As filed via EDGAR with the Securities and Exchange Commission on
May 13, 1997
File No. 811-5151
Registration No. 33-14196
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 43 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Post-Effective Amendment No. 82 |X|
-------------------------------
MUTUAL FUND GROUP
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue
New York, New York 10178
--------------------------------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 492-1600
George Martinez, Esq. Peter Eldridge, Esq. Gary S. Schpero, Esq.
BISYS Fund Services, Inc. Chase Manhattan Bank Simpson Thacher & Bartlett
3435 Stelzer Road 270 Park Avenue 425 Lexington Avenue
Columbus, Ohio 43219 New York, New York 10017 New York, New York 10017
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
| | immediately upon filing pursuant to | | on ( ) pursuant to
paragraph (b) paragraph (b)
|X| 60 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(1) paragraph (a)(1)
|_| 75 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(2) paragraph (a)(2) rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
------------------
The Registrant has registered an indefinite number or amount of its shares of
common stock for each of its series under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940 on July 18, 1994 and
Registrant's Rule 24f-2 Notice was filed on November 27, 1996.
<PAGE>
MUTUAL FUND GROUP
Registration Statement on Form N-1A
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) Under the Securities Act of 1933
VISTA(SM) U.S. TREASURY INCOME FUND
VISTA(SM) BALANCED FUND
VISTA(SM) EQUITY INCOME FUND
VISTA(SM) GROWTH AND INCOME FUND
VISTA(SM) CAPITAL GROWTH FUND
VISTA(SM) LARGE CAP EQUITY FUND
VISTA(SM) BOND FUND
VISTA(SM) SHORT-TERM BOND FUND
VISTA(SM) INTERNATIONAL EQUITY FUND
VISTA(SM) SMALL CAP EQUITY FUND
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND
VISTA(SM) AMERICAN VALUE FUND
VISTA(SM) SOUTHEAST ASIAN FUND
VISTA(SM) JAPAN FUND
VISTA(SM) EUROPEAN FUND
VISTA(SM) SMALL CAP OPPORTUNITIES FUND
VISTA(SM) SELECT GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
Captions apply to all Prospectuses except where
indicated in parenthesis. Parenthesis indicate
captions for Institutional Shares Prospectuses
1 Front Cover Page *
2(a) Expense Summary *
(b) Not Applicable *
3(a) Financial Highlights *
(b) Not Applicable *
(c) Performance Information *
4(a)(b) Other Information *
Concerning the Fund;
Fund Objective; Investment
Policies
(c) Fund Objective; Investment *
Policies
(d) Not Applicable *
5(a) Management *
(b) Management *
(c)(d) Management; Other Information Concerning the Fund *
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(e) Other Information Concerning *
the Fund; Back Cover Page
(f) Other Information Concerning *
the Fund
(g) Not Applicable *
5A Not Applicable *
6(a) Other Information Concerning *
the Fund
(b) Not Applicable *
(c) Not Applicable *
(d) Not Applicable *
(e)(f) About Your Investment; How to Buy, Sell *
and Exchange Shares (How to Purchase, Redeem
and Exchange Shares); How Distributions Are
Made; Tax Information; Other Information
Concerning the Fund; Make the Most of Your
Vista Privileges.
(f) How Distributions are Made; *
Tax Information
(g) How Distributions are Made; Tax Matters
Tax Information
(h) About Your Investment; How to Buy, *
Sell and Exchange Shares (How to
Purchase, Redeem and Exchange Shares);
Other Information Concerning the Fund
7(a) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(b) How the Fund Values its Shares; *
How to Buy, Sell and Exchange
Shares (How to Purchase, Redeem
and Exchange Shares)
(c) Not Applicable *
(d) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem and
Exchange Shares)
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(e) Management; Other Information *
Concerning the Fund
(f) Other Information Concerning the *
Fund
8(a) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(b) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(c) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(d) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
9 Not Applicable *
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
10 * Front Cover Page
11 * Front Cover Page
12 * Not Applicable
13(a)(b) Fund Objective; Investment Investment Policies
Policies and Restrictions
14(c) * Management of the Trust and
Funds or Portfolios
(b) * Not Applicable
(c) * Management of the Trust and
Funds or Portfolios
15(a) * Not Applicable
(b) * General Information
(c) * General Information
16(a) Management Management of the Trust and
Funds or Portfolios
(b) Management Management of the Trust and
Funds or Portfolios
(c) Other Information Concerning Management of the Trust and
the Fund Funds or Portfolios
(d) Management Management of the Trust and
Funds or Portfolios
(e) * Not Applicable
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(f) How to Buy, Sell and Exchange Shares Management of the Trust and
(How to Purchase, Redeem and Exchange Shares); Funds or Portfolios
Other Information Concerning the Fund
(g) * Not Applicable
(h) * Management of the Trust and
Funds or Portfolios;
Independent Accountants
(i) * Not Applicable
17 Investment Policies Investment Policies and Restrictions
18(a) Other Information Concerning the Fund; General Information
How to Buy, Sell and Exchange Shares
(How to Purchase, Redeem and Exchange
Shares)
(b) * Not Applicable
19(a) How to Buy, Sell and Exchange Shares Purchases, Redemptions and Exchanges
(How to Purchase, Redeem and Exchange
Shares)
(b) How the Fund Values its Shares; How to Determination of Net Asset Value
Buy, Sell and Exchange Shares (How to
Purchase, Redeem and Exchange Shares)
(c) * Purchases, Redemptions and Exchanges
20 How Distributions are Made; Tax Information Tax Matters
21(a) * Management of the Trust and Funds
or Portfolios
(b) * Management of the Trust and Funds
or Portfolios
(c) * Not Applicable
22 * Performance Information
23 * Not Applicable
</TABLE>
-v-
<PAGE>
EXPLANATORY NOTE
Prospectuses for Class A and Class B Shares of Vista Balanced Fund, Vista
Bond Fund, Vista Capital Growth Fund, Vista Equity Income Fund, Vista European
Fund, Vista Growth and Income Fund, Vista International Equity Fund, Vista Japan
Fund, Vista Large Cap Equity Fund, Vista Small Cap Equity Fund, Vista Southeast
Asian Fund and Vista U.S. Treasury Income Fund, the Prospectuses for Class A
Shares of Vista Short-Term Bond Fund, Vista U.S. Government Securities Fund and
Vista U.S. Treasury Income Fund, the Prospectus for Shares of Vista American
Value Fund, and the Prospectuses for Institutional Shares of Vista Bond Fund,
Vista Capital Growth Fund, Vista Growth and Income Fund, Vista Large Cap Equity
Fund, Vista Small Cap Equity Fund, Vista Short-Term Bond Fund and Vista U.S.
Government Securities Fund are incorporated by reference to Amendment No. 41 to
the Registration Statement on Form N-1A of the Registrant filed on February 28,
1997.
The Prospectus for Shares of Vista Select Growth and Income Fund is
incorporated by reference to Amendment No. 38 to the Registration Statement on
Form N-1A of the Registrant filed on October 16, 1996.
The Prospectus Supplement for Class A and Class B Shares of Vista Large Cap
Equity Fund and Institutional Shares of Vista Large Cap Equity Fund are
incorporated by reference to the Registrant's filing of a definitive copy under
Rule 497(e) of the Securities Act of 1933, as amended (the "Securities Act").
The Statement of Additional Information for Vista European Fund, Vista
International Equity Fund, Vista Japan Fund and Vista Southeast Asian Fund is
incorporated by reference to Amendment No. 41 to the Registration Statement on
Form N-1A of the Registrant filed on February 28, 1997.
The Statement of Additional Information for Vista Select Growth and Income
Fund is incorporated by reference to Amendment No. 38 to the Registration
Statementon Form N-1A of the Registrant filed on October 16, 1996.
<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA(SM) SMALL CAP OPPORTUNITIES FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
May , 1997
This Prospectus explains concisely what you should know before investing. Please
read it carefully and keep it for future reference. You can find more detailed
information about the Fund in its May , 1997 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed with the
Securities and Exchange Commission (the "Commission") and is incorporated into
this Prospectus by reference. In addition, the Commission maintains a Web site
(http://www.sec.gov) that contains the SAI, the Fund's Annual Report to
Shareholders and other information regarding the Fund which has been
electronically filed with the Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Investments in the Fund are not bank deposits or obligations of, or guaranteed
or endorsed by, The Chase Manhattan Bank or any of its affiliates and are not
insured by the FDIC, the Federal Reserve Board or any other government agency.
Investments in mutual funds involve risk, including the possible loss of the
principal amount invested.
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................. 4
The expenses you might pay on your Fund investment, including examples
Fund Objective .............................................................. 6
Investment Policies ......................................................... 6
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management .................................................................. 11
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the
Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ....................................................... 11
Choosing a share class
How to Buy, Sell and Exchange Shares ........................................ 12
How the Fund Values its Shares .............................................. 19
How Distributions are Made; Tax Information ................................. 19
How the Fund distributes its earnings, and tax treatment
related to those earnings
Other Information Concerning the Fund ....................................... 20
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information ..................................................... 23
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ...................................... 25
3
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on estimated
expenses for the current fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment over specified periods.
Class A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ......................... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* .................... None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee ...................................... 0.65% 0.65%
12b-1 Fee** .................................................. 0.25% 0.75%
Shareholder Servicing Fee .................................... 0.00%# 0.25%
Other Expenses ............................................... 0.60% 0.60%
---- ----
Total Fund Operating Expenses ................................ 1.50% 2.25%
==== ====
EXAMPLES
Your investment of $1,000 would incur the following expenses, assuming 5% annual
return:
1 3
Year Years
---- -----
Class A Shares+ ............................................... $62 $ 93
Class B Shares:
Assuming complete redemption at the end of the period++ +++ .. $74 $103
Assuming no redemptions+++ ................................... $23 $ 70
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
# Reflects current waiver arrangements to maintain the Total Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Shareholder Servicing Fee and Total Fund Operating Expenses would be
0.25% and 1.75%, respectively, for Class A shares.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The examples
should not be considered representations of past or future expenses or returns;
actual expenses and returns may be greater or less than shown.
4
<PAGE>
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an investment
in the Fund. The Fund understands that Shareholder Servicing Agents may credit
to the accounts of their customers from whom they are already receiving other
fees amounts not exceeding such other fees or the fees received by the
Shareholder Servicing Agent from the Fund with respect to those accounts. See
"Other Information Concerning the Fund."
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Small Cap Opportunities Fund seeks long-term capital growth. The Fund is
not intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its total
assets in equity securities and at least 65% of its total assets in equity
securities of small cap companies. The Fund's advisers define small cap
companies as those with market capitalizations of up to $1 billion at the time
of purchase by the Fund. To pursue the Fund's objective the advisers will seek
to invest in companies with consistent, accelerating earnings and attractive
stock valuations. The Fund's advisers intend to utilize both quantitative and
fundamental research to identify those equities offering the best combination of
value and growth among small cap stocks. Current income is an incidental
consideration to the Fund's objective. You should be aware that an investment in
small cap companies may be more volatile than investments in companies with
greater capitalization, as described under "Risk Factors" below.
To retain investment flexibility, the Fund may determine to discontinue selling
new shares when the Fund's net assets reach approximately $1 billion. 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 classified as a "non-diversified" fund under federal securities law.
The Fund's assets may be more concentrated in the securities of any single
issuer or group of issuers than if the Fund were diversified.
The Fund may invest any portion of its assets not invested in equity securities
in high quality money market instruments and repurchase agreements. In addition,
at times when the Fund's advisers deem it advisable to limit the Fund's exposure
to the equity markets, the Fund may invest up to 20% of its total assets in U.S.
Government obligations other than money market instruments. For temporary
defensive purposes, the Fund may invest without limitation in money market
instruments and repurchase agreements. To the extent that the Fund departs from
its investment policies during temporary defensive periods, the Fund's
investment objective may not be achieved.
Instead of investing directly in underlying securities the Fund is authorized to
seek to achieve its objective by investing all of its investable assets in
another investment company having substantially the same investment objectives
and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who. . .
[bullet] Are seeking long-term growth of capital
[bullet] Are investing for goals several years away
[bullet] Own or plan to own other types of investments for diversification
purposes
6
<PAGE>
[bullet] Can assume above-average market risk
This Fund may NOT be appropriate for investors who are unable to tolerate
frequent up and down price changes, are investing for short-term goals or who
are in need of current income.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when consistent
with the Fund's overall objective and policies. These practices, and certain
associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in foreign
securities, including Depositary Receipts, which are described below. Since
foreign securities are normally denominated and traded in foreign currencies,
the values of the Fund's foreign investments may be influenced by currency
exchange rates and exchange control regulations. There may be less information
publicly available about foreign issuers than U.S. issuers, and they are not
generally subject to accounting, auditing and financial reporting standards and
practices comparable to those in the U.S. Foreign securities may be less liquid
and more volatile than comparable U.S. securities. Foreign settlement procedures
and trade regulations may involve certain expenses and risks. One risk would be
the delay in payment or delivery of securities or in the recovery of the Fund's
assets held abroad. It is possible that nationalization or expropriation of
assets, imposition of currency exchange controls, taxation by withholding Fund
assets, political or financial instability and diplomatic developments could
affect the value of the portfolio's investments in certain foreign countries.
Foreign laws may restrict the ability to invest in certain countries or issuers
and special tax considerations will apply to foreign securities. The risks can
increase if the Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form of
American Depositary Receipts, European Depositary Receipts or other similar
securities representing securities of foreign issuers (collectively, "Depositary
Receipts"). The Portfolio treats Depositary Receipts as interests in the
underlying securities for purposes of its investment policies. The Fund will
limit its investment in Depositary Receipts not sponsored by the issuer of the
underlying securities to no more than 5% of the value of its net assets (at the
time of investment).
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. These may include U.S. Government
securities, commercial paper of domestic and foreign issuers and obligations of
domestic and foreign banks. Investments in foreign money market instruments may
involve certain risks associated with foreign investment.
7
<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow money to buy
additional securities, known as "leveraging." The Fund may also sell and
simultaneously commit to repurchase a portfolio security at an agreed-upon price
and time. The Fund may use this practice to generate cash for shareholder
redemptions without selling securities in a down market. Whenever the Fund
enters into a reverse repurchase agreement, it will establish a segregated
account in which it will maintain liquid assets on a daily basis in an amount at
least equal to the repurchase price (including accrued interest). The Fund would
be required to pay interest on amounts obtained through reverse repurchase
agreements, which are considered borrowing under federal securities laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including those
sometimes referred to as stand-by commitments, with respect to securities in its
portfolio. In these transactions, the Fund would acquire the right to sell a
security at an agreed upon price within a specified period prior to its maturity
date. These transactions involve some risk to the Fund if the other party should
default on its obligation and the Fund is delayed or prevented from recovering
the collateral or completing the transaction. A put transaction will increase
the cost of the underlying security and consequently reduce the available yield.
CONVERTIBLE SECURITIES. The Fund may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed interest
or dividend yields which may be converted either at a stated price or stated
rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets in
shares of other investment
8
<PAGE>
companies when consistent with its investment objective and policies, subject to
applicable regulatory limitations. Additional fees may be charged by other
investment companies.
STRIPS. The Fund may invest up to 20% of its total assets in stripped
obligations (i.e., separately traded principal and interest components of
securities) where the underlying obligations are backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency contracts; and (iv) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Fund invests
may be particularly sensitive to changes in prevailing economic conditions and
market value. The ability of the Fund to successfully utilize these instruments
may depend in part upon the ability of its advisers to forecast these factors
correctly. Inaccurate forecasts could expose the Fund to a risk of loss. There
can be no guarantee that there will be a correlation between price movements in
a hedging instrument and in the portfolio assets being hedged. The Fund is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in losses that may exceed the original investment of the Fund. There can
be no assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other investment
strategies may cause price distortions in derivatives markets. In certain
instances, particularly those involving over-the-counter transactions or forward
contracts, there is a greater potential that a counterparty or broker may
default. In the event of a default, the Fund may experience a loss. For
additional information concerning derivatives, related instruments and
9
<PAGE>
the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Fund's buy and sell transactions will
vary from year to year. The Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and would
make it more difficult for the Fund to qualify as a registered investment
company under federal tax law. See "How Distributions are Made; Tax
Information."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Fund limit investment risks for the
Fund's shareholders. These restrictions prohibit the Fund from: (a) investing
more than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable in
accordance with procedures established by the Board of Trustees of the Fund); or
(b) investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (b) above and investment policies designated as
fundamental in the SAI, the investment policies of the Fund (including the
investment objective) are not fundamental. Shareholder approval is not required
to change any non-fundamental policy. However, in the event of a change in the
Fund's investment objective, shareholders will be given at least 30 days' prior
written notice.
RISK FACTORS
The net asset value of the Fund's shares will fluctuate based on the value of
the securities held by the Fund's portfolio. The Fund is aggresively managed
and, therefore, the value of the shares of the Fund is subject to greater
fluctuation and an investment in the Fund's shares involves a higher degree of
risk than an investment in a conservative equity fund or a growth fund investing
entirely in proven growth equities. An investment in the Fund should not be
considered a complete investment program and may not be appropriate for all
investors.
The securities of small cap companies often trade less frequently and in more
limited volume, and may be subject to more abrupt or erratic price movements,
than securities of larger, more established companies. Such companies may have
limited product lines, markets or financial resources, or may depend on a
limited management group.
Because the Fund is "non-diversified," the value of the Fund's shares is more
susceptible to developments affecting issuers in which the Fund invests.
To the extent the Fund invests in longer-term U.S. Government obligations, the
performance of the Fund may also be affected by interest rate changes. As
interest rates increase, the value of any fixed income securities held by the
Fund will tend to decrease.
10
<PAGE>
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase")is the Fund's investment adviser under an
Investment Advisory Agreement and has overall responsibility for investment
decisions of the Fund, subject to the oversight of the Board of Trustees. Chase
is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank holding
company. Chase and its predecessors have over 100 years of money management
experience.
For its investment advisory services to the Fund, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal to
0.65% of the Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Fund's sub-investment adviser under a Sub-Investment Advisory Agreement
between CAM and Chase. CAM is a wholly-owned operating subsidiary of Chase. CAM
makes investment decisions for the Fund on a day-to-day basis. For these
services, CAM is entitled to receive a fee, payable by Chase from its advisory
fee, at an annual rate equal to 0.30% of the Fund's average daily net assets.
CAM was recently formed for the purpose of providing discretionary investment
advisory services to institutional clients and to consolidate Chase's investment
management function. The same individuals who serve as portfolio managers for
Chase also serve as portfolio managers for CAM. CAM is located at 1211 Avenue of
the Americas, New York, New York 10036.
PORTFOLIO MANAGERS. Jill Greenwald and Ronald Zibelli, Vice Presidents and
Senior Portfolio Managers at Chase, are responsible for the management of the
Fund. 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.
Mr. Zibelli joined Chase in June 1996. Most recently, he held a similar position
at The Portfolio Group, Inc. for one year. Prior to that, he was Director of
Equity Research and Portfolio Manager at Princeton Bank & Trust Company for
seven years, and began his career at J.P. Morgan Investment Management.
ABOUT YOUR INVESTMENTu
- ----------------------
CHOOSING A SHARE CLASS
CLASS A SHARES. An investor who purchases Class A shares pays a sales charge at
the time of purchase. As a result, Class A shares are not subject to any sales
charges when they are redeemed. Certain purchases of Class A shares qualify for
reduced sales charges. Class A shares have lower combined 12b-1 and service fees
than Class B shares. See "How to Buy, Sell and Exchange Shares"
11
<PAGE>
and "Other Information Concerning the Fund."
CLASS B SHARES. Class B shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative net
asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
WHICH ARRANGEMENT IS BEST FOR YOU? The decision as to which class of shares
provides a more suitable investment for you depends on a number of factors,
including the amount and intended length of the investment. If you are making an
investment that qualifies for reduced sales charges, you might consider Class A
shares. If you prefer not to pay an initial sales charge, you might consider
Class B shares. In almost all cases, if you are planning to purchase $250,000 or
more of the Fund's shares you will pay lower aggregate charges and expenses by
purchasing Class A shares.
HOW TO BUY, SELL AND
EXCHANGE SHARES
- ---------------
HOW TO BUY SHARES
You can open a Fund account with as little as $2,500 for regular accounts or
$1,000 for IRAs, SEP-IRAs and the Systematic Investment Plan. Additional
investments can be made at any time with as little as $100. You can buy Fund
shares three ways-through an investment representative, through the Fund's
distributor by calling the Vista Service Center, or through the Systematic
Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, credit cards and cash will not be accepted. The
Fund reserves the right to reject any purchase order or cease offering shares
for purchase at any time. When purchases are made by check, redemptions will not
be allowed until the check clears, which may take 15 calendar days or longer. In
addition, the redemption of shares purchased through Automated Clearing House
(ACH) will not be allowed until your payment clears, which may take 7 business
days or longer.
