing Agents") or customers of a
securities broker or certain financial institutions who have entered into
Selected Dealer Agreements with the Distributor. VBDS receives a distribution
fee from most, but not all of the Funds, pursuant to the plans of distribution
adopted pursuant to Rule 12b-1 of the 1940 Act.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. In the case of the Portfolios,
separate Boards of Trustees, with certain common members, provide broad
supervision. The Chase Manhattan Bank, N.A. ("Chase") is the investment adviser
(the "Adviser") for the Funds 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 the Portfolios. The Adviser
continuously manages the investments of the Funds and the two Portfolios in
accordance with the investment objective and policies of each Fund. The
selection of investments for each Fund or Portfolio and the way in which they
are managed depend on the conditions and trends in the economy and the financial
marketplaces. Occasionally, communications to shareholders may contain the views
of the investment adviser as to current market, economic, trade and interest
rate trends, as well as legislative, regulatory and monetary developments, and
may include investment strategies and related matters believed to be of
relevance to a Fund. A majority of the Trustees of the Trust are not affiliated
with the Adviser. Similarly, a majority of the Trustees of the Portfolios are
not affiliated with the Adviser.
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 the Vista Funds.
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<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
VISTA BALANCED FUND (the "Balanced Fund") seeks maximum total return
through a combination of long-term growth of capital and current income.
VISTA BOND FUND (the "Bond Fund") seeks to provide as high a level of
income as is consistent with reasonable risk by investing primarily in a broad
range of investment-grade corporate bonds as well as other fixed income
securities. In addition the Bond Fund seeks to provide capital preservation and
will, where appropriate, take advantage of opportunities to realize capital
appreciation.
VISTA CAPITAL GROWTH FUND (the "Capital Growth Fund") aggressively
seeks long-term capital growth, through a broad portfolio (i.e. at least 80% of
its assets in normal circumstances) in common stocks. The Fund will invest in
companies, with average capitalization of $500 million to $4 billion. The
Adviser intends to utilize both qualitative and fundamental research to identify
undervalued stocks with a catalyst for positive change. As indicated in the
Prospectus, this Fund is intended for investors who understand and are willing
to accept the potential risks associated with the Fund's investment objective.
VISTA EQUITY FUND (the "Equity Fund") seeks to provide its shareholders
with long-term growth of capital by investing primarily in a diversified
portfolio of common stocks of well-known and established companies. The Equity
Fund normally will be fully invested and, absent unusual market conditions, in
normal circumstances, at least 65% of its assets will be invested in the common
stock of well-known and established companies, which are defined as those
companies with a market capitalization of at least $200 million whose stock is
included in the Standard & Poor's Daily Stock Price Index of 500 Common Stocks
("S&P Index") or the Dow Jones Industrial Average ("DJIA"). Such common stocks
typically have a large number of publicly held shares and high trading volume,
resulting in a high degree of liquidity. Dividend income, if any, is a
consideration incidental to the Equity Fund's objective of growth of capital.
VISTA EQUITY INCOME FUND (the "Equity Income Fund") seeks to obtain
reasonable income by investing primarily in income-producing equity securities
and securities convertible into such equity securities,
VISTA GROWTH AND INCOME FUND (the "Growth and Income Fund") seeks
long-term capital appreciation, with dividend income as a secondary objective,
through investment in a Portfolio of common stocks with the same investment
objectives and policies.
VISTA SHORT-TERM BOND FUND (the "Short-Term Bond Fund") seeks to
provide a high level of current income, consistent with preservation of capital
by investing primarily in a broad range of short-term investment-grade bonds and
other fixed income securities. The dollar-weighted average maturity of the
ShortTerm Bond Fund's portfolio securities will not exceed three years.
Portfolio securities with put features will measure their maturity based on the
next put date, which must fall within the three year limit.
VISTA SMALL CAP EQUITY FUND (the "Fund") aggressively seeks long-term
capital growth, through investments in common stocks of issuers with a
capitalization of $750 million or less, commonly
- 3 -
<PAGE>
referred to as "small cap". As indicated in the Prospectus, this Fund is
intended for investors who understand and are willing to accept the potential
risks associated with the Fund's investment objective.
VISTA U.S. GOVERNMENT INCOME FUND (the "U.S. Government Income Fund") seeks
to provide monthly dividends through investments in obligations backed by the
full faith and credit of the U.S. Government.
The Bond Fund, Equity Income Fund, Short-Term Bond Fund and Equity Fund
are diversified series of the Trust. The remaining Income and Equity Funds are
non-diversified series of the Trust.
INVESTMENT POLICIES
The Prospectus sets forth the various investment policies applicable to
each Fund or Portfolio. As used in this Statement of Additional Information,
with respect to those Funds or Portfolios and policies for which they apply. For
descriptions of the ratings of short-term obligations permitted as investments
by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("Standard & Poor's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps,
Inc. ("Duff") and Thomson BankWatch, Inc. ("TBW"), see Appendix A.
The following information supplements and should be read in conjunction
with the sections of each Prospectus entitled "Investment Objectives and
Policies", "Additional Information on Investment Policies and Techniques" and
with the Appendices included at the end of the relevant Prospectus.
U.S. GOVERNMENT SECURITIES -- As indicated in each Prospectus, and
although the Equity Funds, including any underlying Portfolio, invest primarily
in common stocks, they may also maintain cash reserves and invest in a variety
of short-term debt securities, including obligations issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, which have remaining
maturities not exceeding one year. Agencies and instrumentalities that issue or
guarantee debt securities and have been established or sponsored by the U.S.
Government include the Bank for Cooperatives, the Export-Import Bank, the
Federal Farm Credit System, the Federal Home Loan Banks, the Federal Home Loan
Mortgage Corporation, the Federal Intermediate Credit Banks, the Federal Land
Banks, the Federal National Mortgage Association and the Student Loan Marketing
Association. Certain of these securities may not be backed by the full faith and
credit of the U.S. Government.
BANK OBLIGATIONS -- Investments by the Equity Funds, including any
underlying Portfolio, in short-term debt securities as described above also
include investments in obligations (including certificates of deposit and
bankers' acceptances) of those U.S. banks 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.
A certificate of deposit is an interest-bearing negotiable certificate
issued by a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
COMMERCIAL PAPER -- Investments by the Equity Funds, including any
underlying Portfolio, in
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short-term debt securities also include investments in commercial paper, which
represents short-term, unsecured promissory notes issued in bearer form by bank
holding companies, corporations and finance companies. The commercial paper
purchased for the above-referenced Funds or Portfolios will consist of direct
obligations of domestic issuers which, at the time of investment, are (i) rated
"P-1" by Moody's or "A-1" or better by Standard & Poor's, (ii) issued or
guaranteed as to principal and interest by issuers or guarantors having an
existing debt security rating of "Aa" or better by Moody's or "AA" or better by
Standard & Poor's, or (iii) securities which, if not rated, are, in Chase's
opinion, of an investment quality comparable to rated commercial paper in which
the above-referenced Funds may invest. The rating "P-1" is the highest
commercial paper rating assigned by Moody's and the ratings "A-1" and "A-1+" are
the highest commercial paper ratings assigned by Standard & Poor's. Debt
securities rated "Aa" or better by Moody's or "AA" or better by Standard &
Poor's are generally regarded as high-grade obligations and such ratings
indicate that the ability to pay principal and interest is very strong.
REPURCHASE AGREEMENTS -- Each Fund and Portfolio may, when appropriate,
enter into repurchase agreements only with member banks of the Federal Reserve
System and securities dealers believed creditworthy, and only if fully
collateralized by U.S. Government obligations or other securities in which such
Fund is permitted to invest. Under the terms of a typical repurchase agreement,
a Fund or Portfolio would acquire an underlying debt 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 may be deemed 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 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 Trust's 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 the Fund. Repurchase agreements will give rise to income
which will not qualify as tax-exempt income when distributed by a Tax Free Fund.
A Fund or Portfolio will not be invested in a repurchase agreement maturing in
more than seven days if any such investment together with securities subject to
restrictions on transfer held by such Fund exceed 10% of its total net assets.
(See paragraph 5 under "Investment Restrictions" below.) Repurchase agreements
are also subject to the same risks described below with respect to stand-by
commitments.
WHEN-ISSUED OR FORWARD DELIVERY PURCHASES -- As described in the
Prospectus, each Income Fund may purchase new issues of securities in which it
is permitted to invest on a "when-issued" or, with respect to existing issues,
on a "forward delivery" basis. In order to invest a Fund's assets immediately,
while awaiting delivery of securities purchased on a "when-issued" or "forward
delivery" basis, short-term obligations that offer same-day settlement and
earnings (and, with respect to the U.S. Government Income Fund, that are backed
by the full faith and credit of the U.S. Government) will normally be purchased.
Although, with respect to any Tax Free Fund, short-term investments will
normally be in tax-exempt securities
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or Municipal Obligations, as the case may be, short-term taxable securities or
obligations may be purchased if suitable short-term tax-exempt securities or
Municipal Obligations are not available. When a commitment to purchase a
security on a "when-issued" or "forward delivery" 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 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 the Fund consisting of cash, cash equivalents or high
quality debt securities equal to the amount of the Fund's commitments to
purchase "when-issued" or "forward delivery" securities will be established at
the Fund'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.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a "when-issued" or "forward
delivery" basis may involve more risk than other types of purchases. Securities
purchased on a "when-issued" or "forward delivery" basis and the securities held
in the respective Fund's portfolio are subject to changes in value (both
generally changing in the same way, that is, both experiencing appreciation when
interest rates decline and depreciation when interest rates rise) based upon the
public's perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Purchasing securities on a
"when-issued" or "forward delivery" 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 "when-issued" or "forward delivery" securities, the respective Fund 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 "when-issued" or "forward delivery"
securities themselves (which may have a value greater or lesser than the Fund'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 engages in "when-issued" or "forward delivery"
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.
VARIABLE RATE SECURITIES AND PARTICIPATION CERTIFICATES --The variable
rate securities in which all of the Funds may be invested include participation
certificates issued by a bank, insurance company or other financial institution,
in variable rate securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate gives
a Fund an undivided interest in the variable rate security in the proportion
that the Fund's participation interest bears to the total principal amount of
the security and 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.
A Fund has 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 participation interest in the security, plus accrued interest. A Fund
will exercise the demand feature only (i) upon a default under the terms of the
offering documentation of the security, (ii) as
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needed to provide liquidity to the Fund in order to make redemptions of Fund
shares, or (iii) to maintain a high quality investment portfolio. The
institutions issuing the Participation Certificates will 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. The
total fees generally range from 5% to 15% of the applicable prime rate or other
short-term rate index. With respect to insurance, a Fund will attempt to have
the issuer of the participation certificate bear the cost of the insurance,
although the Fund retains the option to purchase insurance if necessary.
The Adviser has been instructed by the Trust's Board of Trustees to
monitor continually the pricing, quality and liquidity of the variable rate
securities held by the above-referenced Funds, including the Participation
Certificates, on the basis of published financial information and reports of the
rating agencies and other bank analytical services to which the Funds may
subscribe. Although these instruments may be sold by a Fund, it is intended that
they be held until maturity, except under the circumstances stated above.
No Fund will invest more than 5% of its total assets (taken at the
greater of cost or market value) in Participation Certificates.
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 variable rate nature of the underlying 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 income securities. A Fund's portfolio may contain 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 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 variable rate securities is made in relation
to movements of the applicable banks' "prime rates" or other short-term rate
adjustment indices, the variable rate securities are not comparable to long-term
fixed rate securities. Accordingly, interest rates on the 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 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.
PORTFOLIO MANAGEMENT -- It is intended that the portfolio of the U.S.
Government Income Fund will be fully managed by buying and selling securities,
as well as holding securities to maturity. In managing the portfolio of this
Fund, the Adviser seeks to take advantage of market developments, yield
disparities and variations in the creditworthiness of issuers, which may include
use of the following strategies:
(1) shortening the average maturity of a portfolio in
anticipation of a rise in interest rates so as to minimize depreciation
of principal;
(2) lengthening the average maturity of a portfolio in
anticipation of a decline in interest rates so as to maximize the
tax-exempt yield of the U.S. Government Income Fund's appreciation of
principal;
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(3) selling one type of debt security (e.g., revenue bonds) or
U.S. Government obligation (e.g., Treasury bonds), as the case may be,
and buying another (e.g., general obligation bonds or GNMA direct
pass-through certificates, respectively, as the case may be) when
disparities arise in the relative values of each; and
(4) changing from one debt security or U.S. Government
obligation, as the case may be, to an essentially similar debt security
or U.S. Government obligation when their respective yields are
distorted due to market factors.
LOANS OF PORTFOLIO SECURITIES -- Certain securities dealers who make
"short sales" or who wish to obtain particular securities for short periods may
seek to borrow them from institutional investors such as the Funds or
Portfolios. Each Fund or Portfolio reserves the right to seek to increase its
income by lending its portfolio securities. Under present regulatory policies,
including those of the Board of Governors of the Federal Reserve System and the
Securities and Exchange Commission, such loans may be made only to member firms
of the New York Stock Exchange, and are required to be secured continuously by
collateral in cash, cash equivalents, or U.S. Government securities maintained
on a current basis in an amount at least equal to the market value of the
securities loaned. Under a loan, a Fund or Portfolio has the right to call a
loan and obtain the securities loaned at any time on five days' notice.
During the existence of a loan, a Fund or Portfolio continues to
receive the equivalent of the interest or dividends paid by the issuer on the
securities loaned and also receives compensation based on investment of the
collateral. A Fund or Portfolio does not, however, have the right to vote any
securities having voting rights during the existence of the loan, but can call
the loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material matter
affecting the investment.
As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral if the borrower of the
securities experiences financial difficulty. However, the loans will be made
only to dealers deemed by a Fund or Portfolio to be of good standing, and when,
in the judgment of the Fund or Portfolio, the consideration that can be earned
currently from securities loans of this type justifies the attendant risk. In
the event a Fund or Portfolio makes securities loans, it is not intended that
the value of the securities loaned would exceed 30% of the value of the Fund's
or Portfolio's total assets.
NON-DIVERSIFICATION -- The Trust has registered as a "non-diversified"
investment company, which means that as to 50% of a Fund's total assets, no more
than 5% of the assets of each Fund, other than Equity Income Fund, Bond Fund,
Short-Term Bond Fund and Equity Fund, may be invested in the obligations of an
issuer, subject to diversification requirements applicable to the Funds under
federal tax laws. At present, these requirements do not permit more than 25% of
the value of a Fund's total assets to be invested in securities (other than
various securities issued or guaranteed by the United States or its agencies or
instrumentalities) of any one issuer, at the close of any calendar quarter.
Since a relatively high percentage of the assets of each Fund may be invested in
the obligations of a limited number of issuers, the value of each Fund's shares
may be more susceptible to any single economic, political or regulatory
occurrence than the shares of a diversified investment company.
With respect to the Portfolio, the Growth and Income Fund and the
Capital Growth Fund will "look through" its Portfolio to the securities held by
its Portfolio for purposes of determining diversification. Each Portfolio may
invest more than 5% of its assets in the obligations of a single issuer, subject
to diversification requirements under federal tax laws. At present, these
requirements do not permit more than 25% of the value of a Portfolio's total
assets to be invested in securities (other than various securities issued or
guaranteed
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by the United States or its agencies or instrumentalities) of any one issuer, at
the close of any calendar quarter. Since a relatively high percentage of the
assets of each Portfolio may be invested in the obligations of a limited number
of issuers, the net asset value of each Fund's shares may be more susceptible to
any single economic, political or regulatory occurrence than the net asset value
of a diversified investment company.
ADDITIONAL POLICIES REGARDING DERIVATIVE AND RELATED TRANSACTIONS
As explained more fully below, several of the Funds or 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 or 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 and Portfolio to successfully
utilize these instruments may depend in part upon the ability of the Adviser to
forecast interest rates and other economic factors correctly. If the Adviser
incorrectly forecasts such factors and has taken positions in derivative or
similar instruments contrary to prevailing market trends, the Funds could be
exposed to the risk of a loss. THE FUNDS 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 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.
Derivative and Related Instruments. To the extent permitted by the
investment objectives and policies of each Fund, and as described more fully
below, a Fund or Portfolio may: (i) purchase, write and exercise call and put
options on securities, securities indexes and foreign currencies (including
using options in combination with securities, other options or derivative
instruments); (ii) enter into futures contracts and options on futures
contracts; (iii) employ forward currency and interest-rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v) purchase
and sell structured products.
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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. As incorrect correlation could result
in a loss on both the hedged assets in a Fund 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 Adviser may incorrectly forecast interest rates, market values
or other economic factors in utilizing a derivatives strategy. In such a case,
the Fund/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 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 the
Funds' or Portfolios' use of various strategies involving derivatives and
related instruments.
OPTIONS ON SECURITIES, SECURITIES INDEXES, CURRENCIES AND DEBT INSTRUMENTS.
The Funds or Portfolios may purchase, sell or exercise call and put options on:
(i) securities; (ii) securities indexes; (iii) currencies; or (iv) debt
instruments.
Although in most cases these options will be exchange-traded, the Funds
or 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 a 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
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
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is sold. A Fund 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.
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) 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 the 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, the
Fund 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 seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, a Fund may be unable to close out a position.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Funds or Portfolios may
purchase or sell : (i) interest-rate futures contracts; (ii) stock index futures
contracts; (iii) foreign currency futures contracts; (iv) futures contracts on
specified instruments; and (v) options on these futures contracts ("futures
options").
The futures contracts and futures options may be based on various
securities in which the Funds or 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) and other financial instruments and indices.
These instruments may be used to hedge portfolio positions and
transactions as well as to gain exposure to markets. For example, a Fund 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 intends to acquire an instrument or enter
into a position. For example, a Fund 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 or 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. Funds or 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
or Portfolios will only enter into futures contracts or options on futures
contracts which are standardized and traded on a U.S. or foreign exchange or
board of trade, or
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similar entity, or quoted on an automated quotation system.
FORWARD CONTRACTS. Funds and Portfolios 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. All Funds and
Portfolios 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 "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
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 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 investments or
anticipated investments in securities denominated in foreign currencies. A Fund
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.
MORTGAGE-BACKED SECURITIES. The Funds and Portfolios 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 YIELD OF
A MORTGAGE-BACKED SECURITY MAY BE ADVERSELY AFFECTED BY THE PREPAYMENT OF
MORTGAGES INCLUDED IN THE MORTGAGE POOL UNDERLYING THE SECURITY.
The Funds and Portfolios may also invest in securities representing
interests in collateralized mortgage
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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,
semi-annually. CMOs are 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, is first returned
to investors holding the shortest maturity class. Investors holding the longer
maturity classes receive principal only after the first class has been retired.
An investor is partially protected against a sooner than desired return of
principal because of the sequential payments.
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.
STRUCTURED PRODUCTS. The Funds and Portfolios may purchase interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of certain debt obligations, thereby creating
"structured products." 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. THE EXTENT OF THE PAYMENTS MADE WITH
RESPECT TO STRUCTURED PRODUCTS IS DEPENDENT ON THE EXTENT OF THE CASH FLOW ON
THE UNDERLYING INSTRUMENTS.
The Funds and Portfolios may also invest in other types of structured
products, including among others, spread trades and notes linked by a formula
(e.g., a multiple) to the price of an underlying instrument or currency. A
spread trade is an investment position relating to a difference in the prices or
interest rates of two securities or currencies 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 or currencies.
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
Regulations of the CFTC require that the Funds or Portfolios enter into
transactions in futures contracts and options thereon for hedging purposes only,
in order to assure that they are not deemed to be a "commodity pools" under such
regulations. In particular, CFTC regulations require that all short futures
positions be entered into for the purpose of hedging the value of securities
held in a Fund's or Portfolio's portfolio, and that all long futures positions
either constitute bona fide hedging transactions, as defined in such
regulations, or have a total value not in excess of an amount determined by
reference to certain cash and securities positions maintained for the Fund or
Portfolio, and accrued profits on such positions. In addition, a Fund or
Portfolio may not purchase or sell such instruments if, immediately thereafter,
the sum of the amount of initial margin deposits on its existing futures
positions and premiums paid for options on futures contracts would exceed 5% of
the market value of the Fund's or Portfolio's total assets.
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 the Fund's or Portfolio's custodian or
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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.
The Funds' or Portfolios' ability to engage in the hedging 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.
Shareholder approval is not required to change any of the investment
policies discussed above, except as otherwise noted herein and in the
Prospectus.
INVESTMENT RESTRICTIONS
The Funds have adopted, and the Portfolio will adopt, 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 the Fund or total beneficial interests of a Portfolio
present at a meeting, if the holders of more than 50% of the outstanding shares
of the Fund or total beneficial interests of a Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
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 Fund shareholders and will cast its
votes as instructed by the Fund shareholders.
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, 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 5% of its
assets in another issuer, (2) may, consistent with Section 12 of the 1940 Act,
invest in securities issued by other registered investment companies, (3) may
invest more than 10% of its net assets in the securities of a registered
investment company, (4) may hold more than 10% of the voting securities of a
registered investment company, (5) will concentrate its investments in the
investment company and (6) will not issue senior securities except as permitted
by an exemptive order of the SEC. It is a fundamental investment policy of each
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 or Portfolio may not:
(1) borrow money or pledge, mortgage or hypothecate its
assets, except that, as a temporary measure for extraordinary or
emergency purposes the Funds or Portfolios may borrow in an amount not
to exceed 1/3 of the current value of its net assets, including the
amount borrowed, and may pledge, mortgage or hypothecate not more than
1/3 of such assets to secure such borrowings (it is intended that,
money would be borrowed by a Fund or Portfolio only from banks and only
to accommodate requests for the repurchase of shares of the Fund or
Portfolio while effecting an orderly liquidation of portfolio
securities), provided that collateral arrangements with respect to a
Fund's or Portfolio's permissible futures and options transactions,
including initial and variation margin, are not considered to be a
pledge of assets for purposes of this restriction; no Fund or Portfolio
will purchase
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<PAGE>
investment securities if its outstanding borrowing, including
repurchase agreements, exceeds 5% of the value of the Fund's or
Portfolio's total assets; for additional related restrictions, see
clause (i) under the caption "State and Federal Restrictions"
hereafter;
(2) purchase any security or evidence of interest therein on
margin, except that such short-term credit may be obtained as may be
necessary for the clearance of purchases and sales of securities and
except that, with respect to a Fund's or Portfolio's permissible
options and futures transactions, deposits of initial and variation
margin may be made in connection with the purchase, ownership, holding
or sale of futures or options positions;
(3) underwrite securities issued by other persons except
insofar as the Fund or Portfolio may technically be deemed an
underwriter under the Securities Act of 1933 in selling a portfolio
security;
(4) write, purchase or sell any put or call option or any
combination thereof, provided that this shall not prevent (i) with
respect to the Growth and Income Fund (including the Growth and Income
Portfolio), the Capital Growth Fund (including the Capital Growth
Portfolio), the Equity Fund and the Equity Income Fund only, the
purchase, ownership, holding or sale of warrants where the grantor of
the warrants is the issuer of the underlying securities, (ii) with
respect to all of the Funds and Portfolios, the writing, purchasing or
selling of puts, calls or combinations thereof with respect to U.S.
Government securities or (iii) 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;
(5) knowingly invest in securities which are subject to legal
or contractual restrictions on resale (including securities that are
not readily marketable, but not including repurchase agreements
maturing in not more than seven days) if, as a result thereof, more
than 10% of the Fund's or Portfolio's total assets (taken at market
value) would be so invested (including repurchase agreements maturing
in more than seven days), except with respect to the Balanced Fund
where such limitation is 15% of the Fund's total assets subject to
additional restrictions imposed by jurisdictions in which such Fund's
shares are offered for sale, thereby currently making the effective
limitation 10% of the Balanced Fund's total assets;
(6) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate
or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of business,
other than (i) with respect to a Fund's or Portfolio's permissible
futures and options transactions or (ii) with respect to the Growth and
Income Fund (including the Growth and Income Portfolio), the Capital
Growth Fund (including the Capital Growth Portfolio) and the Equity
Fund only, forward purchases and sales of foreign currencies or
securities (each Fund reserves the freedom of action to hold and to
sell real estate acquired as a result of its ownership of securities);
(7) 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 or the Portfolio;
(8) make short sales of securities or maintain a short
position; except that all Funds and Portfolios other than the Bond
Fund, Short-Term Bond Fund and Equity Fund may only make such short
sales of securities or maintain a short position if when a short
position is open such Fund or Portfolio owns an equal amount of such
securities or securities convertible into or exchangeable, without
payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short, and unless not
more than 10% of the Fund's and Portfolio's net assets
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<PAGE>
(taken at market value) is held as collateral for such sales at any one
time (it is the present intention of management to make such sales only
for the purpose of deferring realization of gain or loss for federal
income tax purposes; such sales would not be made of securities subject
to outstanding options);
(9) concentrate its investments in any particular industry,
but if it is deemed appropriate for the achievement of a Fund's and
Portfolio's investment objective, up to 25% of the assets of the Fund
or Portfolio, at market value at the time of each investment, may be
invested in any one industry, except that, with respect to a Fund's or
Portfolio's permissible futures and options transactions, positions in
options and futures shall not be subject to this restriction; or
(10) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, provided that
collateral arrangements with respect to a Fund's or Portfolio's
permissible options and futures transactions, including deposits of
initial and variation margin, are not considered to be the issuance of
a senior security for purposes of this restriction.