BUYING SHARES THROUGH THE FUND'S DISTRIBUTOR. Complete and return the enclosed
application and your check in the amount you wish to invest to the Vista Service
Center.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments of
12
<PAGE>
$100 or more per transaction through automatic periodic deduction from your bank
checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter and a deposit slip or voided check to the Vista Service Center.
Call the Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are purchased at the public offering price, which is based on the net
asset value next determined after the Vista Service Center receives your order
in proper form. In most cases, in order to receive that day's public offering
price, the Vista Service Center must receive your order before the close of
regular trading on the New York Stock Exchange. If you buy shares through your
investment representative, the representative must receive your order before the
close of regular trading on the New York Stock Exchange to receive that day's
public offering price. Orders for shares are accepted by the Fund after funds
are converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
CLASS A SHARES
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives the
net asset value. The sales charge is allocated between your broker-dealer and
the Fund's distributor as shown in the following table, except when the Fund's
distributor, in its discretion, allocates the entire amount to your
broker-dealer.
<TABLE>
<CAPTION>
Sales charge as a percent of:
-----------------------------
Amount of sales charge
Amount of transaction Offering Net amount reallowed to dealers as a
at offering price($) price invested percentage of offering price
- ----------------------------------- -------- ---------- -----------------------------
<S> <C> <C> <C>
Under 100,000 ..................... 4.75 4.99 4.00
100,000 but under 250,000 ......... 3.75 3.90 3.25
250,000 but under 500,000 ......... 2.50 2.56 2.25
500,000 but under 1,000,000 ...... 2.00 2.04 1.75
</TABLE>
There is no initial sales charge on purchases of Class A shares of $1 million or
more.
13
<PAGE>
The Fund's distributor pays broker- dealers commissions on net sales of Class A
shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 1.00% of the amount under $2.5 million,
0.75% of the next $7.5 million, 0.50% of the next $40 million and 0.20%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
CLASS B SHARES
Class B shares are sold without an initial sales charge, although a CDSC will be
imposed if you redeem shares within a specified period after purchase, as shown
in the table below. The following types of shares may be redeemed without charge
at any time: (i) shares acquired by reinvestment of distributions and (ii)
shares otherwise exempt from the CDSC, as described below. For other shares, the
amount of the charge is determined as a percentage of the lesser of the current
market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ----------------------------------------------------------------------------
CDSC ...... 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will first
redeem shares not subject to any charge, and then shares held longest during the
CDSC period. When a share that has appreciated in value is redeemed during the
CDSC period, a CDSC is assessed only on its initial purchase price. For
information on how sales charges are calculated if you exchange your shares, see
"How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult your
investment representative or the Vista Service Center for details about Vista's
combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges are waived if you are using redemption proceeds received
within the prior ninety days from non-Vista mutual funds to buy your shares, and
on which you paid a front-end or contingent deferred sales charge.
Some participant-directed employee benefit plans participate in a "multi-fund"
program which offers both Vista and non-Vista mutual funds. With Board of
Trustee approval, the money that is invested in Vista Funds may be combined with
the other mutual funds in the same program when determing the plan's eligibility
to buy Class A shares without a sales charge. These investments will also be
included for purposes of the discount privileges and programs described above.
The Fund may sell Class A shares at net asset value without an initial sales
charge to the Fund's current and retired Trustees (and their immediate
families), current and retired employees (and their immediate families) of
Chase, the
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<PAGE>
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds, and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of the Fund's Class A shares
if you are investing the proceeds of a qualified retirement plan where a portion
of the plan was invested in the Vista Family of Funds, any qualified retirement
plan with 50 or more participants, or an individual participant in a
tax-qualified plan making a tax-free rollover or transfer of assets from the
plan in which Chase or an affiliate serves as trustee or custodian of the plan
or manages some portion of the plan's assets.
Purchases of the Fund's Class A shares may be made with no initial sales charge
through an investment adviser or financial planner that charges a fee for its
services. Purchases of the Fund's Class A shares 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 also be made for retirement and
deferred compensation plans and trusts used to fund those plans.
Purchases of the Fund's Class A shares may be made with no initial sales charge
in accounts opened by a bank, trust company or thrift institution which is
acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor or the Vista Service
Center.
Shareholders of record of any Vista Fund as of November 30, 1990 and certain
immediate family members may purchase the Fund's Class A shares with no initial
sales charge for as long as they continue to own Class A shares of any Vista
fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase the
Fund's Class A shares with no initial sales charge for as long as they continue
to own shares of any Vista fund following this date, provided there is no change
in account registration.
15
<PAGE>
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company. The CDSC will be waived on redemption of
Class B shares arising out of death or disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the value of Class
B shares subject to a systematic withdrawal plan may also be redeemed each year
without a CDSC, provided that the Class B account had a minimum balance of
$20,000 at the time the systematic withdrawal plan was established. The SAI
contains additional information about purchasing the Fund's shares at reduced
sales charges.
The Fund reserves the right to change any of these policies on purchases without
an initial sales charge at any time and may reject any such purchase request.
For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on specified
minimum balance requirements, such as reduced or no fees for certain banking
services or preferred rates on loans and deposits. Chase and certain
broker-dealers and other shareholder servicing agents may, at their own expense,
provide gifts, such as computer software packages, guides and books related to
investment or additional Fund shares valued up to $250 to their customers that
invest in the Vista Funds.
Shareholders of other Vista funds may be entitled to exchange their shares for,
or reinvest distributions from their funds in, shares of the Fund at net asset
value.
HOW TO SELL SHARES
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of instruction to the
Vista Service Center, along with any certificates that represent shares you want
to sell. The price you will receive is the next net asset value calculated after
the Fund receives your request in proper form, less any applicable CDSC. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the signatures
of registered owners or their legal representatives must be guaranteed by a
bank, broker-dealer or certain other financial institutions. See the SAI for
more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your address
as it appears on Vista's records, a signature guarantee is required. The Fund
may require additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint
16
<PAGE>
owner. Contact the Vista Service Center for details.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares the
business day after your request is received in proper form, assuming the Fund
has collected payment of the purchase price of your shares. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
TELEPHONE REDEMPTIONS. You may use Vista's Telephone Redemption Privilege to
redeem shares from your account unless you have notified the Vista Service
Center of an address change within the preceding 30 days. Telephone redemption
requests in excess of $25,000 will only be made by wire to a bank account on
record with the Fund. Unless an investor indicates otherwise on the account
application, the Fund will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any person claiming to
act as his or her representative, who can provide the Fund with his or her
account registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, as described above,
or contact your investment representative. The Telephone Redemption Privilege is
not available if you were issued certificates for shares that remain
outstanding. The Telephone Redemption Privilege may be modified or terminated
without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
17
<PAGE>
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for shares of the same class of certain other Vista
Funds at net asset value beginning 15 days after purchase. Not all Vista Funds
offer all classes of shares. The prospectus of the other Vista Fund into which
shares are being exchanged should be read carefully and retained for future
reference. If you exchange shares subject to a CDSC, the transaction will not be
subject to the CDSC. However, when you redeem the shares acquired through the
exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
EXCHANGING TO MONEY MARKET FUNDS. An exchange of Class B shares into any of the
Vista money market funds other than the Class B shares of the Vista Prime Money
Market Fund will be treated as a redemption-and therefore subject to the
conditions of the CDSC-and a subsequent purchase. Class B shares of any Vista
non-money market fund may be exchanged into the Class B shares of the Vista
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
For federal income tax purposes, an exchange is treated as a sale of shares and
generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available. Call
the Vista Service Center for procedures for telephone transactions. The
Telephone Exchange Privilege is not available if you were issued certificates
for shares that remain outstanding. Ask your investment representative or the
Vista Service Center for prospectuses of other Vista funds. Shares of certain
Vista funds are not available to residents of all states.
EXCHANGE PARAMETERS. The exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and in other circumstances where Vista management or
the Trustees believe doing so would be in the best interests of the Fund, the
Fund reserves the right to revise or
18
<PAGE>
terminate the exchange privilege, limit the amount or number of exchanges or
reject any exchange. In addition, any shareholder who makes more than ten
exchanges of shares involving the Fund in a year or three in a calendar quarter
will be charged a $5.00 administration fee for each such exchange. Shareholders
would be notified of any such action to the extent required by law. Consult the
Vista Service Center before requesting an exchange. See the SAI to find out more
about the exchange privilege.
REINSTATEMENT PRIVILEGE. Upon written request, Class A shareholders have a one
time privilege of reinstating their investment in the Fund at net asset value
within 90 calendar days of the redemption. The redemption request must be
accompanied by payment for the shares (not in excess of the redemption), and
shares will be purchased at the next determined net asset value. Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES
ITS SHARES
- ----------
The net asset value of each class of the Fund's shares is determined once daily
based upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced at
4:15 p.m., Eastern time), on each business day of the Fund, by dividing the net
assets of the Fund attributable to that class by the total number of outstanding
shares of that class. Values of assets held by the Fund are determined on the
basis of their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least semi-annually and any
net realized capital gains at least annually. Capital gains are distributed
after deducting any available capital loss carryovers. Distributions paid by the
Fund with respect to Class A shares will generally be greater than those paid
with respect to Class B shares because expenses attributable to Class B shares
will generally be higher.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares without a sales charge; (2)
receive distributions from net investment income in cash or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. You can change your distribution option by notifying the Vista
Service Center in writing. If you do not select an option when you open your
account, all distributions will be reinvested. All distributions not paid in
cash or by ACH will be reinvested in shares of the same share class. You will
receive a statement confirming
19
<PAGE>
reinvestment of distributions in additional Fund shares promptly following the
quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Vista fund without a sales charge. If the Vista Service Center does not
receive your election, the distribution will be reinvested in the Fund.
Similarly, if the Fund or the Vista Service Center sends you correspondence
returned as "undeliverable," distributions will automatically be reinvested in
the Fund.
The Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. The Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If the Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
TAXATION OF DISTRIBUTIONS. Fund distributions other than net long-term capital
gains will be taxable to you as ordinary income. Distributions of net long-term
capital gains will be taxable as such, regardless of how long you have held the
shares. The taxation of your distribution is the same whether received in cash
or in shares through the reinvestment of distributions.
You should carefully consider the tax implications of purchasing shares just
prior to a distribution. This is because you will be taxed on the entire amount
of the distribution received, even though the net asset value per share will be
higher on the date of such purchase as it will include the distribution amount.
Early in each calendar year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund for the preceding year.
The above is only a summary of certain federal income tax consequences of
investing in the Fund. You should consult your tax adviser to determine the
precise effect of an investment in the Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION
CONCERNING THE FUND
- -------------------
DISTRIBUTION PLANS
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares, which
provide for the payment of distribution fees at annual rates of up to 0.25% and
0.75% of the average daily net assets attributable to Class A and Class B shares
of the Fund, respectively. Payments under the distribution plans shall be used
to compensate or
20
<PAGE>
reimburse the Fund's distributor and broker-dealers for services provided and
expenses incurred in connection with the sale of Class A and Class B shares, and
are not tied to the amount of actual expenses incurred. Payments may be used to
compensate broker-dealers with trail or maintenance commissions at an annual
rate of up to 0.25% of the average daily net asset value of Class A or Class B
shares invested in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Promotional activities for
the sale of Class A and Class B shares will be conducted generally by the Vista
Family of Funds, and activities intended to promote the Fund's Class A or Class
B shares may also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista Funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater or entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of Class A or Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their customers,
such as pre-authorized or systematic purchase and redemption plans. Each
shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Chase and/or VFD may from time to time, at their own expense out of compensation
retained by them
21
<PAGE>
from the Fund or other sources available to them, make additional payments to
certain selected dealers or other shareholder servicing agents for performing
administrative services for their customers. These services include maintaining
account records, processing orders to purchase, redeem and exchange Fund shares
and responding to certain customer inquiries. The amount of such compensation
may be up to an additional 0.10% annually of the average net assets of the Fund
attributable to shares of the Fund held by customers of such shareholder
servicing agents. Such compensation does not represent an additional expense to
the Fund or its shareholders, since it will be paid by Chase and/or VFD.
ADMINISTRATOR AND
SUB-ADMINISTRATOR
Chase acts as the administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of their
average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 101 Park
Avenue, New York, New York 10178.
CUSTODIAN
Chase acts as the Fund's custodian and fund accountant and receives compensation
under an agreement with the Trust. Fund securities and cash may be held by
sub-custodian banks if such arrangements are reviewed and approved by the
Trustees.
EXPENSES
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
22
<PAGE>
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of the Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ for
each class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call 1-800-34-VISTA
to obtain additional information about other classes of shares of the Fund that
are offered. Any person entitled to receive compensation for selling or
servicing shares of the Fund may receive different levels of compensation with
respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of its Board of Trustees. The Trust is not required to hold
annual meetings of shareholders but will hold special meetings of shareholders
of all series or classes when in the judgment of the Trustees it is necessary or
desirable to submit matters for a shareholder vote. The Trustees will promptly
call a meeting of shareholders to remove a trustee(s) when requested to do so in
writing by record holders of not less than 10% of all outstanding shares of the
Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
PERFORMANCE
INFORMATION
- -----------
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares, in the manner described in the SAI. "Yield" for each class of
shares is
23
<PAGE>
calculated by dividing the annualized net investment income per share during a
recent 30-day period by the maximum public offering price per share of such
class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or since inception, if
shorter) through the most recent calendar quarter represents the average annual
compounded rate of return on an investment of $1,000 in the Fund invested at the
maximum public offering price (in the case of Class A shares) or reflecting the
deduction of any applicable contingent deferred sales charge (in the case of
Class B shares). Total return may also be presented for other periods or without
reflecting sales charges. Any quotation of investment performance not reflecting
the maximum initial sales charge or contingent deferred sales charge would be
reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the Fund's
portfolio, the Fund's operating expenses and which class of shares you purchase.
Investment performance also often reflects the risks associated with the Fund's
investment objectives and policies. These factors should be considered when
comparing the Fund's investment results to those of other mutual funds and other
investment vehicles. Quotation of investment performance for any period when a
fee waiver or expense limitation was in effect will be greater than if the
waiver or limitation had not been in effect. The Fund's performance may be
compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
24
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
- --------------------------------------
The following services are available to you as a Vista mutual fund shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually.
A minimum account balance of $5,000 is required to establish a
systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Vista funds in the same
class of shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change. Investors may not
maintain, within the same fund, simultaneous plans for systematic
investment or exchange and systematic withdrawal or exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege
of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of the
redemption).
Class B shareholders who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares with no initial sales
charge (in an amount not in excess of their redemption proceeds) if the
purchase occurs within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call
your shareholder servicing agent, investment representative or the
Vista Service Center at 1-800-34-VISTA. These privileges are subject to
change or termination.
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<PAGE>
Vista Family of Mutual Funds & Retirement Products
VISTA INTERNATIONAL EQUITY FUNDS
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
VISTA TAX-FREE FUNDS1
New York Tax Free Income Fund
California Intermediate Tax Free Income Fund
Tax Free Income Fund
VISTA TAX-FREE MONEY MARKET FUNDS(1,2)
New York Tax Free Money Market Fund
Connecticut Daily Tax Free Income Fund Select Shares(3)
New Jersey Daily Municipal Income Fund Select Shares(3)
Tax Free Money Market Fund
California Tax Free Money Market Fund
VISTA TAXABLE MONEY MARKET FUNDS(2)
Cash Management Fund
Federal Money Market Fund
100% U.S. Treasury Securities Money Market Fund
U.S. Government Money Market Fund
Treasury Plus Money Market Fund
VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Vista Mutual Funds or Retirement Products,
including information about fees and expenses, call your investment professional
or 1-800-34-VISTA for a prospectus. Please read it carefully before you invest
or send money.
(1) Some income may be subject to certain state and local taxes. A portion of
the income may be subject to the federal alternative minimum tax for some
investors.
(2) An investment in a Money Market Fund is neither insured nor guaranteed by
the U.S. Government. Yields will fluctuate, and there can be no assurance that
the Fund will be able to maintain a stable net asset value of $1.00 per share.
(3) Vista Select Shares of these funds are not a part of, or affiliated with,
the Vista Family of Mutual Funds. Reich & Tang Distributors L.P. and New England
Investment Companies L.P., which are unaffiliated with Chase, are the funds'
distributor and investment adviser, respectively.
(4) The variable annuity contract is issued by First SunAmerica Life Insurance
Company in New York; in other states, but not necessarily all states, it is
issued by Anchor National Life Insurance Company.
26
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING AGENT
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
[VISTA LOGO
P.O. Box 419392
Kansas City, MO 64141-6392
VSCO-1-497
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
May , 1997
VISTA(SM) AMERICAN VALUE FUND
VISTA(SM) BALANCED FUND
VISTA(SM) BOND FUND
VISTA(SM) CAPITAL GROWTH FUND
VISTA(SM) EQUITY INCOME FUND
VISTA(SM) GROWTH AND INCOME FUND
VISTA(SM) LARGE CAP EQUITY FUND
VISTA(SM) SHORT-TERM BOND FUND
VISTA(SM) SMALL CAP EQUITY FUND
VISTA(SM) SMALL CAP OPPORTUNITIES FUND
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND
VISTA(SM) U.S. TREASURY INCOME FUND
101 Park Avenue, New York, New York 10178
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering shares
of Vista U.S. Government Securities Fund, Vista U.S. Treasury Income Fund, Vista
Bond Fund and Vista Short-Term Bond Fund (collectively the "Income Funds"), and
Vista American Value Fund, Vista Balanced Fund, Vista Equity Income Fund, Vista
Growth and Income Fund, Vista Capital Growth Fund, Vista Large Cap Equity Fund,
Vista Small Cap Equity Fund and Vista Small Cap Opportunities Fund (collectively
the "Equity Funds"). Any references to a "Prospectus" in this Statement of
Additional Information is a reference to one or more of the foregoing
Prospectuses, as the context requires. Copies of each Prospectus may be obtained
by an investor without charge by contacting Vista Fund Distributors,
Inc.("VFD"), the Funds' distributor (the "Distributor"), at the above-listed
address.
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
For more information about your account, simply call or write the Vista Service
Center at:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
MFG-SAI
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
The Funds ................................................................. 3
Investment Policies and Restrictions ...................................... 3
Performance Information ................................................... 21
Determination of Net Asset Value .......................................... 28
Purchases, Redemptions and Exchanges ...................................... 29
Tax Matters ............................................................... 32
Management of the Trust and the Funds or Portfolios ....................... 37
Independent Accountants ................................................... 51
Certain Regulatory Matters ................................................ 51
General Information ....................................................... 52
Appendix A--Description of Certain Obligations Issued or Guaranteed by
U.S. Government Agencies or Instrumentalities ............................ A-1
Appendix B--Description of Ratings ........................................ B-1
2
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THE FUNDS
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists of
17 separate series (the "Funds"). Certain of the Funds are diversified and other
Funds are non-diversified, as such term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). The shares of the Funds are collectively
referred to in this Statement of Additional Information as the "Shares."
The Growth and Income Fund and Capital Growth Fund converted to a master
fund/feeder fund structure in December 1993. Under this structure, each of these
Funds seeks to achieve its investment objective by investing all of its
investable assets in an open-end management investment company which has the
same investment objective as that Fund. The Growth and Income Fund invests in
the Growth and Income Portfolio and the Capital Growth Fund invests in the
Capital Growth Portfolio (collectively the "Portfolios"). Each of the Portfolios
is a New York trust with its principal office in New York. Certain qualified
investors, in addition to a Fund, may invest in a Portfolio. For purposes of
this Statement of Additional Information, any information or references to
either or both of the Portfolios refer to the operations and activities after
implementation of the master fund/feeder fund structure.
On May 3, 1996, The Hanover American Value Fund merged into Vista American
Value Fund, The Hanover Large Cap Equity Fund merged into the Institutional
Shares of Vista Large Cap Equity Fund, The Hanover Short-Term Bond Fund merged
into the Class A shares of Vista Short-Term Bond Fund, Investor Shares of The
Hanover Small Cap Equity Fund merged into the Class A shares of Vista Small Cap
Equity Fund, CBC Benefit Shares of The Hanover Small Cap Equity Fund merged into
the Institutional Shares of Vista Small Cap Equity Fund and The Hanover U.S.
Government Securities Fund merged into the Institutional Shares of Vista U.S.
Government Securities Fund. The foregoing mergers are referred to herein as the
"Hanover Reorganization."
Effective as of May 6, 1996, Vista U.S. Government Income Fund changed its
name to Vista U.S. Treasury Income Fund and Vista Equity Fund changed its name
to Vista Large Cap Equity Fund.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. In the case of the Portfolios,
separate Boards of Trustees, the same members as the Board of Trustees of the
Trust, provide broad supervision. The Chase Manhattan Bank ("Chase") is the
investment adviser for the Funds (other than the Growth and Income Fund and
Capital Growth Fund, which do not have their own advisers) and the two
Portfolios. Chase also serves as the Trust's administrator (the "Administrator")
and supervises the overall administration of the Trust, including the Funds, and
is the administrator of the Portfolios. A majority of the Trustees of the Trust
are not affiliated with the investment adviser or sub-advisers. Similarly, a
majority of the Trustees of the Portfolios are not affiliated with the
investment adviser or sub-advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies of each Fund and
Portfolio. The following information supplements and should be read in
conjunction with the related sections of each Prospectus. For descriptions of
the securities ratings of Moody's Investors Service, Inc. ("Moody's"), Standard
& Poor's Corporation ("S&P") and Fitch Investors Service, Inc. ("Fitch"), see
Appendix B.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities of
one year or less), U.S. Treasury notes (maturities of one to ten years) and U.S.
Treasury bonds
3
<PAGE>
(generally maturities of greater than ten years); and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are supported
by any of the following: (a) the full faith and credit of the U.S. Treasury, (b)
the right of the issuer to borrow any amount listed to a specific line of credit
from the U.S. Treasury, (c) discretionary authority of the U.S. Government to
purchase certain obligations of the U.S. Government agency or instrumentality or
(d) the credit of the agency or instrumentality. Agencies and instrumentalities
of the U.S. Government include but are not limited to: Federal Land Banks,
Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Student Loan Marketing
Association, United States Postal Service, Chrysler Corporate Loan Guarantee
Board, Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government. Certain U.S.
Government Securities, including U.S. Treasury bills, notes and bonds,
Government National Mortgage Association certificates and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government Securities are issued or guaranteed by
federal agencies or government sponsored enterprises and are not supported by
the full faith and credit of the United States. These securities include
obligations that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of the Federal Home Loan Banks, and
obligations that are supported by the creditworthiness of the particular
instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. For a description of
certain obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small Business
Administration, Federal Aviation Administration, Department of Defense, Bureau
of Indian Affairs and Private Export Funding Corporation, which often provide
higher yields than are available from the more common types of government-backed
instruments. However, such specialized instruments may only be available from a
few sources, in limited amounts, or only in very large denominations; they may
also require specialized capability in portfolio servicing and in legal matters
related to government guarantees. While they may frequently offer attractive
yields, the limited-activity markets of many of these securities means that, if
a Fund or Portfolio were required to liquidate any of them, it might not be able
to do so advantageously; accordingly, each Fund and Portfolio investing in such
securities normally to hold such securities to maturity or pursuant to
repurchase agreements, and would treat such securities (including repurchase
agreements maturing in more than seven days) as illiquid for purposes of its
limitation on investment in illiquid securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation, and foreign banks (including their
U.S. branches) having total assets in excess of $10 billion (or the equivalent
in other currencies), and such other U.S. and foreign commercial banks which are
judged by the advisers to meet comparable credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit is
a short-term negotiable certificate issued by a commercial bank against funds
deposited in the bank and is either interest-bearing or purchased on a discount
basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by
a borrower, usually in connection with an international commercial transaction.
The borrower is liable for payment as is the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Fixed time
deposits are obligations of branches of United States banks or foreign banks
which are payable at a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party. Fixed time deposits subject to withdrawal penalties and with
respect to which a Fund or Portfolio cannot realize the proceeds thereon within
seven days are deemed "illiquid" for the purposes of its restriction on
investments in illiquid securities. Deposit notes are notes issued by commercial
banks which generally bear fixed rates of interest and typically have original
maturities ranging from eighteen months to five years.
4
<PAGE>
Banks are subject to extensive governmental regulations that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations. Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligations or
by government regulation. Investors should also be aware that securities of
foreign banks and foreign branches of United States banks may involve foreign
investment risks in addition to those relating to domestic bank obligations.
Depositary Receipts. A Fund or Portfolio will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying security to no
more than 5% of the value of its net assets (at the time of investment). A
purchaser of an unsponsored Depositary Receipt may not have unlimited voting
rights and may not receive as much information about the issuer of the
underlying securities as with a sponsored Depositary Receipt.
ECU Obligations. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Trustees do not
believe that such adjustments will adversely affect holders of ECU-denominated
securities or the marketability of such securities.
Supranational Obligations. Supranational organizations, include
organizations such as The World Bank, which was chartered to finance development
projects in developing member countries; the European Community, which is a
twelve-nation organization engaged in cooperative economic activities; the
European Coal and Steel Community, which is an economic union of various
European nations steel and coal industries; and the Asian Development Bank,
which is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations of the Asian and
Pacific regions.
Corporate Reorganizations. In general, securities that are the subject of a
tender or exchange offer or proposal sell at a premium to their historic market
price immediately prior to the announcement of the offer or proposal. The
increased market price of these securities may also discount what the stated or
appraised value of the security would be if the contemplated action were
approved or consummated. These investments may be advantageous when the discount
significantly overstates the risk of the contingencies involved; significantly
undervalues the securities, assets or cash to be received by shareholders of the
prospective portfolio company as a result of the contemplated transaction; or
fails adequately to recognize the possibility that the offer or proposal may be
replaced or superseded by an offer or proposal of greater value. The evaluation
of these contingencies requires unusually broad knowledge and experience on the
part of the advisers that must appraise not only the value of the issuer and its
component businesses as well as the assets or securities to be received as a
result of the contemplated transaction, but also the financial resources and
business motivation of the offeror as well as the dynamics of the business
climate when the offer or proposal is in progress. Investments in reorganization
securities may tend to increase the turnover ratio of a Fund and increase its
brokerage and other transaction expenses.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices do
not necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants but normally have a shorter duration and are distributed
directly by the issuer to shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which is
a type of commercial paper) represents a direct borrowing arrangement involv-
5
<PAGE>
ing periodically fluctuating rates of interest under a letter agreement between
a commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.
Repurchase Agreements. A Fund or Portfolio will enter into repurchase
agreements only with member banks of the Federal Reserve System and securities
dealers believed creditworthy, and only if fully collateralized by securities in
which such Fund or Portfolio is permitted to invest. Under the terms of a
typical repurchase agreement, a Fund or Portfolio would acquire an underlying
instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase the instrument and the Fund
or Portfolio to resell the instrument at a fixed price and time, thereby
determining the yield during the Fund's or Portfolio's holding period. This
procedure results in a fixed rate of return insulated from market fluctuations
during such period. A repurchase agreement is subject to the risk that the
seller may fail to repurchase the security. Repurchase agreements are considered
under the 1940 Act to be loans collateralized by the underlying securities. All
repurchase agreements entered into by a Fund or Portfolio will be fully
collateralized at all times during the period of the agreement in that the value
of the underlying security will be at least equal to 102% of the amount of the
loan, including the accrued interest thereon, and the Fund or Portfolio or its
custodian or sub-custodian will have possession of the collateral, which the
Board of Trustees believes will give it a valid, perfected security interest in
the collateral. Whether a repurchase agreement is the purchase and sale of a
security or a collateralized loan has not been conclusively established. This
might become an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities would not be
owned by the Fund or Portfolio, but would only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, a Fund or Portfolio
may suffer time delays and incur costs in connection with the disposition of the
collateral. The Board of Trustees believes that the collateral underlying
repurchase agreements may be more susceptible to claims of the seller's
creditors than would be the case with securities owned by a Fund or Portfolio.
Repurchase agreements maturing in more than seven days are treated as illiquid
for purposes of the Funds' and Portfolios' restrictions on purchases of illiquid
securities. Repurchase agreements are also subject to the risks described below
with respect to stand-by commitments.
Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will normally
be purchased. When a commitment to purchase a security on a forward commitment
basis is made, procedures are established consistent with the General Statement
of Policy of the Securities and Exchange Commission concerning such purchases.
Since that policy currently recommends that an amount of the respective Fund's
or Portfolio's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, a separate account of such Fund
or Portfolio consisting of cash or liquid securities equal to the amount of such
Fund's or Portfolio's commitments securities will be established at such Fund's
or Portfolio's custodian bank. For the purpose of determining the adequacy of
the securities in the account, the deposited securities will be valued at market
value. If the market value of such securities declines, additional cash, cash
equivalents or highly liquid securities will be placed in the account daily so
that the value of the account will equal the amount of such commitments by the
respective Fund or Portfolio.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis may
involve more risk than other types of purchases. Securities purchased on a
forward commitment basis and the securities held in the respective Fund's or
Portfolio's portfolio are subject to changes in value based upon the public's
perception of the issuer and changes, real or anticipated, in the level of
interest rates. Purchasing securities on a forward commitment basis can involve
the risk that the yields available in the market when the delivery takes place
may actually be higher or lower than those obtained in the transaction itself.
On the settlement date of the forward commitment transaction, the respective
Fund or Portfolio will meet its obligations from then available cash flow, sale
of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the forward
commitment securities themselves (which may have a value greater or lesser than
such Fund's
6
<PAGE>
or Portfolio's payment obligations). The sale of securities to meet such
obligations may result in the realization of capital gains or losses.
To the extent a Fund or Portfolio engages in forward commitment
transactions, it will do so for the purpose of acquiring securities consistent
with its investment objective and policies and not for the purpose of investment
leverage, and settlement of such transactions will be within 90 days from the
trade date.
Floating and Variable Rate Securities; Participation Certificates. The
securities in which certain Funds and Portfolios may be invested include
participation certificates issued by a bank, insurance company or other
financial institution in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate gives
a Fund or Portfolio an undivided interest in the security in the proportion that
the Fund's or Portfolio's participation interest bears to the total principal
amount of the security and generally provides the demand feature described
below. Each Participation Certificate is backed by an irrevocable letter of
credit or guaranty of a bank (which may be the bank issuing the Participation
Certificate, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the Participation Certificate) or insurance policy of an
insurance company that the Board of Trustees of the Trust has determined meets
the prescribed quality standards for a particular Fund or Portfolio.
A Fund or Portfolio may have the right to sell the Participation
Certificate back to the institution and draw on the letter of credit or
insurance on demand after the prescribed notice period, for all or any part of
the full principal amount of the Fund's or Portfolio's participation interest in
the security, plus accrued interest. The institutions issuing the Participation
Certificates would retain a service and letter of credit fee and a fee for
providing the demand feature, in an amount equal to the excess of the interest
paid on the instruments over the negotiated yield at which the Participation
Certificates were purchased by a Fund or Portfolio. The total fees would
generally range from 5% to 15% of the applicable prime rate or other short-term
rate index. With respect to insurance, a Fund or Portfolio will attempt to have
the issuer of the participation certificate bear the cost of any such insurance,
although the Funds and Portfolios retain the option to purchase insurance if
deemed appropriate. Obligations that have a demand feature permitting a Fund or
Portfolio to tender the obligation to a foreign bank may involve certain risks
associated with foreign investment. A Fund's or Portfolio's ability to receive
payment in such circumstances under the demand feature from such foreign banks
may involve certain risks such as future political and economic developments,
the possible establishments of laws or restrictions that might adversely affect
the payment of the bank's obligations under the demand feature and the
difficulty of obtaining or enforcing a judgment against the bank.
The advisers have been instructed by the Board of Trustees to monitor on an
ongoing basis the pricing, quality and liquidity of the floating and variable
rate securities held by the Funds and Portfolios, including Participation
Certificates, on the basis of published financial information and reports of the
rating agencies and other bank analytical services to which the Funds and
Portfolios may subscribe. Although these instruments may be sold by a Fund or
Portfolio, it is intended that they be held until maturity.
Past periods of high inflation, together with the fiscal measures adopted
to attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the underlying
floating or variable rate securities may change with changes in interest rates
generally, the floating or variable rate nature of the underlying floating or
variable rate securities should minimize changes in value of the instruments.
Accordingly, as interest rates decrease or increase, the potential for capital
appreciation and the risk of potential capital depreciation is less than would
be the case with a portfolio of fixed rate securities. A Fund's or Portfolio's
portfolio may contain floating or variable rate securities on which stated
minimum or maximum rates, or maximum rates set by state law, limit the degree to
which interest on such floating or variable rate securities may fluctuate; to
the extent it does, increases or decreases in value may be somewhat greater than
would be the case without such limits. Because the adjustment of interest rates
on the floating or variable rate securities is made in relation to movements of
the applicable banks' "prime rates" or other short-term rate adjustment indices,
the floating or variable rate securities are not comparable to long-
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term fixed rate securities. Accordingly, interest rates on the floating or
variable rate securities may be higher or lower than current market rates for
fixed rate obligations of comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of (i)
the notice period required before a Fund or Portfolio is entitled to receive
payment of the principal amount of the security upon demand or (ii) the period
remaining until the security's next interest rate adjustment.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund or Portfolio with an agreement to repurchase
the securities at an agreed upon price and date. The repurchase price is
generally equal to the original sales price plus interest. Reverse repurchase
agreements are usually for seven days or less and cannot be repaid prior to
their expiration dates. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities transferred may decline below the price
at which the Fund or Portfolio is obliged to purchase the securities.
Zero Coupon, Payment-in-Kind and Stripped Obligations. The principal and
interest components of United States Treasury bonds with remaining maturities of
longer than ten years are eligible to be traded independently under the Separate
Trading of Registered Interest and Principal of Securities ("STRIPS") program.
Under the STRIPS program, the principal and interest components are separately
issued by the United States Treasury at the request of depository financial
institutions, which then trade the component parts separately. The interest
component of STRIPS may be more volatile than that of United States Treasury
bills with comparable maturities.
Zero coupon obligations are sold at a substantial discount from their value
at maturity and, when held to maturity, their entire return, which consists of
the amortization of discount, comes from the difference between their purchase
price and maturity value. Because interest on a zero coupon obligation is not
distributed on a current basis, the obligation tends to be subject to greater
price fluctuations in response to changes in interest rates than are ordinary
interest-paying securities with similar maturities. The value of zero coupon
obligations appreciates more than such ordinary interest-paying securities
during periods of declining interest rates and depreciates more than such
ordinary interest-paying securities during periods of rising interest rates.
Under the stripped bond rules of the Internal Revenue Code of 1986, as amended,
investments by a Fund or Portfolio in zero coupon obligations will result in the
accrual of interest income on such investments in advance of the receipt of the
cash corresponding to such income.
Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the coupon
payments and principal payment that will be generated by this security
separately. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities, Treasury Investment Growth Receipts and generic Treasury Receipts,
are examples of stripped U.S. Treasury securities separated into their component
parts through such custodial arrangements.
Payment-in-kind ("PIK") bonds are debt obligations which provide that the
issuer thereof may, at its option, pay interest on such bonds in cash or in the
form of additional debt obligations. Such investments benefit the issuer by
mitigating its need for cash to meet debt service, but also require a higher
rate of return to attract investors who are willing to defer receipt of such
cash. Such investments experience greater volatility in market value due to
changes in interest rates than debt obligations which provide for regular
payments of interest. A Fund or Portfolio will accrue income on such investments
for tax and accounting purposes, as required, which is distributable to
shareholders and which, because no cash is received at the time of accrual, may
require the liquidation of other portfolio securities to satisfy the Fund's or
Portfolio's distribution obligations.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund and Portfolio may elect to treat as liquid, in
accordance with procedures established by the Board of Trustees, certain
investments in restricted securities for which there may be a secondary market
of qualified institutional buyers as contemplated by Rule 144A under the
Securities Act of 1933, as amended (the "Securities Act") and commercial
obligations issued in reliance on the so-called "private placement" exemption
from regis-
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tration afforded by Section 4(2) of the Securities Act ("Section 4(2) paper").
Rule 144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified
institutional buyers. Section 4(2) paper is restricted as to disposition under
the federal securities laws, and generally is sold to institutional investors
such as a Fund or Portfolio who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale of Section
4(2) paper by the purchaser must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid market
for Rule 144A securities or Section 4(2) paper will develop or be maintained.
The Trustees have adopted policies and procedures for the purpose of determining
whether securities that are eligible for resale under Rule 144A and Section 4(2)
paper are liquid or illiquid for purposes of the limitation on investment in
illiquid securities. Pursuant to those policies and procedures, the Trustees
have delegated to the advisers the determination as to whether a particular
instrument is liquid or illiquid, requiring that consideration be given to,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to sell the security and the number of potential
purchasers, dealer undertakings to make a market in the security, the nature of
the security and the time needed to dispose of the security. The Trustees will
periodically review the Funds' and Portfolios' purchases and sales of Rule 144A
securities and Section 4(2) paper.
Stand-By Commitments. In a put transaction, a Fund or Portfolio acquires
the right to sell a security at an agreed upon price within a specified period
prior to its maturity date, and a stand-by commitment entitles a Fund or
Portfolio to same-day settlement and to receive an exercise price equal to the
amortized cost of the underlying security plus accrued interest, if any, at the
time of exercise. Stand-by commitments are subject to certain risks, which
include the inability of the issuer of the commitment to pay for the securities
at the time the commitment is exercised, the fact that the commitment is not
marketable by a Fund or Portfolio, and that the maturity of the underlying
security will generally be different from that of the commitment.
Securities Loans. To the extent specified in its Prospectus, each Fund and
Portfolio is permitted to lend its securities to broker-dealers and other
institutional investors in order to generate additional income. Such loans of
portfolio securities may not exceed 30% of the value of a Fund's or Portfolio's
total assets. In connection with such loans, a Fund or Portfolio will receive
collateral consisting of cash, cash equivalents, U.S. Government securities or
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 102% of the
current market value plus accrued interest of the securities loaned. A Fund or
Portfolio can increase its income through the investment of such collateral. A
Fund or Portfolio continues to be entitled to the interest payable or any
dividend-equivalent payments received on a loaned security and, in addition, to
receive interest on the amount of the loan. However, the receipt of any
dividend-equivalent payments by a Fund or Portfolio on a loaned security from
the borrower will not qualify for the dividends-received deduction. Such loans
will be terminable at any time upon specified notice. A Fund or Portfolio might
experience risk of loss if the institutions with which it has engaged in
portfolio loan transactions breach their agreements with such Fund or Portfolio.
The risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delays in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower experience financial difficulty. Loans will be made only to firms
deemed by the advisers to be of good standing and will not be made unless, in
the judgment of the advisers, the consideration to be earned from such loans
justifies the risk.
Real Estate Investment Trusts. Certain Funds may invest in shares of real
estate investment trusts ("REITs"), which are pooled investment vehicles which
invest primarily in income-producing real estate or real estate related loans or
interests. REITs are generally classified as equity REITs or mortgage REITs.
Equity REITs invest the majority of their assets directly in real property and
derive income primarily from the collection of rents. Equity REITs can also
realize capital gains by selling properties that have appreciated in value.
Mortgage REITs invest the majority of their assets in real estate mortgages and
derive income from the collection of interest payments. The value of equity
trusts will depend upon the value of the underlying properties, and the value of
mortgage trusts will be sensitive to the value of the underlying loans or
interests.
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Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Funds and Portfolios may
employ derivative and related instruments as tools in the management of
portfolio assets. Put briefly, a "derivative" instrument may be considered a
security or other instrument which derives its value from the value or
performance of other instruments or assets, interest or currency exchange rates,
or indexes. For instance, derivatives include futures, options, forward
contracts, structured notes and various over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways: first,
to reduce risk by hedging (offsetting) an investment position; second, to
substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives; and lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for a Fund or Portfolio.
Each Fund and Portfolio may invest its assets in derivative and related
instruments subject only to the Fund's or Portfolio's investment objective and
policies and the requirement that the Fund or Portfolio maintain segregated
accounts consisting of cash or other liquid assets (or, as permitted by
applicable regulation, enter into certain offsetting positions) to cover its
obligations under such instruments with respect to positions where there is no
underlying portfolio asset so as to avoid leveraging the Fund or Portfolio.
The value of some derivative or similar instruments in which the Funds or
Portfolios may invest may be particularly sensitive to changes in prevailing
interest rates or other economic factors, and--like other investments of the
Funds and Portfolios--the ability of a Fund or Portfolio to successfully utilize
these instruments may depend in part upon the ability of the advisers to
forecast interest rates and other economic factors correctly. If the advisers
inaccurately forecast such factors and has taken positions in derivative or
similar instruments contrary to prevailing market trends, a Fund or Portfolio
could be exposed to the risk of a loss. The Funds and Portfolios might not
employ any or all of the strategies described herein, and no assurance can be
given that any strategy used will succeed.
Set forth below is an explanation of the various derivatives strategies and
related instruments the Funds or Portfolios may employ along with risks or
special attributes associated with them. This discussion is intended to
supplement the Funds' current prospectuses as well as provide useful information
to prospective investors.