Each Fund and Portfolio is not permitted to make loans to other
persons, except (i) through the lending of its portfolio securities and provided
that any such loans not exceed 30% (or 20% in the case of the Bond Fund,
Short-Term Bond Fund and Equity Fund) of the Fund's or Portfolio's total assets
(taken at market value), (ii) through the use of repurchase agreements or the
purchase of short-term obligations and provided that not more than 10% of the
Fund's or Portfolio's total assets will be invested in repurchase agreements
maturing in more than seven days, or (iii) by purchasing, subject to the
limitation in paragraph 5 above, a portion of an issue of debt securities of
types commonly distributed privately to financial institutions, for which
purposes the purchase of short-term commercial paper or a portion of an issue of
debt securities which are part of an issue to the public shall not be considered
the making of a loan.
The Bond Fund, Short-Term Bond Fund and Equity Fund may not make any
commitment to purchase securities on a when-issued basis if, as a result, more
than 30% of a Fund's total assets would be so committed.
The Balanced Fund, and the Equity Income Fund may not purchase the
securities of other investment companies except as part of a merger,
consolidation, or other acquisition involving such Fund
The Equity Income Fund may not (i) invest in securities of any company
if an officer, trustee, or director of the Trust or of the Manager owns
beneficially more than 1/2% of the outstanding securities of such company, and
such officers, trustees, and directors, as a group, own beneficially more than
5% of the outstanding securities of such issuer..
For purposes of the investment restrictions described above and the
state and federal restrictions described below, 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. For purposes
of Investment Restriction No. 9, 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".
The U.S. Government Income Fund has also adopted a fundamental policy which
provides that all of its 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 up to 5% of the
Fund's assets may be invested in futures contracts (and related options thereon)
based on U.S. Government
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<PAGE>
obligations, including any index of government obligations that may be available
for trading.
In addition, the Funds and Portfolios that are permitted to enter into
repurchase agreements have adopted the following operating policy with respect
to such activity, which is not fundamental and which may be changed without
shareholder approval. Such Funds and Portfolios may enter into repurchase
agreements (a purchase of and a simultaneous commitment to resell a security at
an agreed-upon price on an agreed-upon date) only with member banks of the
Federal Reserve System and securities dealers believed creditworthy and only if
fully collateralized by U.S. Government obligations or other securities in which
such Funds and Portfolios are permitted to invest. If the vendor of a repurchase
agreement fails to pay the sum agreed to on the agreed-upon delivery date, a
Fund or Portfolio would have the right to sell the securities constituting the
collateral; however, the Fund or Portfolio might thereby incur a loss and in
certain cases may not be permitted to sell such securities. Moreover, as noted
above in paragraph 5, a Fund or Portfolio that is permitted to invest in
repurchase agreements may not, as a matter of fundamental policy, invest more
than 10% (15% with respect to the Balanced Fund) of its total assets in
repurchase agreements maturing in more than seven days.
The Funds and Portfolios have no current intention of engaging in the
following activities in the foreseeable future: (i) writing, purchasing or
selling puts, calls or combinations thereof with respect to U.S. Government
securities; (ii) making short sales of securities or maintaining a short
position; or other than with respect to the Equity Funds (including the
Portfolios), (iii) purchasing voting securities of any issuer.
STATE AND FEDERAL RESTRICTIONS: In order to comply with certain federal
and state statutes and regulatory policies, as a matter of operating policy,
each Fund or Portfolio will not: (i) sell any security which it does not own
unless by virtue of its ownership of other securities the Fund has at the time
of sale a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions, (ii) invest for
the purpose of exercising control or management, (iii) except for the Growth and
Income Fund and Capital Growth Fund, purchase securities issued by any
registered investment company except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such purchase, though not
made in the open market, is part of plan of merger or consolidation; provided,
however, that the securities of any registered investment company will not be
purchased on behalf of the Fund if such purchase at the time thereof would cause
more than 5% or 10% of the Fund's total assets (taken at the greater of cost or
market value) to be invested in the securities of such issuer or the securities
of registered investment companies, respectively, or would cause more than 3% of
the outstanding voting securities of any such issuer to be held by the Fund; and
provided, further, that securities issued by any open-end investment company
shall not be purchased on behalf of the Fund, (iv) invest more than 10% of the
Fund's or Portfolio's total assets (taken at the greater of cost or market
value) in securities that are not readily marketable except that the Growth and
Income Fund and Capital Growth Fund will invest all assets in Portfolios, (v) as
to 50% of a Fund's total assets (other than the Growth and Income Fund and
Capital Growth Fund), except that with respect to Bond Fund, Short-Term Bond
Fund and Equity Fund as to 75% of such Fund's total assets, purchase securities
of any issuer if such purchase at the time thereof would cause the Fund to hold
more than 10% of any class of securities of such issuer, for which purposes all
indebtedness of an issuer shall be deemed a single class and all preferred stock
of an issuer shall be deemed a single class, (vi) invest more than 5% of the
Fund's 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 10% of its assets in such companies, (vii) invest in
warrants valued at the lower of cost or market, in excess of 5% of the value of
the Fund's 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 (viii) purchase
or retain in the Fund's or Portfolio's 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
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<PAGE>
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. These policies are not fundamental and may be changed
by the Trust's or Portfolio's Board of Trustees without shareholder approval.
PERCENTAGE AND RATING RESTRICTIONS: If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security of a Fund or Portfolio will not be considered a violation of policy.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Specific decisions to purchase or sell securities for the Funds that
invest in equity and debt securities are made by a portfolio manager who is an
employee of the Adviser to such Funds or Portfolios and who is appointed and
supervised by senior officers of such Adviser. Changes in the Funds' or
Portfolios' investments are reviewed by the Board of Trustees. The Funds' and
Portfolio's portfolio managers may serve other clients of the Adviser in a
similar capacity.
The frequency of a Fund's portfolio transactions -- the portfolio
turnover rate -- will vary from year to year depending upon market conditions.
Because a high turnover rate may increase transaction costs and the possibility
of taxable short-term gains (see "Tax Matters" in the Prospectus), the Adviser
will weigh the added costs of short-term investment against anticipated gains.
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. Government Income Fund 296 163% 164%
Growth and Income Fund 41% * *
Capital Growth Fund 36% * *
Equity Income Fund --- 75% 91%
Bond Fund 20% 17% 30%
Short-Term Bond Fund 17% 44% 62%
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.
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 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%
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The primary consideration in placing portfolio security transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Funds and
Portfolios and other clients of the Adviser on the basis of their professional
capability, the value and quality of their brokerage services, and the level of
their brokerage commissions. Debt securities are traded principally in the
over-the-counter market through dealers acting on their own account and not as
brokers. In the case of securities traded in the over-the-counter market (where
no stated commissions are paid but the prices include a dealer's markup or
markdown), the Adviser 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 on the tender of the
Funds' 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. At present, no other recapture arrangements are in
effect.
Under the Funds' and Portfolios' Investment Advisory Agreements and as
permitted by Section 28(e) of the Securities Exchange Act of 1934, the Adviser
may cause the Funds and Portfolios to pay a broker-dealer which provides
brokerage and research services to the Adviser an amount of commission for
effecting a securities transaction for the Funds and Portfolios in excess of the
amount other broker-dealers would have charged for the transaction if the
Adviser determines in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
the Adviser's overall responsibilities to the Funds and Portfolios or to its
clients. Not all of such services are useful or of value in advising 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.
Although commissions paid on every transaction will, in the judgment of
the Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Funds and Portfolios and the Adviser's other clients as part of providing
advice as to the availability of securities or of purchasers or sellers of
securities and services in effecting securities transactions and performing
functions incidental thereto, such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and
other factual information or services ("Research") to the Adviser for no
consideration other than brokerage or underwriting commissions. Securities may
be bought or sold through such broker-dealers, but at present, unless otherwise
directed by the Funds or Portfolios, a commission higher than one charged
elsewhere will not be paid to such a firm solely because it provided Research to
the Adviser.
The Adviser's investment management personnel will attempt to evaluate
the quality of Research provided by brokers. Results of this effort are
sometimes used by the Adviser as a consideration in the selection of brokers to
execute portfolio transactions. However, the Adviser may be unable to quantify
the amount of commissions which are paid as a result of such Research because a
substantial number of transactions are effected through brokers which provide
Research but which are selected principally because
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of their execution capabilities.
The management fees that the Funds pay to the Adviser will not be
reduced as a consequence of the Adviser's 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 and
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 in serving one or more of the Funds and Portfolios and
other clients and, conversely, such services obtained by the placement of
brokerage business of other clients generally would be useful to the Adviser in
carrying out its obligations to a Fund or Portfolio. While such services are not
expected to reduce the expenses of the Adviser, the Adviser would, through use
of the services, avoid the additional expenses which would be incurred if it
should attempt to develop comparable information through its own staff.
In certain instances, there may be securities that are suitable for one
or more of the Funds or Portfolios as well as one or more of the Adviser's other
clients. Investment decisions for the Funds and Portfolios and for the Adviser's
other clients are made with a view to achieving their respective investment
objectives. It may develop that the same investment decision is made for more
than one client or that a particular security is bought or sold for only one
client even though it might be held by, or bought or sold for, other clients.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling that same security. Some simultaneous transactions
are inevitable when several clients receive investment advice from the same
investment adviser, particularly when the same security is suitable for the
investment objectives of more than one client. 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 or 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 Equity Fund (prior to the reorganization) 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 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.
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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 Adviser, or with any
affiliate of the Adviser, acting either as principal or as broker.
- 21 -
<PAGE>
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN
A Fund's total rate of return for any period will be calculated by (a)
dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. The average annual rate of return quotation will
be calculated by (x) adding 1 to the period total rate of return quotation as
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
The average annual total rate of return figures for the A Shares of the
following Funds, reflecting the initial investment and reinvested dividends for
the one and five year periods ended October 31, 1995, and for the period from
commencement of business operations of each such Fund to October 31, 1995, were
as follows:
<TABLE><CAPTION>
One Five Since Date of
Fund Year Years Inception Inception
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. Government 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
Capital Growth Fund
A Shares 13.89% 25.37% 20.32% 9/8/87
B Shares 13.34% --- 8.72% 11/5/93
Bond Fund 15.83% --- 9.14% 11/30/90
Short-Term Bond Fund 7.37% --- 5.81% 11/30/90
Equity Fund 20.41% --- 14.12% 11/30/90
Small Cap Equity Fund
A Shares --- --- --- 12/20/94
B Shares --- --- --- 3/28/95
</TABLE>
Had the maximum sales charge for the Class A Shares (4.50% for the U.S.
Government Income Fund, Balanced Fund and Equity Income Fund and 4.75% for the
Growth and Income Fund and Capital Growth Fund) been in effect, and the maximum
CDSC of 5%for the one year period and 4% for the period since inception) the
average annual total rate of return figures for the same periods would have been
as follows:
- 22 -
<PAGE>
One Five Since
Fund Year Years Inception
- --------------------------------------------------------------------------------
U.S. Government 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%
Capital Growth Fund
A Shares 8.48% 24.15% 19.60%
B Shares 8.34% --- 6.85%
Small Cap Equity Fund
A Shares --- --- ---
B Shares --- --- ---
YIELD QUOTATIONS
Any current "yield" quotation of the Shares of an Income or Equity Fund
shall consist of an annualized hypothetical yield, carried at least to the
nearest hundredth of one percent, based on a thirty calendar day period and
shall be calculated by (a) raising to the sixth power the sum of 1 plus the
quotient obtained by dividing the Fund's net investment income earned during the
period by the product of the average daily number of shares outstanding during
the period that were entitled to receive dividends and the maximum offering
price per share on the last day of the period, (b) subtracting 1 from the
result, and (c) multiplying the result by 2.
The yields of the Shares of the Funds for the thirty-day period ended
October 31, 1995 were as follows:
Class A Class B Class A Class B
U.S. Government Income 5.09% 4.58% Capital Growth Fund 0.49% 0.02%
Fund
Balanced Fund 2.74% 2.12% Equity Fund 1.87% ----
Equity Income Fund 2.04% ---- Bond Fund 6.15% ----
Growth and Income Fund 1.50% 1.08% Short-Term Bond Fund 5.69% ----
Small Cap Equity Fund 1.39% 0.73%
Advertisements for the Vista Funds may include references to the asset
size of other financial products made available by Chase Manhattan, such as the
offshore assets of the Vista Funds.
- 23 -
<PAGE>
NON-STANDARDIZED PERFORMANCE RESULTS
The chart below reflects the net change in the value of an assumed
initial investment of $10,000 in the following Funds for the period from the
commencement date of business for each such Fund (i.e., either September 8,
September 23, 1987 or November 30, 1990 for the former Trinity Funds) and July
16, 1993 for the Equity Income Fund, and November 4, 1992 for the Balanced Fund.
The commencement of offering of all Funds' B shares, except March 28, 1995 for
the Small Cap Equity Fund, was November 4, 1993. The values reflect an
assumption that capital gain distributions and income dividends, if any, have
been accepted in additional Shares. From time to time, the Funds will provide
these performance results, if any, in addition to the total rate of return
quotations required by the Securities and Exchange Commission. As discussed more
fully in the Prospectus, neither these performance results, nor total rate of
return quotations, should be considered as representative of the performance of
the 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.
- 24 -
<PAGE>
VALUE OF VALUE OF VALUE OF
PERIOD ENDED INITIAL $10,000 CAPITAL GAINS REINVESTED
OCTOBER 31, 1995 INVESTMENT DISTRIBUTIONS DIVIDENDS TOTAL VALUE
- --------------------------------------------------------------------------------
U.S. Government
Income Fund
A Shares $11,400.00 $1,065.04 $8,716.49 $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 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
Equity Fund 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 10,910.00 273.37 4,193.78 15,377.14
Short-Term Bond Fund 10,080.00 16.32 3,107.56 13,203.88
Had the maximum sales charge (4.50% for the U.S. Government 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) been in effect for Class A
Shares, and 4% CDSC for the B Shares of each Fund except the Small Cap Equity
Fund which assumes a 5% CDSC) the average annual total rate of return figures
for the same periods would have been as follows:
- 25 -
<PAGE>
VALUE OF VALUE OF VALUE OF
PERIOD ENDED INITIAL $10,000 CAPITAL GAINS REINVESTED
OCTOBER 31, 1995 INVESTMENT DISTRIBUTIONS DIVIDENDS TOTAL VALUE
- --------------------------------------------------------------------------------
U.S. Government
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 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
- 26 -
<PAGE>
DETERMINATION OF NET ASSET VALUE
Each class of shares of each Fund determines its net asset value per
Share each day as of the regular close of the New York Stock Exchange, or 4:15
p.m. for Funds holding options, in the case of a Fixed Income or Equity Fund)
during which the New York Stock Exchange is open for trading (a "Fund Business
Day"), by dividing its net assets attributable to that class by the number of
its shares outstanding in that class at the time the determination is made. (As
of the date of this Statement of Additional Information, the New York Stock
Exchange is open for trading every weekday except for the following holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas.) The Adviser is closed on the
following days: Martin Luther King Junior Day, Columbus Day and Veteran's Day.
The Adviser is closed on the following: Martin Luther King Junior Day,
Columbus Day and Veteran's Day. Purchases and redemptions will be effected
at the time of determination of net asset value next following the receipt of
any purchase or redemption order. (See "Purchases and Redemptions of Shares" in
the Prospectus.)
Equity securities 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
redemption price at maturity) and premiums (the excess of purchase price over
stated redemption price at maturity). Interest income on short-term obligations
is determined on the basis of interest and discount accrued less amortization of
premium.
Subject to compliance with applicable regulations, each Fund has
reserved the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of portfolio securities (instead of cash).
The securities so distributed would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. The Trust has
filed an election under Rule 18f-1 committing to pay in cash all redemptions by
a shareholder of record up to amounts specified by the rule.
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
- 27 -
<PAGE>
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. As of 4:00 p.m. (Eastern Time) on each such day,
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 4:00 p.m. 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 4:00 p.m. 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 4:00 p.m. on the following day the
New York Stock Exchange is open for trading.
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) and at least 90% of
its tax-exempt income (net of expenses allocable thereto) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by 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
- 28 -
<PAGE>
business of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain gains on designated hedging transactions that are offset by realized or
unrealized losses on offsetting positions) from the sale or other disposition of
stock, securities or foreign currencies (or options, futures or forward
contracts thereon) held for less than three months (the "Short-Short Gain
Test"). For purposes of these calculations, gross income includes tax-exempt
income. However, foreign currency gains, including those derived from options,
futures and forwards, will not in any event be characterized as ShortShort 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 (including a municipal 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.
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 (i) 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
- 29 -
<PAGE>
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 (and Treasury Regulations now provide) that gains
arising from Section 1256 contracts will be treated for purposes of the
Short-Short Gain Test as being derived from securities held for not less than
three months if the gains arise as a result of a constructive sale under Code
Section 1256.
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, 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.
- 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")) (Tax-exempt
interest on municipal obligations is not subject to the excise tax). The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall:
(1) reduce its capital gain net income (but not below its net capital gain) by
the amount of any net ordinary loss for the calendar year; and (2) exclude
foreign currency gains and losses incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
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 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 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. The Code provides, however, that under certain conditions
only 50% of the capital gain recognized upon a Fund's disposition of "small
business" stock will be subject to tax.
Conversely, if a Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If 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 an Equity Fund with respect to a
taxable year will qualify for the 70% dividends-received deduction generally
available to corporations (other than corporations, such as Subchapter S
- 31 -
<PAGE>
corporations, which are not eligible for the deduction because of their special
characteristics and other than for purposes of special taxes such as the
accumulated earnings tax and the personal holding company tax) to the extent of
the amount of qualifying dividends received by the Equity Fund from domestic
corporations for the taxable year. A dividend received by an Equity Fund will
not be treated as a qualifying dividend (1) if it has been received with respect
to any share of stock that the Fund has held for less than 46 days (91 days in
the case of certain preferred stock), excluding for this purpose under the rules
of Code Section 246(c) (3) and (4): (i) any day more than 45 days (or 90 days in
the case of certain preferred stock) after the date on which the stock becomes
ex-dividend and (ii) any period during which the Equity Fund has an option to
sell, is under a contractual obligation to sell, has made and not closed a short
sale of, is the grantor of a deep-in-the-money or otherwise nonqualified option
to buy, or has otherwise diminished its risk of loss by holding other positions
with respect to, such (or substantially identical) stock; (2) to the extent that
the Equity Fund is under an obligation (pursuant to a short sale or otherwise)
to make related payments with respect to positions in substantially similar or
related property; or (3) to the extent the stock on which the dividend is paid
is treated as debt-financed under the rules of Code Section 246A. Moreover, the
dividends-received deduction for a corporate shareholder may be disallowed or
reduced (1) if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of the Equity 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 AMTI. However, corporate shareholders will
generally be required to take the full amount of any dividend received from an
Equity 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.
Distributions by a Fund that do not constitute ordinary income
dividends, exempt-interest dividends or capital gain dividends will be treated
as a return of capital to the extent of (and in reduction of) the shareholder's
tax basis in his shares; any excess will be treated as gain from the sale of his
shares, as discussed below.
Distributions by 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
- 32 -
<PAGE>
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.
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
- 33 -
<PAGE>
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,
exempt-interest dividends and capital gain dividends from regulated investment
companies often differ from the rules for U.S. federal income taxation described
above. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in a Fund.
- 34 -
<PAGE>
MANAGEMENT OF THE FUNDS AND PORTFOLIOS
TRUSTEES AND OFFICERS OF THE TRUST
The Trustees and officers and their principal occupations for at least
the past five years are set forth below. Their titles may have varied during
that period. Asterisks indicate those Trustees and officers that are "interested
persons" (as defined in the 1940 Act). Unless otherwise indicated below, the
address of each officer is 125 W. 55th Street, New York, New York 10019.
TRUSTEES
FERGUS REID, III* - Chairman of the Board of Trustees. Chairman of the Board of
Trustees of Mutual Fund Trust and Trustee of Certain Portfolios advised by Chase
(the "Portfolios") ; Chairman and Chief Executive Officer, Lumelite Corporation,
since September 1985; Trustee, Morgan Stanley Portfolios; from 1982 through
1984, Managing Director, Bernhard Associates (venture capital firm). Address:
202 June Road, Stamford, Connecticut 06940.
DR. RICHARD E. TEN HAKEN - Trustee. Trustee of Mutual Fund Trust and the
Portfolios; Former District Superintendent of Schools, Monroe No.2 and Orleans
Counties, New York; Chairman of the Finance and the Audit and Accounting
Committees, Member of the Executive Committee; Chairman of the Board and
President, New York State Teachers' Retirement System.
Address: 4 Barnfield Road, Pittsford, New York 14534.
WILLIAM J. ARMSTRONG - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Vice President and Treasurer, Ingersoll- Rand Company.
Address: 49 Aspen Way, Upper Saddle River, New Jersey 07458.
JOHN R.H. BLUM - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Attorney in Private Practice; formerly, a Partner in the law firm of Richards,
O'Neil & Allegaert; Commissioner of Agriculture - State of Connecticut,
1992-1995.
Address: 322 Main Street, Lakeville, Connecticut 06039.
JOSEPH J. HARKINS* - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Retired; formerly, Commercial Sector Executive and Executive Vice President of
The Chase Manhattan Bank, N.A. from 1985 through 1989. He has been employed by
Chase in numerous capacities and offices since 1954. Director of Blessings
Corporation, Jefferson Insurance Company of New York, Monticello Insurance
Company and Nationar.
Address: 257 Plantation Circle South, Ponte Vedra Beach, Florida 32082.
H. RICHARD VARTABEDIAN* - Trustee. President and Trustee of the Trust and Mutual
Fund Trust; Chairman and President 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.
Address: P.O. Box 296, Beach Road, Hendrick's Head, Southport, Maine 04576
STUART W. CRAGIN, JR. - Trustee. Trustee of Mutual Fund Trust and the
Portfolios; 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.
Address: 108 Valley Road, Cos Cob, connecticut 06807.
- 35 -
<PAGE>
IRVING L. THODE - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
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.
Address: 80 Perkins Road, Greenwich, Connecticut 06830.
The Board of Trustees met seven times during the twelve months ended December
31, 1995, and each of the Trustees attended at least 75% of those meetings.
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.
* Interested Trustees as defined under the 1940 Act.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting of
the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the Adviser is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the Adviser. 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. 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>
Vista Vista
Vista Equity Growth Vista Vista Vista
Balanced Income and Capital Equity Bond
Fund Fund Income Growth 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, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
William J. Armstrong, 160.88 64.07 9595 .45 5,063.12 360.67 312.41
Trustee
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, 169.60 67.79 10,159.13 5,376.61 330.18 330.18
Trustee
Stuart W. Cragin, Jr., 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
Irving L. Thode, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
</TABLE>
- 36 -
<PAGE>
<TABLE><CAPTION>
Vista Vista Vista
Short Vista Small Vista Global Vista
Term U.S. Cap International Fixed Southeast Vista Vista
Bond Government 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, 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
</TABLE>
Pension or Total
Retirement Compensation
Benefits Accrued from "Fund
as Fund Expenses Complex"(1)
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., Trustee 0 52,304.39
Irving L. Thode, Trustee 0 52,304.39
(1) Data reflects total compensation earned during the period January 1,
1995 to December 31, 1995 for service as a Trustee to all thirty-two
(Portfolios) Funds advised by the Adviser.
- 37 -
<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 Portfolios, the Adviser, Administrator or Distributor or
any of their affiliates) may be entitled to certain benefits upon retirement
from the Board of Trustees. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the Adviser (collectively, the "Covered Portfolios"). Each
Eligible Trustee is entitled to receive from the Covered Portfolios 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 Portfolios 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 Portfolios. Such benefit is payable to each eligible Trustee in
monthly installments for the life of the Trustee.