Risk Factors. As explained more fully below and in the discussions of
particular strategies or instruments, there are a number of risks associated
with the use of derivatives and related instruments. There can be no guarantee
that there will be a correlation between price movements in a hedging vehicle
and in the portfolio assets being hedged. An incorrect correlation could result
in a loss on both the hedged assets in a Fund or Portfolio and the hedging
vehicle so that the portfolio return might have been greater had hedging not
been attempted. This risk is particularly acute in the case of "cross-hedges"
between currencies. The advisers may inaccurately forecast interest rates,
market values or other economic factors in utilizing a derivatives strategy. In
such a case, a Fund or Portfolio may have been in a better position had it not
entered into such strategy. Hedging strategies, while reducing risk of loss, can
also reduce the opportunity for gain. In other words, hedging usually limits
both potential losses as well as potential gains. Strategies not involving
hedging may increase the risk to a Fund or Portfolio. Certain strategies, such
as yield enhancement, can have speculative characteristics and may result in
more risk to a Fund or Portfolio than hedging strategies using the same
instruments. There can be no assurance that a liquid market will exist at a time
when a Fund or Portfolio seeks to close out an option, futures contract or other
derivative or related position. Many exchanges and boards of trade limit the
amount of fluctuation permitted in option or futures contract prices during a
single day; once the daily limit has been reached on particular contract, no
trades may be made that day at a price beyond that limit. In addition, certain
instruments are relatively new and without a significant
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trading history. As a result, there is no assurance that an active secondary
market will develop or continue to exist. Finally, over-the-counter instruments
typically do not have a liquid market. Lack of a liquid market for any reason
may prevent a Fund from liquidating an unfavorable position. Activities of large
traders in the futures and securities markets involving arbitrage, "program
trading," and other investment strategies may cause price distortions in these
markets. In certain instances, particularly those involving over-the-counter
transactions, forward contracts there is a greater potential that a counterparty
or broker may default or be unable to perform on its commitments. In the event
of such a default, a Fund or Portfolio may experience a loss. In transactions
involving currencies, the value of the currency underlying an instrument may
fluctuate due to many factors, including economic conditions, interest rates,
governmental policies and market forces.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by a
Fund or Portfolio.
Options on Securities, Securities Indexes and Debt Instruments. A Fund or
Portfolio may PURCHASE, SELL or EXERCISE call and put options on (i) securities,
(ii) securities indexes, and (iii) debt instruments.
Although in most cases these options will be exchange-traded, the Funds and
Portfolios may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller. As such, over-the-counter options generally have much less market
liquidity and carry the risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund or Portfolio
may also use combinations of options to minimize costs, gain exposure to markets
or take advantage of price disparities or market movements. For example, a Fund
or Portfolio may sell put or call options it has previously purchased or
purchase put or call options it has previously sold. These transactions may
result in a net gain or loss depending on whether the amount realized on the
sale is more or less than the premium and other transaction costs paid on the
put or call option which is sold. A Fund or Portfolio may write a call or put
option in order to earn the related premium from such transactions. Prior to
exercise or expiration, an option may be closed out by an offsetting purchase or
sale of a similar option. The Funds will not write uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund or Portfolio writing a covered call (i.e., where the underlying securities
are held by the Fund or Portfolio) has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but has retained the risk of loss should
the price of the underlying securities decline. The writer of an option has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price.
If a put or call option purchased by a Fund or Portfolio is not sold when
it has remaining value, and if the market price of the underlying security, in
the case of a put, remains equal to or greater than the exercise price or, in
the case of a call, remains less than or equal to the exercise price, such Fund
or Portfolio will lose its entire investment in the option. Also, where a put or
call option on a particular security is purchased to hedge against price
movements in a related security, the price of the put or call option may move
more or less than the price of the related security. There can be no assurance
that a liquid market will exist when a Fund or Portfolio seeks to close out an
option position. Furthermore, if trading restrictions or suspensions are imposed
on the options markets, a Fund or Portfolio may be unable to close out a
position.
Futures Contracts and Options on Futures Contracts. A Fund or Portfolio may
purchase or sell (i) interest-rate futures contracts, (ii) futures contracts on
specified instruments or indices, and (iii) options on these futures contracts
("futures options").
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The futures contracts and futures options may be based on various
instruments or indices in which the Funds and Portfolios may invest such as
foreign currencies, certificates of deposit, Eurodollar time deposits,
securities indices, economic indices (such as the Consumer Price Indices
compiled by the U.S. Department of Labor).
Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For example,
a Fund or Portfolio may sell a futures contract--or buy a futures option--to
protect against a decline in value, or reduce the duration, of portfolio
holdings. Likewise, these instruments may be used where a Fund or Portfolio
intends to acquire an instrument or enter into a position. For example, a Fund
or Portfolio may purchase a futures contract--or buy a futures option--to gain
immediate exposure in a market or otherwise offset increases in the purchase
price of securities or currencies to be acquired in the future. Futures options
may also be written to earn the related premiums.
When writing or purchasing options, the Funds and Portfolios may
simultaneously enter into other transactions involving futures contracts or
futures options in order to minimize costs, gain exposure to markets, or take
advantage of price disparities or market movements. Such strategies may entail
additional risks in certain instances. The Funds and Portfolios may engage in
cross-hedging by purchasing or selling futures or options on a security or
currency different from the security or currency position being hedged to take
advantage of relationships between the two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Funds and
Portfolios will only enter into futures contracts or options on futures
contracts which are traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system.
Forward Contracts. A Fund and Portfolio may use foreign currency and
interest-rate forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. A Fund or Portfolio
that may invest in securities denominated in foreign currencies may, in addition
to buying and selling foreign currency futures contracts and options on foreign
currencies and foreign currency futures, enter into forward foreign currency
exchange contracts to reduce the risks or otherwise take a position in
anticipation of changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be a fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency contract, a Fund or Portfolio "locks
in" the exchange rate between the currency it will deliver and the currency it
will receive for the duration of the contract. As a result, a Fund or Portfolio
reduces its exposure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it will exchange
into. The effect on the value of a Fund or Portfolio is similar to selling
securities denominated in one currency and purchasing securities denominated in
another. Transactions that use two foreign currencies are sometimes referred to
as "cross-hedges."
A Fund or Portfolio may enter into these contracts for the purpose of
hedging against foreign exchange risk arising from the Fund's or Portfolio'
investments or anticipated investments in securities denominated in foreign
currencies. A Fund or Portfolio may also enter into these contracts for purposes
of increasing exposure to a foreign currency or to shift exposure to foreign
currency fluctuations from one country to another.
A Fund or Portfolio may also use forward contracts to hedge against changes
in interest rates, increase exposure to a market or otherwise take advantage of
such changes. An interest-rate forward contract involves the obligation to
purchase or sell a specific debt instrument at a fixed price at a future date.
Interest Rate and Currency Transactions. A Fund or Portfolio may employ
currency and interest rate management techniques, including transactions in
options (including yield curve options), futures,
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options on futures, forward foreign currency exchange contracts, currency
options and futures and currency and interest rate swaps. The aggregate amount
of a Fund's or Portfolio's net currency exposure will not exceed the total net
asset value of its portfolio. However, to the extent that a Fund or Portfolio is
fully invested while also maintaining currency positions, it may be exposed to
greater combined risk.
The Funds and Portfolios will only enter into interest rate and currency
swaps on a net basis, i.e., the two payment streams are netted out, with the
Fund or Portfolio receiving or paying, as the case may be, only the net amount
of the two payments. Interest rate and currency swaps do not involve the
delivery of securities, the underlying currency, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate and
currency swaps is limited to the net amount of interest or currency payments
that a Fund or Portfolio is contractually obligated to make. If the other party
to an interest rate or currency swap defaults, a Fund's or Portfolio's risk of
loss consists of the net amount of interest or currency payments that the Fund
or Portfolio is contractually entitled to receive. Since interest rate and
currency swaps are individually negotiated, the Funds and Portfolios expect to
achieve an acceptable degree of correlation between their portfolio investments
and their interest rate or currency swap positions.
A Fund or Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
A Fund or Portfolio may purchase or sell without limitation as to a
percentage of its assets forward foreign currency exchange contracts when the
advisers anticipate that the foreign currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not held by such Fund or Portfolio. In
addition, a Fund or Portfolio may enter into forward foreign currency exchange
contracts in order to protect against adverse changes in future foreign currency
exchange rates. A Fund or Portfolio may engage in cross-hedging by using forward
contracts in one currency to hedge against fluctuations in the value of
securities denominated in a different currency if its advisers believe that
there is a pattern of correlation between the two currencies. Forward contracts
may reduce the potential gain from a positive change in the relationship between
the U.S. Dollar and foreign currencies. Unanticipated changes in currency prices
may result in poorer overall performance for a Fund or Portfolio than if it had
not entered into such contracts. The use of foreign currency forward contracts
will not eliminate fluctuations in the underlying U.S. dollar equivalent value
of the prices of or rates of return on a Fund's or Portfolio's foreign currency
denominated portfolio securities and the use of such techniques will subject the
Fund or Portfolio to certain risks.
The matching of the increase in value of a forward contract and the decline
in the U.S. dollar equivalent value of the foreign currency denominated asset
that is the subject of the hedge generally will not be precise. In addition, a
Fund or Portfolio may not always be able to enter into foreign currency forward
contracts at attractive prices, and this will limit a Fund's or Portfolio's
ability to use such contract to hedge or cross-hedge its assets. Also, with
regard to a Fund's or Portfolio's use of cross-hedges, there can be no assurance
that historical correlations between the movement of certain foreign currencies
relative to the U.S. dollar will continue. Thus, at any time poor correlation
may exist between movements in the exchange rates of the foreign currencies
underlying a Fund's or Portfolio's cross-hedges and the movements in the
exchange rates of the foreign currencies in which the Fund's or Portfolio's
assets that are the subject of such cross-hedges are denominated.
A Fund or Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. A Fund or Portfolio will typically
use interest rate swaps to shorten the effective duration of its portfolio.
Interest rate swaps involve the exchange by a Fund or Portfolio with another
party of their respective commitments to pay or receive interest, such as an
exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of their respective rights to make or receive payments in
specified currencies.
Mortgage-Related Securities. A Fund or Portfolio may purchase
mortgage-backed securities--i.e., securities representing an ownership interest
in a pool of mortgage loans issued by lenders such as mort-
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gage bankers, commercial banks and savings and loan associations. Mortgage loans
included in the pool-- but not the security itself--may be insured by the
Government National Mortgage Association or the Federal Housing Administration
or guaranteed by the Federal National Mortgage Association, the Federal Home
Loan Mortgage Corporation or the Veterans Administration. Mortgage-backed
securities provide investors with payments consisting of both interest and
principal as the mortgages in the underlying mortgage pools are paid off.
Although providing the potential for enhanced returns, mortgage-backed
securities can also be volatile and result in unanticipated losses.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities. Prepayments of principal by mortgagors and mortgage foreclosures
will usually result in the return of the greater part of the principal invested
far in advance of the maturity of the mortgages in the pool. The actual rate of
return of a mortgage-backed security may be adversely affected by the prepayment
of mortgages included in the mortgage pool underlying the security.
A Fund or Portfolio may also invest in securities representing interests in
collateralized mortgage obligations ("CMOs"), real estate mortgage investment
conduits ("REMICs") and in pools of certain other asset-backed bonds and
mortgage pass-through securities. Like a bond, interest and prepaid principal
are paid, in most cases, monthly. CMOs may be collateralized by whole mortgage
loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by the U.S. Government, or U.S.
Government-related entities, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Monthly payment of principal received from the
pool of underlying mortgages, including prepayments, are allocated to different
classes in accordance with the terms of the instruments, and changes in
prepayment rates or assumptions may significantly affect the expected average
life and value of a particular class.
REMICs include governmental and/or private entities that issue a fixed pool
of mortgages secured by an interest in real property. REMICs are similar to CMOs
in that they issue multiple classes of securities. REMICs issued by private
entities are not U.S. Government securities and are not directly guaranteed by
any government agency. They are secured by the underlying collateral of the
private issuer.
The advisers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities may
include alternative mortgage instruments, that is, mortgage instruments whose
principal or interest payments may vary or whose terms to maturity may differ
from customary long-term fixed-rate mortgages. A Fund or Portfolio may also
invest in debentures and other securities of real estate investment trusts. As
new types of mortgage-related securities are developed and offered to investors,
the Funds and Portfolios may consider making investments in such new types of
mortgage-related securities.
Dollar Rolls. Under a mortgage "dollar roll," a Fund sells mortgage-backed
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, a Fund forgoes principal and
interest paid on the mortgage-backed securities. A Fund is compensated by the
difference between the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. A Fund may only enter into
covered rolls. A "covered roll" is a specific type of dollar roll for which
there is an offsetting cash position which matures on or before the forward
settlement date of the dollar roll transaction. At the time a Fund enters into a
mortgage "dollar roll", it will establish a segregated account with its
custodian bank in which it will maintain cash or liquid securities equal in
value to its obligations in respect of dollar rolls, and accordingly, such
dollar rolls will not be considered borrowings. Mortgage dollar rolls involve
the risk that the market value of the securities the Fund is obligated to
repurchase under the agreement may decline below the repurchase price. In the
event the buyer of securities under a mortgage dollar roll files for bankruptcy
or becomes insolvent, the Fund's use
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of proceeds of the dollar roll may be restricted pending a determination by the
other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
Asset-Backed Securities. A Fund or Portfolio may invest in asset-backed
securities, including conditional sales contracts, equipment lease certificates
and equipment trust certificates. The advisers expect that other asset-backed
securities (unrelated to mortgage loans) will be offered to investors in the
future. Several types of asset-backed securities already exist, including, for
example, "Certificates for Automobile ReceivablesSM" or "CARSSM" ("CARS"). CARS
represent undivided fractional interests in a trust whose assets consist of a
pool of motor vehicle retail installment sales contracts and security interests
in the vehicles securing the contracts. Payments of principal and interest on
CARS are passed-through monthly to certificate holders, and are guaranteed up to
certain amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the trustee or originator of the CARS
trust. An investor's return on CARS may be affected by early prepayment of
principal on the underlying vehicle sales contracts. If the letter of credit is
exhausted, the CARS trust may be prevented from realizing the full amount due on
a sales contract because of state law requirements and restrictions relating to
foreclosure sales of vehicles and the obtaining of deficiency judgments
following such sales or because of depreciation, damage or loss of a vehicle,
the application of federal and state bankruptcy and insolvency laws, the failure
of servicers to take appropriate steps to perfect the CARS trust's rights in the
underlying loans and the servicer's sale of such loans to bona fide purchasers,
giving rise to interests in such loans superior to those of the CARS trust, or
other factors. As a result, certificate holders may experience delays in
payments or losses if the letter of credit is exhausted. A Fund or Portfolio
also may invest in other types of asset-backed securities. In the selection of
other asset-backed securities, the advisers will attempt to assess the liquidity
of the security giving consideration to the nature of the security, the
frequency of trading in the security, the number of dealers making a market in
the security and the overall nature of the marketplace for the security.
Structured Products. A Fund or Portfolio may invest in interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of certain other investments. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, or specified instruments (such as commercial bank loans)
and the issuance by that entity of one or more classes of securities
("structured products") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured products to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with respect to
structured products is dependent on the extent of the cash flow on the
underlying instruments. A Fund or Portfolio may invest in structured products
which represent derived investment positions based on relationships among
different markets or asset classes.
A Fund or Portfolio may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by a
formula to the price of an underlying instrument. Inverse floaters have coupon
rates that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost of
Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon rate
while any drop in the reference rate of an inverse floater causes an increase in
the coupon rate. A spread trade is an investment position relating to a
difference in the prices or interest rates of two securities where the value of
the investment position is determined by movements in the difference between the
prices or interest rates, as the case may be, of the respective securities. When
a Fund or Portfolio invests in notes linked to the price of an underlying
instrument, the price of the underlying security is determined by a multiple
(based on a formula) of the price of such underlying security. A structured
product may be considered to be leveraged to the extent its interest rate varies
by a magnitude that exceeds the magnitude of the change in the index rate
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of interest. Because they are linked to their underlying markets or securities,
investments in structured products generally are subject to greater volatility
than an investment directly in the underlying market or security. Total return
on the structured product is derived by linking return to one or more
characteristics of the underlying instrument. Because certain structured
products of the type in which a Fund or Portfolio may invest may involve no
credit enhancement, the credit risk of those structured products generally would
be equivalent to that of the underlying instruments. A Fund or Portfolio may
invest in a class of structured products that is either subordinated or
unsubordinated to the right of payment of another class. Subordinated structured
products typically have higher yields and present greater risks than
unsubordinated structured products. Although a Fund's or Portfolio's purchase of
subordinated structured products would have similar economic effect to that of
borrowing against the underlying securities, the purchase will not be deemed to
be leverage for purposes of a Fund's or Portfolio' fundamental investment
limitation related to borrowing and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, a Fund's investments in
these structured products may be limited by the restrictions contained in the
1940 Act. Structured products are typically sold in private placement
transactions, and there currently is no active trading market for structured
products. As a result, certain structured products in which a Fund or Portfolio
invests may be deemed illiquid and subject to its limitation on illiquid
investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security. In
addition, because structured products are typically sold in private placement
transactions, there currently is no active trading market for structured
products.
Additional Restrictions on the Use of Futures and Option Contracts. None of
the Funds is a "commodity pool" (i.e., a pooled investment vehicle which trades
in commodity futures contracts and options thereon and the operator of which is
registered with the CFTC and futures contracts and futures options will be
purchased, sold or entered into only for bona fide hedging purposes, provided
that a Fund may enter into such transactions for purposes other than bona fide
hedging if, immediately thereafter, the sum of the amount of its initial margin
and premiums on open contracts and options would not exceed 5% of the
liquidation value of the Fund's portfolio, provided, further, that, in the case
of an option that is in-the-money, the in-the-money amount may be excluded in
calculating the 5% limitation.
When a Fund or Portfolio purchases a futures contract, an amount of cash or
cash equivalents or high quality debt securities will be deposited in a
segregated account with such Fund's or Portfolio's custodian or sub-custodian so
that the amount so segregated, plus the initial deposit and variation margin
held in the account of its broker, will at all times equal the value of the
futures contract, thereby insuring that the use of such futures is unleveraged.
A Fund's or Portfolio's ability to engage in the transactions described
herein may be limited by the current federal income tax requirement that a Fund
or Portfolio derive less than 30% of its gross income from the sale or other
disposition of stock or securities held for less than three months.
Investment Restrictions
The Funds and Portfolios have adopted the following investment restrictions
which may not be changed without approval by a "majority of the outstanding
shares" of a Fund or Portfolio which, as used in this Statement of Additional
Information, means the vote of the lesser of (i) 67% or more of the shares of a
Fund or total beneficial interests of a Portfolio present at a meeting, if the
holders of more than 50% of the outstanding shares of a Fund or total beneficial
interests of a Portfolio are present or represented by proxy, or (ii) more than
50% of the outstanding shares of a Fund or total beneficial interests of a
Portfolio.
Whenever the Trust is requested to vote on a fundamental policy of a
Portfolio, the Trust will hold a meeting of shareholders of the Fund that
invests in such Portfolio and will cast its votes as instructed by the
shareholders of such Fund.
With respect to the Growth and Income Fund and the Capital Growth Fund, it
is a fundamental policy of each Fund that when the Fund holds no portfolio
securities except interests in the Portfolio in which it
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invests, the Fund's investment objective and policies shall be identical to the
Portfolio's investment objective and policies, except for the following: a Fund
(1) may invest more than 10% of its net assets in the securities of a registered
investment company, (2) may hold more than 10% of the voting securities of a
registered investment company, and (3) will concentrate its investments in the
investment company. It is a fundamental investment policy of each such Fund that
when the Fund holds only portfolio securities other than interests in the
Portfolio, the Fund's investment objective and policies shall be identical to
the investment objective and policies of the Portfolio at the time the assets of
the Fund were withdrawn from the Portfolio.
Each Fund and Portfolio may not:
(1) borrow money, except that each Fund and Portfolio may borrow money
for temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33-1/3% of the value of its total
assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings.
Any borrowings representing more than 5% of a Fund's or Portfolio's total
assets must be repaid before the Fund or Portfolio may make additional
investments;
(2) make loans, except that each Fund and Portfolio may: (i) purchase
and hold debt instruments (including without limitation, bonds, notes,
debentures or other obligations and certificates of deposit, bankers'
acceptances and fixed time deposits) in accordance with its investment
objectives and policies; (ii) enter into repurchase agreements with respect
to portfolio securities; and (iii) lend portfolio securities with a value
not in excess of one-third of the value of its total assets;
(3) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of the Fund's or Portfolio's total assets would be
invested in the securities of companies whose principal business activities
are in the same industry. Notwithstanding the foregoing, with respect to a
Fund's or Portfolio's permissible futures and options transactions in U.S.
Government securities, positions in such options and futures shall not be
subject to this restriction;
(4) purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments but this shall not prevent
a Fund or Portfolio from (i) purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities or (ii) engaging in forward purchases or sales of
foreign currencies or securities;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund or Portfolio from investing insecurities or other instruments backed
by real estate or securities of companies engaged in the real estate
business). Investments by a Fund or Portfolio in securities backed by
mortgages on real estate or in marketable securities of companies engaged
in such activities are not hereby precluded;
(6) issue any senior security (as defined in the 1940 Act), except
that (a) a Fund or Portfolio may engage in transactions that may result in
the issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order; (b)
a Fund or Portfolio may acquire other securities, the acquisition of which
may result in the issuance of a senior security, to the extent permitted
under applicable regulations or interpretations of the 1940 Act; and (c)
subject to the restrictions set forth above, a Fund or Portfolio may borrow
money as authorized by the 1940 Act. For purposes of this restriction,
collateral arrangements with respect to permissible options and futures
transactions, including deposits of initial and variation margin, are not
considered to be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as a
Fund or Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling a portfolio security.
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In addition, as a matter of fundamental policy, notwithstanding any other
investment policy or restriction, each Fund may seek to achieve its investment
objective by investing all of its investable assets in another investment
company having substantially the same investment objective and policies as the
Fund. For purposes of investment restriction (5) above, real estate includes
Real Estate Limited Partnerships.
For purposes of investment restriction (3) above, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as an
"industry." Investment restriction (3) above, however, is not applicable to
investments by a Fund or Portfolio in municipal obligations where the issuer is
regarded as a state, city, municipality or other public authority since such
entities are not members of an "industry." Supranational organizations are
collectively considered to be members of a single "industry" for purposes of
restriction (3) above.
In addition, each Fund and Portfolio is subject to the following
nonfundamental restrictions which may be changed without shareholder approval:
(1) Each Fund other than the Capital Growth Fund, Growth and Income
Fund, Small Cap Opportunities Fund, Small Cap Equity Fund and U.S. Treasury
Income Fund may not, with respect to 75% of its assets, hold more than 10%
of the outstanding voting securities of any issuer or invest more than 5%
of its assets in the securities of any one issuer (other than obligations
of the U.S. Government, its agencies and instrumentalities); Each Portfolio
and each of the Capital Growth Fund, Growth and Income Fund, Small Cap
Opportunities Fund, Small Cap Equity Fund and U.S. Treasury Income Fund may
not, with respect to 50% of its assets, hold more than 10% of the
outstanding voting securities of any issuer.
(2) Each Fund and Portfolio may not make short sales of securities,
other than short sales "against the box," or purchase securities on margin
except for short-term credits necessary for clearance of portfolio
transactions, provided that this restriction will not be applied to limit
the use of options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and investment
program of a Fund or Portfolio.
(3) Each Fund and Portfolio may not purchase or sell interests in oil,
gas or mineral leases.
(4) Each Fund and Portfolio may not invest more than 15% of its net
assets in illiquid securities.
(5) Each Fund and Portfolio may not write, purchase or sell any put or
call option or any combination thereof, provided that this shall not
prevent (i) the writing, purchasing or selling of puts, calls or
combinations thereof with respect to portfolio securities or (ii) with
respect to a Fund's or Portfolio's permissible futures and options
transactions, the writing, purchasing, ownership, holding or selling of
futures and options positions or of puts, calls or combinations thereof
with respect to futures.
(6) Except as specified above, each Fund and Portfolio may invest up
to 5% of its total assets in the securities of any one investment company,
but may not own more than 3% of the securities of any one investment
company or invest more than 10% of its total assets in the securities of
other investment companies.
It is the Trust's position that proprietary strips, such as CATS and TIGRS,
are United States Government securities. However, the Trust has been advised
that the staff of the Securities and Exchange Commission's Division of
Investment Management does not consider these to be United States Government
securities, as defined under the Investment Company Act of 1940, as amended.
For purposes of the Funds' and Portfolios' investment restrictions, the
issuer of a tax-exempt security is deemed to be the entity (public or private)
ultimately responsible for the payment of the principal of and interest on the
security.
In order to permit the sale of its shares in certain states, a Fund or
Portfolio may make commitments more restrictive than the investment policies and
limitations described above and in its Prospectus. Should
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<PAGE>
a Fund or Portfolio determine that any such commitment is no longer in its best
interests, it will revoke the commitment by terminating sales of its shares in
the state involved. In order to comply with certain regulatory policies, as a
matter of operating policy, each Fund and Portfolio will not: (i) invest more
than 5% of its assets in companies which, including predecessors, have a record
of less than three years' continuous operation, except for the Small Cap Equity
Fund which may invest up to 15% of its assets in such companies, (ii) invest in
warrants, valued at the lower of cost or market, in excess of 5% of the value of
its net assets, and no more than 2% of such value may be warrants which are not
listed on the New York or American Stock Exchanges, or (iii) purchase or retain
in its portfolio any securities issued by an issuer any of whose officers,
directors, trustees or security holders is an officer or Trustee of the Trust or
Portfolio, or is an officer or director of the adviser, if after the purchase of
the securities of such issuer by the Fund or Portfolio one or more of such
persons owns beneficially more than 1/2 of 1% of the shares or securities, or
both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more than
5% of such shares or securities, or both, all taken at market value.
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time a transaction is
effected, later changes in percentage resulting from any cause other than
actions by a Fund or Portfolio will not be considered a violation. If the value
of a Fund's or Portfolio's holdings of illiquid securities at any time exceeds
the percentage limitation applicable at the time of acquisition due to
subsequent fluctuations in value or other reasons, the Board of Trustees will
consider what actions, if any, are appropriate to maintain adequate liquidity.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for a Fund or Portfolio
are made by a portfolio manager who is an employee of the adviser or sub-adviser
to such Fund or Portfolio and who is appointed and supervised by senior officers
of such adviser or sub-adviser. Changes in a Fund's or Portfolio's investments
are reviewed by the Board of Trustees of the Trust or Portfolio. The portfolio
managers may serve other clients of the advisers in a similar capacity.
The frequency of a Fund's or Portfolio's portfolio transactions--the
portfolio turnover rate--will vary from year to year depending upon market
conditions. Because a high turnover rate may increase transaction costs and the
possibility of taxable short-term gains, the advisers will weigh the added costs
of short-term investment against anticipated gains. Each Fund or Portfolio will
engage in portfolio trading if its advisers believe a transaction, net of costs
(including custodian charges), will help it achieve its investment objective.
Funds investing in both equity and debt securities apply this policy with
respect to both the equity and debt portions of their portfolios.
For the fiscal years ended October 31, 1994, 1995 and 1996, the annual
rates of portfolio turnover for the following Funds were as follows:
1994 1995 1996
---- ---- ----
Balanced Fund 77% 68% 149%
U.S. Treasury Income Fund 163% 164% 103%
Growth and Income Fund * * *
Capital Growth Fund * * *
Equity Income Fund 75% 91% 114%
Bond Fund 17% 30% 122%
Short-Term Bond Fund 44% 62% 158%
Large Cap Equity Fund 53% 45% 89%
Small Cap Equity Fund -- -- 78%
- ----------
* The Growth and Income Fund and the Capital Growth Fund invest all of their
investable assets in their respective Portfolio and do not invest directly in
a portfolio of assets, and therefore do not have reportable portfolio turnover
rates. The portfolio turnover rates for the Growth and Income Portfolio and
the Capital
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Growth Portfolio for the fiscal year ended October 31, 1994 were 57% and 60%,
respectively, for the fiscal year ended October 31, 1995, the portfolio
turnover rates were 71% and 86%, respectively, and for the fiscal year ended
October 31, 1996, the Portfolio turnover rates were 62% and 90%, respectively.
For the period December 20, 1994 through October 31, 1995, the Small Cap
Equity Fund had a portfolio turnover rate of 75%.
For the fiscal period December 1, 1996 through October 31, 1996, the annual
portfolio turnover rates for the American Value Fund and U.S. Government
Securities Fund were 25% and 101%, respectively.
For the fiscal period May 15, 1996 through October 31, 1997, the annual
rate of portfolio turnovr for the Small Cap Opportunities Fund is expected not
to exceed 100%.
Under the advisory agreement and the sub-advisory agreements, the adviser
and sub-advisers shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs or
proceeds being the most favorable to the Funds and Portfolios. In assessing the
best overall terms available for any transaction, the adviser and sub-advisers
consider all factors they deem relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to the adviser or
sub-advisers, and the reasonableness of the commissions, if any, both for the
specific transaction and on a continuing basis. The adviser and sub-advisers are
not required to obtain the lowest commission or the best net price for any Fund
or Portfolio on any particular transaction, and are not required to execute any
order in a fashion either preferential to any or Portfolio Fund relative to
other accounts they manage or otherwise materially adverse to such other
accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the adviser or
sub-adviser to a Fund or Portfolio normally seeks to deal directly with the
primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's or Portfolio's portfolio
securities in so-called tender or exchange offers. Such soliciting dealer fees
are in effect recaptured for a Funds and Portfolios by the adviser and
sub-advisers. At present, no other recapture arrangements are in effect.
Under the advisory and sub-advisory agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the adviser or sub-advisers may
cause the Funds and Portfolios to pay a broker-dealer which provides brokerage
and research services to the adviser or sub-advisers, the Funds or Portfolios
and/or other accounts for which they exercise investment discretion an amount of
commission for effecting a securities transaction for a Fund or Portfolio in
excess of the amount other broker-dealers would have charged for the transaction
if they determine in good faith that the greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of either a particular transaction or
their overall responsibilities to accounts over which they exercise investment
discretion. Not all of such services are useful or of value in advising the
Funds and Portfolios. The adviser and sub-advisers report to the Board of
Trustees regarding overall commissions paid by the Funds and Portfolios and
their reasonableness in relation to the benefits to the Funds and Portfolios.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or of purchasers or sellers of securities,
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts,
and effecting securities transactions and performing functions incidental
thereto such as clearance and settlement.
The management fees that the Funds and Portfolios pay to the adviser will
not be reduced as a consequence of the adviser's or sub-advisers' receipt of
brokerage and research services. To the extent the
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<PAGE>
Funds' or Portfolios' portfolio transactions are used to obtain such services,
the brokerage commissions paid by the Funds or Portfolios will exceed those that
might otherwise be paid by an amount which cannot be presently determined. Such
services generally would be useful and of value to the adviser or sub-advisers
in serving one or more of their other clients and, conversely, such services
obtained by the placement of brokerage business of other clients generally would
be useful to the adviser and sub-advisers in carrying out their obligations to
the Funds and Portfolios. While such services are not expected to reduce the
expenses of the adviser or sub-advisers, the advisers would, through use of the
services, avoid the additional expenses which would be incurred if they should
attempt to develop comparable information through their own staffs.
In certain instances, there may be securities that are suitable for one or
more of the Funds and Portfolios as well as one or more of the adviser's or
sub-advisers' other clients. Investment decisions for the Funds and Portfolios
and for other clients are made with a view to achieving their respective
investment objectives. It may develop that the same investment decision is made
for more than one client or that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling that same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more Funds or
Portfolios or other clients are simultaneously engaged in the purchase or sale
of the same security, the securities are allocated among clients in a manner
believed to be equitable to each. It is recognized that in some cases this
system could have a detrimental effect on the price or volume of the security as
far as the Funds or Portfolios are concerned. However, it is believed that the
ability of the Funds and Portfolios to participate in volume transactions will
generally produce better executions for the Funds and Portfolios.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Capital
Growth Portfolio paid aggregate brokerage commissions of $1,242,652, $2,311,291
and $1,618,640, respectively. For the fiscal years ended October 31, 1994, 1995
and 1996, the Growth and Income Portfolio paid aggregate brokerage commissions
of $1,515,504, $2,352,596 and $1,304,272, respectively.
For the fiscal years ended October 31, 1993, 1994, 1995 and 1996, the Large
Cap Equity Fund paid aggregate brokerage commissions of $129,600, $202,556,
$23,824 and $201,001, respectively.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Balanced
Fund paid aggregate brokerage commissions of $26,724, $27,315 and $62,036,
respectively.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Equity
Income Fund paid aggregate brokerage commissions of $23,520, $23,824 and
$44,136, respectively.
For the period December 20, 1994 through October 31, 1995 and the fiscal
year ended October 31, 1996, the Small Cap Equity Fund paid aggregate brokerage
commissions of $56,980 and $327,762, respectively.
For the period from December 1, 1995 through October 31, 1996, the Vista
American Value Fund paid aggregate brokerage commissions of $9,937.
No portfolio transactions are executed with the advisers or a Shareholder
Servicing Agent, or with any affiliate of the advisers or a Shareholder
Servicing Agent, acting either as principal or as broker.
PERFORMANCE INFORMATION
From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
past investment results, it should not be considered as an indication or
representation of the performance of any classes of a Fund in the future. From
time to time, the performance and yield of classes of
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<PAGE>
a Fund may be quoted and compared to those of other mutual funds with similar
investment objectives, unmanaged investment accounts, including savings
accounts, or other similar products and to stock or other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of a Fund or its classes may be compared to data prepared by Lipper
Analytical Services, Inc. or Morningstar Mutual Funds on Disc, widely recognized
independent services which monitor the performance of mutual funds. Performance
and yield data as reported in national financial publications including, but not
limited to, Money Magazine, Forbes, Barron's, The Wall Street Journal and The
New York Times, or in local or regional publications, may also be used in
comparing the performance and yield of a Fund or its classes. A Fund's
performance may be compared with indices such as the Lehman Brothers
Government/Corporate Bond Index, the Lehman Brothers Government Bond Index, the
Lehman Government Bond 1-3 Year Index and the Lehman Aggregate Bond Index; the
S&P 500 Index, the Dow Jones Industrial Average or any other commonly quoted
index of common stock prices; and the Russell 2000 Index and the NASDAQ
Composite Index. Additionally, a Fund may, with proper authorization, reprint
articles written about such Fund and provide them to prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in a
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return figures will assume
payment of the maximum initial sales load at the time of purchase. For Class B
shares, the average annual total rate of return figures will assume deduction of
the applicable contingent deferred sales charge imposed on a total redemption of
shares held for the period. One-, five-, and ten-year periods will be shown,
unless the class has been in existence for a shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values of the classes of
shares of a Fund will vary based on market conditions, the current market value
of the securities held by the Fund and changes in the Fund's expenses. The
advisers, Shareholder Servicing Agents, the Administrator, the Distributor and
other service providers may voluntarily waive a portion of their fees on a
month-to-month basis. In addition, the Distributor may assume a portion of a
Fund's operating expenses on a month-to-month basis. These actions would have
the effect of increasing the net income (and therefore the yield and total rate
of return) of the classes of shares of the Fund during the period such waivers
are in effect. These factors and possible differences in the methods used to
calculate the yields and total rates of return should be considered when
comparing the yields or total rates of return of the classes of shares of a Fund
to yields and total rates of return published for other investment companies and
other investment vehicles (including different classes of shares). The Trust is
advised that certain Shareholder Servicing Agents may credit to the accounts of
their customers from whom they are already receiving other fees amounts not
exceeding the Shareholder Servicing Agent fees received, which will have the
effect of increasing the net return on the investment of customers of those
Shareholder Servicing Agents. Such customers may be able to obtain through their
Shareholder Servicing Agents quotations reflecting such increased return.
Each Fund presents performance information for each class thereof since the
commencement of operations of that Fund (or the related predecessor fund, as
described below), rather than the date such class was introduced. Performance
information for each class introduced after the commencement of operations of
the related Fund (or predecessor fund) is therefore based on the performance
history of a predecessor class. Performance information is restated to reflect
the current maximum front-end sales charge (in the case of Class A Shares) or
the maximum contingent deferred sales charge (in the case of Class B Shares)
when presented inclusive of sales charges. Additional performance information
may be presented which does not reflect the deduction of sales charges.
Historical expenses reflected in performance information are based upon the
distribution, shareholder servicing fees and other expenses actually incurred
during the periods presented and have not been restated, for periods during
which the performance information for a particular
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class is based upon the performance history of a predecessor class, to reflect
the ongoing expenses currently borne by the particular class.
In connection with the Hanover Reorganization, the Vista U.S. Government
Securities and Vista American Value Fund were established to receive the assets
of The Hanover U.S. Government Securities Fund and The Hanover American Value
Fund, respectively. Performance results presented for each class of the Vista
U.S. Government Securities Fund and Vista American Value Fund include the
performance of The Hanover U.S. Government Securities Fund and The Hanover
American Value Fund, respectively, for periods prior to the consummation of the
Hanover Reorganization.
Advertising or communications to shareholders may contain the views of the
advisers as to current market, economic, trade and interest rate trends, as well
as legislative, regulatory and monetary developments, and may include investment
strategies and related matters believed to be of relevance to a Fund.
Advertisements for the Vista funds may include references to the asset size
of other financial products made available by Chase, such as the offshore assets
of other funds.
Total Rate of Return
A Fund's or class' total rate of return for any period will be calculated
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains declared during such period
with respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. The average annual rate of return quotation will
be calculated by (x) adding 1 to the period total rate of return quotation as
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
Average Annual Total Returns*
(excluding sales charges)
The average annual total rate of return figures for the following Funds,
reflecting the initial investment and assuming the reinvestment of all
distributions (but excluding the effects of any applicable sales charges) for
the one and five year periods ended October 31, 1996 and for the period from
commencement of business operations of each such Fund to October 31, 1996 were
as follows:
Since Date of Date of
One Five Fund Fund Class
Fund Year Years Inception Inception Introduction
- ------------------------- ------ ----- --------- --------- ------------
American Value Fund** 21.70% -- 21.86% 2/3/95 2/3/95
U.S. Treasury Income Fund 9/8/87
A Shares 3.56% 6.62% 8.98% 9/8/87
B Shares+ 2.82% 6.20% 8.75% 11/4/93
Balanced Fund 11/4/92
A Shares 16.89% -- 13.30% 11/4/92
B Shares 16.10% -- 12.67% 11/4/93
Equity Income Fund 7/15/93
A Shares 29.79% -- 15.35% 7/15/93
B Shares 29.24% -- 15.20% 5/7/96
Growth and Income Fund 9/23/87
A Shares 19.60% 13.83% 22.67% 9/23/87
B Shares+ 19.02% 13.48% 22.46% 11/5/93
Institutional Shares++ 20.01% 13.91% 22.72% 1/24/96
23
<PAGE>
<TABLE>
<CAPTION>
Since Date of Date of
One Five Fund Fund Class
Fund Year Years Inception Inception Introduction
- ------------------------- ---- ----- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Capital Growth Fund 9/23/87
A Shares 21.48% 15.93% 20.50% 9/23/87
B Shares+ 20.88% 15.60% 20.31% 11/5/93
Institutional Shares++ 21.83% 16.00% 20.54% 1/24/96
Bond Fund 11/30/90
Class A Shares*** 4.50% 7.57% 8.36% 5/6/96
Class B Shares*** 4.67% 7.61% 8.39% 5/6/96
Institutional Shares 4.90% 7.66% 8.43% 11/30/90
Short-Term Bond Fund 11/30/90
Class A Shares*** 5.79% 5.32% 5.82% 5/6/96
Institutional Shares 6.10% 5.38% 5.87% 11/30/90
Large Cap Equity Fund 11/30/90
Class A Shares*** 25.10% 13.93% 15.95% 5/6/96
Class B Shares*** 24.89% 13.89% 15.91% 5/6/96
Institutional Shares 25.65% 14.03% 16.03% 11/30/90
Small Cap Equity Fund 12/20/94
A Shares 29.06% -- 43.19% 12/20/94
B Shares+ 28.04% -- 42.23% 3/28/95
Institutional Shares++ 29.27% -- 43.31% 1/8/96
U.S. Government
Securities Fund** 2/19/93
A Shares*** 3.71% -- 5.24% 5/6/96
Institutional Shares 3.97% 4.15%# 5.31% 2/19/93
</TABLE>
- ----------
*The ongoing fees and expenses borne by Class B Shares are greater than those
borne by Class A Shares; the ongoing fees and expenses borne by a Fund's Class
A and Class B Shares are greater than those borne by the Fund's Institutional
Shares. As indicated above, the performance information for each class
introduced after the commencement of operations of the related Fund (or
predecessor fund) is based on the performance history of a predecessor class
and historical expenses have not been restated, for periods during which the
performance information for a particular class is based upon the performance
history of a predecessor class, to reflect the ongoing expenses currently
borne by the particular class. Accordingly, the performance information
presented in the table above and in each table that follows may be used in
assessing each Fund's performance history but does not reflect how the
distinct classes would have performed on a relative basis prior to the
introduction of those classes, which would require an adjustment to the
ongoing expenses. The performance quoted reflects fee waivers that subsidize
and reduce the total operating expenses of certain Funds (or classes thereof).
Returns on these Funds (or classes) would have been lower if there were not
such waivers. With respect to certain Funds, Chase and/or other service
providers are obligated to waive certain fees and/or reimburse certain
expenses for a stated period of time. In other instances, there is no
obligation to waive fees or to reimburse expenses. Each Fund's Prospectus
discloses the extent of any agreements to waive fees and/or reimburse
expenses.
24
<PAGE>
** Performance presented in the table above and in each table that follows for
each class of these Funds includes the performance of their respective
predecessor funds for periods prior to the consummation of the Hanover
Reorganization. Performance presented for each class of each of these Funds
is based on the historical expenses and performance of a single class of
shares of its predecessor fund and does not reflect the current
distribution, service and/or other expenses that an investor would incur as
a holder of such class of such Fund. Date of Fund inception shown for these
Funds is the date of inception of their respective predecessor funds. These
Funds commenced operations as part of the Trust on May 6, 1996.