Set forth in the table below are the estimated annual benefits payable to an
eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of December 31, 1995, 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 BENEFIT 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 Adviser, Administrator
or Distributor or any of their affiliates) may enter into agreements with the
Funds whereby payment of the Trustees' fees are deferred until the payment date
elected by the Trustee (or the Trustee's termination of service). The deferred
amounts are deemed invested in shares of a Fund on whose Board the Trustee sits,
subject to the Trustee's election. 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. The following Eligible
Trustees have executed a deferred compensation agreement for the 1996 calendar
year:
Messrs. Ten Haken, Thode and Vartabedian.
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<PAGE>
PRINCIPAL EXECUTIVE OFFICERS:
The principal executive officers of the Trust are as follows:
H. Richard Vartabedian - President and Trustee.
Martin R. Dean - Treasurer and Assistant Secretary; Vice President, BISYS Funds
Group, Inc.
Ann Bergin - Secretary and Assistant Treasurer; Vice President, BISYS Funds
Group, Inc.; Secretary, Vista BrokerDealer Services, Inc.
OWNERSHIP OF SHARES OF THE PORTFOLIOS. The Trustees and officers as a group
directly or beneficially own less than 1% of each Portfolio.
The Declaration of Trust provides that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust, unless,
as to liability to the Trust or its shareholders, it is finally adjudicated that
they engaged in wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices or with respect to any matter
unless it is finally adjudicated that they did not act in good faith in the
reasonable belief that their actions were in the best interest of the Trust. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a written
opinion of independent counsel, that such officers or Trustees have not engaged
in wilful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
The Fund pays no direct remuneration to any officer of the Trust.
The Trustees of the Growth and Income Portfolio are H. Richard Vartabedian,
Chairman, Richard Ten Haken, Stuart W. Cragin, Jr., Fergus Reid, III and Irv
Thode. The Trustees of the Capital Growth Portfolio are H. Richard Vartabedian,
Chairman, Joseph Harkins, Stuart W. Cragin, Jr., Fergus Reid, III and Irv Thode.
ADVISER
Chase serves as the Adviser to the Fund. On August 27, 1995, The Chase
Manhattan Corporation announced its entry into an Agreement and Plan of Merger
(the "Merger Agreement") with Chemical Banking Corporation ("Chemical"), a bank
holding company, pursuant to which The Chase Manhattan Corporation will merge
with and into Chemical (the "Holding Company Merger"). Under the terms of the
Merger Agreement, Chemical will be the surviving corporation in the Holding
Company Merger and will continue its corporate existence under Delaware law
under the name "The Chase Manhattan Corporation" ("New Chase"). The board of
directors of each holding company has approved the Holding Company Merger, which
will create the second largest bank holding company in the United States based
on assets. The consummation of the Holding Company Merger is subject to certain
closing conditions. On December 11, 1995, the shareholders of The Chase
Manhattan Corporation and Chemical voted to approve the Holding Company Merger.
The Holding Company Merger is expected to be completed on or about March 31,
1996.
Subsequent to the Holding Company Merger, it is expected that the
Adviser will be merged with and into Chemical Bank. a New York State chartered
bank ("Chemical Bank") (the "Bank Merger" and together with the Holding Company
Merger, the "Mergers"). The surviving bank will continue operations under the
name The Chase Manhattan Bank (as used herein, the term "Chase" refers to The
Chase Manhattan Bank, N.A. and its successor
- 39 -
<PAGE>
in the Bank Merger, and the term "Adviser" means Chase (including its successor
in the Bank Merger) in its capacity as investment adviser to the Fund). The
consummation of the Bank Merger is subject to certain closing conditions,
including the receipt of certain regulatory approvals. The Bank Merger is
expected to occur in July, 1996.
Chemical is a publicly owned bank holding company incorporated under
Delaware law and registered under the Federal Bank Holding Company Act of 1956,
as amended. As of December 31, 1995, through its direct or indirect
subsidiaries, Chemical managed more than $57 billion in assets, including
approximately $6.9 billion in mutual fund assets in 11 mutual fund portfolios.
Chemical Bank is a wholly-owned subsidiary of Chemical and is a New York State
chartered bank.
The Adviser manages the assets of each Fund pursuant to Investment
Advisory Agreements, dated as of August 19, 1987 for each of the Funds except
the Bond Fund, Short-Term Bond Fund and Equity Fund (December 31, 1992) Balanced
Fund (August 4, 1992, Equity Income Fund (May 13, 1993) (the "Advisory
Agreements"). In addition, the Adviser manages the assets of the Portfolios
pursuant to an investment advisory contract substantially similar to that
previously existing for the Growth and Income Fund and Capital Growth Fund.
Subject to such policies as the Board of Trustees may determine, Chase makes
investment decisions for each Fund and Portfolio. Pursuant to the terms of the
Advisory Agreements, the Adviser provides each Fund and Portfolio with such
investment advice and supervision as it deems necessary for the proper
supervision of each Fund's or Portfolio's investments. The Adviser continuously
provides investment programs and determines from time to time what securities
shall be purchased, sold or exchanged and what portion of each Fund's or
Portfolio's assets shall be held uninvested. The Adviser furnishes, at its own
expense, all services, facilities and personnel necessary in connection with
managing the investments and effecting portfolio transactions for the Funds and
Portfolios. The other expenses attributable to, and payable by the Funds, are
described under "Expenses" in the Prospectus. The Advisory Agreement for each
Fund and Portfolio 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 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 Advisory Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on such
Advisory Agreement.
Pursuant to the terms of each of the Advisory Agreements, the Adviser
is permitted to render services to others. Each Advisory Agreement is terminable
without penalty by the Trust on behalf of each Fund and Portfolio on not more
than 60 days', nor less than 30 days', written notice when authorized either by
a majority vote of such Fund's or Portfolio's shareholders or by a vote of a
majority of the Board of Trustees of the Trust, or by the 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). Each
Advisory Agreement provides that the 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 or Portfolio, 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 Equity Funds or Equity Portfolios, the equity
research team of the Adviser looks for two key variables when analyzing stocks
for potential investment in 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. A proprietary computer model gauges potential performance and relative
value of about 1,500 stocks. The equity research team then considers a company's
cash flow, the stock's price earning ratio, price-to-book ratio and dividend
level. The team uses a model that helps forecast how the selected stocks will
react to different economic trends.
The top 20 percent of stocks picked by the computer model are then studied
further by the team by seeking out the opinions of leading analysts and doing
hands-on research, such as interviewing corporate managers. This
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<PAGE>
research helps narrow the field from the 250 to 300 stocks accepted by the
computer model.
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 or Portfolio imposed by the
securities laws or regulations thereunder of any state in which the shares of
such Fund or Portfolio 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 fee otherwise payable with respect to such Fund or
Portfolio during such fiscal year; and if such amounts should exceed the monthly
fee, the Adviser 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 the Adviser pursuant to
the Advisory Agreements, each Fund pays an investment advisory fee computed and
paid monthly based on a rate equal to a specified percentage 0.25% for the
Short-Term Bond Fund; 0.30% for the U.S. Government Income Fund, and the Bond
Fund; and 0.40% for the Equity Income Fund, the Growth and Income Fund, the
Capital Growth Fund and the Equity Fund ; 0.50% for the Balanced Fund and 0.65%
for the Small Cap Equity Fund) with respect to each Fund's average daily net
assets, on an annualized basis for such Fund's then-current fiscal year. After
implementation of the master fund/feeder fund structure, the Growth and Income
Portfolio and Capital Growth Portfolio will pay the same advisory fee as that
presently paid by the Growth and Income Fund and Capital Growth Fund. However,
each Adviser may voluntarily agree to waive a portion of the fees payable to it
on a month-to-month basis.
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 voluntarily waived the amounts in parentheses following
such fees with respect to each such period:
- 41 -
<PAGE>
FISCAL YEAR-ENDED OCTOBER 31,
FUND 1993 1994 1995
PAYABLE WAIVED PAYABLE WAIVED PAYABLE WAIVED
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
INCOME FUND $227,496 ($107,208) $351,680 ($234,236) $319,705 ($220,998)
GROWTH AND
INCOME FUND $1,878,340 none $296,161 none **
CAPITAL GROWTH
FUND $430,099 none $71,213 none **
BALANCED FUND --- --- $103,522 ($103,522) $145,295 ($145,295)
EQUITY INCOME --- --- $52,804 ($31,989) $44,277 ($35,433)
FUND
EQUITY FUND * --- $378,813 ($378,813) $250,452 ($250,452)
BOND FUND * --- $167,780 ($167,780) $162,618 ($162,618)
SHORT-TERM
BOND FUND * --- $137,634 ($137,634) $85,353 ($85,353)
SMALL CAP
EQUITY FUND --- --- --- --- $130,401 ($130,401)
* For the Fiscal year ended October 31, 1993 the Equity Fund, Bond Fund
and Short-Term Bond Fund paid or accrued and voluntarily waived the amounts in
parentheses of $463,533 ($463,533), $166,164 ($166,164) and $177,700 ($177,700),
respectively.
** The Funds 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 The Chase Manhattan Bank, N.A. (the
"Adviser"), which also serves as the Funds' administrator.
ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989 as
amended September 30, 1993 (the "Administration Agreement"), Chase serves as
administrator of the Trust. Chase provides certain administrative services to
the Trust and Portfolios, including, among other responsibilities, coordinating
the negotiation of contracts and fees with, and the monitoring of performance
and billing of, the Trust's and Portfolio's
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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 Trust
and Portfolios and providing, at its own expense, office facilities, equipment
and personnel necessary to carry out its duties. The administrator does not have
any responsibility or authority for the management of the Funds or Portfolios,
the determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
Under the administration agreements Chase renders 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 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 agreement 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 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, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust or Portfolios, or
by the Administrator on 60 days' written notice, and will automatically
terminate in the event of its "assignment" (as defined in the 1940 Act). The
administration agreements also provide that neither Chase or their personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Funds, 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, the Administrator receives from each Fund a fee
computed 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.
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<PAGE>
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:
FISCAL YEAR-ENDED OCTOBER 31,
FUND 1993 1994 1995
PAYABLE WAIVED PAYABLE WAIVED PAYABLE WAIVED
- --------------------------------------------------------------------------------
U.S.
GOVERNMENT
INCOME FUND $75,832 ($35,736) $117,228 ($78,078) $106,559 ($76,094)
GROWTH AND
INCOME $469,585 none $637,264 none $830,077 ($252,586)
FUND
CAPITAL GROWTH $107,524 none $208,866 none $435,695 ($116,282)
FUND
BALANCED FUND --- --- $20,704 ($20,704) $29,053 ($29,053)
EQUITY INCOME
FUND --- --- $13,201 ($7,764) $11,069 ($8,855)
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)
* 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.
DISTRIBUTOR
DISTRIBUTION PLAN
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") including several Distribution
Plans on behalf of the Class A Shares of the Income and Equity Funds and the
Vista Shares of the Tax Free Money Market Funds which provides that each of the
Funds shall pay a distribution fee (the "Basic Distribution Fee"), including
payments to the Distributor, at an annual rate not to
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exceed 0.20% of its Shares average daily net assets for distribution services
(exclusive of any expenses incurred by the Distributor in connection with print
or electronic media advertising). The Distributor may use all or any portion of
such Basic Distribution Fee to pay for Fund expenses of printing prospectuses
and reports used for sales purposes, expenses of the preparation and printing of
sales literature and other such distribution-related expenses. Each of the Funds
is also permitted to pay the Distributor an additional fee not to exceed 0.05%
per annum of its Shares' average daily net assets in anticipation of, or as
reimbursement for, expenses incurred in connection with print or electronic
media advertising for its shares. The Funds have not made any payment of such an
additional fee as of the date of this Statement of Additional Information.
As noted above the Class B shareholders will pay a distribution fee of
0.75% of average daily net assets under a Rule 12b-1 Distribution Plan. The
Distributor currently expects to pay sales commissions to a dealer at the time
of sale of Class B shares of up to 4% of the purchase price of the shares sold
by such dealer. The principal underwriter will use its own fund or funds
facilitated by the Distributor (which may be borrowed or otherwise financed) to
pay such amounts. Because the Distributor will receive a maximum of 0.75% of
average daily net assets represented by Class B shares it will take the
Distributor several years to recoup the sales commissions paid to dealers and
other sales expenses.
Because of the 0.75% limitation on the compensation paid to the
Distributor during such fiscal year, a large portion of the commissions
attributable to sales of Class B shares will be accrued and paid by the Fund to
the Distributor in fiscal years subsequent to the years in which the Class B
shares are sold.
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
Plan or in any agreement related to such Plan ("Qualified Trustees"). The
continuance of each Distribution Plan was most recently approved on December 16,
1991. 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 such Fund (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 the Distribution Plan for a
period of not less than six years from the date of the Distribution Plan, and
for the first two years such copies will be preserved in an easily accessible
place.
Since the Basic Distribution Fee is not directly tied to actual
expenses, the amount of Basic Distribution Fee paid by each of the Shares during
any year may be more or less than actual expenses incurred pursuant to the
Distribution Plan. For this reason, this type of distribution fee arrangement is
characterized by the staff of the Securities and Exchange Commission as being of
the "compensation variety" (in contrast to "reimbursement" arrangements, such as
those described above with respect to expenses incurred in connection with print
or electronic media advertising, by which the Distributor's compensation is
directly linked to its expenses). However, the Shares are not liable for any
distribution expenses incurred in excess of the Basic Distribution Fee paid.
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<PAGE>
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. Government 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)
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 shares of the 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. Government
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
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<PAGE>
Equity Income Fund $4,735 $13,571 $3,828
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 Distributor and Sub-Administration
Agreement dated April 2, 1990 as amended June 1, 1990, August 4, 1992 and
September 30, 1993 (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 of the Vista Shares. As of April 1, 1990, the Distributor became a
wholly-owned subsidiary of Concord Financial Group. The Distribution Agreement
provides that the Distributor will bear the expenses of printing, distributing
and filing prospectuses and statements of additional information and reports
used for sales purposes, and of preparing and printing sales literature and
advertisements not paid for by the Distribution Plan. The Trust pays for all of
the expenses for qualification of the shares of 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 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.
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<PAGE>
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.
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:
FISCAL YEAR-ENDED OCTOBER 31,
FUND 1993 1994 1995
PAYABLE WAIVED PAYABLE WAIVED PAYABLE WAIVED
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
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 --- $6,60 none $5,535 none
EQUITY FUND * $47,352 none $31,306 none
BOND FUND * $27,963 none $27,103 none
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SHORT-TERM
BOND FUND * $27,527 none $17,071 none
SMALL CAP
EQUITY FUND --- --- $10,030
$3,488
* 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.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has entered into a shareholder servicing agreement (a
"Servicing Agreement") with each Shareholder Servicing Agent to provide certain
services. The fees relating to acting as liaison to shareholders and providing
personal services to shareholders will not exceed, on an annualized basis, 0.25%
of the average daily net assets of each of the Shares of the Income Funds and
the Equity Funds represented by shares owned during the period for which payment
is being made by investors with whom such Shareholder Servicing Agent maintains
a servicing relationship. However, each Shareholder Servicing Agent has
voluntarily agreed to waive a portion of the fees payable to it under its
Servicing Agreement with respect to each Fund. It is the present intention of
the Trust that no such fee will be paid by the Bond Fund, Short-Term Bond Fund
or Equity Fund. 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:
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<PAGE>
FISCAL YEAR-ENDED OCTOBER 31,
FUND 1993 1994 1995
PAYABLE WAIVED PAYABLE WAIVED PAYABLE WAIVED
- --------------------------------------------------------------------------------
U.S. GOVERNMENT
INCOME FUND $211,063 ($99,758) $293,070 ($177,004) $266,421 ($197,001)
GROWTH AND
INCOME FUND $1,126,760 none $3,186,323 none $4,150,388 none
CAPITAL
GROWTH FUND $261,208 none $1,043,992 none $2,177,440 none
BALANCED FUND --- $51,761 ($45,962) $72,641 ($48,520)
EQUITY
INCOME FUND --- $33,030 ($22,131) $26,964 ($26,964)
SMALL CAP
EQUITY FUND --- --- $14,887 none
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and Portfolio for which Chase receives compensation as is
from time to time agreed upon by the Trust (or Portfolio) and Chase. However,
Chase has agreed not to charge its custodian fees with respect to the Bond Fund,
Short-Term Bond Fund and Equity Fund. For additional information, see
"Shareholder Servicing Agents, Transfer Agent and Custodian" in the Prospectus.
In certain circumstances Shareholder Servicing Agents may be required
to register as dealers under state law.
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, have been so incorporated by reference 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 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.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended October 31,
1995 of each Fund are incorporated herein by reference to the Portfolio's annual
report to shareholders as filed with the Securities and Exchange Commission by
the Trust on Form N-30D on December 29, 1995, accession number
0000950123-95-003915.
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<PAGE>
GENERAL INFORMATION
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group is an open-end, management investment company
organized as Massachusetts business trust under the laws of the Commonwealth of
Massachusetts in 1987. Because certain of the Funds comprising the Trust are
"non-diversified", more than 5% of any of the assets of any such Fund 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 15 Funds of shares of beneficial
interest without par value. With respect to certain of the Equity and Income
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 separately,
for example to approve investment advisory agreements or distribution plans, but
shares of all series and classes vote together, to the extent required under the
1940 Act, in the election or selection of Trustees and independent accountants.
With respect to shares purchased through a Shareholder Servicing Agent and, in
the event written proxy instructions are not received by the Fund or its
designated agent prior to a shareholder meeting at which a proxy is to be voted
and the shareholder does not attend the meeting in person, the Shareholder
Servicing Agent for such shareholder will be authorized pursuant to an
applicable agreement with the shareholder to vote the shareholder's outstanding
shares in the same proportion as the votes cast by other Fund shareholders
represented at the meeting in person or by proxy.
The Balanced Fund, U.S. Government Income Fund, Growth and Income Fund
, Capital Growth Fund and Small Cap Equity Fundoffer both Class A and Class B
shares. The classes of shares have several different attributes relating to
sales charges and expenses.
Class A shares are sold at net asset value plus an initial sales charge
of up to a maximum of 4.75% of the public offering price. Class B shares have no
initial sales charge; however, a contingent deferred sales charge will be
imposed on redemptions made within six years of purchase. The amount of this
contingent deferred sales charge will be 5% of the redemption proceeds on
redemptions in the first year after purchase, declining to zero for redemptions
made more than six years after purchase. However, this contingent deferred sales
charge will not apply to redemptions of shares representing capital appreciation
on Fund assets and reinvestment of dividends or capital distributions.
Approximately eight years after purchase, Class B shares will automatically
convert to Class A shares.
In general, absent waivers, Class A and Class B shares each have an
annual shareholder servicing fee of 0.25% of average daily net assets. The Class
A Shares of the Small Cap Equity Fund do not have a Shareholder Servicing fee.
In addition, absent waivers, Class A has an annual distribution fee under Rule
12b-1 of 0.25% of average daily net assets, while Class B has an annual
distribution fee under Rule 12b-1 of 0.75% of average daily net assets.
Moreover, expenses borne by each class may differ slightly because of the
allocation of other classspecific 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
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particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders of a series or class when, in the
judgment of the Trustees, it is necessary or desirable to submit matters for a
shareholder vote. Shareholders have, under certain circumstances, the right to
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have, in certain circumstances, the right to remove one or more Trustees without
a meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of a majority of the outstanding
shares of each portfolio affected by the amendment. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series or class, a Shareholder Servicing Agent may vote any shares as to which
such Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares of that portfolio otherwise
represented at the meeting in person or by proxy as to which such Shareholder
Servicing Agent is the agent of record. Any shares so voted by a Shareholder
Servicing Agent will be deemed represented at the meeting for purposes of quorum
requirements. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any series
or class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two-thirds of its outstanding
shares, except that if the Board of Trustees recommends such merger,
consolidation or sale or disposition of assets, the approval by vote of the
holders of a majority of the series' or class' outstanding shares will be
sufficient, or (ii) by the vote of the holders of a majority of its outstanding
shares, or (iii) by the Board of Trustees by written notice to the series' or
class' shareholders. Unless each series and class is so terminated, the Trust
will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to shares
that may be redeemed through expedited or automated procedures established by a
Shareholder Servicing Agent.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
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:
o Prohibitions on investment personnel acquiring securities in initial
offerings;
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<PAGE>
o A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer granting such
approval have no interest in the issuer making the private placement;
o A restriction on access persons executing transactions for securities
on a recommended list until 14 days after distribution of that list;
o A prohibition on access persons acquiring securities that are pending
execution by one of the Funds or Portfolios until 7 days after the
transactions of the Funds or Portfolios are completed;
o A prohibition of any buy or sell transaction in a particular security
in a 30-day period, except as may be per mitted in certain hardship
cases or exigent circumstances where prior approval is obtained. This
provision differs slightly from the ICI recommendation;
o A requirement for pre-clearance of any buy or sell transaction in a
particular security after 30 days, but within 60 days;
o A requirement that any gift exceeding $75.00 from a customer must be
reported to the appropriate compliance officer;
o A requirement that access persons submit in writing any request to
serve as a director or trustee of a publicly traded company;
o A requirement that all securities transactions in excess of $1,000 be
pre-cleared, except that if a person has engaged in more than $10,000
of securities transactions in a calendar quarter all securities of such
person require pre-clearance (this de minimus exception differs
slightly from the ICI recommendations);
o A requirement that all access persons direct their broker-dealer to
submit duplicate confirmation and customer statements to the
appropriate compliance unit; and
o A requirement that all access persons sign a Code of Ethics
acknowledgment, affirming that they have read and understood the Code
and submit a personal security holdings report upon commencement of
employment or status and a personal security transaction report within
10 days of each calendar quarter thereafter.
Principal Holders
As of January 31, 1996, the following persons owned beneficially,
directly or indirectly, 5% or more of the outstanding shares of the following
classes or Funds:
U.S. GOVERNMENT INCOME - A
Carriers ILA CFS Container Royalty Fund 14.86%
C/O CCC Inc.
One Evertrust Plaza
Jersey City, NJ 07302-3051
Carriers ILA CFS Container Royalty Fund 9.90%
One Evertrust Plaza
Jersey City, NJ 07302-3051
Chase Manhattan Bank N.A. 9.07%
Global Securities Services Omnibus
3 Chase Metrotech Center
Brooklyn, NY 11245- 0002
Trulin & Co 7.28%
Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
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Testa and Co. 5.42%
C/O Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
BALANCED FUND - A
Chase Manhattan Bank N.A . 21.84%
Global Securities Services Omnibus
3 Chase Metrotech Center
Brooklyn, NY 11245- 0002
Testa and Co. 20.32%
C/O Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
Trulin & Co 8.98%
Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
GROWTH AND INCOME FUND - A
CMB Thrift Incentive Plan 13.58% 3 MetroTech Center - 5th Fl.
Brooklyn, NY 11245-0001
CAPITAL GROWTH FUND
Charles Schwab & Co., Inc. 8.10%
Reinvest Acct.
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
SMALL CAP EQUITY FUND - A
Charles Schwab & Co., Inc. 13.40%
Reinvest Acct.
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
Jupiter & Co. 9.85%
C/O Investors BankTrust Co.
P.O. Box 1537 TOP 57
Boston, MA 02205-1537
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EQUITY FUND
Trulin & Co 78.40%
Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
Testa and Co. 8.89%
C/O Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
Liva & Co. 5.75%
C/O Chase Manhattan Bank
Trust Securities/Mutual Funds
One Chase Square
Rochester, NY 14643-0001
Penlin & Co. 5.19%
C/O Chase Manhattan Bank
Trust Securities/Mutual Funds
One Chase Square
Rochester, NY 14643-0001
BOND FUND
Trulin & Co 91.53%
Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
SHORT-TERM BOND FUND
Trulin & Co 74.41%
Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
Testa and Co. 9.48%
C/O Chase Manhattan Bank
P.O. Box 1412
Rochester, NY 14603-1412
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<PAGE>
Specimen Computations of Offering Prices Per Share
U.S. Government 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........ $11 .37
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 31, 1995..... ............................ $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:
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<PAGE>
Net Asset Value and Redemption Price per Share of Beneficial
Interest at October 31,1995................................. $35.39
Equity Income Fund (specimen computations)
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
Equity Fund (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial
Interest at October 31, 1995................................. $12.24
Bond Fund (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial Interest
at October 31, 1995.......................................... $10.91
Short-Term Bond Fund (specimen computations)
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)
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<PAGE>
(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
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<PAGE>
APPENDIX A
DESCRIPTION OF RATINGS
BOND RATINGS
Moody's Investors Service, Inc. - Bonds which are rated Aaa are judged
to be the best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." 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 positions of
such issues. Bonds which are rated Aa are judged to be of high quality by all
standards. Together with 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 fluctuations 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. Bonds which are rated A possess many favorable investment attributes
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.
Moody's applies numerical modifiers "1," "2" and "3" in each generic rating
classification from Aa through B in its corporate bond rating system. 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 Corporation - Bonds rated AAA have the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong. Bonds rated AA have a very strong capacity to pay interest and
repay principal and differ from AAA issues only in small degree. Bonds rated A
have a strong capacity to pay interest and repay principal although they are
somewhat more susceptible to the adverse effects of change in circumstances and
economic conditions than bonds in higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions liable to but slight market fluctuation other than through changes
in the money rate. The prime feature of an AAA bond is showing of earnings
several times or many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable question whatever changes
occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured but influenced
as to rating by the lesser financial power of the enterprise and more local type
market.
Bonds rated Duff-1 are judged by Duff to be of the highest credit
quality with negligible risk factors; only slightly more than U.S. Treasury
debt. Bonds rated Duff-2, 3 and 4 are judged by Duff to be of high credit
quality with strong protection factors. Risk is modest but may vary slightly
from time to time because of economic conditions.
Bonds rated TBW-1 are judged by Thomson BankWatch, Inc. to be of the
highest credit quality with a very high degree of likelihood that principal and
income will be paid on a timely basis. Bonds rated TBW-2 offer a strong degree
of safety regarding repayment. The relative degree of safety, however, is not as
high as TBW-1.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers
to repay punctually promissory obligations. Moody's employs the following three
designations, all judged to be investment grade, to indicate the
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<PAGE>
relative repayment capacity of rated issuers: Prime 1-Highest Quality; Prime
2-Higher Quality; Prime 3-High Quality.
A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment. Ratings are graded into four categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Issues assigned the highest rating, A, are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2, and 3 to indicate the relative degree of safety. The
designation A-1 indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. A "+" designation is applied to those issues
rated "A-1" which possess safety characteristics. Capacity for timely payment on
issues with the designation A-2 is strong. However, the relative degree of
safety is not as high as for issues designated A-1. Issues carrying the
designation A-3 have a satisfactory capacity for timely payment. They are,
however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
The rating Fitch-1 (Highest Grade) is the highest commercial rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-1 is the highest commercial paper rating assigned by
Duff. Paper rated Duff-1 is regarded as having very high certainty of timely
payment with excellent liquidity factors which are supported by ample asset
protection. Risk factors are minor. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets and sound
liquidity factors and company fundamentals. Risk factors are small.
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<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
MARCH 1, 1996
IEEE BALANCED FUND
125 W. 55TH STREET, NEW YORK, NEW YORK 10019
Table of Contents Page
Investment Objective, Policies and Restrictions.......................... 2
Performance Information.................................................. 10
Determination of Net Asset Value......................................... 12
Tax Matters.............................................................. 13
Management of the Fund................................................... 20
Independent Accountants.................................................. 31
Financial Statements..................................................... 32
General Information...................................................... 31
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Fund's Prospectus dated March 1 1996. This Statement of Additional Information
should be read in conjunction with the Fund's Prospectus, a copy of which may be
obtained by an investor without charge by contacting Vista Broker-Dealer
Services, Inc., the Fund's 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 the Vista Service Center at
our toll-free number:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
IEBAL-SAI
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide its shareholders
with a maximum total return through a combination of long-term growth of capital
and current income. Of course, there can be no assurance that the Fund will
achieve its investment objective. The investment objective of the Fund may not
be changed without approval by the Fund's shareholders.
INVESTMENT POLICIES
The following information supplements and should be read in conjunction
with the sections of the Fund's Prospectus entitled "Investment Objectives and
Policies" and "Additional Information on Investment Policies and Techniques".
U.S. GOVERNMENT SECURITIES -- As indicated in the Prospectus, although
the Fund invests primarily in equity and fixed-income securities, it may also
maintain cash reserves and invest in a variety of short-term debt securities,
including obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, which have remaining maturities not exceeding one
year. Agencies and instrumentalities that issue or guarantee debt securities and
have been established or sponsored by the U.S. Government include the Department
of Housing and Urban Development, the Government National Mortgage Association,
the Farmers Home Administration, the Small Business Administration, the Bank for
Cooperatives, the Export-Import Bank, the Federal Farm Credit System, the
Federal Home Loan Banks, the Federal Home Loan Mortgage Corporation, the Federal
Intermediate Credit Banks, the Federal Land Banks, the Federal National Mortgage
Association and the Student Loan Marketing Association. Certain of these
securities may not be backed by the full faith and credit of the U.S.
Government.
BANK OBLIGATIONS -- Investments by the Fund in short-term debt
securities as described above also include investments in obligations (including
certificates of deposit and bankers' acceptances) of those U.S. banks 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.
A certificate of deposit is an interest-bearing negotiable certificate
issued by a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
COMMERCIAL PAPER -- Investments by the Fund in short-term debt
securities also include investments in commercial paper, which represents
short-term, unsecured promissory notes issued in bearer form by bank holding
companies, corporations and finance companies. The commercial
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<PAGE>
paper purchased for the Fund will consist of direct obligations of domestic
issuers which, at the time of investment, are (i) rated "P-1" by Moody's or
"A-1" or better by Standard & Poor's, (ii) issued or guaranteed as to principal
and interest by issuers or guarantors having an existing debt security rating of
"Aa" or better by Moody's or "AA" or better by Standard & Poor's, or (iii)
securities which, if not rated, are, in the Sub-Adviser's opinion, of an
investment quality comparable to rated commercial paper in which the
above-referenced Funds may invest. The rating "P-1" is the highest commercial
paper rating assigned by Moody's and the ratings "A-1" and "A-1+" are the
highest commercial paper ratings assigned by Standard & Poor's. Debt securities
rated "Aa" or better by Moody's or "AA" or better by Standard & Poor's are
generally regarded as high-grade obligations and such ratings indicate that the
ability to pay principal and interest is very strong.
REPURCHASE AGREEMENTS -- The Fund may, when appropriate, enter into
repurchase agreements only with member banks of the Federal Reserve System and
securities dealers believed creditworthy, and only if fully collateralized by
U.S. Government obligations or other securities in which the Fund is permitted
to invest. Under the terms of a typical repurchase agreement, the Fund would
acquire an underlying debt 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 to resell the instrument at a fixed price and time,
thereby determining the yield during the Fund'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 may be deemed under the
Investment Company Act of 1940 ("1940 Act") to be loans collateralized by the
underlying securities. All repurchase agreements entered into by the Fund 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 the amount of the
loan, including the accrued interest thereon, and the Fund or its custodian or
sub-custodian will have possession of the collateral, which the Trust's 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, but would only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, the Fund may suffer time
delays and incur costs in connection with the disposition of the collateral. The
Trust's 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 the Fund. The Fund will not be
invested in a repurchase agreement maturing in more than seven days if any such
investment together with securities subject to restrictions on transfer held by
the Fund exceed 15% of its total net assets. (See paragraph 4 under "Investment
Restrictions" on page 4) Repurchase agreements are also subject to the same
risks described below with respect to stand-by commitments.
LOANS OF PORTFOLIO SECURITIES -- Certain securities dealers who make
"short sales" or who wish to obtain particular securities for short periods may
seek to borrow them from institutional investors such as the Fund. The Fund
reserves the right to seek to increase its income by lending its portfolio
securities. Under present regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the Securities and Exchange
Commission, such loans may be
- 3 -
<PAGE>
made only to member firms of the New York Stock Exchange, and are required to be
secured continuously by collateral in cash, cash equivalents, or U.S. Government
securities maintained on a current basis in an amount at least equal to the
market value of the securities loaned. Under a loan, the Fund has the right to
call a loan and obtain the securities loaned at any time on five days' notice.
During the existence of a loan, the Fund continues to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and also receives compensation based on investment of the collateral. The
Fund does not, however, have the right to vote any securities having voting
rights during the existence of the loan, but can call the loan in anticipation
of an important vote to be taken among holders of the securities or of the
giving or withholding of their consent on a material matter affecting the
investment.
As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral if the borrower of the
securities experiences financial difficulty. However, the loans will be made
only to dealers deemed by the Fund to be of good standing, and when, in the
judgment of the Fund, the consideration that can be earned currently from
securities loans of this type justifies the attendant risk. In the event the
Fund makes securities loans, it is not intended that the value of the securities
loaned would exceed 30% of the value of the Fund's total assets.
NON-DIVERSIFICATION -- The Trust has registered as a "non-diversified"
investment company, which means that more than 5% of the assets of the Fund may
be invested in the obligations of an issuer, subject to diversification
requirements applicable to the Fund under federal tax laws. At present, these
requirements do not permit more than 25% of the value of the Fund's total assets
to be invested in securities (other than various securities issued or guaranteed
by the United States or its agencies or instrumentalities) of any one issuer, at
the close of any calendar quarter. Since a relatively high percentage of the
assets of the Fund may be invested in the obligations of a limited number of
issuers, the value of the Fund's shares may be more susceptible to any single
economic, political or regulatory occurrence than the shares of a diversified
investment company.
Shareholder approval is not required to change any of the investment
policies discussed above, except as otherwise noted herein and in the
Prospectus.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which may
not be changed without approval by a "majority of the outstanding shares" of the
Fund which, as used in this Statement of Additional Information, means the vote
of the lesser of (i) 67% or more of the shares of the Fund present at a meeting,
if the holders of more than 50% of the outstanding shares of the Fund are
present or represented by proxy, or (ii) more than 50% of the outstanding shares
of the Fund.
- 4 -
<PAGE>
The Fund may not:
(1) borrow money or pledge, mortgage or hypothecate its
assets, except that, as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the
current value of its net assets, including the amount borrowed, and may
pledge, mortgage or hypothecate not more than 1/3 of such assets to
secure such borrowings (it is intended that money would be borrowed by
the Fund only from banks and only to accommodate requests for the
repurchase of shares of the Fund while effecting an orderly liquidation
of portfolio securities), provided that collateral arrangements with
respect to the Fund's permissible futures and options transactions,
including initial and variation margin, are not considered to be a
pledge of assets for purposes of this restriction; the Fund will not
purchase investment securities if its outstanding borrowing exceeds 5%
of the value of the Fund's total assets; for additional related
restrictions, see clause (i) under the caption "State and Federal
Restrictions" hereafter;
(2) purchase any security or evidence of interest therein on
margin, except that such short-term credit may be obtained as may be
necessary for the clearance of purchases and sales of securities and
except that, with respect to the Fund's permissible options and futures
transactions, deposits of initial and variation margin may be made in
connection with the purchase, ownership, holding or sale of futures or
options positions;
(3) underwrite securities issued by other persons except
insofar as the Fund may technically be deemed an underwriter under the
Securities Act of 1933 in selling a portfolio security;
(4) knowingly invest in securities which are subject to legal
or contractual restrictions on resale (including securities that are
not readily marketable, but not including repurchase agreements
maturing in not more than seven days) if, as a result thereof, more
than 15% of the Fund's total assets (taken at market value) would be so
invested (including repurchase agreements maturing in more than seven
days). (This limitation may be subject to additional restrictions
imposed by jurisdictions in which the Fund's shares are offered for
sale (currently 10%). See "State and Federal Restrictions" below.);
(5) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate
or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of business,
other than with respect to the Fund's permissible futures and options
transactions (the Fund reserves the freedom of action to hold and to
sell real estate acquired as a result of its ownership of securities);
- 5 -
<PAGE>
(6) 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;
(7) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 10% of the Fund's net assets
(taken at market value) is held as collateral for such sales at any one
time (it is the present intention of management to make such sales only
for the purpose of deferring realization of gain or loss for federal
income tax purposes; such sales would not be made of securities subject
to outstanding options);
(8) concentrate its investments in any particular industry,
but if it is deemed appropriate for the achievement of the Fund's
investment objective, up to 25% of the assets of the Fund, at market
value at the time of each investment, may be invested in any one
industry, except that, with respect to the Fund's permissible futures
and options transactions, positions in options and futures shall not be
subject to this restriction;
(9) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, provided that
collateral arrangements with respect to a Fund's permissible options
and futures transactions, including deposits of initial and variation
margin, are not considered to be the issuance of a senior security for
purposes of this restriction; or
(10) acquire or retain the securities of any open-end
investment company.
The Fund is not permitted to make loans to other persons, except (i)
through the lending of its portfolio securities and provided that any such loans
not exceed 30% of the Fund's total assets (taken at market value), (ii) through
the use of repurchase agreements or the purchase of short-term obligations and
provided that not more than 15% of the Fund's total assets will be invested in
repurchase agreements maturing in more than seven days, or (iii) by purchasing,
subject to the limitation in paragraph 4 above, a portion of an issue of debt
securities of types commonly distributed privately to financial institutions,
for which purposes the purchase of short-term commercial paper or a portion of
an issue of debt securities which are part of an issue to the public shall not
be considered the making of a loan.
For purposes of the investment restrictions described above and the
state and federal restrictions described below, 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.
- 6 -
<PAGE>
In addition, the Fund has adopted the following operating policy with
respect to repurchase agreements which is not fundamental and which may be
changed without shareholder approval. The Fund may enter into repurchase
agreements (a purchase of and a simultaneous commitment to resell a security at
an agreed-upon price on an agreed-upon date) only with member banks of the
Federal Reserve System and securities dealers believed creditworthy and only if
fully collateralized by U.S. Government obligations or other securities in which
the Fund is permitted to invest. If the vendor of a repurchase agreement fails
to pay the sum agreed to on the agreed-upon delivery date, the Fund would have
the right to sell the securities constituting the collateral; however, the Fund
might thereby incur a loss and in certain cases may not be permitted to sell
such securities. Moreover, as noted above in paragraph 5, the Fund may not, as a
matter of fundamental policy, invest more than 15% of its total assets in
repurchase agreements maturing in more than seven days. (This limitation may be
subject to additional restrictions imposed by jurisdictions in which the Fund's
shares are offered for sale (currently 10%). See "State and Federal
Restrictions" below.)
The Fund has no current intention of making short sales of securities
or maintaining a short position in the foreseeable future.
STATE AND FEDERAL RESTRICTIONS: In order to comply with certain federal
and state statutes and regulatory policies, as a matter of operating policy, the
Fund will not: (i) sell any security which it does not own unless by virtue of
its ownership of other securities the Fund has at the time of sale a right to
obtain securities, without payment of further consideration, equivalent in kind
and amount to the securities sold and provided that if such right is conditional
the sale is made upon the same conditions, (ii) invest for the purpose of
exercising control or management, (iii) purchase securities issued by any
registered investment company except by purchase in the open market where no
commission or profit to a sponsor or dealer results from such purchase other
than the customary broker's commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation; provided,
however, that the securities of any registered investment company will not be
purchased on behalf of the Fund if such purchase at the time thereof would cause
more than 5% or 10% of the Fund's total assets (taken at the greater of cost or
market value) to be invested in the securities of such issuer or the securities
of registered investment companies, respectively, or would cause more than 3% of
the outstanding voting securities of any such issuer to be held by the Fund; and
provided, further, that securities issued by any open-end investment company
shall not be purchased on behalf of the Fund, (iv) invest more than 10% of the
Fund's total assets (taken at the greater of cost or market value) in securities
that are not readily marketable, (v) as to 50% of its total assets, purchase
securities of any issuer if such purchase at the time thereof would cause the
Fund to hold more than 10% of any class of securities of such issuer, for which
purposes all indebtedness of an issuer shall be deemed a single class and all
preferred stock of an issuer shall be deemed a single class, (vi) invest more
than 5% of the Fund's assets in companies which, including predecessors, have a
record of less than three years' continuous operation, (vii) invest in warrants
valued at the lower of cost or market, in excess of 5% of the value of the
Fund's 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 (viii) purchase or
retain in the Fund's 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 is an officer or director of an Adviser, if after the purchase of
the securities of such issuer by the Fund one or more of such persons owns
beneficially more than 1/2
- 7 -
<PAGE>
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. These policies are not fundamental and may be changed
by the Trust's Board of Trustees without shareholder approval.
PERCENTAGE AND RATING RESTRICTIONS: If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security of a Fund will not be considered a violation of policy.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Specific decisions to purchase or sell equity securities for the Fund
are made by a portfolio manager who is an employee of the Sub-Adviser to the
Fund and who is appointed and supervised by senior officers of the Sub-Adviser.
Specific decisions to purchase or sell fixed-income or debt securities are made
by the Institute of Electrical and Electronics Engineers, Inc. ("IEEE") subject
to oversight by the Sub-Adviser. Changes in the Fund's investments are reviewed
by the Adviser and the Board of Trustees. The Fund's portfolio managers may
serve other clients of the Sub-Adviser or IEEE, respectively, in a similar
capacity.
The frequency of the Fund's portfolio transactions -- the Fund's
portfolio turnover rate -- will vary from year to year depending upon market
conditions. Because a high turnover rate may increase the Fund's transaction
costs and the possibility of taxable short-term gains (see "Tax Matters" in the
Prospectus), the Sub-Adviser will weigh the added costs of short-term investment
against anticipated gains. For the period from November 1 , 1993 to October 31,
1994, the rate of portfolio turnover for the Fund was 28%. For the fiscal year
ended October 31, 1995, the rate of portfolio turnover for the Fund was 30%.
The primary consideration in placing portfolio security transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Sub-Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Fund and other
clients of the Sub-Adviser on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. Debt securities are traded principally in the over-the-counter
market through dealers acting on their own account and not as brokers. In the
case of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown), the
Sub-Adviser normally seeks to deal directly with the primary market makers
unless, in its opinion, best execution is available elsewhere. In the case of
securities purchased from underwriters, the cost of such securities generally
includes a fixed underwriting commission or concession. From time to time,
soliciting dealer fees are available to the Sub-Adviser on the tender of the
Fund's portfolio securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Sub-Adviser.
At present, no other recapture arrangements are in effect.
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<PAGE>
Under the Fund's Investment Advisory Agreement, the Sub-Advisory
Agreement and as permitted by Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser may cause the Fund to pay a broker-dealer which provides
brokerage and research services to the Sub-Adviser an amount of commission for
effecting a securities transaction for the Fund in excess of the amount other
broker-dealers would have charged for the transaction if the Sub-Adviser
determines in good faith that the greater commission is reasonable in relation
to the value of the brokerage and research services provided by the executing
broker-dealer viewed in terms of either a particular transaction or the
Sub-Adviser's overall responsibilities to the Fund or to its clients. Not all of
such services are useful or of value in advising the Fund.
The term "brokerage and research services" includes advice as to the
value of securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or of purchasers or sellers of
securities, furnishing analyses and reports concerning issues, industries,
securities, economic factors and trends, portfolio strategy and the performance
of accounts, and effecting securities transactions and performing functions
incidental thereto such as clearance and settlement.
Although commissions paid on every transaction will, in the judgment of
the Sub-Adviser, be reasonable in relation to the value of the brokerage
services provided, commissions exceeding those which another broker might charge
may be paid to broker-dealers who were selected to execute transactions on
behalf of the Fund and the Sub-Adviser's other clients as part of providing
advice as to the availability of securities or of purchasers or sellers of
securities and services in effecting securities transactions and performing
functions incidental thereto, such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and
other factual information or services ("Research") to the Sub-Adviser for no
consideration other than brokerage or underwriting commissions. Securities may
be bought or sold through such broker-dealers, but at present, unless otherwise
directed by the Fund, a commission higher than one charged elsewhere will not be
paid to such a firm solely because it provided Research to the Sub-Adviser.
The Sub-Adviser's investment management personnel will attempt to
evaluate the quality of Research provided by brokers. Results of this effort are
sometimes used by the Sub-Adviser as a consideration in the selection of brokers
to execute portfolio transactions. However, the Sub-Adviser would be unable to
quantify the amount of commissions which are paid as a result of such Research
because a substantial number of transactions are effected through brokers which
provide Research but which are selected principally because of their execution
capabilities.
The management fees that the Adviser pays to the Sub-Adviser will not
be reduced as a consequence of the Sub-Adviser's receipt of brokerage and
research services. To the extent the Fund's portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Fund will exceed
those that might otherwise be paid, by an amount which cannot be presently
determined. Such services would be useful and of value to the Sub-Adviser in
serving the Fund and other clients and, conversely, such services obtained by
the placement of brokerage business of other clients would be useful to the
Sub-Adviser in carrying out its obligations to the Fund. While such services are
not expected to reduce the expenses of the Sub-Adviser, the Sub-Adviser would,
through
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<PAGE>
use of the services, avoid the additional expenses which would be incurred if it
should attempt to develop comparable information through its own staff.
In certain instances, there may be securities that are suitable for the
Fund as well as one or more of the Sub-Adviser's other clients. Investment
decisions for the Fund and for the Sub-Adviser's other clients are made with a
view to achieving their respective investment objectives. It may develop that
the same investment decision is made for more than one client or that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When the Fund and 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 Fund is concerned. However, it is believed that the
ability of the Fund to participate in volume transactions will generally produce
better executions for the Fund.
For the fiscal year ended October 31, 1995, the Fund paid aggregate
brokerage commissions of $9,695.
No portfolio transactions are executed with the Adviser, the
Sub-Adviser, IEEE or a Shareholder Servicing Agent, or with any affiliate of the
Adviser, the Sub-Adviser, IEEE or a Shareholder Servicing Agent, acting either
as principal or as broker.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN
The Fund's total rate of return for any period will be calculated by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. 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 rate of return for the Fund, reflecting the
initial investment and reinvestment of dividends for the period from September
8, 1993 (commencement of operations) to October 31, 1995 was 7.22%. The average
annual rate of return for the fiscal year ended October 31, 1994 and 1995 was
(3.78%) and 19.93%, respectively.
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<PAGE>
YIELD QUOTATIONS
Any current "yield" quotation of the Shares of the Fund 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 yield of the shares of the Fund for the thirty day period ended
October 31, 1995 was 2.16%.
From time to time, advertising materials for the Fund may refer to or
discuss then-current or past economic conditions, developments and/or events,
including those relating to or arising from actual or proposed tax legislation.
From time to time, advertising materials for the Fund may also refer to
statistical or other information concerning trends relating to investment
companies, as compiled by industry associations such as The Investment Company
Institute.
NON-STANDARDIZED PERFORMANCE RESULTS
The chart below reflects the net change in the value of an assumed
initial investment of $10,000 in the Fund for the period from commencement date
of business for the Fund. The values reflect an assumption that capital gain
distributions and income dividends, if any, have been accepted in additional
shares. From time to time, the Fund will provide these performance results, if
any, in addition to the total rate of return quotations required by the
Securities and Exchange Commission. As discussed more fully in the Prospectus,
neither the performance results, nor total rate of return quotations, should be
considered as representative of the performance of the Fund in the future. These
factors and the possible differences in the methods used to calculate
performance results and total rate of return should be considered when comparing
such performance results and total rate of return quotations of the fund with
those published for other investment companies and other investment vehicles.
- 11 -
<PAGE>
VALUE OF VALUE OF VALUE OF
PERIOD ENDED INITIAL $10,000 CAPITAL GAINS REINVESTED TOTAL
OCTOBER 31, 1995 INVESTMENT DISTRIBUTIONS DIVIDENDS VALUE
- ------------------ ---------- ------------- --------- -------
IEEE Balanced Fund $10,980.00 $61.31 $573.13 $11,614.43
DETERMINATION OF NET ASSET VALUE
The Fund determines its net asset value per Share each day as of the
regular close of trading on the New York Stock Exchange (normally 4:00 P.M.
Eastern time, however, options are priced after 4:15 P.M.) on each business day
during which the New York Stock Exchange is open for trading (a "Fund Business
Day"), by dividing the value of its net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) by the number of its shares outstanding at the time the determination
is made. (As of the date of this Statement of Additional Information, the New
York Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas.) Purchases and
redemptions will be effected at the time of determination of net asset value
next following the receipt of any purchase or redemption order. (See "Purchases
and Redemptions of Shares" in the Prospectus.)
Equity securities in the Fund's portfolio are valued at the last sale
price on the exchange on which they are primarily traded or on the NASDAQ system
for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. Bonds and other fixed income
securities (other than short-term obligations, but including listed issues) in
the Fund'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 the Fund's portfolio is
determined on the basis of interest accrued plus amortization of discount
(generally, the difference between issue 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.
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<PAGE>
Subject to compliance with applicable regulations and an election under
Rule 18f-1, the Fund has reserved the right to pay the redemption price of its
Shares, either totally or partially, by a distribution in kind of portfolio
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. Pursuant to an election under Rule 18f-1, the Fund has committed to pay
in cash all redemptions by a shareholder of record up to the amounts specified
in the rule.
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Fund and its shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the 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
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
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 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
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<PAGE>
thereon). Because of the Short-Short Gain Test, the Fund may have to limit the
sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent the Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded. Interest (including original
issue discount) received by the Fund at maturity or upon the disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of the Short-Short 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 the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (i) 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, (ii) 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 (iii) the asset is stock and the
Fund grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (i) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S.
- 14 -
<PAGE>
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.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable 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.
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 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.