*** Performance information presented in the table above and in each table that
follows for this class of this Fund prior to the date the class was
introduced does not reflect shareholder servicing and distribution fees and
certain other expenses borne by this class which, if reflected, would
reduce the performance quoted.
+ Performance information presented in the table above and in each table that
follows for this class of this Fund prior to the date the class was
introduced does not reflect distribution fees and certain other expenses
borne by this class which, if reflected, would reduce the performance
quoted.
++ Performance information presented in the table above and in each table that
follows for this class of this Fund prior to the date the class was
introduced is based upon historical expenses of a predecessor class which
are higher than the actual expenses that an investor would incur as a
holder of shares of this class. # Represents average annual total return
for the three years end 10/31/96.
25
<PAGE>
Average Annual Total Returns*
(including sales charges)
With the current maximum sales charge for Class A shares (1.50% for the
Short-Term Bond Fund, 4.50% for the U.S. Treasury Income Fund, Balanced Fund,
Equity Income Fund, Bond Fund and U.S. Government Securities Fund and 4.75% for
the Small Cap Equity Fund, Growth and Income Fund, Capital Growth Fund and Large
Cap Equity Fund) reflected and the currently applicable CDSC for Class B shares
for each period length, the average annual total rate of return figures for the
same periods would be as follows:
Since
One Five Fund
Fund Year Years Inception
- -------------------------------- ----- ----- ---------
U.S. Treasury Income Fund
A Shares (1.10%) 5.64% 8.44%
B Shares (2.06%) 4.27% 8.75%
Balanced Fund
A Shares 11.63% -- 12.00%
B Shares 11.10% -- 12.32%
Equity Income Fund
A Shares 23.95% -- 13.75%
B Shares 24.24% -- 14.54%
Growth and Income Fund
A Shares 13.92% 12.73% 22.02%
B Shares 14.02% 11.48% 22.46%
Capital Growth Fund
A Shares 15.71% 14.81% 19.86%
B Shares 15.88% 13.60% 20.31%
Bond Fund
A Shares (0.20%) 6.59% 7.52%
B Shares (0.26%) 5.61% 8.39%
Short-Term Bond Fund
A Shares 4.21% 5.01% 5.55%
Large Cap Equity Fund
A Shares 19.15% 12.83% 15.00%
B Shares 19.89% 11.89% 15.91%
Small Cap Equity Fund
A Shares 22.93% -- 39.37%
B Shares 23.04% -- 41.04%
U.S. Government Securities Fund
A Shares (0.96%) -- 1.57%
- ----------
*See the notes to the preceding table.
The Funds may also from time to time include in advertisements or other
communications a total return figure that is not calculated according to the
formula set forth above in order to compare more accurately the performance of a
Fund with other measures of investment return.
Yield Quotations
Any current "yield" quotation for a class of shares shall consist of an
annualized 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 out-
26
<PAGE>
standing 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, 1996 were as follows:
Class A Class B Institutional
------- ------- -------------
U.S. Treasury Income Fund 5.27% 4.80% --
Capital Growth Fund 0.04% 0.00% 0.45%
Balanced Fund 2.68% 2.06% --
Large Cap Equity Fund 0.71% 0.24% 1.61%
Equity Income Fund 1.98% 1.31% --
Bond Fund 5.26% 4.79% 5.94%
Growth and Income Fund 0.97% 0.53% 1.40%
Short-Term Bond Fund 5.32% -- 5.73%
Small Cap Equity Fund 0.05% 0.00% 0.45%
U.S. Government Securities Fund 5.09% -- 5.55%
American Value Fund 1.15% -- --
Advertisements for the Funds may include references to the asset size of
other financial products made available by Chase, such as the offshore assets of
other funds advised by Chase.
Non-Standardized Performance Results*
(excluding sales charges)
The table below reflects the net change in the value of an assumed initial
investment of $10,000 in each class of Fund shares in the following Funds
(excluding the effects of any applicable sale charges) for the period from the
commencement date of business for each such Fund through October 31, 1996. The
values reflect an assumption that capital gain distributions and income
dividends, if any, have been invested in additional shares of the same class.
From time to time, the Funds may provide these performance results in addition
to the total rate of return quotations required by the Securities and Exchange
Commission. As discussed more fully in the Prospectuses, neither these
performance results, nor total rate of return quotations, should be considered
as representative of the performance of the Funds in the future. These factors
and the possible differences in the methods used to calculate performance
results and total rates of return should be considered when comparing such
performance results and total rate of return quotations of the Funds with those
published for other investment companies and other investment vehicles.
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of Fund
$10,000 Gains Reinvested Inception
Investment Distributions Dividends Total Value Date
---------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
U.S. Treasury
Income Fund
9/8/87
Class A $ 11,130 $ 1,103 $9,703 $21,936
Class B $ 11,110 $ 1,081 $9,313 $21,505
Balanced Fund
11/4/92
Class A $ 13,830 $ 733 $1,889 $16,452
Class B $ 13,450 $ 708 $1,637 $15,794
Equity Income Fund
7/15/92
Class A $ 12,161 $ 2,831 $1,006 $15,998
Class B $ 12,116 $ 2,819 $ 995 $15,930
Growth and Income Fund
9/23/87
Class A $ 39,210 $17,095 $7,774 $64,079
Class B $ 39,020 $16,845 $7,233 $63,098
Institutional Shares $ 39,260 $17,154 $7,886 $64,300
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of Fund
$10,000 Gains Reinvested Inception
Investment Distributions Dividends Total Value Date
---------- ------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Capital Growth Fund 9/23/87
Class A $41,600 $9,064 $3,806 $54,470
Class B $41,210 $8,953 $3,526 $53,689
Institutional Shares $41,650 $9,090 $3,887 $54,627
Large Cap Equity Fund
11/30/90
Class A $13,250 $8,880 $1,834 $23,965
Class B $13,220 $8,866 $1,839 $23,925
Institutional Shares $13,270 $8,919 $1,881 $24,070
Small Cap Equity Fund
12/20/94
Class A $19,190 $ 220 $ 111 $19,521
Class B $19,000 $ 219 $ 60 $19,278
Institutional Shares $19,220 $ 221 $ 111 $19,552
Bond Fund
11/1/90
Class A $10,710 $ 363 $4,997 $16,070
Class B $10,760 $ 364 $4,972 $16,095
Institutional Shares $10,710 $ 365 $5,056 $16,131
Short Term Bond Fund
11/30/90
Class A $10,080 $ 17 $4,039 $14,137
Institutional Shares $10,120 $ 17 $3,872 $14,009
U.S. Government Securities Fund
2/19/93
Class A $ 9,900 $ 120 $2,051 $12,071
Institutional Shares $ 9,890 $ 120 $2,091 $12,101
American Value Fund $13,490 $ 305 $ 304 $14,099 2/3/95
</TABLE>
- ----------
*See the notes to the table captioned "Average Annual Total Return (excluding
sales charges)" above. The table above assumes an initial investment of $10,000
in a particular class of a Fund for the period from the Fund's commencement of
operations, although the particular class may have been introduced at a
subsequent date. As indicated above, performance information for each class
introduced after the commencement of operations of the related Fund (or
predecessor fund) is based on the performance history of a predecessor class,
and historical expenses have not been restated, for periods during which the
performance information for a particular class is based upon the performance
history of a predecessor class, to reflect the ongoing expenses currently borne
by the particualar class.
Non-Standardized Performance Results*
(includes sales charges)
With the current maximum sales charge for Class A shares (1.50% for
Short-Term Bond Fund; 4.50% for U.S. Treasury Income Fund, Balanced Fund, Equity
Income Fund, Bond Fund and U.S. Government Securities Fund; 4.75% for Growth and
Income Fund, Capital Growth Fund, Large Cap Equity Fund and Small Cap Equity
Fund) reflected , and the currently applicable CDSC for Class B shares for each
period length, the performance figures for the same periods would be as follows:
Value of Value of
Initial Capital Value of
Period Ended $10,000 Gains Reinvested
October 31, 1996 Investment Distributions Dividends Total Value
- ---------------- ---------- ------------- --------- -----------
U.S. Treasury
Income Fund
Class A $10,629 $1,053 $9,267 $20,949
Class B $11,110 $1,081 $9,313 $21,505
28
<PAGE>
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of
Period Ended $10,000 Gains Reinvested
October 31, 1996 Investment Distributions Dividends Total Value
- ---------------- ---------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Balanced Fund
Class A $13,208 $ 700 $1,804 $ 15,712
Class B $13,250 $ 708 $1,637 $ 15,594
Equity Income Fund
Class A $12,161 $ 2,831 $1,006 $ 15,998
Class B $11,816 $ 2,819 $ 995 $ 15,630
Growth and Income Fund
Class A $37,348 $16,283 $7,404 $ 61,035
Class B $39,020 $16,845 $7,233 $ 63,098
Capital Growth Fund
Class A $39,624 $ 8,633 $3,626 $ 51,883
Class B $41,210 $ 8,953 $3,526 $ 53,689
Large Cap Equity Fund
Class A $12,621 $ 8,459 $1,747 $ 22,826
Class B $13,220 $ 8,866 $1,839 $ 23,925
Small Cap Equity Fund
Class A $18,278 $ 210 $ 106 $ 18,594
Class B $18,700 $ 219 $ 60 $ 18,978
Bond Fund
Class A $10,228 $ 347 $4,772 $ 15,347
Class B $10,760 $ 364 $4,972 $ 16,095
Short-Term Bond Fund
Class A $ 9,929 $ 17 $3,979 $ 13,925
U.S. Government Securities Fund
Class A $ 9,455 $ 115 $1,959 $ 11,528
</TABLE>
- ----------
*See the notes to the table captioned "Average Annual Total Return (excluding
sales charges)" above. The table above assumes an initial investment of $10,000
in a particular class of a Fund for the period from the Fund's commencement of
operations, although the particular class may have been introduced at a
subsequent date. As indicated above, performance information for each class
introduced after the commencement of operations of the related Fund (or
predecessor fund) is based on the performance history of a predecessor class,
and historical expenses have not been restated, for periods during which the
performance information for a particular class is based upon the performance
history of a predecessor class, to reflect the ongoing expenses currently borne
by the particualar class.
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Equity securities in a Fund's or Portfolio's portfolio are valued at the
last sale price on the exchange on which they are primarily traded or on the
NASDAQ National Market System, or at the last quoted bid price for securities in
which there were no sales during the day or for other unlisted
(over-the-counter) securities not reported on the NASDAQ National Market System.
Bonds and other fixed income securities (other than short-term obligations, but
including listed issues) in a Fund's or Portfolio's portfolio are valued on the
basis of valuations furnished by a pricing service, the use of which has been
approved by the Board of Trustees. In making such valuations, the pricing
service utilizes both dealer-supplied valuations and electronic data
29
<PAGE>
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.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses are not
available until a completed and signed account application has been received by
the Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in Section 6 of the Account Application.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, a Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of such Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to such Fund in writing.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of readily marketable portfolio securities
(instead of cash). The securities so distributed would be valued at the same
amount as that assigned to them in calculating the net asset value for the
shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Trust has filed an election under Rule 18f-1 committing to pay in
cash all redemptions by a shareholder of record up to amounts specified by the
rule (approximately $250,000).
With respect to the Growth and Income Fund and Capital Growth Fund, the
Trust will redeem Fund shares in kind only if it has received a redemption in
kind from the corresponding Portfolio and therefore shareholders of the Fund
that receive redemptions in kind will receive portfolio securities of such
Portfolio and in no case will they receive a security issued by the Portfolio.
Each Portfolio has advised the Trust that the Portfolio will not redeem in kind
except in circumstances in which the corresponding Fund is permitted to redeem
in kind or unless requested by the corresponding Fund.
Each investor in a Portfolio, including the corresponding Fund, may add to
or reduce its investment in the Portfolio on each day that the New York Stock
Exchange is open for business. Once each such day, based upon prices determined
as of the close of regular trading on the New York Stock Exchange (normally 4:00
p.m., Eastern time, however, options are priced at 4:15 p.m., Eastern time) the
value of each investor's
30
<PAGE>
interest in a Portfolio will be determined by multiplying the net asset value of
the Portfolio by the percentage representing that investor's share of the
aggregate beneficial interests in the Portfolio. Any additions or reductions
which are to be effected on that day will then be effected. The investor's
percentage of the aggregate beneficial interests in a Portfolio will then be
recomputed as the percentage equal to the fraction (i) the numerator of which is
the value of such investor's investment in the Portfolio as of such time on such
day plus or minus, as the case may be, the amount of net additions to or
reductions in the investor's investment in the Portfolio effected on such day
and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of such time on such day plus or minus, as the case may be, the
amount of net additions to or reductions in the aggregate investments in the
Portfolio by all investors in the Portfolio. The percentage so determined will
then be applied to determine the value of the investor's interest in the
Portfolio as of such time on the following day the New York Stock Exchange is
open for trading.
Investors in Class A shares may qualify for reduced initial sales charges
by signing a statement of intention (the "Statement"). This enables the investor
to aggregate purchases of Class A shares in the Fund with purchases of Class A
shares of any other Fund in the Trust (or if a Fund has only one class, shares
of such Fund), excluding shares of any Vista money market fund, during a
13-month period. The sales charge is based on the total amount to be invested in
Class A shares during the 13-month period. All Class A or other qualifying
shares of these Funds currently owned by the investor will be credited as
purchases (at their current offering prices on the date the Statement is signed)
toward completion of the Statement. A 90-day back-dating period can be used to
include earlier purchases at the investor's cost. The 13-month period would then
begin on the date of the first purchase during the 90-day period. No retroactive
adjustment will be made if purchases exceed the amount indicated in the
Statement. A shareholder must notify the Transfer Agent or Distributor whenever
a purchase is being made pursuant to a Statement.
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 (or if
a Fund has only one class and is subject to an initial sales charge, shares of
such Fund) 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.
Class A shares of a Fund may also 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 excluding any Vista money market fund, and (b) applying the initial sales
charge applicable to such aggregate dollar value (the "Cumulative Quantity
Discount"). The privilege of the Cumulative Quality Discount is subject to
modification or discontinuance at any time with respect to all Class A shares
(or if a Fund has only one class and is subject to an initial sales charge,
shares of such Fund) purchased thereafter.
An individual who is a member of a qualified group (as hereinafter defined)
may also purchase Class A shares of a Fund (or if a Fund has only one class and
is subject to an initial sales charge, shares of such 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 (or if a Fund
has only one class and is subject to an initial sales charge, shares of such
Fund) previously purchased and still owned by the group plus the securities
currently being purchased and is determined as stated in the preceding
paragraph. 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
31
<PAGE>
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 (or if a Fund
has only one class and is subject to an initial sales charge, shares of such
Fund) 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 (or if a Fund has only one class and is subject to an initial sales
charge, shares of such Fund). 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 in the Fund. This privilege is subject to
modification or discontinuance at any time with respect to all Class A shares
(or if a Fund has only one class and is subject to an initial sales charge,
shares of such Fund) purchased thereafter.
Under the Exchange Privilege, shares may be exchanged for shares of another
fund only if shares of the fund exchanged into are registered in the state where
the exchange is to be made. Shares of a Fund may only be exchanged into another
fund if the account registrations are identical. With respect to exchanges from
any Vista money market fund, shareholders must have acquired their shares in
such money market fund by exchange from one of the Vista non-money market funds
or the exchange will be done at relative net asset value plus the appropriate
sales charge. Any such exchange may create a gain or loss to be recognized for
federal income tax purposes. Normally, shares of the fund to be acquired are
purchased on the redemption rate, but such purchase may be delayed by either
fund for up to five business days if a fund determines that it would be
disadvantaged by an immediate transfer of the proceeds.
The contingent deferred sales charge for Class B shares will be waived for
certain exchanges and for redemptions in connection with a Fund's systematic
withdrawal plan, subject to the conditions described in the Prospectuses. In
addition, subject to confirmation of a shareholder's status, the contingent
deferred sales charge will be waived for: (i) a total or partial redemption made
within one year of the shareholder's death or initial qualification for Social
Security disability payments; (ii) a redemption in connection with a Minimum
Required Distribution from an IRA, Keogh or custodial account under section
403(b) of the Internal Revenue Code or a mandatory distribution from a qualified
plan; (iii) redemptions made from an IRA, Keogh or custodial account under
section 403(b) of the Internal Revenue Code through an established Systematic
Redemption Plan; (iv) a redemption resulting from an over-contribution to an
IRA; (v) distributions from a qualified plan upon retirement; and (vi) an
involuntary redemption of an account balance under $500.
Class B shares automatically convert to Class A shares (and thus are then
subject to the lower expenses borne by Class A shares) after a period of time
specified below has elapsed since the date of purchase (the "CDSC Period"),
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares attributable to the
Class B shares then converting. The conversion of Class B shares purchased on or
after May 1, 1996, will be effected at the relative net asset values per share
of the two classes on the first business day of the month following the eighth
anniversary of the original purchase. The conversion of Class B shares purchased
prior to May 1, 1996, will be effected at the relative net asset values per
share of the two classes on the first business day of the month following the
seventh anniversary of the original purchase. If any exchanges of Class B shares
during the CDSC Period occurred, the holding period for the shares exchanged
will be counted toward the CDSC Period. At the time of the conversion the net
asset value per share of the Class A shares may be higher or lower than the net
asset value per share of the Class B shares; as a result, depending on the
relative net asset values per share, a shareholder may receive fewer or more
Class A shares than the number of Class B shares converted.
A Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written
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requests for additional account services made after a shareholder has submitted
an initial account application to the Fund, and in certain other circumstances
described in the Prospectuses. A Fund may also refuse to accept or carry out any
transaction that does not satisfy any restrictions then in effect. A signature
guarantee may be obtained from a bank, trust company, broker-dealer or other
member of a national securities exchange. Please note that a notary public
cannot provide a signature guarantee.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the respective Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in each Fund's Prospectus are not intended as substitutes
for careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, each Fund is not subject to federal income tax on
the portion of its net investment income (i.e., its investment company taxable
income, as that term is defined in the Code, without a deduction for dividends
paid ) and net capital gain (i.e., the excess of net long-term capital gains
over net short-term capital losses) that it distributes to shareholders,
provided that it distributes at least 90% of its net investment income 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 for each taxable
year, 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 from the sale or other disposition of
any of the following held for less than three months: (i) stock or securities,
(ii) options, futures or forward contracts (other than options, futures or
forward contracts on foreign currencies), or (iii) foreign currencies (or
foreign currency options, futures or forward contracts) that are not directly
related to its principal business of investing in stock or securities (or
options and futures with respect to stocks or securities) (the "Short-Short Gain
Test"). Because of the Short-Short Gain Test, a Fund may have to limit the sale
of appreciated securities that it has held for less than three months. However,
the Short-Short Gain Test will not prevent a Fund from disposing of investments
at a loss, since the recognition of a loss before the expiration of the
three-month holding period is disregarded for this purpose. Interest (including
original issue discount) received by a Fund at maturity or upon the disposition
of a security held for less than three months will not be treated as gross
income derived from the sale or other disposition of such security within the
meaning of the Short-Short Gain Test. However, income that is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent
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of the portion of the market discount which accrued during the period of time
the Fund held the debt obligation and has not already been included in income.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
such Fund and a contemporaneous contract to sell substantially identical
property in the future; (2) the transaction is a straddle within the meaning of
Section 1092 of the Code; (3) the transaction is one that was marketed or sold
to such Fund on the basis that it would have the economic characteristics of a
loan but the interest-like return would be taxed as capital gain; or (4) the
transaction is described as a conversion transaction in the Treasury
Regulations. The amount of the gain recharacterized generally will not exceed
the amount of the interest that would have accrued on the net investment for the
relevant period at a yield equal to 120% of the federal long-term, mid-term, or
short-term rate, depending upon the type of instrument at issue, reduced by an
amount equal to: (1) prior inclusions of ordinary income items from the
conversion transaction; and (2) the capitalized interest on acquisition
indebtedness under Code Section 263(g). Built-in losses will be preserved where
a Fund has a built-in loss with respect to property that becomes a part of a
conversion transaction. No authority exists that indicates that the converted
character of the income will not be passed to a Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if: (1) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (2) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto); or (3) the asset is stock and the Fund
grants an in-the- money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by certain of the Funds (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. A Fund, however,
may elect not to have this special tax treatment apply to Section 1256 contracts
that are part of a "mixed straddle" with other investments of the Fund that are
not Section 1256 contracts. The Internal Revenue Service (the "IRS") has held in
several private rulings that gains arising from Section 1256 contracts will not
be treated for purposes of the Short-Short Gain Test as being derived from
securities held for 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 for any taxable year,
to elect (unless it has made a taxable year election
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for excise tax purposes as discussed below) to treat all or any part of any net
capital loss, any net long-term capital loss or any net foreign currency loss
incurred after October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument. For purposes of asset diversification
testing, obligations issued or guaranteed by agencies or instrumentality's of
the U.S. Government such as the Federal Agricultural Mortgage Corporation, the
Farm Credit System Financial Assistance Corporation, a Federal Home Loan Bank,
the Federal Home Loan Mortgage Association, the Government National Mortgage
Corporation, and the Student Loan Marketing Association are treated as U.S.
Government Securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election"). The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year; and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will qualify for the 70% dividends-received deduction for
corpo-
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rations 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.
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 a Fund with respect to a taxable year
will qualify for the 70% dividends-received deduction generally available to
corporations to the extent of the amount of qualifying dividends received by a
Fund from domestic corporations for the taxable year. A dividend received by a
Fund will not be treated as a qualifying dividend (1) if it has been received
with respect to any share of stock that the Fund has held for less than 46 days
(91 days in the case of certain preferred stock), excluding for this purpose
under the rules of Code Section 246(c) (3) and (4): (i) any day more than 45
days (or 90 days in the case of certain preferred stock) after the date on which
the stock becomes ex-dividend and (ii) any period during which a Fund has an
option to sell, is under a contractual obligation to sell, has made and not
closed a short sale of, is the grantor of a deep-in-the-money or otherwise
nonqualified option to buy, or has otherwise diminished its risk of loss by
holding other positions with respect to, such (or substantially identical)
stock; (2) to the extent that a Fund is under an obligation (pursuant to a short
sale or otherwise) to make related payments with respect to positions in
substantially similar or related property; or (3) to the extent the stock on
which the dividend is paid is treated as debt-financed under the rules of Code
Section 246A. Moreover, the dividends-received deduction for a corporate
shareholder may be disallowed or reduced (1) if the corporate shareholder fails
to satisfy the foregoing requirements with respect to its shares of a Fund or
(2) by application of Code Section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items). In the case where a Fund invests all of its assets in a Portfolio and
the Fund satisfies the holding period rules pursuant to Code Section 246(c) as
to its interest in the Portfolio, a corporate shareholder which satisfies the
foregoing requirements with respect to its shares of the Fund should receive the
dividends-received deduction.
For purposes of the Corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMT.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from a Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings.
Investment income that may be received by certain of the Funds from sources
within foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle any such Fund to a reduced rate of, or exemption from, taxes on
such income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of any such Fund's assets to be invested in various
countries is not known.
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Distributions by a Fund that do not constitute ordinary income dividends,
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has provided
either an incorrect tax identification number or no number at all, (2) who is
subject to backup withholding by the IRS for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long- term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be disallowed to the
extent of the amount of exempt-interest dividends received on such shares and
(to the extent not disallowed) will be treated as a long-term capital loss to
the extent of the amount of capital gain dividends received on such shares. For
this purpose, the special holding period rules of Code Section 246(c)(3) and (4)
(discussed above in connection with the dividends-received deduction for
corporations) generally will apply in determining the holding period of shares.
Long-term capital gains of noncorporate taxpayers are currently taxed at a
maximum rate 11.6% lower than the maximum rate applicable to ordinary income.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of a Fund, (2)
disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
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Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid to
a foreign shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, capital gain dividends and
exempt-interest dividends and amounts retained by the Fund that are designated
as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
State and Local Tax Matters
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes or withholding taxes.
Most states provide that a regulated investment company may pass through
(without restriction) to its shareholders state and local income tax exemptions
available to direct owners of certain types of U.S. government securities (such
as U.S. Treasury obligations). Thus, for residents of these states,
distributions derived from a Fund's investment in certain types of U.S.
government securities should be free from state and local income taxes to the
extent that the interest income from such investments would have been exempt
from state and local income taxes if such securities had been held directly by
the respective shareholders themselves. Certain states, however, do not allow a
regulated investment company to pass through to its shareholders the state and
local income tax exemptions available to direct owners of certain types of U.S.
government securities unless the regulated investment company holds at least a
required amount of U.S. government securities. Accordingly, for residents of
these states, distributions derived from a Fund's investment in certain types of
U.S. government securities may not be entitled to the exemptions from state and
local income taxes that would be available if the shareholders had purchased
U.S. government securities directly. Shareholders' dividends attributable to a
Fund's income from repurchase agreements generally are subject to state and
local income taxes, although states and regulations vary in their treatment of
such income. The exemption from state and local income taxes does not preclude
states from asserting other taxes on the ownership of U.S. government
securities. To the extent that a Fund invests to a substantial degree in U.S.
government securities which are subject to favorable state and local tax
treatment, shareholders of such Fund will be notified as to the extent to which
distributions from the Fund are attributable to interest on such securities.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies may differ from the rules for U.S.
federal income taxation in other respects. 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.
Effect of Future Legislation
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 Informa-
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tion. 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.
MANAGEMENT OF THE TRUST AND THE FUNDS OR PORTFOLIOS
Trustees and Officers
The Trustees and officers of the Trust and their principal occupations for
at least the past five years are set forth below. Their titles may have varied
during that period.
Fergus Reid, III--Chairman of the Trust. Chairman and Chief Executive
Officer, Lumelite Corporation, since September 1985; Trustee, Morgan Stanley
Funds. Age: 64. Address: 202 June Road, Stamford, CT 06903.
Richard E. Ten Haken--Trustee; Chairman of the Audit Committee. Formerly
District Superintendent of Schools, Monroe No. 2 and Orleans Counties, New York;
Chairman of the Board and President, New York State Teachers' Retirement System.
Age: 62. Address: 4 Barnfield Road, Pittsford, NY 14534.
William J. Armstrong--Trustee. Vice President and Treasurer, Ingersoll-Rand
Company. Age: 55. Address: 49 Aspen Way, Upper Saddle River, NJ 07458.
John R.H. Blum--Trustee. Attorney in private practice; formerly, partner in
the law firm of Richards, O'Neil & Allegaert; Commissioner of Agriculture -
State of Connecticut, 1992-1995. Age: 67. Address: 322 Main Street, Lakeville,
CT 06039.
Joseph J. Harkins--Trustee. Retired; Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He was employed by Chase in numerous capacities and offices from 1954
through 1989. Director of Blessings Corporation, Jefferson Insurance Company of
New York, Monticello Insurance Company and National. Age: 65. Address: 257
Plantation Circle South, Ponte Vedra Beach, FL 32082.
*H. Richard Vartabedian--Trustee and President of the Trust. Consultant,
Republic Bank of New York; formerly, Senior Investment Officer, Division
Executive of the Investment Management Division of The Chase Manhattan Bank,
N.A., 1980 through 1991. Age: 61. Address: P.O. Box 296, Beach Road, Hendrick's
Head, Southport, ME 04576.
Stuart W. Cragin, Jr.--Trustee. Retired; formerly President, Fairfield
Testing Laboratory, Inc. He has previously served in a variety of marketing,
manufacturing and general management positions with Union Camp Corp., Trinity
Paper & Plastics Corp., and Conover Industries. Age: 63. Address: 108 Valley
Road, Cos Cob, CT 06807.
Irving L. Thode--Trustee. Retired; formerly Vice President of Quotron
Systems. He has previously served in a number of executive positions with
Control Data Corp., including President of its Latin American Operations, and
General Manager of its Data Services business. Age: 66. Address: 80 Perkins
Road, Greenwich, CT 06830.
*W. Perry Neff--Trustee. Independent Financial Consultant; Director of
North America Life Assurance Co., Petroleum & Resources Corp. and The Adams
Express Co.; formerly Director and Chairman of The Hanover Funds, Inc.; formerly
Director, Chairman and President of The Hanover Investment Funds, Inc. Age: 69.
Address: RR 1 Box 102, Weston, VT 05181.
Roland R. Eppley, Jr.--Trustee. Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association Inc. (1971-1988);
Director, Janel Hydraulics, Inc.; formerly Director of The Hanover Funds, Inc.
Age: 64. Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer of
The Adams Express Co. and Petroleum &
39
<PAGE>
Resources Corp.; formerly Director of The Hanover Funds, Inc. and The Hanover
Investment Funds, Inc. Age: 69. Address: 624 East 45th Street, Savannah, GA
31405
Martin R. Dean--Treasurer. Associate Director, Accounting Services, BISYS
Fund Services; formerly Senior Manager, KPMG Peat Marwick (1987-1994). Age: 33.
Address: 3435 Stelzer Road, Columbus, OH 43219.
W. Anthony Turner--Secretary. Senior Vice President and Regional Client
Executive, BISYS Fund Services; formerly Senior Vice President, First Union
Brokerage Services, Inc. and Senior Vice President, NationsBank. Age: 36.
Address: 125 W. 55th Street, New York, NY 10019.
- ----------
*Asterisks indicate those Trustees that are "interested persons" (as defined in
the 1940 Act). Mr. Reid is not an interested person of the Trust's investment
advisers or principal underwriter, but may be deemed an interested person of
the Trust solely by reason of being Chairman of the Trust.
The Board of Trustees of the Trust presently has an Audit Committee. The
members of the Audit Committee are Messrs. Ten Haken (Chairman), Blum, Cragin,
Thode, Armstrong, Harkins, Reid and Vartabedian. The function of the Audit
Committee is to recommend independent auditors and monitor accounting and
financial matters. The Audit Committee met two times during the fiscal year
ended October 31, 1996.
The Board of Trustees of the Trust has established an Investment Committee.
The members of the Investment Committee are Messrs. Vartabedian (President) and
Reid, as well as Leonard M. Spalding, President of Vista Capital Management. The
function of the Investment Committee is to review the investment management
process of the Trust.
The Trustees and officers of the Trust appearing in the table above also
serve in the same capacities with respect to Mutual Fund Trust, Mutual Fund
Variable Annuity Trust, Mutual Fund Select Group, Mutual Fund Select Trust,
Capital Growth Portfolio, Growth and Income Portfolio and International Equity
Portfolio (these entities, together with the Trust, are referred to below as the
"Vista Funds").
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisers is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the advisers. Each Trustee
receives a fee, allocated among all investment companies for which the Trustee
serves, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1996 for each Trustee of the Trust:
<TABLE>
<CAPTION>
Growth
Equity and Capital Large Cap American
Balanced Income Income Growth Equity Bond Value
Fund Fund Fund Fund Fund Fund Fund
-------- ------ ------- ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee $327.83 $92.74 $9,519.66 $5,139.80 $518.18 $384.51 $16.89
Richard E. Ten Haken, Trustee 214.32 61.81 6,265.51 3,384.56 336.47 253.11 10.50
William J. Armstrong, Trustee 218.59 61.81 6,346.47 3,426.53 345.44 256.35 11.26
John R.H. Blum, Trustee 218.59 61.81 6,346.47 3,426.53 345.44 256.35 11.26
Joseph J. Harkins, Trustee 218.59 61.81 6,346.47 3,426.53 345.44 256.35 11.26
H. Richard Vartabedian, Trustee 327.83 92.74 9,519.66 5,139.80 518.18 384.51 16.89
Stuart W. Cragin, Jr., Trustee 218.59 61.81 6,346.47 3,426.53 345.44 256.35 11.26
Irving L. Thode, Trustee 218.59 61.81 6,346.47 3,426.53 345.44 256.35 11.26
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Growth
Equity and Capital Large Cap American
Balanced Income Income Growth Equity Bond Value
Fund Fund Fund Fund Fund Fund Fund
-------- ------ ------ ------- --------- ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
W. Perry Neff, Trustee 109.95 24.22 2,124.56 1,153.62 194.49 100.05 11.26
Ronald R. Eppley, Jr., Trustee 109.95 24.22 2,124.56 1,153.62 194.49 100.05 11.26
W.D. MacCallan, Trustee 106.38 22.98 2,032.86 1,103.53 184.54 94.60 11.26
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Short- U.S. Inter- U.S.
Term Treasury Small Cap national Gov't Southeast
Bond Income Equity Equity Securities Asian Japan European
Fund Fund Fund Fund Fund Fund Fund Fund
------ -------- --------- -------- ---------- --------- ----- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee $281.07 $795.97 $936.61 $192.92 $150.43 $29.51 $10.46 $11.53
Richard E. Ten Haken, Trustee 184.24 521.45 605.29 127.57 93.94 19.68 6.96 7.69
William J. Armstrong, Trustee 187.37 530.67 624.44 128.61 100.30 19.68 6.96 7.69
John R.H. Blum, Trustee 187.37 530.67 624.44 128.61 100.30 19.68 6.96 7.69
Joseph J. Harkins, Trustee 187.37 530.67 624.44 128.61 100.30 19.68 6.96 7.69
H. Richard Vartabedian, Trustee 281.07 795.97 936.61 192.92 150.43 29.51 10.46 11.53
Stuart W. Cragin, Jr., Trustee 187.37 530.67 624.44 128.61 100.30 19.68 6.96 7.69
Irving L. Thode, Trustee 187.37 530.67 624.44 128.61 100.30 19.68 6.96 7.69
W. Perry Neff, Trustee 89.61 232.20 416.91 51.34 100.30 13.60 7.43 8.08
Ronald R. Eppley, Jr., Trustee 89.61 232.20 416.91 51.34 100.30 13.60 7.43 8.08
W.D. MacCallan, Trustee 86.24 222.38 398.56 49.06 94.47 13.60 7.43 8.08
</TABLE>
Pension or Total
Retirement Compensation
Benefits Accrued from
by the Fund Complex(1) "Fund Complex"(2)
---------------------- -----------------
Fergus Reid, III, Trustee $57,892 $90,000
Richard E. Ten Haken, Trustee 32,541 58,500
William J. Armstrong, Trustee 36,497 58,500
John R.H. Blum, Trustee 41,966 60,000
Joseph J. Harkins, Trustee 47,318 60,000
H. Richard Vartabedian, Trustee 42,584 90,000
Stuart W. Cragin, Jr., Trustee 30,652 60,000
Irving L. Thode, Trustee 36,439 60,000
W. Perry Neff, Trustee -- 43,500
Ronald R. Eppley, Jr., Trustee -- 43,500
W.D. MacCallan, Trustee -- 42,000
- ----------
(1) Data reflects total benefits accrued by the Trust, Capital Growth Portfolio,
Growth and Income Portfolio and International Equity Portfolio for the
fiscal year ended October 31, 1996 and by Mutual Fund Trust and Mutual Fund
Variable Annuity Trust for the fiscal year ended August 31, 1996.
(2) Data reflects total compensation earned during the period January 1, 1996 to
December 31, 1996 for service as a Trustee to all Funds advised by the
adviser.
42
<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 Vista Funds, the advisers, administrator or distributor
or any of their affiliates) may be entitled to certain benefits upon retirement
from the Board of Trustees. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the adviser (collectively, the "Covered Funds"). Each
Eligible Trustee is entitled to receive from the Covered Funds an annual benefit
commencing on the first day of the calendar quarter coincident with or following
his date of retirement equal to the sum of (i) 8% of the highest annual
compensation received from the Covered Funds multiplied by the number of such
Trustee's years of service (not in excess of 10 years) completed with respect to
any of the Covered Funds and (ii) 4% of the highest annual compensation received
from the Covered Funds for each year of service in excess of 10 years, provided
that no Trustee's annual benefit will exceed the highest annual compensation
received by that Trustee from the Covered Funds. Such benefit is payable to each
eligible Trustee in monthly installments for the life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of October 31, 1996, the estimated credited years of
service for Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian,
Cragin, Thode, Neff, Eppley and MacCallan are 12, 12, 9, 12, 6, 5, 4, 4, 12, 8
and 7, respectively.
Highest Annual Compensation Paid by All Vista Funds
--------------------------------------------------------------
$60,000 $70,000 $80,000 $90,000 $100,000
Years of
Service Estimated Annual Benefits upon Retirement
- --------- --------------------------------------------------------------
14 $57,600 $67,200 $76,800 $86,400 $96,000
12 52,800 61,600 70,400 79,200 88,000
10 48,000 56,000 64,000 72,000 80,000
8 38,400 44,800 51,200 57,600 64,000
6 28,800 33,600 38,400 43,200 48,000
4 19,200 22,400 25,600 28,800 32,000
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which
each Trustee (who is not an employee of any of the Funds, the advisers,
administrator or distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustee's fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination of
service). The deferred amounts are invested in shares of Vista funds selected by
the Trustee. The deferred amounts are paid out in a lump sum or over a period of
several years as elected by the Trustee at the time of deferral. If a deferring
Trustee dies prior to the distribution of amounts held in the deferral account,
the balance of the deferral account will be distributed to the Trustee's
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring Trustee's death.
Messrs. Ten Haken, Thode and Vartabedian each executed a deferred
compensation agreement for the 1996 calendar year and as of October 31, 1996
they had contributed $17,400, $45,000, and $67,500, respectively.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices or with
respect to any matter unless it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best interest
of the Trust. In the case of settlement, such indemnification
43
<PAGE>
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 willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.
As of April 30, 1997, the Trustees and officers as a group owned less than
1% of each Fund's outstanding shares, all of which were acquired for investment
purposes. For the fiscal year ended October 31, 1996, the Trust paid its
disinterested Trustees fees and expenses for all of the meetings of the Board
and any committees attended in the aggregate amount of approximately $12,796
which amount was then apportioned between the Funds comprising the Trust.
Adviser and Sub-Advisers
Chase acts as investment adviser to the Funds or Portfolios pursuant to an
Investment Advisory Agreement, dated as of May 6, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase is responsible for investment decisions for the Funds or Portfolios.
Pursuant to the terms of the Advisory Agreement, Chase provides the Funds or
Portfolios with such investment advice and supervision as it deems necessary for
the proper supervision of the Funds' or Portfolios' investments. The advisers
continuously provide investment programs and determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the Funds'
or Portfolios' assets shall be held uninvested. The advisers to the Funds or
Portfolios furnish, at their own expense, all services, facilities and personnel
necessary in connection with managing the investments and effecting portfolio
transactions for the Funds or Portfolios. The Advisory Agreement for the Funds
or Portfolios will continue in effect from year to year only if such continuance
is specifically approved at least annually by the Board of Trustees or by vote
of a majority of a Fund's or Portfolio's outstanding voting securities and by a
majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on such Advisory Agreement.
Under the Advisory Agreement, the adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Funds and
Portfolios with greater opportunities and flexibility in accessing investment
expertise.
Pursuant to the terms of the Advisory Agreement and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without penalty
by the Trust on behalf of the Funds on not more than 60 days', nor less than 30
days', written notice when authorized either by a majority vote of a Fund's
shareholders or by a vote of a majority of the Board of Trustees of the Trust,
or by the adviser or sub-adviser on not more than 60 days', nor less than 30
days', written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The advisory agreements provide that
the adviser or sub-adviser under such agreement shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of portfolio transactions
for the respective Fund, except for wilful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties thereunder.
With respect to the Equity Funds or Equity Portfolios, the equity research
team of the adviser looks for two key variables when analyzing stocks for
potential investment by equity portfolios: value and momentum. To uncover these
qualities, the team uses a combination of quantitative analysis, fundamental
research and computer technology to help identify undervalued stocks.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to the Funds imposed by the securities laws or regulations thereunder
of any state in which the shares of the Funds are qualified for sale, as such
limitations may be raised or lowered from time to time, the adviser
44
<PAGE>
shall reduce its advisory fee (which fee is described below) to the extent of
its share of such excess expenses. The amount of any such reduction to be borne
by the adviser shall be deducted from the monthly advisory fee otherwise payable
with respect to the Funds during such fiscal year; and if such amounts should
exceed the monthly fee, the adviser shall pay to a Fund its share of such excess
expenses no later than the last day of the first month of the next succeeding
fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement provides
that Chase may render services through its own employees or the employees of one
or more affiliated companies that are qualified to act as an investment adviser
of the Fund and are under the common control of Chase as long as all such
persons are functioning as part of an organized group of persons, managed by
authorized officers of Chase.
Chase, on behalf of the Funds or Portfolios (except the American Value
Fund), has entered into an investment sub-advisory agreement dated as of May 6,
1996 with Chase Asset Management, Inc. ("CAM"). With respect to the American
Value Fund, Chase has entered into an investment sub-advisory agreement with Van
Deventer & Hoch ("VDH") dated as of May 6, 1996. With respect to the day-to-day
management of the Funds or Portfolios, under the sub-advisory agreements, the
sub-advisers make decisions concerning, and place all orders for, purchases and
sales of securities and helps maintain the records relating to such purchases
and sales. The sub-advisers may, in their discretion, provide such services
through their own employees or the employees of one or more affiliated companies
that are qualified to act as an investment adviser to the Company under
applicable laws and are under the common control of Chase; provided that (i) all
persons, when providing services under the sub-advisory agreement, are
functioning as part of an organized group of persons, and (ii) such organized
group of persons is managed at all times by authorized officers of the
sub-advisers. This arrangement will not result in the payment of additional fees
by the Funds.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. Also included among Chase's accounts are commingled trust
funds and a broad spectrum of individual trust and investment management
portfolios. These accounts have varying investment objectives.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange Commission as an investment adviser
and was formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function, and the same individuals who serve as portfolio managers
for CAM also serve as portfolio managers for Chase.