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 may (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and
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<PAGE>
treated as dividends for federal income tax purposes, but they will qualify for
the 70% dividends-received deduction for corporations only to the extent
discussed below.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. Conversely, if the Fund elects to retain its net capital
gain, the Fund will be taxed thereon (except to the extent of any available
capital loss carryovers) at the 35% corporate tax rate. If the Fund elects to
retain its net capital gain, it is expected that the Fund also will elect to
have shareholders treated as if each received a distribution of its pro rata
share of such gain, with the result that each shareholder will be required to
report its pro rata share of such gain on its tax return as long-term capital
gain, will receive a refundable tax credit for its pro rata share of tax paid by
the Fund on the gain, and will increase the tax basis for its shares by an
amount equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to corporations (other than corporations, such as "S" corporations, which are
not eligible for the deduction because of their special characteristics and
other than for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
A dividend received by the Fund will not be treated as a qualifying dividend (1)
if it has been received with respect to any share of stock that the Fund has
held for less than 46 days (91 days in the case of certain preferred stock),
excluding for this purpose under the rules of Code Section 246(c)(3) and (4) (i)
any day more than 45 days (or 90 days in the case of certain preferred stock)
after the date on which the stock becomes ex-dividend and (ii) any period during
which the Fund has an option to sell, is under a contractual obligation to sell,
has made and not closed a short sale of, is the grantor of a deep-in-the-money
or otherwise nonqualified option to buy, or has otherwise diminished its risk of
loss by holding other positions with respect to, such (or substantially
identical) stock; (2) to the extent that the Fund is under an obligation
(pursuant to a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property; or (3) to the extent the
stock on which the dividend is paid is treated as debt-financed under the rules
of Code Section 246A. Moreover, the dividends-received deduction for a corporate
shareholder may be disallowed or reduced (i) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of the Fund or
(ii) 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).
AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum rate of 28% for noncorporate taxpayers
and 20% for corporate taxpayers on the excess of the taxpayer's alternative
minimum taxable income ("AMTI") over an exemption amount. In addition, under the
Superfund Amendments and Reauthorization Act of 1986, a tax is imposed for
taxable years beginning after 1986 and before 1996 at the rate of 0.12% on the
excess of a corporate taxpayer's AMTI (determined without regard to the
deduction for this tax and
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<PAGE>
the AMT net operating loss deduction) over $2 million. The corporate dividends
received deduction is not itself an item of tax preference that must be added
back to taxable income or is otherwise disallowed in determining a corporation's
AMTI. However, corporate shareholders will generally be required to take the
full amount of any dividend received from the Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings,
which are used in computing an additional corporate preference item (i.e., 75%
of the excess of a corporate taxpayer's adjusted current earnings over its AMTI
(determined without regard to this item and the AMT net operating loss
deduction)) includable in AMTI.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known.
Distributions by the Fund that do not constitute ordinary income
dividends, exempt-interest dividends or capital gain dividends will be treated
as a return of capital to the extent of (and in reduction of) the shareholder's
tax basis in his shares; any excess will be treated as gain from the sale of his
shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U. S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to the Fund that it is not subject to backup withholding or
that it is a corporation or other "exempt recipient."
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<PAGE>
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be disallowed to the
extent of the amount of exempt-interest dividends received on such shares and
(to the extent not disallowed) will be treated as a long-term capital loss to
the extent of the amount of capital gain dividends received on such shares. For
this purpose, the special holding period rules of Code Section 246(c)(3) and (4)
(discussed above in connection with the dividends-received deduction for
corporations) generally will apply in determining the holding period of shares.
Long-term capital gains of noncorporate taxpayers are currently taxed at a
maximum rate 3% 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.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
will be subject to U.S. withholding tax at the rate of 30% (or lower treaty
rate) upon the gross amount of the dividend. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of the Fund, capital gain dividends and exempt-interest dividends and
amounts retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be
required to withhold U.S. federal income tax at a rate of 30% 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.
- 18 -
<PAGE>
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 the 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 regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends,
exempt-interest dividends and capital gain dividends from regulated investment
companies often differ from the rules for U.S. federal income taxation described
above. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in the Fund.
- 19 -
<PAGE>
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Trustees and officers and their principal occupations for at least
the past five years are set forth below. Their titles may have varied during
that period. Asterisks indicate those Trustees and officers that are "interested
persons" (as defined in the 1940 Act). Unless otherwise indicated below, the
address of each officer is 125 W. 55th Street, New York, NY 10019.
TRUSTEES
FERGUS REID, III* - Chairman of the Board of Trustees. Chairman of the Board of
Trustees of Mutual Fund Trust and Trustee of Certain Portfolios advised by Chase
(the "Portfolios") ; Chairman and Chief Executive Officer, Lumelite Corporation,
since September 1985; Trustee, Morgan Stanley Portfolios; from 1982 through
1984, Managing Director, Bernhard Associates (venture capital firm).
Address:202 June Road, Stamford, Connecticut 06940.
DR. RICHARD E. TEN HAKEN - Trustee. Trustee of Mutual Fund Trust and the
Portfolios; Former District Superintendent of Schools, Monroe No.2 and Orleans
Counties, New York; Chairman of the Finance and the Audit and Accounting
Committees, Member of the Executive Committee; Chairman of the Board and
President, New York State Teachers' Retirement System.
Address: 4 Barnfield Road, Pittsford, New York 14534.
WILLIAM J. ARMSTRONG - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Vice President and Treasurer, Ingersoll- Rand Company.
Address: 49 Aspen Way, Upper Saddle River, New Jersey 07458.
JOHN R.H. BLUM - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Attorney in Private Practice; formerly, a Partner in the law firm of Richards,
O'Neil & Allegaert; Commissioner of Agriculture - State of Connecticut,
1992-1995.
Address: 322 Main Street, Lakeville, Connecticut 06039.
JOSEPH J. HARKINS* - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Retired; formerly, Commercial Sector Executive and Executive Vice President of
The Chase Manhattan Bank, N.A. from 1985 through 1989. He has been employed by
Chase in numerous capacities and offices since 1954. Director of Blessings
Corporation, Jefferson Insurance Company of New York, Monticello Insurance
Company and Nationar.
Address: 257 Plantation Circle South, Ponte Vedra Beach, Florida 32082.
H. RICHARD VARTABEDIAN* - Trustee. President and Trustee of the Trust and Mutual
- 20 -
Monday, February 26, 1996 8:47PM
KL2:129841.3
<PAGE>
Fund Trust; Chairman and President 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.
Address: P.O. Box 296, Beach Road, Hendrick's Head, Southport, Maine 04576
STUART W. CRAGIN, JR. - Trustee. Trustee of Mutual Fund Trust and the
Portfolios; 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.
Address: 108 Valley Road, Cos Cob, connecticut 06807.
IRVING L. THODE - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
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.
Address: 80 Perkins Road, Greenwich, Connecticut 06830.
The Board of Trustees met seven times during the twelve months ended December
31, 1995, and each of the Trustees attended at least 75% of those meetings.
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.
* Interested Trustees as defined under the 1940 Act.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting of
the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the Adviser is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the Adviser. 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. 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.
- 21 -
<PAGE>
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>
Vista Vista
Vista Equity Growth Vista Vista Vista
Balanced Income and Capital Equity Bond
Fund Fund Income Growth 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, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
William J. Armstrong, 160.88 64.07 9595 .45 5,063.12 360.67 312.41
Trustee
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, 169.60 67.79 10,159.13 5,376.61 330.18 330.18
Trustee
Stuart W. Cragin, Jr., 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
Irving L. Thode, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
</TABLE>
<TABLE><CAPTION>
Vista Vista Vista
Short Vista Small Vista Global Vista
Term U.S. Cap International Fixed Southeast Vista Vista
Bond Government 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, 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
</TABLE>
- 22 -
<PAGE>
Pension or Total
Retirement Compensation
Benefits Accrued from "Fund
as Fund Expenses Complex"(1)
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., Trustee 0 52,304.39
Irving L. Thode, Trustee 0 52,304.39
(1) Data reflects total compensation earned during the period January 1, 1995
to December 31, 1995 for service as a Trustee to all thirty-two
(Portfolios) Funds advised by the Adviser.
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 Portfolios, the Adviser, Administrator or Distributor or
any of their affiliates) may be entitled to certain benefits upon retirement
from the Board of Trustees. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the Adviser (collectively, the "Covered Portfolios"). Each
Eligible Trustee is entitled to receive from the Covered Portfolios 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 Portfolios 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 Portfolios. Such benefit is payable to each eligible Trustee in
monthly installments for the life of the Trustee.
Set forth in the table below are the estimated annual benefits payable to an
eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of December 31, 1995, 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.
- 23 -
<PAGE>
HIGHEST ANNUAL COMPENSATION PAID BY ALL VISTA FUNDS
40,000 45,000 50,000 55,000
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT 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 Adviser, Administrator
or Distributor or any of their affiliates) may enter into agreements with the
Funds whereby payment of the Trustees' fees are deferred until the payment date
elected by the Trustee (or the Trustee's termination of service). The deferred
amounts are deemed invested in shares of a Fund on whose Board the Trustee sits,
subject to the Trustee's election. 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. The following Eligible
Trustees have executed a deferred compensation agreement for the 1996 calendar
year:
Messrs. Ten Haken, Thode and Vartabedian.
PRINCIPAL EXECUTIVE OFFICERS:
The principal executive officers of the Trust are as follows:
H. Richard Vartabedian - President and Trustee.
Martin R. Dean - Treasurer and Assistant Secretary; Vice President, BISYS Funds
Group, Inc.
Ann Bergin - Secretary and Assistant Treasurer; Vice President, BISYS Funds
Group, Inc.; Secretary, Vista BrokerDealer Services, Inc.
OWNERSHIP OF SHARES OF THE PORTFOLIOS. The Trustees and officers as a group
directly or beneficially own less than 1% of each Portfolio.
The Declaration of Trust provides that the Trust will indemnify its Trustees and
officers against liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the Trust, unless,
as to liability to the Trust or its shareholders, it is finally adjudicated that
they engaged in wilful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in their offices or with respect to any matter
unless it is finally adjudicated that they did not act in good faith in the
reasonable belief that their
- 24 -
<PAGE>
actions were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court or
other body approving the settlement or other disposition, or by a reasonable
determination based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in wilful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
The Fund pays no direct remuneration to any officer of the Trust.
THE ADVISER
Chase serves as the Adviser to the Fund. On August 27, 1995, The Chase Manhattan
Corporation announced its entry into an Agreement and Plan of Merger (the
"Merger Agreement") with Chemical Banking Corporation ("Chemical"), a bank
holding company, pursuant to which The Chase Manhattan Corporation will merge
with and into Chemical (the "Holding Company Merger"). Under the terms of the
Merger Agreement, Chemical will be the surviving corporation in the Holding
Company Merger and will continue its corporate existence under Delaware law
under the name "The Chase Manhattan Corporation" ("New Chase"). The board of
directors of each holding company has approved the Holding Company Merger, which
will create the second largest bank holding company in the United States based
on assets. The consummation of the Holding Company Merger is subject to certain
closing conditions. On December 11, 1995, the shareholders of The Chase
Manhattan Corporation and Chemical voted to approve the Holding Company Merger.
The Holding Company Merger is expected to be completed on or about March 31,
1996.
Subsequent to the Holding Company Merger, it is expected that the Adviser will
be merged with and into Chemical Bank. a New York State chartered bank
("Chemical Bank") (the "Bank Merger" and together with the Holding Company
Merger, the "Mergers"). The surviving bank will continue operations under the
name The Chase Manhattan Bank (as used herein, the term "Chase" refers to The
Chase Manhattan Bank, N.A. and its successor in the Bank Merger, and the term
"Adviser" means Chase (including its successor in the Bank Merger) in its
capacity as investment adviser to the Fund). The consummation of the Bank Merger
is subject to certain closing conditions, including the receipt of certain
regulatory approvals. The Bank Merger is expected to occur in July, 1996.
Chemical is a publicly owned bank holding company incorporated under Delaware
law and registered under the Federal Bank Holding Company Act of 1956, as
amended. As of December 31, 1995, through its direct or indirect subsidiaries,
Chemical managed more than $57 billion in assets, including approximately $6.9
billion in mutual fund assets in 11 mutual fund portfolios. Chemical Bank is a
wholly-owned subsidiary of Chemical and is a New York State chartered bank.
The Adviser is responsible for overseeing the management of the assets of
the Fund pursuant to an Investment Advisory Agreement, dated as of August 4,
1992 (the "Advisory Agreement"). Subject to such policies as the Board of
Trustees may determine, the Adviser is responsible for overseeing the management
of the Fund and the investment of its assets. The Adviser also furnishes or
procures on behalf of the Fund all services necessary for the proper conduct of
the Fund's business. In addition to the foregoing, the Adviser selects, monitors
and evaluates the Fund's Sub-Adviser. The primary factor in the Adviser's
selection process in identifying qualified sub-advisers is demonstrable
long-term, above average performance, as verified by independent performance
measurement services. The Adviser will review the Sub-Adviser's performance
records periodically, and will make changes if necessary, subject to trustee and
shareholder approval. The Adviser furnishes at its own expense all office space,
facilities, equipment and clerical personnel necessary for carrying out its
duties under the Advisory Agreement. The other expenses attributable to, and
payable by the Fund, are described under "Expenses" in the Fund's Prospectus.
The Advisory Agreement is currently in effect for two years, and will continue
in effect thereafter only if such continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of
- 25 -
<PAGE>
the Fund's outstanding voting securities and, in either case, 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 the Advisory
Agreement.
Pursuant to the terms of the Advisory Agreement, the Adviser is permitted
to render services to others. The Advisory Agreement is terminable without
penalty by the Trust on behalf of the Fund on not more than 60 days', nor less
than 30 days', written notice when authorized either by majority vote of its
shareholders or by a vote of a majority of its Board of Trustees, or by the
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 Agreement provides that the Adviser 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 Fund, except for wilful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of reckless disregard of its
obligations and duties thereunder.
In addition, the Advisory Agreement generally provides that, in the event
the operating expenses of the Fund, including all investment advisory and
administration fees, but excluding brokerage commissions and fees, distribution
fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Fund imposed by the securities laws or regulations thereunder of any state in
which the shares of the Fund are qualified for sale, as such limitations may be
raised or lowered from time to time, the 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 fee otherwise payable to the Adviser during
such fiscal year; and if such amounts should exceed the monthly fee, the Adviser
shall pay to the Fund its share of such excess expenses no later than the last
day of the first month of the next succeeding fiscal year.
In consideration of the services provided by the Adviser pursuant to the
Advisory Agreement, the Fund pays an investment advisory fee computed and paid
monthly at an annual rate equal to 0.65% of the Fund's average daily net assets,
on an annualized basis for the Fund's then-current fiscal year. The Adviser,
however, may voluntarily agree to waive a portion of the fees payable to it. For
the period from September 8, 1993 to October 31, 1993, Chase voluntarily waived
its entire investment advisory fee in the amount of $4,520. For the period from
November 1, 1993 through October 31, 1994, the Advisor was paid or accrued
advisory fees in the amount of $50,780 and voluntarily waived fees in the
amount of $14,011. For the year ended October 31, 1995, the Advisor was paid or
accrued advisory fees in the amount of $62,347 and voluntarily waived fees in
the amount of $4,796.
SUB-ADVISER
Pursuant to a sub-advisory agreement (the "Sub-Advisory Agreement")
between the Adviser and the Sub-Adviser, Atlanta Capital Management Company (the
"Sub-Adviser"), the Adviser has delegated to the Sub-Adviser the authority and
responsibility to make and execute decisions for the Fund within the framework
of the Fund's investment policies, subject to review by the Adviser and the
Board of Trustees of the Fund. Under the terms of the Sub-Advisory Agreement,
the Sub-Adviser has discretion to purchase and sell securities, except as
limited by the Fund's investment objective, policies and restrictions.
The Sub-Advisory Agreement provides for the payment to the Sub-Adviser, by
the Adviser, of monthly compensation based on the Fund's average daily net
assets for providing investment advice to the Fund and managing the investment
of the assets of the Fund. The Agreement provides that the Sub-Adviser's fee
shall be reduced proportionately based on the ratio of the Sub-Adviser's fee to
the Adviser's fee in the event the Adviser's fee is reduced as a result of a
state expense limitation.
- 26 -
<PAGE>
The Sub-Advisory Agreement, dated July 26, 1993, was approved by the
Fund's Trustees on July 26, 1993. The Sub- Advisory Agreement provides that it
may be terminated without penalty by either the Fund or the Sub-Adviser at any
time by the giving of 60 days' written notice to the other and terminates
automatically in the event of "assignment", as defined in the 1940 Act or upon
termination of the Advisory Agreement. The Sub-Advisory Agreement provides that,
unless sooner terminated, it shall continue in effect for an initial two year
period, and from year to year thereafter only so long as such continuance is
specifically approved at least annually by either the Board of Trustees of the
Fund or by a vote of the majority of the outstanding voting securities of the
Fund, provided, that in either event, such continuance is also approved by the
vote of the majority of the Trustees who are not parties to the Sub-Advisory
Agreement or "interested persons" of such parties cast in person at a meeting
called for the purpose of voting on such approval.
IEEE
The Sub-Adviser has entered into a Fixed Income Management Agreement,
dated August 30, 1993, with IEEE pursuant to which IEEE will provide advice and
recommendations with respect to fixed-income instruments and futures and options
on fixed-income instruments. IEEE is a professional organization and is
registered as an investment adviser with the Securities and Exchange Commission.
ADMINISTRATOR
Pursuant to an Administration Agreement, dated as of January 1, 1989 (the
"Administration Agreement"), Chase Lincoln First Bank, N.A. ("Chase Lincoln"),
served as the Administrator of the Trust. Effective January 1, 1993, The Chase
Manhattan Bank, N.A., became the successor to Chase Lincoln by merger. The
Administrator provides certain administrative services to the Trust, including,
among other responsibilities, coordinating the negotiation of contracts and fees
with, and the monitoring of performance and billing of, the Trust's independent
contractors and agents; preparation for signature by an officer of the Trust of
all documents required to be filed for compliance by the Trust with applicable
laws and regulations excluding those of the securities laws of various states;
arranging for the computation of performance data, including net asset value and
yield; responding to shareholder inquiries; and arranging for the maintenance of
books and records of the Trust and providing, at its own expense, office
facilities, equipment and personnel necessary to carry out its duties. The
Administrator does not have any responsibility or authority for the management
of the Fund, the determination of investment policy, or for any matter
pertaining to the distribution of Fund shares.
The Administration Agreement provides that the Administrator may render
administrative services to others. The Administration Agreement will continue in
effect from year to year with respect to the Fund only if such continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Administration Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Administration Agreement is terminable without penalty with respect to the Fund
on 60 days' written notice to the Administrator when authorized either by a
majority vote of the Fund's shareholders or by vote of a majority of the Board
of Trustees of the Trust, including a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust, or by the
Administrator on 60 days' written notice, and will automatically terminate in
the event of its "assignment" (as defined in the 1940 Act). The Administration
Agreement also provides that neither the Administrator nor its personnel shall
be liable for any error of judgment or mistake of law or for any act or omission
in the administration or management of the Fund, except for wilful misfeasance,
bad faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Administration Agreement.
In addition, the Administration Agreement provides that, in the event the
operating expenses of the Fund,
- 27 -
<PAGE>
including all investment advisory and administration fees, but excluding
brokerage commissions and fees, distribution fees, taxes, interest and
extraordinary expenses such as litigation, for any fiscal year exceed the most
restrictive expense limitation applicable to the Fund imposed by the securities
laws or regulations thereunder of any state in which the shares of the Fund are
qualified for sale, as such limitations may be raised or lowered from time to
time, the Administrator 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 the Administrator shall be deducted from
the monthly administration fee otherwise payable to the Administrator during
such fiscal year; and if such amounts should exceed the monthly fee, the
Administrator shall pay to the Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the services provided by the Administrator pursuant to
the Administration Agreement, the Administrator receives from the Fund a fee
computed and paid monthly at an annual rate equal to 0.10% of the Fund's average
daily net assets, on an annualized basis for the Fund's then-current fiscal
year. The Administrator, however, may voluntarily agree to waive a portion of
the fees payable to it. For the period from September 8, 1993 to October 31,
1993, Chase voluntarily waived its entire administrative fee of $695. For the
period from November 1, 1993 through October 31, 1994, Chase was paid or
accrued Administration fees of $7,810. For the year ended October 31, 1995,
the Administrator was paid or accrued administration fees in the amount of
$9,592.
DISTRIBUTOR
DISTRIBUTION PLAN
The Fund has adopted a plan of distribution pursuant to Rule 12b-1 under
the 1940 Act (the "Distribution Plan") which provides that the Fund shall pay a
distribution fee (the "Distribution Fee"), to the Distributor at an annual rate
not to exceed 0.10% of the average daily net assets for distribution services
(exclusive of any expenses incurred by the Distributor in connection with print
or electronic media advertising). The Distributor may use all or any portion of
such Distribution Fee to pay for expenses of printing prospectuses and reports
used for sales purposes, expenses of the preparation and printing of sales
literature and other such distribution-related expenses.
The Distribution Plan, adopted by the Trust on December 16, 1991, provides
that it will continue in effect indefinitely if such continuance is specifically
approved at least annually by a vote of both a majority of the Trustees and a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust and who have no direct or indirect financial interest in
the operation of the Distribution Plan or in any agreement related to the
Distribution Plan ("Qualified Trustees"). The Distribution Plan requires that
the Trust shall provide to the Board of Trustees, and the Board of Trustees
shall review, at least quarterly, a written report of the amounts expended (and
the purposes therefor) under the Distribution Plan. The Distribution Plan
further provides that the selection and nomination of Qualified Trustees shall
be committed to the discretion of the disinterested Trustees (as defined in the
1940 Act) then in office. The Distribution Plan may be terminated at any time by
a vote of a majority of the Qualified Trustees or by vote of a majority of the
Fund's outstanding voting shares (as defined in the 1940 Act). The Distribution
Plan may not be amended to increase materially the amount of permitted expenses
thereunder without the approval of shareholders and may not be materially
amended in any case without a vote of the majority of both the Trustees and the
Qualified Trustees. The Fund will preserve copies of any plan, agreement or
report made pursuant to the Distribution Plan for a period of not less than six
years from the date of the Distribution Plan, and for the first two years such
copies will be preserved in an easily accessible place.
Since the Distribution Fee is not directly tied to actual expenses, the
amount of Distribution Fee paid by the Fund during any year may be more or less
than actual expenses incurred pursuant to the Distribution Plan. For this
reason, this type of distribution fee arrangement is characterized by the staff
of the Securities and Exchange
- 28 -
<PAGE>
Commission as being of the "compensation variety" (in contrast to
"reimbursement" arrangements, such as those described above with respect to
expenses incurred in connection with print or electronic media advertising, by
which the Distributor's compensation is directly linked to its expenses).
However, the Fund is not liable for any distribution expenses incurred in excess
of the Distribution Fee it paid.
For the period from September 8, 1993 to October 31, 1993, the distributor
voluntarily waived its entire fee in the amount of $1,739. For the period from
November 1, 1993 through October 31, 1994, the Distributor was paid or accrued
distribution fees of $19,531. For the same period, the Distributor reimbursed
the Fund for expenses amounting to $150,580. For the year ended October 31,
1995, the Distributor was paid or accrued distribution fees of $23,980.
DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trust has entered into a Distribution and Sub-Administration Agreement
dated April 2, 1990 and amended June 1, 1990, (the "Distribution Agreement")
with the Distributor, pursuant to which the Distributor acts as the Fund's
exclusive underwriter, provides certain administration services and promotes and
arranges for the sale of the shares of the Fund. As of April 1, 1990, the
Distributor became a wholly-owned subsidiary of Concord Financial Group. The
Distribution Agreement provides that the Distributor will bear the expenses of
printing, distributing and filing prospectuses and statements of additional
information and reports used for sales purposes, and of preparing and printing
sales literature and advertisements not paid for by the Distribution Plan. The
Trust pays for all of the expenses for qualification of the shares of the Fund
for sale in connection with the public offering of such shares, and all legal
expenses in connection therewith. In addition, pursuant to the Distribution
Agreement, the Distributor provides certain sub-administration services,
including providing officers, clerical staff and office space.
The Distribution Agreement is currently in effect until May 13, 1994, and
will continue in effect thereafter with respect to the Fund only if such
continuance is specifically approved at least annually by the Board of Trustees
or by vote of a majority of the Fund's outstanding voting securities and, 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 with
respect to the Fund on 60 days' written notice to the Distributor when
authorized either by a majority vote of the Fund's shareholders or by vote of a
majority of the Board of Trustees of the Trust, including a majority of the
Trustees who are not "interested persons" (as defined in the 1940 Act) of the
Trust, or 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 the Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to the Fund imposed by the securities laws or regulations thereunder
of any state in which the shares of the Fund are qualified for sale, as such
limitations may be raised or lowered from time to time, the Distributor will be
required to reduce its sub-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 the Distributor shall be deducted from the monthly
sub-administration fee otherwise payable to the Distributor during such fiscal
year; and if such amounts should exceed the monthly fee, the Distributor shall
pay to the Fund its share of such excess expenses no later than the last day of
the first month of the next succeeding fiscal year.
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<PAGE>
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 the Fund. For the
period from September 8, 1993 to October 31, 1993, the Distributor voluntarily
waived its entire subadministration fee in the amount of $348. For the period
from November 1, 1993 through October 31, 1994, the Distributor was paid or
accrued sub-administration fees of $3,905. For the year ended October 31, 1995,
the Distributor was paid or accrued sub-administration fee in the amount of
$4,796.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust, on behalf of the Fund, has entered into a shareholder servicing
agreement (a "Servicing Agreement") with each Shareholder Servicing Agent to
provide certain services for a fee which will not exceed, on an annualized
basis, 0.25% of the Fund's average daily net assets represented by shares owned
during the period for which payment is being made by investors with whom such
Shareholder Servicing Agent maintains a servicing relationship. However, each
Shareholder Servicing Agent may voluntarily agree to waive a portion of the fees
payable to it under its Servicing Agreement on a month-to-month basis. For the
period from September 8, 1993 to October 31, 1993, the Shareholder Servicing
Agents voluntarily waived their entire fees in the amount of $1,739. For the
period from November 1, 1993 through October 31, 1994, the Shareholder Servicing
Agents were paid or accrued fees in the amount of $19,531. For the year ended
October 31, 1995, Shareholder Servicing Agents were paid or accrued fees in the
amount of $23,980.
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") to which DST acts as transfer agent for the Trust.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets of
each Fund for which Chase receives compensation as is from time to time agreed
upon by the Trust and Chase. With respect to transactions involving futures or
options on futures, the Bank of New York may act as sub-custodian with respect
to margin and collateral. For additional information, see "Shareholder Servicing
Agents, Transfer Agent and Custodian" in the Prospectus.
In certain circumstances Shareholder Servicing Agents may be required to
register as dealers under state law.
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<PAGE>
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, serves as the Trust's independent accountants. Price Waterhouse LLP
provides the Fund with audit services, tax return preparation, and assistance
and consultation with respect to the preparation of filings with the Securities
and Exchange Commission.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended October 31,
1995 of the Fund are incorporated herein by reference to the Portfolio's annual
report to shareholders as filed with the Securities and Exchange Commission by
the Trust on Form N-30D on December 29, 1995, accession number
0000950123-95-003915.
GENERAL INFORMATION
DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Mutual Fund Group (the "Trust") is an open-end management investment
company organized as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts in 1987. The Trust currently consists of nineteen
Funds with shares of beneficial interest without par value The Trust may offer
two classes 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 pre-emptive or conversion rights.
Shares when issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each share held. Shares of each series
or class generally vote separately, for example to approve investment advisory
agreements or distribution plans, but shares of all series and classes vote
together, to the extent required under the 1940 Act, in the election or
selection of Trustees and independent accountants. With respect to shares
purchased through a Shareholder Servicing Agent and, in the event written proxy
instructions are not received by the Fund or its designated agent prior to a
shareholder meeting at which a proxy is to be voted and the shareholder does not
attend the meeting in person, the Shareholder Servicing Agent for such
shareholder will be authorized pursuant to an applicable agreement with the
shareholder to vote the shareholder's outstanding shares in the same proportion
as the votes cast by other Fund shareholders represented at the meeting in
person or by proxy as to which such Shareholder Servicing Agent is the agent of
record.
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
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<PAGE>
record and which are not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
that portfolio otherwise represented at the meeting in person or by proxy as to
which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shares have no preemptive or conversion
rights. Shares, when issued, are fully paid and non-assessable, except as set
forth below. Any series or class may be terminated (i) upon the merger or
consolidation with, or the sale or disposition of all or substantially all of
its assets to, another entity, if approved by the vote of the holders of
two-thirds of its outstanding shares, except that if the Board of Trustees
recommends such merger, consolidation or sale or disposition of assets, the
approval by vote of the holders of a majority of the series' or class'
outstanding shares will be sufficient, or (ii) by the vote of the holders of a
majority of its outstanding shares, or (iii) by the Board of Trustees by written
notice to the series' or class' shareholders. Unless each series and class is so
terminated, the Trust will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to shares
that may be redeemed through expedited or automated procedures established by a
Shareholder Servicing Agent.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The Code of Ethics substantially conforms to the
recommendations made by the Investment Company Institute ("ICI") (except where
noted) and includes such provisions as:
o Prohibitions on investment personnel acquiring securities in
initial offerings;
o A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer granting such
approval have no interest in the issuer the private placement; o A
restriction on access persons executing transactions for securities
on a recommended list until 14 days after distribution of that list;
o A prohibition on access persons acquiring securities that are
pending execution by one of the Funds or Portfolios until 7 days
after the transactions of the Funds or Portfolios are completed; o A
prohibition of any buy or sell transaction in a particular security
in a 30-day period, except as may be permitted in certain hardship
cases or exigent circumstances where prior approval is obtained. This
provision differs slightly from the ICI recommendation; o A
requirement for pre-clearance of any buy or sell transaction in a
particular security after 30 days, but within 60 days; o A
requirement that any gift exceeding $75.00 from a customer must be
reported to the appropriate compliance officer; o A requirement that
access persons submit in writing any request to serve as a director
or trustee of a publicly traded company;
o A requirement that all securities transactions in excess of $1,000
be pre-cleared, except that if a person has engaged in more than
$10,000 of securities transactions in a calendar quarter all
securities of such person require pre-clearance (this de minimus
exception differs slightly from the ICI recommendations); o A
requirement that all access persons direct their broker-dealer to
submit duplicate confirmation and customer statements to the
appropriate compliance unit; and o A requirement that all access
persons sign a Code of Ethics acknowledgment, affirming that they
have read and understood the Code and submit a personal security
holdings report upon commencement of employment or status and a
personal security transaction report within 10 days of each calendar
quarter thereafter.
Principal Holders
As January 31, 1996, the following persons owned beneficially, directly or
indirectly, 5% or more of the outstanding shares of the Fund:
The Institue of Electrical and Electronic Engineers, Inc. 52.47%
445 Hoes Lane
P.O. Box 1331
Piscataway, NJ 08855-1331
IEEE/ECI 6.31%
Attn: Michael Sosa
445 Hoes Lane
Piscataway, NJ 08854-4103
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<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
MARCH 1, 1996
VISTA GLOBAL FIXED INCOME FUND
VISTA INTERNATIONAL EQUITY FUND
125 WEST 55TH STREET, NEW YORK, NEW YORK 10019
Table of Contents Page
The Funds........................................................2
Investment Objective, Policies and Restrictions..................3
Performance Information....................................... 21
Determination of Net Asset Value.............................. 24
Tax Matters................................................... 25
Management of the Trust and Portfolios ....................... 32
Independent Accountants....................................... 40
Financial Statements..........................................
General Information........................................... 40
Appendix A.....................................................A-1
Appendix B.....................................................B-1
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Prospectus offering each dated March 1, 1996. This Statement of Additional
Information should be read in conjunction with the individual Prospectuses
offering shares of each of Vista Global Fixed Income Fund (the "Income Fund")
and Vista International Equity Fund (the "Equity Fund").
Any references to the "Prospectus" in this Statement of Additional Information
is a reference to the Prospectus offering a Fund to which this Statement
pertains. In each instance, the specific Prospectus referred to is referenced by
the surrounding text, which identifies a specific Fund. Copies of each
Prospectus may be obtained by an investor without charge by contacting Vista
Broker-Dealer Services, Inc., the Funds' 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 the Vista Service Center at
our toll-free number:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141 VIG-SAI
<PAGE>
THE FUNDS
Mutual Fund Group (the "Trust") is a non-diversified, 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 15 separate series (a "Fund" or the "Funds"). Under a multiple-class
distribution system, both the Income Fund and Equity Fund offer two classes of
shares: Class A shares (which are subject to an initial sales load) and Class B
shares (which are subject to a contingent deferred sales load and a higher
distribution fee). The shares of the Income Fund and the Equity Fund are
collectively referred to in this Statement of Additional Information as the
"Shares."
The Funds' Shares are continuously offered for sale through Vista
Broker-Dealer Services, Inc. ("VBDS"), the Funds' distributor (the
"Distributor"), only to investors who are customers of a financial institution,
such as a federal or state-chartered bank, trust company, or savings and loan
association that has entered into a shareholder servicing agreement with the
Trust on behalf of the Funds (collectively, "Shareholder Servicing Agents") or
customers of a securities broker or certain financial institutions who have
entered into Selected Dealer Agreements with the Distributor. VBDS receives a
distribution fee from the Funds pursuant to plans of distribution adopted
pursuant to Rule 12b-1 of the Investment Company Act of 1940, as amended (the
"1940 Act").
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Trust seeks to achieve the Income
Fund's and Equity Fund's investment objective by investing all of its investable
assets in an open-end, non-diversified management investment company which has
the same investment objective as that Fund. The Income Fund invests in Global
Fixed Income Portfolio (the "Income Portfolio") and the Equity Fund invests in
International Equity Portfolio (the "Equity Portfolio") (each a "Portfolio" and
collectively the "Portfolios"). The Chase Manhattan Bank, N.A. ("Chase"), the
Trust's administrator, supervises the overall administration of the Trust,
including the Funds. The Chase Manhattan Trust Corporation Limited is the
administrator of the Portfolios. Chase is the investment adviser (the "Adviser")
for each Portfolio. The Adviser continuously manages each Portfolio in
accordance with its investment objective and policies. The selection of
investments for each Portfolio and the way in which they are managed depend on
the conditions and trends in the economy and the financial marketplaces. A
majority of the Trustees of the Trust and each Portfolio are not affiliated with
the Adviser. Certain qualified investors in addition to a Fund may invest in a
Portfolio. Occasionally, communications to shareholders may contain the views of
the investment adviser as to current market, economic, trade and interest rate
trends, as well as legislative, regulatory and monetary developments, and may
include investment strategies and related matters believed to be of relevance to
a Fund.
Advertisements for the Vista Funds may include references to the asset
size of other products made available by Chase Manhattan, such as the offshore
assets of the Vista Funds.
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<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
VISTA GLOBAL FIXED INCOME FUND seeks to provide a high total return,
achieving such through current income and capital appreciation, through
investment in a portfolio of high quality fixed income securities of U.S. and
foreign issuers and through transactions in foreign currencies.
VISTA INTERNATIONAL EQUITY FUND seeks to provide a total return on
assets from long-term growth of capital and income principally derived through a
broad portfolio of marketable securities of established foreign companies
organized in countries other than the United States, and companies participating
in foreign economies with prospects for growth.
INVESTMENT POLICIES
The Prospectus sets forth the various investment policies applicable to
each Fund and its related Portfolio. Since the investment characteristics of a
Fund will correspond directly to those of its Portfolio, the following is a
discussion of the various investments of and techniques employed by each
Portfolio.
The following information supplements and should be read in conjunction
with the sections of the Prospectus entitled "Investment Objective and Policies"
and "Additional Information on Investment Policies and Techniques".
U.S. Government Securities. For a description of obligations issued or
guaranteed by U.S. Government agencies or instrumentalities, see Appendix A.
Certificates of Deposit and Bankers' Acceptances. Certificates of
deposit are receipts issued by a depository institution in exchange for the
deposit of funds. The issuer agrees to pay the amount deposited plus interest to
the bearer of the receipt on the date specified on the certificate. The
certificate usually can be traded in the secondary market prior to maturity.
Bankers' acceptances typically arise from short-term credit arrangements
designed to enable businesses to obtain funds to finance commercial
transactions. Generally, an acceptance is a time draft drawn on a bank by an
exporter or an importer to obtain a stated amount of funds to pay for specific
merchandise. The draft is then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face value of the instrument on its
maturity date. The acceptance may then be held by the accepting bank as an
earning asset or it may be sold in the secondary market at the going rate of
discount for a specific maturity. Although maturities for acceptance can be as
long as 270 days, most acceptances have maturities of six months or less.
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.
For a description of commercial paper ratings, see Appendix B.
Zero Coupon, Payment in Kind and Stripped Government Obligations. The
Portfolios may invest in zero coupon bonds, deferred interest bonds, bonds on
which the interest is payable in kind ("PIK bonds") and U.S. Treasury bonds or
notes from which their unmatured interest coupons have been separated or
stripped. Zero coupon and deferred interest bonds are debt obligations which are
issued at a significant discount from face value. The discount approximates the
total amount of interest the bonds will accrue and compound over the period
until maturity
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<PAGE>
or the first interest accrual date at a rate of interest reflecting the market
rate of the security at the time of issuance. While zero coupon bonds do not
require the periodic payment of interest, deferred interest bonds provide for a
period of delay before the regular payment of interest begins. Although this
period of delay is different for each deferred interest bond, a typical period
is approximately one-third of the bond's term to maturity. 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 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 Portfolio's distribution obligations. Stripped obligations are
created when the holder of U.S. Treasury bonds or notes, typically a custodian
bank or investment brokerage firm, strips their unmatured interest coupons and
resells each component separately. Stripped interest coupons have been marketed
in custodial receipt programs under such names as "TIGRS" and "CATS." The
underlying bonds and notes are sold and either held in book-entry form at a
Federal Reserve Bank or, in the case of bearer securities, in trust on behalf of
the owners thereof. The Equity Portfolio may invest up to 5% of its total assets
in stripped obligations.
Mortgage-Backed Securities. The Income Portfolio may also invest in
mortgage-backed securities, which are interests in pools of mortgage loans,
including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental, government-related and
private organizations (see "Mortgage Pass-Through Securities").
The Income Portfolio may also invest in debt securities which are secured with
collateral consisting of mortgage-backed securities (see "Collateralized
Mortgage Obligations") and in other types of mortgage-related securities (see
"Other Mortgage-Backed Securities" and "Other Asset-Backed Securities") but not
including stripped mortgage-backed securities. Not more than 25% of the Income
Portfolio's assets will be invested in such debt securities.
Prepayments of principal by mortgagors and mortgage foreclosures will
usually result in the return of a greater part of principal invested far in
advance of the maturity of the mortgages in the pool. A decline in interest
rates may lead to a faster rate of prepayment of the underlying mortgages and
expose the Income Portfolio to a lower rate of return upon reinvestment. To the
extent that such mortgage-backed securities are held by the Income Portfolio,
the prepayment right will tend to limit to some degree any potential increase in
net asset value of the Income Portfolio because the value of the mortgage-backed
securities held by the Income Portfolio may not appreciate as rapidly interest
rates decline as the price of noncallable debt securities.
Mortgage Pass-Through Securities. Interests in pools of mortgage-backed
securities differ from other forms of debt securities, which normally provide
for periodic payment of interest in fixed amounts with principal payments at
maturity or specified call dates. Instead, these securities provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a "pass-through" of the monthly payments made by the individual
borrowers on their mortgage loans, net of any fees paid to the issuer or
guarantor of such securities. Additional payments are caused by repayments of
principal resulting from the sale of the underlying property, refinancing or
foreclosure, net of fees or costs which may be incurred. Some mortgage-related
securities (such as securities issued by GNMA) are described as "modified
pass-through." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, at the
scheduled payment dates regardless of whether or not the mortgagor actually
makes the payment.
The principal governmental guarantor of mortgage-related securities is
GNMA. GNMA is a wholly-owned U.S. Government corporation within the Department
of Housing and Urban Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of principal and
interest on securities issued by institutions approved by GNMA (such as savings
and loan institutions, commercial banks and mortgage bankers) and backed by
pools of FHA-insured or VA-guaranteed mortgages. These guarantees, however,
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<PAGE>
do not apply to the market value or yield of mortgage-backed securities or to
the value of shares of the Income Fund or beneficial interests of the Income
Portfolio. Also, the GNMA securities often are purchased at a premium over the
maturity value of the underlying mortgages. This premium is not guaranteed and
will be lost if prepayment occurs.
Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. Government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) mortgages from a list of approved sellers which include stateand
federal-chartered savings and loan associations, mutual savings banks,
commercial banks, credit unions and mortgage bankers. Pass-through securities
issued by FNMA are guaranteed as to timely payment of principal and interest by
FNMA but are not backed by the full faith and credit of the U.S. Government.
FHLMC is a corporate instrumentality of the U.S. Government and was
created by Congress in 1970 for the purpose of increasing the availability of
mortgage credit for residential housing. Its stock is owned by the 12 Federal
Home Loan Banks. FHLMC issues Participation Certificates ("PCs") which represent
interests in conventional mortgages from FHLMC's national portfolio. FHLMC
guarantees the timely payment of interest and ultimate collection of principal,
but PCs are not backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage
insurance companies, mortgage bankers and other secondary market issuers also
create pass-through pools of conventional mortgage loans ("Private
Certificates"). Such issuers may in addition be the originators and/or servicers
of the underlying mortgage loans as well as the guarantors of the
mortgage-related securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and government-related
pools because there are no direct or indirect government or agency guarantees of
payments. However, timely payment of interest and principal of these pools may
be supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit. The insurance and
guarantees are issued by governmental entities, private insurers and the
mortgage poolers. Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a mortgage-related
security meets the Income Portfolio's investment quality standards. There can be
no assurance that the private insurers or guarantors can meet their obligations
under the insurance policies or guarantee arrangements. The Income Portfolio may
buy mortgage-related securities without insurance or guarantees if through an
examination of the loan experience and practices of the originator/servicers and
poolers, the Adviser determines that the securities' quality standards are
equivalent to the Income Portfolio's quality standards applicable to corporate
debt obligations. Although the market for such securities is becoming
increasingly liquid, securities issued by certain private organizations may not
be readily marketable.
The Income Portfolio invests in mortgage-backed securities rated AA or
higher by Moody's or S&P or which, if unrated, are determined by the Adviser
pursuant to criteria established by the Board of Trustees of the Income
Portfolio to be of comparable quality.
Collateralized Mortgage Obligations ("CMOs"). The Income Portfolio may
invest in CMOs, including, with respect to up to 5% of total assets, "interest
only" and "principal only" classes thereof issued by the U.S. Government or its
agencies and instrumentalities. In a typical CMO transaction, a corporation
issues multiple series (e.g., A, B, C, through Z) of CMO bonds ("Bonds").
Proceeds of the offering of the Bonds are used to purchase mortgages or mortgage
pass-through certificates ("Collateral"). The Collateral is pledged to a third
party trustee as security for the Bonds. Principal and interest payments from
the Collateral are used to pay principal on the Bonds in the order A, B, C
through Z. The Series A, B and C Bonds (i.e., all Bonds other than Series Z) all
bear current interest. Interest on the Series Z Bond is accrued and added to
principal, and a like amount is paid as principal on the Series A, B or C Bond
currently being paid off. When the Series A, B and C Bonds (i.e., all Bonds
other than Series Z) are paid in full, interest and principal on the Series Z
Bond begins to be paid currently.
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FHLMC Collateralized Mortgage Obligations ("FHLMC CMOs"). FHLMC CMOs
are debt obligations of FHLMC issued in multiple classes having different
maturity dates which are secured by the pledge of a pool of conventional
mortgage loans purchased by FHLMC. Unlike FHLMC PCs, payments of principal and
interest on the CMOs are made semiannually, as opposed to monthly. The amount of
principal payable on each semiannual payment date is determined in accordance
with FHLMC's mandatory sinking fund schedule, which, in turn, is equal to
approximately 100% of FHA prepayment experience applied to the mortgage
collateral pool. All sinking fund payments in the CMOs are allocated to the
retirement of the individual classes of bonds in the order of their stated
maturities. Payment of principal on the mortgage loans in the collateral pool in
excess of the amount of FHLMC's minimum sinking fund obligation for any payment
date is made to the holders of the CMOs as additional sinking fund payments.
Because of the "pass-through" nature of all principal payments received on the
collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate
at which principal of the CMOs is actually repaid is likely to be such that each
class of bonds will be retired in advance of its scheduled maturity date.
If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.
Other Mortgage-Backed Securities. The Adviser expects that
governmental, government-related or private entities may create mortgage loan
pools and other mortgage-related securities offering mortgage pass-through and
mortgage-collateralized investments in addition to those described above. 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. The Income Portfolio will not purchase mortgage-backed
securities or any other assets which, in the opinion of the Adviser, are not
readily marketable if, as a result, more than 10% of the value of the Income
Portfolio's net assets will be not readily marketable. The Income 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 Adviser will, consistent with the Income Portfolio's investment
objective, policies and quality standards, consider making investments in such
new types of mortgage-related securities. In addition, the Fund's Prospectus
will be appropriately updated to describe such securities.
Other Asset-Backed Securities. The Income Portfolio may invest in
asset-backed securities, including conditional sales contracts, equipment lease
certificates and equipment trust certificates. The Adviser expects 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. Consistent with its investment objective and policies, the Income
Portfolio also may
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invest in other types of asset-backed securities. In the selection of other
asset-backed securities, the Adviser 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.
The limitations on the net assets of the Income Portfolio which may be
invested in mortgage-backed securities, including CMOs, real estate mortgage
investment conduits and other mortgage-backed securities, do not apply where the
obligations involved are issued or guaranteed as to the payment of principal or
interest by the U.S.
Government, its agencies authorities or instrumentalities.
The Board of Trustees of the Income Portfolio will monitor the
Adviser's assessment of the liquidity of asset-backed securities and the Adviser
will make its assessments pursuant to guidelines approved by the Board of
Trustees.
Illiquid Securities. Historically, illiquid securities have included
securities subject to contractual or legal restrictions on resale because they
have not been registered under the Securities Act of 1933, as amended
("Securities Act"), securities which are otherwise not readily marketable and
repurchase agreements having a maturity of longer than seven days. Securities
which have not been registered under the Securities Act are referred to as
private placements or restricted securities and are purchased directly from the
issuer or in the secondary market. Mutual funds do not typically hold a
significant amount of these restricted or other illiquid securities because of
the potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act,
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale of such investments to the
general public or to certain institutions may not be indicative of their
liquidity.
Each Portfolio may invest up to 5% of its total assets in restricted
securities issued under Section 4(2) of the Securities Act, which exempts from
registration "transactions by an issuer not involving any public offering".
Section 4(2) instruments are restricted in the sense that they can only be
resold through the issuing dealer and only to institutional investors; they
cannot be resold to the general public without registration. Restricted
securities issued under Section 4(2) of the Securities Act will be treated as
illiquid and subject to each Portfolio's overall 15% limitation on illiquid
securities.
The Securities and Exchange Commission has recently adopted Rule 144A,
which allows a broader institutional trading market for securities otherwise
subject to restriction on their resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act of resales of certain securities to qualified institutional buyers. The
Adviser anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this new
regulation and the development of automated systems for the trading, clearance
and settlement of unregistered securities of domestic and foreign issuers, such
as the PORTAL System sponsored by the National Association of Securities
Dealers, Inc.
The Board of Trustees of each Portfolio, which has the ultimate
responsibility for determinations as to liquidity of portfolio securities, has
adopted guidelines and procedures for determining the liquidity of Rule 144A
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securities and monitoring the Adviser's implementation thereof.
Derivative and Related Instruments. To the extent permitted by the
investment objectives and policies of the Portfolio, and as described more fully
below, the Portfolio may: purchase, write and exercise call and put options on
securities, securities indexes (including using options in combination with
securities, other options or derivative instruments); enter into futures
contracts and options on futures contracts; purchase and sell mortgage-backed
and asset-backed securities; and purchase and sell structured products.
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. As incorrect correlation could result
in a loss on both the hedged assets in the 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 Adviser may incorrectly forecast interest rates, market values
or other economic factors in utilizing a derivatives strategy. In such a case,
the 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 the Portfolio. Certain strategies, such as yield enhancement, can
have speculative characteristics and may 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
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 the 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 there is a
greater potential that a counterparty or broker may default or be unable to
perform on its commitments. In the event of such a default, the Portfolio may
experience a loss.
Specific Uses and Strategies. Set forth below are explanations of the
Portfolio's use of various strategies involving derivatives and related
instruments.
OPTIONS ON SECURITIES, SECURITIES INDEXES AND DEBT INSTRUMENTS. The
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
Portfolio may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
twoparty 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 Portfolio intends to purchase pending its
ability to invest in such securities in an orderly manner. The 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, the
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. The Portfolio may write a call or put option
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<PAGE>
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.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, when
the Portfolio writes a covered call (i.e., where the underlying securities are
held by the 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 the 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, the 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 the Portfolio seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, the Portfolio may be unable to close out a position.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolio may
purchase or sell (i) interest-rate futures contracts, (ii) futures contracts on
specified instruments, and (iii) options on these futures contracts ("futures
options").
The futures contracts and futures options may be based on various
securities in which the Portfolio 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) and other financial instruments and indices.
These instruments may be used to hedge portfolio positions and
transactions as well as to gain exposure to markets. For example, the 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 when the Portfolio intends to acquire an instrument or
enter into a position. For example, the 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 Portfolio 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 Portfolio 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
Portfolio will only enter into futures contracts or options on futures contracts
which are standardized and traded on a U.S. or foreign exchange or board of
trade, or similar entity, or quoted on an automated quotation system.
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FORWARD CONTRACTS. The 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 Portfolio 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, the 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, the 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 the 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."
The Portfolio may enter into these contracts for the purpose of hedging
against foreign exchange risk arising from the Portfolio's investments or
anticipated investments in securities denominated in foreign currencies. The
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.
The 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.
MORTGAGE-BACKED SECURITIES. The Portfolios 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 YIELD OF
A MORTGAGE-BACKED SECURITY MAY BE ADVERSELY AFFECTED BY THE PREPAYMENT OF
MORTGAGES INCLUDED IN THE MORTGAGE POOL UNDERLYING THE SECURITY.
The Portfolios 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, semi-annually. CMOs are 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
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from the pool of underlying mortgages, including prepayments, is first returned
to investors holding the shortest maturity class. Investors holding the longer
maturity classes receive principal only after the first class has been retired.
An investor is partially protected against a sooner than desired return of
principal because of the sequential payments.
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.
STRUCTURED PRODUCTS. The Portfolios may purchase interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of certain debt obligations, thereby creating "structured
products." 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. THE EXTENT OF THE PAYMENTS MADE WITH RESPECT TO
STRUCTURED PRODUCTS IS DEPENDENT ON THE EXTENT OF THE CASH FLOW ON THE
UNDERLYING INSTRUMENTS.
The Portfolio may also invest in other types of structured products,
including among others, spread trades and notes linked by a formula (e.g., a
multiple) to the price of an underlying instrument or currency. A spread trade
is an investment position relating to a difference in the prices or interest
rates of two securities or currencies 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 or currencies.
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.
Interest Rate and Currency Swaps. The Income 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 Income Portfolio receiving or paying, as the
case may be, only the net amount of the two payments. Inasmuch as these
transactions are entered into for good faith hedging purposes, the Income
Portfolio and the Adviser believe that such obligations do not constitute senior
securities (as defined in the Investment Company Act of 1940 (the "1940 Act"))
and, accordingly, will not treat them as being subject to the Income Portfolio's
borrowing restrictions. The net amount of the excess, if any, of the Income
Portfolio's obligations over its entitlements with respect to each interest rate
or currency swap will be accrued on a daily basis and an amount of cash or
liquid high grade debt securities having an aggregate net asset value at least
equal to the accrued excess will be maintained in a segregated account by the
Income Portfolio's custodian. The Income Portfolio will not enter into any
interest rate or currency swap unless the credit quality of the unsecured senior
debt or the claims-paying ability of the other party thereto is considered to be
investment grade by the Adviser. If there is a default by the other party to
such a transaction, the Income Portfolio will have contractual remedies pursuant
to the agreements related to the transaction. The swap market has grown
substantially in recent years with a large number of banks and investment
banking firms acting both as principals and as agents utilizing standardized
swap documentation. As a result, the swap market has become relatively liquid in
comparison with the markets for other similar instruments which are traded in
the interbank market.
LOANS OF PORTFOLIO SECURITIES -- Certain securities dealers who make
"short sales" or who wish to obtain particular securities for short periods may
seek to borrow them from institutional investors such as the Portfolios. Each
Portfolio reserves the right to seek to increase its income by lending its
portfolio securities. Under present regulatory policies, including those of the
Board of Governors of the Federal Reserve System and the Securities and Exchange
Commission, such loans may be made only to member firms of the New York Stock
Exchange, and are required to be secured continuously by collateral in cash,
cash equivalents, or U.S. Government securities maintained on a current basis in
an amount at least equal to the market value of the securities loaned. Under a
loan,
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a Portfolio has the right to call a loan and obtain the securities loaned at any
time on five days' notice.
During the existence of a loan, a Portfolio continues to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned and also receives compensation based on investment of the collateral. A
Portfolio does not, however, have the right to vote any securities having voting
rights during the existence of the loan, but can call the loan in anticipation
of an important vote to be taken among holders of the securities or of the
giving or withholding of their consent on a material matter affecting the
investment.
As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral if the borrower of the
securities experiences financial difficulty. However, the loans will be made
only to dealers deemed by a Portfolio to be of good standing, and when, in the
judgment of the Portfolio, the consideration that can be earned currently from
securities loans of this type justifies the attendant risk. In the event a
Portfolio makes securities loans, it is not intended that the value of the
securities loaned would exceed 30% of the value of the Portfolio's total assets.
NON-DIVERSIFICATION -- The Trust has registered as a "non-diversified"
investment company. Each Fund "looks through" its Portfolio to the securities
held by its Portfolio for purposes of determining diversification. Each
Portfolio may invest more than 5% of its assets in the obligations of a single
issuer, subject to diversification requirements under federal tax laws. At
present, these requirements do not permit more than 25% of the value of a
Portfolio's total assets to be invested in securities (other than various
securities issued or guaranteed by the United States or its agencies or
instrumentalities) of any one issuer, at the close of any calendar quarter.
Since a relatively high percentage of the assets of each Portfolio may be
invested in the obligations of a limited number of issuers, the net asset value
of each Fund's shares may be more susceptible to any single economic, political
or regulatory occurrence than the net asset value of a diversified investment
company.
---------------
Shareholder approval is not required to change any of the investment
policies discussed above, except as otherwise noted herein and in the
Prospectus.
INVESTMENT RESTRICTIONS
The Funds and the Portfolios have adopted the following investment
restrictions which may not be changed with respect to a Fund or Portfolio
without the approval of a "majority of the outstanding voting securities" of the
Fund or the Portfolio, which, under the 1940 Act and the rules thereunder and as
used in this Statement of Additional Information means, with respect to the Fund
or the Portfolio, the lesser of (i) 67% or more of the outstanding voting
securities of the Fund or of the total beneficial interests of the Portfolio
present at a meeting, if the holders of more than 50% of the outstanding voting
securities of the Fund or of the total beneficial interests of the Portfolio are
present or represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund or of the total beneficial interests of the Portfolio.
Whenever the Trust is requested to vote on a fundamental policy of the
Portfolio, the Trust will hold a meeting of Fund shareholders and will cast its
vote as instructed by Fund shareholders.
It is a fundamental policy of each Fund that when the Fund holds no
portfolio securities except interests in the Portfolio, 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 5% of its assets in another issuer, (2) may, consistent with Section 12 of
the 1940 Act, invest in securities issued by other registered investment
companies, (3) may invest more than 10% of its net assets in the securities of a
registered investment company, (4) may hold more than 10% of the voting
securities of a registered investment company, (5) will concentrate its
investments in the investment company industry and (6) will not issue senior
securities except as permitted by any exemptive order of the SEC. It is a
fundamental investment policy of each Fund that when the Fund holds only
portfolio securities other than interests in the Portfolio, the Fund's
investment objective and policies shall be
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identical to the investment objective and policies of the Portfolio at the time
the assets of the Fund were withdrawn from the Portfolio.
Each Portfolio may not:
(1) borrow money or pledge, mortgage or hypothecate its
assets, except through lending portfolio securities and except that, as
a temporary measure for extraordinary or emergency purposes it may
borrow in an amount not to exceed 1/3 of the current value of its net
assets, including the amount borrowed, and may pledge, mortgage or
hypothecate not more than 1/3 of such assets to secure such borrowings
(it is intended that money would be borrowed by a Portfolio only from
banks and only to accommodate requests for the reductions of
investments in the Portfolio while effecting an orderly liquidation of
portfolio securities), provided that collateral arrangements with
respect to a Portfolio's permissible futures and options transactions,
including initial and variation margin, are not considered to be a
pledge of assets for purposes of this restriction; no Portfolio will
purchase investment securities if its outstanding borrowing, including
repurchase agreements, exceeds 5% of the value of its total assets; for
additional related restrictions, see clause (i) under the caption
"State and Federal Restrictions" hereafter;
(2) purchase any security or evidence of interest therein on
margin, except that such short-term credit may be obtained as may be
necessary for the clearance of purchases and sales of securities and
except that, with respect to a Portfolio's permissible options and
futures transactions, deposits of initial and variation margin may be
made in connection with the purchase, ownership, holding or sale of
futures or options positions;
(3) underwrite securities issued by other persons except
insofar as the Portfolio may technically be deemed an underwriter under
the Securities Act of 1933 in selling a portfolio security;
(4) knowingly invest in securities which are subject to legal
or contractual restrictions on resale (including securities that are
not readily marketable, but not including repurchase agreements
maturing in not more than seven days) if, as a result thereof, more
than 10% of the Portfolio's total assets (taken at market value) would
be so invested (including repurchase agreements maturing in more than
seven days);
(5) purchase or sell real estate (including limited
partnership interests but excluding securities secured by real estate
or interests therein), interests in oil, gas or mineral leases,
commodities or commodity contracts in the ordinary course of business,
other than (i) with respect to a Portfolio's permissible futures and
options transactions or (ii) forward purchases and sales of foreign
currencies or securities (each Portfolio reserves the freedom of action
to hold and to sell real estate acquired as a result of its ownership
of securities);
(6) 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 a Portfolio;
(7) make short sales of securities or maintain a short
position, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for
securities of the same issue as, and equal in amount to, the securities
sold short, and unless not more than 10% of the Portfolio's net assets
(taken at market value) is held as collateral for such sales at any one
time (it is the present intention of management to make such sales only
for the purpose of deferring realization of gain or loss for federal
income tax purposes; such sales would not be made of securities subject
to outstanding options);
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<PAGE>
(8) concentrate its investments in any particular industry,
but if it is deemed appropriate for the achievement of a Portfolio's
investment objective, up to 25% of its assets at market value at the
time of each investment, may be invested in any one industry, except
that this restriction does not apply to U.S. Government securities (in
addition, so long as a single foreign government or supranational
organization is considered to be an "industry" for purposes of this 25%
limitation, each Portfolio will comply therewith), and except that,
with respect to a Portfolio's permissible futures and options
transactions, positions in options and futures shall not be subject to
this restriction; or
(9) issue any senior security (as that term is defined in the
1940 Act) if such issuance is specifically prohibited by the 1940 Act
or the rules and regulations promulgated thereunder, provided that
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 for purposes of
this restriction.
Each Portfolio is not permitted to make loans to other persons, except
(i) through the lending of its portfolio securities and provided that any such
loans not exceed 30% of the Portfolio's total assets (taken at market value),
(ii) through the use of repurchase agreements or the purchase of short-term
obligations and provided that not more than 10% of the Portfolio's total assets
will be invested in repurchase agreements maturing in more than seven days, or
(iii) by purchasing, subject to the limitation in paragraph 5 above, a portion
of an issue of debt securities of types commonly distributed privately to
financial institutions, for which purposes the purchase of short-term commercial
paper or a portion of an issue of debt securities which are part of an issue to
the public shall not be considered the making of a loan.
In addition, the Portfolios may enter into repurchase agreements and
have adopted the following operating policy with respect to such activity, which
is not fundamental and which may be changed without shareholder approval.
Repurchase agreements (a purchase of and a simultaneous commitment to resell a
security at an agreed-upon price on an agreed-upon date) may be entered into
only with member banks of the Federal Reserve System and securities dealers
believed creditworthy and only if fully collateralized by U.S. Government
obligations or other securities in which the Portfolios are permitted to invest.
If the counterparty of a repurchase agreement fails to pay the sum agreed to on
the agreed-upon delivery date, a Portfolio would have the right to sell the
securities constituting the collateral; however, the Portfolio might thereby
incur a loss and in certain cases may not be permitted to sell such securities.
Moreover, as noted above in paragraph 5, a Portfolio that is permitted to invest
in repurchase agreements may not, as a matter of fundamental policy, invest more
than 10% of its total assets in repurchase agreements maturing in more than
seven days.
The Portfolios have no current intention of making short sales of
securities or maintaining a short position.
STATE AND FEDERAL RESTRICTIONS: In order to comply with certain federal
and state statutes and regulatory policies, as a matter of operating policy,
each Portfolio will not: (i) sell any security which it does not own unless by
virtue of its ownership of other securities the Portfolio has at the time of
sale a right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions, (ii) invest for
the purpose of exercising control or management, (iii) purchase securities
issued by any registered investment company except by purchase in the open
market where no commission or profit to a sponsor or dealer results from such
purchase other than the customary broker's commission, or except when such
purchase, though not made in the open market, is part of plan of merger or
consolidation; provided, however, that the securities of any registered
investment company will not be purchased on behalf of the Portfolio if such
purchase at the time thereof would cause more than 5% or 10% of the Portfolio's
total assets (taken at the greater of cost or market value) to be invested in
the securities of such issuer or the securities of registered investment
companies, respectively, or would cause more than 3% of the outstanding voting
securities of any such issuer to be held by the Portfolio; and provided,
further, that securities issued by any open-end investment company shall not be
purchased on behalf of the Portfolio, (iv) invest more than 10% of the
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<PAGE>
Portfolio's total assets (taken at the greater of cost or market value) in
securities that are not readily marketable, (v) as to 50% of its total assets,
purchase securities of any issuer if such purchase at the time thereof would
cause the Portfolio to hold more than 10% of any class of securities of such
issuer, for which purposes all indebtedness of an issuer shall be deemed a
single class and all preferred stock of an issuer shall be deemed a single
class, (vi) invest more than 5% of the Portfolio's assets in companies which,
including predecessors, have a record of less than three years' continuous
operation, (vii) invest in warrants valued at the lower of cost or market, in
excess of 5% of the value of the Portfolio's 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 (viii) purchase or retain in the Portfolio's 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 is an officer or
director of the Adviser, if after the purchase of the securities of such issuer
by the 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. These policies are not fundamental and may be changed
by a Portfolio's Board of Trustees without shareholder approval.
PERCENTAGE AND RATING RESTRICTIONS: If a percentage or rating
restriction on investment or utilization of assets set forth above or referred
to in the Prospectus is adhered to at the time an investment is made or assets
are so utilized, a later change in percentage resulting from changes in the
value of the portfolio securities or a later change in the rating of a portfolio
security of a Portfolio will not be considered a violation of policy.
PORTFOLIO TRANSACTIONS AND BROKERAGE ALLOCATION
Specific decisions to purchase or sell securities for the Portfolios
are made by a portfolio manager who is an employee of the Adviser and who is
appointed and supervised by senior officers of the Adviser. Changes in a
Portfolios' investments are reviewed by the Board of Trustees of the Portfolio.
The portfolio managers may serve other clients of the Adviser in a similar
capacity. Money market instruments are generally purchased in principal
transactions without payment of brokerage commissions.
The frequency of portfolio transactions -- portfolio turnover rate --
will vary from year to year depending upon market conditions. Because a high
turnover rate may increase a Portfolio's transaction costs and the possibility
of taxable short-term gains (see "Tax Matters" in the Prospectus), the Adviser
will weigh the added costs of short-term investment against anticipated gains.
The Portfolio Turnover Rate for the Income Portfolio and the Equity
Portfolio for the period December 31, 1992 (commencement of operations) to
October 31, 1993 was 456% and 39%, respectively. For the fiscal year ended
October 31, 1994 and 1995, the portfolio turnover rates were 345% and 84%,
respectively. For the fiscal year ended October 31, 1995, the portfolio turnover
rate were 624% and 137%, respectively.
The primary consideration in placing portfolio security transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute portfolio transactions on behalf of the Portfolios and
other clients of the Adviser on the basis of their professional capability, the
value and quality of their brokerage services, and the level of their brokerage
commissions. Debt securities are traded principally in the over-the-counter
market through dealers acting on their own account and not as brokers. In the
case of securities traded in the over-the-counter market (where no stated
commissions are paid but the prices include a dealer's markup or markdown), the
Adviser 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 on the tender of portfolio securities
in so-called tender or exchange offers. Such soliciting dealer fees are in
effect recaptured for the Portfolios by the Adviser. At present, no other
recapture arrangements are in effect.
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<PAGE>
Under the Portfolios' Investment Advisory Agreements and as permitted
by Section 28(e) of the Securities Exchange Act of 1934, the Adviser may cause
the Portfolios to pay a broker-dealer which provides brokerage and research
services to the Adviser an amount of commission for effecting a securities
transaction for the Portfolios in excess of the amount other broker-dealers
would have charged for the transaction if the Adviser determines in good faith
that the greater commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker-dealer viewed
in terms of either a particular transaction or the Adviser's overall
responsibilities to the Portfolios or to its clients. Not all of such services
are useful or of value in advising the 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.
Although commissions paid on every transaction will, in the judgment of
the Adviser, be reasonable in relation to the value of the brokerage services
provided, commissions exceeding those which another broker might charge may be
paid to broker-dealers who were selected to execute transactions on behalf of
the Portfolios and the Adviser's other clients as part of providing advice as to
the availability of securities or of purchasers or sellers of securities and
services in effecting securities transactions and performing functions
incidental thereto, such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and
other factual information or services ("Research") to the Adviser for no
consideration other than brokerage or underwriting commissions. Securities may
be bought or sold through such broker-dealers, but at present, unless otherwise
directed by the Portfolios, a commission higher than one charged elsewhere will
not be paid to such a firm solely because it provided Research to the Adviser.
The Adviser's investment management personnel will attempt to evaluate
the quality of Research provided by brokers. Results of this effort are
sometimes used by the Adviser as a consideration in the selection of brokers to
execute portfolio transactions. However, the Adviser would be unable to quantify
the amount of commissions which are paid as a result of such Research because a
substantial number of transactions are effected through brokers which provide
Research but which are selected principally because of their execution
capabilities.
The management fees that the Portfolios pay to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. To the extent the Portfolios' portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Portfolios will
exceed those that might otherwise be paid, by an amount which cannot be
presently determined. Such services would be useful and of value to the Adviser
in serving one or more of the Portfolios and other clients and, conversely, such
services obtained by the placement of brokerage business of other clients would
be useful to the Adviser in carrying out its obligations to a Portfolio. While
such services are not expected to reduce the expenses of the Adviser, the
Adviser would, through use of the services, avoid the additional expenses which
would be incurred if it should attempt to develop comparable information through
its own staff.
In certain instances, there may be securities that are suitable for one
or more of the Portfolios as well as one or more of the Adviser's other clients.
Investment decisions for the Portfolios and for the Adviser's other clients are
made with a view to achieving their respective investment objectives. It may
develop that the same investment decision is made for more than one client or
that a particular security is bought or sold for only one client even though it
might be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
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<PAGE>
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more 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 Portfolios are
concerned. However, it is believed that the ability of the Portfolios to
participate in volume transactions will generally produce better executions for
the Portfolios.
The Equity Portfolio paid brokerage commissions as detailed
below:
12/31/92 Year Year
through Ended Ended
10/31/93 10/31/94 10/31/95
Equity Portfolio $100,779.76 $285,576.81 $383,649
No portfolio transactions are executed with the Adviser or a
Shareholder Servicing Agent, or with any affiliate of the Adviser or a
Shareholder Servicing Agent, acting either as principal or as broker.
PERFORMANCE INFORMATION
TOTAL RATE OF RETURN
A Fund's total rate of return for any period will be calculated by (a)
dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. 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.
As of the fiscal year ended October 31, 1995, the average annual total
rates of return are listed below:
One Since
Year Inception
Vista Global Fixed Income Fund -
A Shares 9.54% 6.70% (12/31/92)
B Shares 8.82% 4.05% (11/4/93)
Vista International Equity Fund -
A Shares (1.19%) 8.60% (12/31/92)
B Shares (1.61%) 1.69% (11/4/93)
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<PAGE>
Had the maximum sales charges of 4.50% and 4.75% For A Shares, and an
applicable CDSC for Shares (5% for one year and 4% since inception), been in
effect, the total rates of return would have been:
One Since
Year Inception
Vista Global Fixed Income Fund -
A Shares 4.61% 4.98% (12/31/92)
B Shares 3.82% 2.11% (11/4/93)
Vista International Equity Fund -
A Shares (5.88%) 6.75% (12/31/92)
B Shares (6.53%) (0.30%) (11/4/943
YIELD QUOTATIONS
Any current "yield" quotation of the Shares of the Income or the Equity
Fund 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 yield of the A Shares of the Income Fund and the Equity Fund as of
October 31, 1995 was 3.32% and (0.299%), respectively. The yield of the B Shares
of those Funds was 2.81% and (0.822%), respectively.
NON-STANDARDIZED PERFORMANCE RESULTS
Each Fund may prepare a chart reflecting the net change in the value of an
assumed initial investment of $10,000 in the Fund for the period from the
commencement date of business for such Fund, with values reflecting an
assumption that capital gain distributions and income dividends, if any, have
been accepted in additional Shares. From time to time, the Funds will provide
these performance results, if any, in addition to the total rate of return
quotations required by the Securities and Exchange Commission. As discussed more
fully in the Prospectus, neither these performance results, nor total rate of
return quotations, should be considered as representative of the performance of
the 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 -
Dec. 31, 1992 Value of Value of Value
through Initial $10,000 Capital 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
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<PAGE>
Had the maximum sales charge of 4.50% and 4.75%, for the Vista Global
Fixed Income Fund and Vista International Equity Fund, respectively been in
effect, the figures for the same period would have been as follows:
Dec. 31, 1992 Value of Value of Value
through Initial $10,000 Capital Gains Reinvested Total
October 31, 1995 Investment Distributions Dividends Value
- ------------------ ---------- ------------- --------- -----
Vista Global Fixed
Income Fund $10,170.75 -0- $1,115.56 $11,286.31
Vista International
Equity Fund 11,449.05 -0- $188.98 11,638.03
---------------------------------------------------------------------------
B Shares -
Nov. 4, 1993 Value of Value of Value
through Initial $10,000 Capital Gains Reinvested Total
October 31, 1995 Investment Distributions Dividends Value
- ------------ ---------- ------------- --------- -----
Vista Global Fixed
Income Fund $10,143.13 $0.00 $684.05 $10,827.18
Vista International
Equity Fund 10,171.09 168.71 -0- 10,339.80
Had the maximum CDSC of 4% been charged upon redemption of shares
acquired on the inception date, the figures for the same period would have been
as follows:
Nov. 4, 1993 Value of Value of Value
through Initial $10,000 Capital 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 -0- 9,939.80
DETERMINATION OF NET ASSET VALUE
Each class of each Fund determines its net asset value per Share each
day (as of the regular close of the Exchange, normally 4:00 p.m. Eastern time,
and 4:15 p.m. for options) during which the New York Stock Exchange is open
for trading (a "Fund Business Day"), by dividing its net assets attributable
to that class by the number of its shares outstanding of that class at the time
the determination is made. (As of the date of this Statement of Additional
Information, the New York Stock Exchange is open for trading every weekday
except for the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas.)
Purchases and redemptions will be effected at the time of determination of
net asset value next following the receipt of any purchase or redemption
order. (See "Purchases and Redemptions of Shares" in the Prospectus.)
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<PAGE>
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 Portfolios' Boards 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 Portfolios' Boards 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 Portfolios'
Boards 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.
The Trust, on behalf of each Fund, and each Portfolio, reserve the
right, if conditions exist which make cash payments undesirable, to honor any
request for redemption by making payment in whole or in part in readily
marketable securities chosen by the Trust, or the Portfolio, as the case may be,
and valued as they are for purposes of computing the Fund's or the Portfolio's
net asset value, as the case may be (a redemption in kind). If payment is made
in securities, an investor, including the Fund, may incur transaction expenses
in converting these securities into cash.
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. As of 4:00 p.m. (Eastern time) on each such day,
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 4:00 p.m. 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 4:00 p.m. 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 4:00 p.m. on the following day the
New York Stock Exchange is open for trading.
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<PAGE>
TAX MATTERS
The following is only a summary of certain additional tax
considerations generally affecting the Income Fund and the Equity Fund
(hereinafter collectively referred to as the "Fund", unless otherwise stated)
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 the
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
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
"investment company taxable income" (i.e., net investment income and the excess
of net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and can therefore satisfy the Distribution Requirement.
Because the 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 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, the 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 the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short 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 the Fund on the disposition of
an asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. 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
- 21 -
<PAGE>
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 the Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of Section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction; and (2) the
capitalized interest on acquisition indebtedness under Code Section 263 (g).
Built-in losses will be preserved where the Fund has a built-in loss with
respect to property that becomes a part of a conversion transaction. No
authority exists that indicates that the converted character of the income will
not be passed to the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (2) the asset is otherwise held by the Fund as part of a "straddle" (which
term generally excludes a situation where the asset is stock and the Fund grants
a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
Transactions that may be engaged in by the Fund (such as regulated
futures contracts, certain foreign currency contracts, and options on stock
indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of 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.
The Fund, however, may elect not to have this special tax treatment apply to
Section 1256 contracts that are part of a "mixed straddle" with other
investments of the Fund that are not Section 1256 contracts. The Internal
Revenue Service (the "IRS") has held in several private rulings (and Treasury
Regulations now provide) that gains arising from Section 1256 contracts will be
treated for purposes of the Short-Short Gain Test as being derived from
- 22 -
<PAGE>
securities held for not less than three months if the gains arise as a result of
a constructive sale under Code Section 1256.
The Fund may enter into notional principal contracts, including
interest rate swaps, caps, floors and collars. Under proposed 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 (or, in the case of a swap, under an alternative method contained in
the proposed regulations and, in the case of a cap or floor, under an
alternative method which the IRS may provide in a revenue procedure).
The Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the 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 the 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) 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) the 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
the 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 recently proposed Treasury Regulations, the 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.
- 23 -
<PAGE>
Treasury Regulations permit a regulated investment company, in
determining its investment company taxable income and net capital gain (i.e.,
the excess of net long-term capital gain over net short-term capital loss) for
any taxable year, to elect (unless it has made a taxable year election for
excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security, not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument. For purposes of asset diversification
testing, obligations issued 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 the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
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).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
- 24 -
<PAGE>
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.
Dividends paid on Class A and Class B shares are calculated at the same
time and in the same manner. 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.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. If net capital gain is distributed and designated as a capital
gain dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
Conversely, if the Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year 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 the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. 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 the Fund. If the 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 the
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 the 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 the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal
- 25 -
<PAGE>
to the fair market value of the shares received, determined as of the
reinvestment date. In addition, if the net asset value at the time a shareholder
purchases shares of the Fund reflects undistributed net investment income or
recognized capital gain net income, or unrealized appreciation in the value of
the assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be 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 determining the holding period of
shares. Long-term capital gains of noncorporate taxpayers are currently taxed at
a maximum rate 11.6% lower than the maximum rate applicable to ordinary income.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of the
Fund, (2) disposes of such shares less than 91 days after they are acquired and
(3) subsequently acquires shares of the Fund or another fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
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
- 26 -
<PAGE>
resulting from the 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 the 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, the Fund may be
required to withhold U.S. federal income tax at a rate of 20% 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 the 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 the Fund.
MANAGEMENT OF THE TRUST AND 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. Asterisks indicate those Trustees and officers who
are "interested persons" (as defined in the 1940 Act). Unless otherwise
indicated below, the address of each officer is 125 West 55th Street, New York,
New York 10019.
TRUSTEES
FERGUS REID, III* - Chairman of the Board of Trustees. Chairman of the Board of
Trustees of Mutual Fund Trust and Trustee of Certain Portfolios advised by Chase
(the "Portfolios") ; Chairman and Chief Executive Officer, Lumelite Corporation,
since September 1985; Trustee, Morgan Stanley Portfolios; from 1982 through
1984, Managing Director, Bernhard Associates (venture capital firm). Address:
202 June Road, Stamford, Connecticut 06940.
DR. RICHARD E. TEN HAKEN - Trustee. Trustee of Mutual Fund Trust and the
Portfolios; Former District Superintendent of Schools, Monroe No.2 and Orleans
Counties, New York; Chairman of the Finance and the
- 27 -
<PAGE>
Audit and Accounting Committees, Member of the Executive Committee; Chairman of
the Board and President, New York State Teachers' Retirement System.
Address: 4 Barnfield Road, Pittsford, New York 14534.
WILLIAM J. ARMSTRONG - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Vice President and Treasurer, Ingersoll-Rand Company.
Address: 49 Aspen Way, Upper Saddle River, New Jersey 07458.
JOHN R.H. BLUM - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Attorney in Private Practice; formerly, a Partner in the law firm of Richards,
O'Neil & Allegaert; Commissioner of Agriculture - State of Connecticut,
1992-1995.
Address: 322 Main Street, Lakeville, Connecticut 06039.
JOSEPH J. HARKINS* - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
Retired; formerly, Commercial Sector Executive and Executive Vice President of
The Chase Manhattan Bank, N.A. from 1985 through 1989. He has been employed by
Chase in numerous capacities and offices since 1954. Director of Blessings
Corporation, Jefferson Insurance Company of New York, Monticello Insurance
Company and Nationar.
Address: 257 Plantation Circle South, Ponte Vedra Beach, Florida 32082.
H. RICHARD VARTABEDIAN* - Trustee. President and Trustee of the Trust and Mutual
Fund Trust; Chairman and President 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.
Address: P.O. Box 296, Beach Road, Hendrick's Head, Southport, Maine 04576
STUART W. CRAGIN, JR. - Trustee. Trustee of Mutual Fund Trust and the
Portfolios; 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.
Address: 108 Valley Road, Cos Cob, connecticut 06807.
IRVING L. THODE - Trustee. Trustee of Mutual Fund Trust and the Portfolios;
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.
Address: 80 Perkins Road, Greenwich, Connecticut 06830.
The Board of Trustees met seven times during the twelve months ended
December 31, 1995, and each of the Trustees attended at least 75% of those
meetings.
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.
* Interested Trustees as defined under the 1940 Act.
REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS:
Each Trustee is reimbursed for expenses incurred in attending each
meeting of the Board of Trustees or any committee thereof. Each Trustee who is
not an affiliate of the Adviser is compensated for his or her services according
to a fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the Adviser. Each Trustee
receives a fee, allocated among all investment companies for
- 28 -
<PAGE>
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. 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>
Vista Vista
Vista Equity Growth Vista Vista Vista
Balanced Income and Capital Equity Bond
Fund Fund Income Growth 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, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
William J. Armstrong, 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
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, 169.60 67.79 10,159.13 5,376.61 330.18 330.18
Trustee
Stuart W. Cragin, Jr., 160.88 64.07 9,595.45 5,063.12 360.67 312.41
Trustee
Irving L. Thode, Trustee 160.88 64.07 9,595.45 5,063.12 360.67 312.41
</TABLE>
<TABLE>
<CAPTION>
Vista Vista Vista
Short Vista Small Vista Global Vista
Term U.S. Cap International Fixed Southeast Vista Vista
Bond Government 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, 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
</TABLE>
- 29 -
<PAGE>
Pension or Total
Retirement Compensation
Benefits Accrued from "Fund
as Fund Expenses Complex"(1)
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., Trustee 0 52,304.39
Irving L. Thode, Trustee 0 52,304.39
(1) Data reflects total compensation earned during the period January 1,
1995 to December 31, 1995 for service as a Trustee to all thirty-two
(Portfolios) Funds advised by the Adviser.
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 Portfolios, the Adviser, Administrator or
Distributor or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board of Trustees. Pursuant to the Plan, the normal
retirement date is the date on which the eligible Trustee has attained age 65
and has completed at least five years of continuous service with one or more of
the investment companies advised by the Adviser (collectively, the "Covered
Portfolios"). Each Eligible Trustee is entitled to receive from the Covered
Portfolios 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 Portfolios 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 Portfolios. Such benefit is payable to each
eligible Trustee in monthly installments for the life of the Trustee.
Set forth in the table below are the estimated annual benefits payable
to an eligible Trustee upon retirement assuming various compensation and years
of service classifications. As of December 31, 1995, 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.
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HIGHEST ANNUAL COMPENSATION PAID BY ALL VISTA FUNDS
40,000 45,000 50,000 55,000
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT 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
Adviser, Administrator or Distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustees' fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination of
service). The deferred amounts are deemed invested in shares of a Fund on whose
Board the Trustee sits, subject to the Trustee's election. 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. The following Eligible Trustees have executed a deferred compensation
agreement for the 1996 calendar year:
Messrs. Ten Haken, Thode and Vartabedian.
PRINCIPAL EXECUTIVE OFFICERS:
The principal executive officers of the Trust are as follows:
H. Richard Vartabedian - President and Trustee.
Martin R. Dean - Treasurer and Assistant Secretary; Vice President, BISYS Funds
Group, Inc.
Ann Bergin - Secretary and Assistant Treasurer; Vice President, BISYS Funds
Group, Inc.; Secretary, Vista BrokerDealer Services, Inc.
OWNERSHIP OF SHARES OF THE PORTFOLIOS. The Trustees and officers as a
group directly or beneficially own less than 1% of each Portfolio.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in wilful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in their offices or with respect to
any matter unless it is finally adjudicated that they did not act in good faith
in the reasonable belief that their
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actions were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court or
other body approving the settlement or other disposition, or by a reasonable
determination based upon a review of readily available facts, by vote of a
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in wilful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
The Fund pays no direct remuneration to any officer of the Trust.
The Trustees of the Income Portfolio are H. Richard Vartabedian, Chairman,
John R.H. Blum, Stuart W. Cragin, Fergus Reid, III and Irv Thode. The Trustees
of the Equity Portfolio are H. Richard Vartabedian, Chairman, William J.
Armstrong, Stuart W. Cragin, Jr., Fergus Reid, III and Irv Thode.
ADVISER
The Funds do not have an investment adviser because the Trust seeks to
achieve the investment objectives of the Funds by investing all of the
investable assets of each respective Fund in each respective Portfolio. The
Portfolios' investment adviser is The Chase Manhattan Bank, N.A. (the
"Adviser"), which also serves as the Funds' administrator.
ADMINISTRATOR
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds and the Portfolios. Chase
provides certain administrative services, including, among other
responsibilities, coordinating the negotiation of contracts and fees with, and
the monitoring of performance and billing of, independent contractors and
agents; preparation for signature by an officer of all documents required to be
filed for compliance 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 and providing, their own
expense, office facilities, equipment and personnel necessary to carry out their
duties. Chase has no responsibility or authority for any matter pertaining to
the distribution of Fund shares. The Administration Agreements provide that the
administrator may render administrative services to others. The Administration
Agreements also provide that neither the administrator nor its personnel shall
be liable for any error of judgment or mistake of law or for any act or omission
in the administration or management of the Funds or the Portfolios, except for
wilful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of reckless disregard of their obligations and duties under
the Administration Agreements.
In addition, the Administration Agreements provide that, in the event the
operating expenses of any Fund and its respective 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 shall be
deducted from the monthly administration fee otherwise payable during such
fiscal year; and if such amounts should exceed the monthly fee, Chase shall pay
to such Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
In consideration of the services provided pursuant to the Administration
Agreements, Chase may receive 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, on an annualized basis for the Funds' or
the Portfolios' then-current fiscal year. Chase may voluntarily waive a portion
of the fees payable to it with respect to each Fund and
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Portfolio.
For the fiscal period December 31, 1992 (commencement of operations)
through October 31, 1993, and the fiscal year ended October 31, 1994 and 1995,
Chase was paid or accrued administration 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 10/31/94 10/31/95
Income Fund: $449 ($449) $1,097 ($1,097) $916 ($916)
Equity Fund: $1,938 ($1,938) $16,367 ($16,367) $18,799 ($18,799)
DISTRIBUTOR
DISTRIBUTION PLAN
Each class of shares has a distribution plan under Rule 12b-1 under the
1940 Act. The Trust has adopted a plan of distribution on behalf of the Shares
pursuant to Rule 12b-1 under the 1940 Act (the "Class A Distribution Plan") for
the Class A shares which provides that each of the Funds shall pay a
distribution fee (the "Class A Distribution Fee") with respect to the Class A
shares , including payments to the Distributor, at an annual rate not to exceed
0.25% of its average daily net assets for distribution services. 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.
As noted above, the Class B shareholders will pay a distribution fee of
0.75% of average daily net assets under a Rule 12b-1 Distribution Plan ("Class B
Distribution Plan"). The Distributor currently expects to pay sales commissions
to a dealer at the time of sale of Class B shares of up to 4% of the purchase
price of the shares sold by such dealer. The Distributor will use its own fund
or funds facilitated by the Distributor (which may be borrowed or otherwise
financed) to pay such amounts. Because the Distributor will receive a maximum of
0.75% of average daily net assets represented by Class B shares, it will take
the distributor several years to recoup the sales commissions paid to dealers
and other sales expenses.
Because of the 0.75% limitation on the daily compensation paid to the
Distributor during such fiscal year, a large portion of the commission
attributable to sales of Class B shares will be accrued and paid by the Fund to
the distributor in fiscal years subsequent to the years in which the Class B
shares are sold.
Both Distribution Plans provide that they will continue in effect
indefinitely if such continuance is specifically approved at least annually by a
vote of both a majority of the Trustees and a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the operation of the Distribution
Plan or in any agreement related to such Plan ("Qualified Trustees"). 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 such Fund (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,
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agreement or report made pursuant to the Distribution Plans for a period of not
less than six years from the date of the Distribution Plan, and for the first
two years such copies will be preserved in an easily accessible place.
For the fiscal period December 31, 1992 (commencement of operations)
through October 31, 1993, and the fiscal year 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 10/31/94 10/31/95
A SHARES -
Income Fund: $2,246 ($2,246) $5,120 $3,697
Equity Fund: $9,683 ($9,683) $73,552 $75,652
B SHARES -
Income Fund: --- $1,100 $2,661
Equity Fund --- $24,853 $55,080
DISTRIBUTION AND SUB-ADMINISTRATION AGREEMENT
The Trust has entered into a Distribution and Sub-Administration Agreement
(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 Fund Shares.
The Distributor is a wholly-owned subsidiary of Concord Financial Group. The
Distribution Agreement provides that the Distributor will bear the expenses of
printing, distributing and filing prospectuses and statements of additional
information and reports used for sales purposes, and of preparing and printing
sales literature and advertisements not paid for by the Distribution Plan. The
Trust pays for all of the expenses for qualification of the shares of 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 until December 31, 1993,
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 subadministration 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-
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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 year ended October 31, 1994 and 1995,
the Distributor was paid or accrued sub-administration 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 10/31/94 10/31/95
Income Fund: $449 ($449) $1,097($1,097) $916 ($916)
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.
The fees relating to acting as liaison to shareholders and providing personal
services to shareholders will not exceed, on an annualized basis, 0.25% of the
average daily net assets of each Fund represented by shares owned during the
period for which payment is being made by investors with whom such Shareholder
Servicing Agent maintains a servicing relationship. Each Shareholder Servicing
Agent may voluntarily waive a portion of the fees payable to it under its
Servicing Agreement with respect to each Fund. Chase may also provide other
related services to the Fund.
For the fiscal period December 31, 1992 (commencement of operations)
through October 31, 1993, and the fiscal year ended October 31, 1994 and 1995,
the Shareholder Servicing Agents were paid or accrued shareholder servicing fees
with respect to the Income Fund and Equity Fund and the Distributor has
voluntarily borne the amount in parentheses following such fees:
12/31/92 11/1/93 11/1/94
through through through
10/31/93 10/31/94 10/31/95
Income Fund: $2,246 ($2,246) $5,487($2,867) $4,583 ($2,070)
Equity Fund: $9,683 ($9,683) $81,836 $94,012
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. For additional information, see "Shareholder
Servicing Agents, Transfer Agent and Custodian" in the Prospectus.
In certain circumstances Shareholder Servicing Agents may be required to
register as dealers under state law.
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For the fiscal period December 31, 1992 (commencement of operations)
through October 31,1993, and the fiscal year ended October 31, 1994 and 1995,
the Transfer Agent was paid or accrued transfer agent fees with respect to the
Income Fund and Equity Fund and the Distributor has voluntarily borne the amount
in parentheses following such fees:
12/31/92 11/1/93 11/4/94
through through through
10/31/93 10/31/94 10/31/95
Income Fund: $25,068 ($24,867) $37,426($60,117) $57,001 ($76,547)
Equity Fund: $25,068 ($24,513) $173,457($118,713) $280,639 ($157,053)
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York
10036, independent accountants of the Funds and the Portfolios, provides the
Funds and the Portfolios with audit services, tax return preparation, and
assistance and consultation with respect to the preparation of filings with the
Securities and Exchange Commission.
FINANCIAL STATEMENTS
The audited financial statements for the fiscal year ended October 31,
1995 of the Portfolio are incorporated herein by reference to the annual
report to shareholders as filed with the Securities and Exchange Commission by
Mutual Fund Group on Form N-30D on December 29, 1995, accession number
0000950123-95-003915.
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 15 Funds of shares of beneficial interest
without par value. 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 each series
or class generally vote separately, for example to approve distribution plans,
but shares of all series and classes vote together, to the extent required under
the 1940 Act, in the election or selection of Trustees and independent
accountants. With respect to shares purchased through a Shareholder Servicing
Agent and, in the event written proxy instructions are not received by the Fund
or its designated agent prior to a shareholder meeting at which a proxy is to be
voted and the shareholder does not attend the meeting in person, the Shareholder
Servicing Agent for such shareholder will be authorized pursuant to an
applicable agreement with the shareholder to vote the shareholder's outstanding
shares in the same proportion as the votes cast by other Fund shareholders
represented at the meeting in person or by proxy.
As noted above, the Fund offers both Class A and Class B shares. The
classes of shares have several different attributes relating to sales charges
and expenses.
Class A shares are sold at net asset value plus an initial sales charge of
up to a maximum of 4.75% of the
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public offering price. Class B shares have no initial sales charge; however, a
contingent deferred sales charge will be imposed on redemptions made within six
years of purchase. The amount of this contingent deferred sales charge will be
5% of the redemption proceeds on redemptions in the first year after purchase,
declining to zero for redemptions made more than six years after purchase.
However, this contingent deferred sales charge will not apply to redemptions of
shares representing capital appreciation on Fund assets and reinvestment of
dividends or capital distributions. Approximately eight years after purchase,
Class B shares will automatically convert to Class A shares.
In general, absent waivers, Class A and Class B shares each have an annual
shareholder servicing fee of 0.25% of average daily net assets. In addition,
absent waivers, Class A has an annual distribution fee under Rule 12b-1 of 0.25%
of average daily net assets, while Class B have an annual distribution fee under
Rule 12b-1 of 0.75% of average daily net assets. Moreover, expenses borne by
each class 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 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.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
maintain appropriate insurance (for example, fidelity bonding and errors and
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omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Board of Trustees has adopted a Code of Ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The Code of Ethics substantially conforms to the
recommendations made by the Investment Company Institute ("ICI") (except where
noted) and includes such provisions as:
o Prohibitions on investment personnel acquiring securities in
initial offerings;
o A requirement that access persons obtain prior to acquiring
securities in a private placement and that the officer
granting such approval have no interest in the issuer making
the private placement;
o A restriction on access persons executing transactions for
securities on a recommended list until 14 days after
distribution of that list;
o A prohibition on access persons acquiring securities that
are pending execution by one of the Portfolios until 7 days
after the transactions of the Portfolios are completed;
o A prohibition of any buy or sell transaction in a particular
security in a 30-day period, except as may be permitted in
certain hardship cases or exigent circumstances where prior
approval is obtained. This provision differs slightly from the
ICI recommendation;
o A requirement for pre-clearance of any buy or sell
transaction in a particular security after 30 days, but within
60 days;
o A requirement that any gift exceeding $75.00 from a customer
must be reported to the appropriate compliance officer;
o A requirement that access persons submit in writing any
request to serve as a director or trustee of a publicly traded
company;
o A requirement that all securities transactions in excess of
$1,000 be pre-cleared, except that if a person has engaged in
more than $10,000 of securities transactions in a calendar
quarter all securities of such person require pre-clearance
(this de minimus exception differs slightly from the ICI
recommendations);
o A requirement that all access persons direct their
broker-dealer to submit duplicate confirmation and customer
statements to the appropriate compliance unit; and
o A requirement that all access persons sign a Code of Ethics
acknowledgment, affirming that they have read and understood
the Code and submit a personal security holdings report upon
commencement of employment or status and a personal security
transaction report within 10 days of each calendar quarter
thereafter.
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Principal Holders
As of January 31, 1996 the following persons owned beneficially,
directly or indirectly, 5% or more of the outstanding shares of the following
Funds:
VISTA GLOBAL FIXED INCOME FUND (A)
CUDD & Co. 47.49%
CMB Mutual Funds Dept. - 35th Fl.
1211 6th Avenue
New York, NY 10036-8701
Barbara M Martin
David G. Martin JTWROS 9.78%
7637 Chancellor Way
Springfield, VA 22153-2344
CUDD & Co. 5.48%
Custody Dept. - 35th Fl.
1211 6th Avenue
New York, NY 10036-8701
VISTA GLOBAL FIXED INCOME FUND (B)
Smith Barney Inc. 12.58%
388 Greenwich Street
New York, NY 10013-2375
BHC Securities, Inc. 11.63%
One Commerce Square
2005 Market Street, Suite 1200
Philadelphia, PA 19103-7042
NFSC FEBO 5.66%
NFSC/FMTC IRA
FBO Rosa Crespo
2312 SW 128 Avenue
Miami, FL. 33175-1940
VISTA INTERNATIONAL EQUITY FUND (A)
CUDD & Co. 11.39%
Custody Division
1211 6th Avenue - 35th Fl .
New York, NY 10036-8701
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APPENDIX A
DESCRIPTION OF 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.
FHA DEBENTURES -- are debentures issued by the Federal Housing
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.
FHLMC BONDS -- are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
FNMA BONDS -- are bonds issued and guaranteed by the Federal National
Mortgage Association. 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.
Although this list includes a description of the primary types of U.S.
Government agency or instrumentality obligations in which each Portfolio intends
to invest, each Portfolio may invest in obligations of U.S. Government agencies
or instrumentalities other than those listed above.
A-1
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APPENDIX B
BOND AND COMMERCIAL PAPER RATINGS
Standard & Poor's Bond Ratings
A Standard & Poor's corporate debt rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. Debt
rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree.
The rating "AA" may be modified by the addition of a plus or minus sign
to show relative standing within such category.
Moody's Bond Ratings
Excerpts from Moody's description of its corporate bond ratings: Aaa -
judged to be the best quality, carry the smallest degree of investment risk; Aa
- -judged to be of high quality by all standards.
Fitch Investors Service Bond Ratings
AAA. Securities of this rating are regarded as strictly high-grade,
broadly marketable, suitable for investment by trustees and fiduciary
institutions, and liable to but slight market fluctuation other than through
changes in the money rate. The factor last named is of importance varying with
the length of maturity. Such securities are mainly senior issues of strong
companies, and are most numerous in the railway and public utility fields,
though some industrial obligations have this rating. The prime feature of an AAA
rating is showing of earnings several times or many times interest requirements
with such stability of applicable earnings that safety is beyond reasonable
question whatever changes occur in conditions. Other features may enter in, such
as a wide margin of protection through collateral security or direct lien on
specific property as in the case of high class equipment certificates or bonds
that are first mortgages on valuable real estate. Sinking funds or voluntary
reduction of the debt by call or purchase are often factors, while guarantee or
assumption by parties other than the original debtor may also influence the
rating.
AA. Securities in this group are of safety virtually beyond question,
and as a class are readily salable while many are highly active. Their merits
are not greatly unlike those of the AAA class, but a security so rated may be of
junior though strong lien--in many cases directly following an AAA security-- or
the margin of safety is less strikingly broad. The issue may be the obligation
of a small company, strongly secured but influenced as to ratings by the lesser
financial power of the enterprise and more local type of market.
Standard & Poor's Commercial Paper Ratings
B-1
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A is the highest commercial paper rating category utilized by S&P,
which uses the numbers 1+, 1, 2 and 3 to denote relative strength within its A
classification. Commercial paper issues rated A by S&P have the following
characteristics: Liquidity ratios are better than industry average. Long-term
debt rating is A or better. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow are in an upward trend.
Typically, the issuer is a strong company in a well-established industry and has
superior management.
Moody's Commercial Paper Ratings
Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
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; well-established access to
a range of financial markets and assured sources of alternate liquidity.
Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
Issuers rated Prime-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition 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.
Fitch-1, Fitch-2, Duff 1 and Duff 2 Commercial Paper Ratings
Commercial paper rated "Fitch-1" is considered to be the highest grade
paper and is regarded as having the strongest degree of assurance for timely
payment. "Fitch-2" is considered very good grade paper and reflects an assurance
of timely payment only slightly less in degree than the strongest issue.
Commercial paper issues rated "Duff 1" by Duff & Phelps, Inc. have the
following characteristics: very high certainty of timely payment, excellent
liquidity factors supported by strong fundamental protection factors, and risk
factors which are very small. Issues rated "Duff 2" have a good certainty of
timely payment, sound liquidity factors and company fundamentals, small risk
factors, and good access to capital markets.