VDH has been in the investment counselling business since 1969 and is
ultimately controlled and equally owned by key professionals of VDH and Chase
Manhattan Corporation. VDH provides a wide range of asset management services to
individuals, corporations, private and charitable trusts, endowments,
foundations and retirement funds.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from each Fund or
Portfolio an investment advisory fee computed daily and paid monthly based on a
rate equal to a percentage of such Fund's or Portfolio's average daily net
assets specified in the relevant Prospectuses. However, the adviser may
voluntarily agree to waive a portion of the fees payable to it on a
month-to-month basis. For its services under its sub-advisory agreement, CAM (or
VDH in the case of the American Value Fund) will be entitled to receive, with
respect to each such Fund or Portfolio, such compensation, payable by the
adviser out of its advisory fee, as is described in the relevant Prospectuses.
For the fiscal years ended October 31, 1994, 1995 and 1996, Chase was paid
or accrued the following investment advisory fees with respect to the following
Funds and Portfolios, and voluntarily waived the amounts in parentheses
following such fees with respect to each such period:
45
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
------------------------------------------------------------------------------------------------
1994 1995 1996
Fund paid/accrued waived paid/accrued waived paid/accrued waved
- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Income Fund $351,680 ($234,236) $319,705 ($220,998) $ 331,915 ($137,440)
Growth and Income Fund * -- * -- * --
Capital Growth Fund * -- * -- * --
Balanced Fund $103,522 ($103,522) $145,295 ($145,295) $ 253,986 ($125,808)
Equity Income Fund $ 52,804 ($ 31,989) $ 44,277 ($ 35,433) $ 54,769 ($ 53,342)
Large Cap Equity Fund $378,813 ($378,813) $250,452 ($250,452) $ 337,772 ($337,772)
Bond Fund $167,780 ($167,780) $162,618 ($162,618) $ 143,017 ($143,017)
Short-Term Bond Fund $137,634 ($137,634) $ 85,353 ($ 85,353) $ 105,509 ($105,509)
Small Cap Equity Fund -- -- $130,401 ($130,401) $1,069,668 ($ 31,530)
American Value Fund -- -- -- -- $ 57,746 ($ 57,746)#
U.S. Government Securities Fund -- -- -- -- $ 288,582 ($ 17,569)#
</TABLE>
- ----------
* On November 23, 1993, these Funds changed their structure to a Master/Feeder
Fund Structure and do not have an investment adviser because the Trust seeks
to achieve the investment objective of the Funds by investing all of the
investable assets of each respective Fund in each respective Portfolio. The
Portfolios' investment adviser is Chase. With respect to the Growth and Income
Portfolio and the Capital Growth Portfolio, for the period November 23, 1993
to October 31, 1994, Chase was paid or accrued the following investment
advisory fees, and voluntarily waived the amounts in parentheses following
such fees: $4,805,067 ($0.00) and $1,649,889 ($0.00), respectively. For the
fiscal year ended October 31, 1995, Chase was paid or accrued the following
investment advisory fees, and voluntarily waived the amounts in parentheses
following such fees: $6,815,197 ($0.00) and $3,563,194 ($0.00), respectively,
with respect to such Portfolios. For the year ended October 31, 1996, Chase
was paid or accrued investment advisory fees of $8,101,188 and $4,226,466,
respectively, with respect to such Portfolios.
# Fees paid or accrued for the period from December 1, 1995 through October 31,
1996.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds and the administrator of
each Portfolio. Chase provides certain administrative services to the Funds and
Portfolios, including, among other responsibilities, coordinating the
negotiation of contracts and fees with, and the monitoring of performance and
billing of, the Funds' and Portfolios' independent contractors and agents;
preparation for signature by an officer of the Trust and Portfolios of all
documents required to be filed for compliance by the Trust and Portfolios with
applicable laws and regulations excluding those of the securities laws of
various states; arranging for the computation of performance data, including net
asset value and yield; responding to shareholder inquiries; and arranging for
the maintenance of books and records of the Funds and Portfolios and providing,
at its own expense, office facilities, equipment and personnel necessary to
carry out its duties. Chase in its capacity as administrator does not have any
responsibility or authority for the management of the Funds or Portfolios, the
determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
Under the Administration Agreements Chase is permitted to render
administrative services to others. The Administration Agreements will continue
in effect from year to year with respect to each Fund or Portfolio only if such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or Portfolio or by vote of a majority of such Fund's or Portfolio's
outstanding voting securities and, in either case, by a majority of the Trustees
who are not parties to the Administration Agreements or "interested persons" (as
defined in the 1940 Act) of any such party. The Administration Agreements are
terminable without penalty by the Trust on behalf
46
<PAGE>
of each Fund or by a Portfolio on 60 days' written notice when authorized either
by a majority vote of such Fund's or Portfolio shareholders or by vote of a
majority of the Board of Trustees, including a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust or
Portfolios, or by Chase on 60 days' written notice, and will automatically
terminate in the event of their "assignment" (as defined in the 1940 Act). The
Administration Agreements also provide that neither Chase or its personnel shall
be liable for any error of judgment or mistake of law or for any act or omission
in the administration of the Funds or Portfolios, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Administration Agreements.
In addition, the Administration Agreements provide that, in the event the
operating expenses of any Fund or Portfolio, including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to that
Fund imposed by the securities laws or regulations thereunder of any state in
which the shares of such Fund are qualified for sale, as such limitations may be
raised or lowered from time to time, Chase shall reduce its administration fee
(which fee is described below) to the extent of its share of such excess
expenses. The amount of any such reduction to be borne by Chase shall be
deducted from the monthly administration fee otherwise payable to Chase during
such fiscal year, and if such amounts should exceed the monthly fee, Chase shall
pay to such Fund or Portfolio its share of such excess expenses no later than
the last day of the first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreements, Chase receives from each Fund a fee computed daily
and paid monthly at an annual rate equal to 0.10% of each of the Fund's average
daily net assets, on an annualized basis for the Fund's then-current fiscal
year, except that with respect to the Growth and Income Fund and Capital Growth
Fund, Chase receives from each of the Funds and the Portfolios a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets. Chase may voluntarily waive a portion of the fees
payable to it with respect to each Fund on a month-to-month basis.
For the fiscal years ended October 31, 1994, 1995 and 1996, Chase was paid
or accrued the following administration fees and voluntarily waived the amounts
in parentheses following such fees:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
---------------------------------------------------------------------------------------------
1994 1995 1996
Fund paid/accrued waived paid/accrued waived paid/accrued waived
- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Income Fund $117,228 ($78,078) $106,559 ($ 76,094) $110,678 ($23,372)
Growth and Income Fund $637,264 none $830,077 ($252,586) $971,251 none
Capital Growth Fund $208,866 none $435,695 ($116,282) $526,852 none
Balanced Fund $ 20,704 ($20,704) $ 29,053 ($ 29,053) $ 50,797 ($14,689)
Equity Income Fund $ 13,201 ($ 7,764) $ 11,069 ($ 8,855) $ 13,692 ($13,293)
Large Cap Equity Fund $ 94,703 ($94,703) $ 62,613 ($ 62,613) $ 84,443 ($84,443)
Bond Fund $ 55,927 ($55,927) $ 54,206 ($ 54,206) $ 47,715 ($47,715)
Short-Term Bond Fund $ 55,054 ($55,054) $ 34,141 ($ 34,141) $ 42,171 ($42,171)
Small Cap Equity Fund -- -- $ 20,040 ($ 20,040) $164,564 ($ 6,152)
American Value Fund -- -- -- -- $ 7,293 ($ 7,293)#
U.S. Government Securities Fund -- -- -- -- $ 63,984 ($26,354)#
</TABLE>
- ----------
# Fees paid or accrued for the period from December 1, 1995 through October 31,
1996.
47
<PAGE>
Distribution Plans
The Trust has adopted separate plans of distribution pursuant to Rule 12b-1
under the 1940 Act (a "Distribution Plan") on behalf of certain classes of
shares of certain Funds as described in the Prospectuses, which provide such
classes of such Funds shall pay for distribution services a distribution fee
(the "Distribution Fee"), including payments to the Distributor, at annual rates
not to exceed the amounts set forth in their respective Prospectuses. The
Distributor may use all or any portion of such Distribution Fee to pay for Fund
expenses of printing prospectuses and reports used for sales purposes, expenses
of the preparation and printing of sales literature and other such
distribution-related expenses.
Class B shares pay a Distribution Fee of up to 0.75% of average daily net
assets. The Distributor currently expects to pay sales commissions to a dealer
at the time of sale of Class B shares of up to 4.00% of the purchase price of
the shares sold by such dealer. The Distributor will use its own funds (which
may be borrowed or otherwise financed) to pay such amounts. Because the
Distributor will receive a maximum Distribution Fee of 0.75% of average daily
net assets with respect to Class B shares, it will take the Distributor several
years to recoup the sales commissions paid to dealers and other sales expenses.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to exceed
0.25% annualized of the average net asset values of Class A shares, or 0.25%
annualized of the average net asset value of the Class B shares, or 0.25%
annualized of the average net asset value of the shares of the American Value
Fund maintained in a Fund by such broker-dealers' customers. Trail or
maintenance commissions on Class B shares will be paid to broker-dealers
beginning the 13th month following the purchase of such Class B shares. Since
the distribution fees are not directly tied to expenses, the amount of
distribution fees paid by a Fund during any year may be more or less than actual
expenses incurred pursuant to the Distribution Plans. For this reason, this type
of distribution fee arrangement is characterized by the staff of the Securities
and Exchange Commission as being of the "compensation variety" (in contrast to
"reimbursement" arrangements by which a distributor's payments are directly
linked to its expenses). With respect to Class B shares, because of the 0.75%
annual limitation on the compensation paid to the Distributor during a fiscal
year, compensation relating to a large portion of the commissions attributable
to sales of Class B shares in any one year will be accrued and paid by a Fund to
the Distributor in fiscal years subsequent thereto. In determining whether to
purchase Class B shares, investors should consider that compensation payments
could continue until the Distributor has been fully reimbursed for the
commissions paid on sales of Class B shares. However, the Shares are not liable
for any distribution expenses incurred in excess of the Distribution Fee paid.
Each class of shares is entitled to exclusive voting rights with respect to
matters concerning its Distribution Plan.
Each Distribution Plan provides that it will continue in effect
indefinitely if such continuance is specifically approved at least annually by a
vote of both a majority of the Trustees and a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the operation of the Distribution
Plans or in any agreement related to such Plan ("Qualified Trustees"). The
continuance of each Distribution Plan was most recently approved on October 13,
1995. Each Distribution Plan requires that the Trust shall provide to the Board
of Trustees, and the Board of Trustees shall review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Distribution Plan. Each Distribution Plan further provides that the selection
and nomination of Qualified Trustees shall be committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. Each
Distribution Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees or, with respect to a particular Fund, by vote of a majority
of the outstanding voting Shares of the class of such Fund to which it applies
(as defined in the 1940 Act). Each Distribution Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders and may not be materially amended in any case without a
vote of the majority of both the Trustees and the Qualified Trustees. Each of
the Funds will preserve copies of any plan, agreement or report made pursuant to
48
<PAGE>
a Distribution Plan for a period of not less than six years from the date of the
Distribution Plan, and for the first two years such copies will be preserved in
an easily accessible place. For the fiscal year ended October 31, 1996, the
Distributor was paid or accrued the following Distribution Fees and voluntarily
waived the amounts of such fees:
Fund Paid/Accrued Waived
- --------------------------------- --------------- --------------
U.S. Treasury Income Fund
A Shares $ 249,325 ($25,249)
B Shares $ 81,177 --
Growth and Income Fund
A Shares $3,988,568 --
B Shares $2,461,737 --
Capital Growth Fund
A Shares $1,836,896 --
B Shares $2,239,953 --
Balanced Fund
A Shares $ 107,170 ($ 9,081)
B Shares $ 59,467 --
Equity Income Fund
A Shares $ 33,992 ($11,667)
B Shares $ 721 --
Large Cap Equity Fund
A Shares $ 8,140 --
B Shares $ 288 --
Institutional Shares* $ 71,707 ($21,319)
Bond Fund
A Shares $ 733 --
B Shares $ 1,547 --
Institutional Shares* $ 74,061 ($38,507)
Short-Term Bond Fund
A Shares $ 12,279 ($ 7,928)
Institutional Shares* $ 46,466 ($38,033)
Small Cap Equity Fund
A Shares $ 237,707 --
B Shares $ 351,044 --
American Value Fund# $ 11,065 ($11,065)
U.S. Government Securities Fund#
Class A $ 3,551 ($ 3,551)
- ----------
* Represents distribution fees paid prior to reclassification of shares on
5/6/96. There is currently no distribution plan for the Institutional classes
of the Funds.
# Fees paid or accrued for the period from May 6, 1996 through October 31, 1996.
With respect to the Class A shares of the Funds, the Distribution Fee was
allocated as follows:
<TABLE>
<CAPTION>
Printing, Postage Sales Advertising &
Fund and Handling Compensation Administrative Filings
- --------------------------- ----------------- ------------ ----------------------
<S> <C> <C> <C>
U.S. Treasury Income Fund $ 47,930 $ 137,403 $ 38,743
Growth and Income Fund $853,155 $2,445,790 $689,623
Capital Growth Fund $392,912 $1,126,385 $317,599
Balanced Fund $ 20,981 $ 60,148 $ 16,960
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Printing, Postage Sales Advertising &
Fund and Handling Compensation Administrative Filings
- --------------------------- ----------------- ------------ ----------------------
<S> <C> <C> <C>
Equity Income Fund $ 4,775 $ 13,690 $ 3,860
Large Cap Equity Fund $ 1,741 $ 4,992 $ 1,407
Bond Fund $ 157 $ 449 $ 127
Short-Term Bond Fund $ 931 $ 2,668 $ 752
Small Cap Equity Fund $50,846 $145,761 $41,100
</TABLE>
Distribution and Sub-Administration Agreement
The Trust has entered into a Distribution and Sub-Administration Agreement
dated August 24, 1995 (the "Distribution Agreement") with the Distributor,
pursuant to which the Distributor acts as the Funds' exclusive underwriter,
provides certain administration services and promotes and arranges for the sale
of each class of Shares. The Distributor is a wholly-owned subsidiary of BISYS
Fund Services, Inc. The Distribution Agreement provides that the Distributor
will bear the expenses of printing, distributing and filing prospectuses and
statements of additional information and reports used for sales purposes, and of
preparing and printing sales literature and advertisements not paid for by the
Distribution Plan. The Trust pays for all of the expenses for qualification of
the shares of each Fund for sale in connection with the public offering of such
shares, and all legal expenses in connection therewith. In addition, pursuant to
the Distribution Agreement, the Distributor provides certain sub-administration
services to the Trust, including providing officers, clerical staff and office
space.
The Distribution Agreement is currently in effect and will continue in
effect with respect to each Fund only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority of
such Fund's outstanding voting securities and, in either case, by a majority of
the Trustees who are not parties to the Distribution Agreement or "interested
persons" (as defined in the 1940 Act) of any such party. The Distribution
Agreement is terminable without penalty by the Trust on behalf of each Fund on
60 days' written notice when authorized either by a majority vote of such Fund's
shareholders or by vote of a majority of the Board of Trustees of the Trust,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, or by the Distributor on 60 days' written
notice, and will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The Distribution Agreement also provides that neither
the Distributor nor its personnel shall be liable for any act or omission in the
course of, or connected with, rendering services under the Distribution
Agreement, except for willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties.
In the event the operating expenses of any Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to that Fund imposed by the securities laws or regulations thereunder
of any state in which the shares of such Fund are qualified for sale, as such
limitations may be raised or lowered from time to time, the Distributor shall
reduce its sub-administration fee with respect to such Fund (which fee is
described below) to the extent of its share of such excess expenses. The amount
of any such reduction to be borne by the Distributor shall be deducted from the
monthly sub-administration fee otherwise payable with respect to such Fund
during such fiscal year; and if such amounts should exceed the monthly fee, the
Distributor shall pay to such Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives an
annual fee, payable monthly, of 0.05% of the net assets of each Fund. However,
the Distributor has voluntarily agreed to waive a portion of the fees payable to
it under the Distribution Agreement with respect to each Fund on a
month-to-month basis. For the fiscal years ended October 31, 1994, 1995 and 1996
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:
50
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
-----------------------------------------------------------------------------------
1994 1995 1996
Fund payable waived payable waived payable waived
- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Income Fund $ 58,614 none $ 53,284 none $ 55,339 none
Growth and Income Fund $637,264 none $ 830,077 none $971,201 none
Capital Growth Fund $208,866 none $ 435,488 none $526,852 none
Balanced Fund $ 10,352 ($10,352) $ 14,527 ($14,527) $ 25,399 ($1,680)
Equity Income Fund $ 6,601 none $ 5,535 none $ 6,846 none
Large Cap Equity Fund $ 47,352 none $ 31,306 none $ 42,221 none
Bond Fund $ 27,963 none $ 27,103 none $ 23,793 none
Short-Term Bond Fund $ 27,527 none $ 17,071 none $ 21,085 none
Small Cap Equity Fund -- -- $ 10,030 $ 3,488 $ 82,282 none
American Value Fund -- -- -- -- $ 2,213 none#
U.S. Government Securities Fund -- -- -- -- $ 18,814 none##
</TABLE>
- ----------
# Fees paid or accrued for the period from December 1, 1995 through October 31,
1996.
## Fees paid or accrued for the period from May 6, 1996 through October 31,
1996.
51
<PAGE>
Shareholder Servicing Agents, Transfer Agent and Custodian
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent to provide certain services
including but not limited to the following: answer customer inquiries regarding
account status and history, the manner in which purchases and redemptions of
shares may be effected for the Fund as to which the Shareholder Servicing Agent
is so acting and certain other matters pertaining to the Fund; assist
shareholders in designating and changing dividend options, account designations
and addresses; provide necessary personnel and facilities to establish and
maintain shareholder accounts and records; assist in processing purchase and
redemption transactions; arrange for the wiring of funds; transmit and receive
funds in connection with customer orders to purchase or redeem shares; verify
and guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts; furnish (either
separately or on an integrated basis with other reports sent to a shareholder by
a Shareholder Servicing Agent) quarterly and year-end statements and
confirmations of purchases and redemptions; transmit, on behalf of the Fund,
proxy statements, annual reports, updated prospectuses and other communications
to shareholders of the Fund; receive, tabulate and transmit to the Fund proxies
executed by shareholders with respect to meetings of shareholders of the Fund;
and provide such other related services as the Fund or a shareholder may
request. Shareholder servicing agents may be required to register pursuant to
state securities law.
Each Shareholder Servicing Agent may voluntarily agree from time to time to
waive a portion of the fees payable to it under its Servicing Agreement with
respect to each Fund on a month-to-month basis. For the fiscal years ended
October 31, 1994, 1995 and 1996, fees payable to the Shareholder Servicing
Agents (all of which currently are related parties) and the amounts voluntarily
waived for each such period (as indicated in parentheses), were as follows:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
--------------------------------------------------------------------------------------
1994 1995 1996
Fund payable waived payable waived payable waived
- ----
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Income Fund
Class A $ 285,388 ($177,004) $ 246,251 ($197,001) $ 249,561 ($222,710)
Class B $ 7,681 -- $ 20,153 -- $ 27,059 --
Growth and Income Fund
Class A $2,999,532 -- $3,610,762 -- $3,989,725 --
Class B $ 186,791 -- $ 539,805 -- $ 820,579 --
Institutional -- -- -- -- $ 46,244 --
Capital Growth Fund
Class A $ 936,977 -- $1,674,668 -- $1,836,642 --
Class B $ 107,015 -- $ 503,805 -- $ 746,722 --
Institutional -- -- -- -- $ 50,897 --
Balanced Fund
Class A $ 47,750 ($ 45,962) $ 60,650 ($ 48,520) $ 107,171 ($ 98,086)
Class B $ 4,011 -- $ 11,983 -- $ 19,822 --
Bond Fund
Class A -- -- -- -- $ 733 $ 733
Class B -- -- -- -- $ 516 --
Institutional -- -- -- -- $ 43,872 ($ 12,631)
Short-Term Bond Fund
Class A -- -- -- -- $ 12,200 ($ 8,772)
Institutional -- -- -- -- $ 46,925 ($ 31,710)
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
-------------------------------------------------------------------------------
1994 1995 1996
Fund payable waived payable waived payable waived
- ----
<S> <C> <C> <C> <C> <C> <C>
Large Cap Equity
Class A -- -- -- -- $ 8,140 --
Class B -- -- -- -- $ 96 --
Institutional -- -- -- -- $131,164 ($24,277)
Equity Income Fund
Class A $33,030 ($22,131) $27,673 ($26,964) $ 33,998 ($33,998)
Class B -- -- -- -- $ 240 --
Small Cap Equity Fund
Class A n/a -- -- -- $ 37,103 --
Class B n/a $14,689 -- -- $117,011 --
Institutional -- -- -- -- $ 38,235 ($38,235)
American Value Fund -- -- -- -- $ 22,535 ($12,977))#
U.S. Government Securities Fund
Class A -- -- -- -- $ 3,551 ($ 3,551)#
Institutional -- -- -- -- $195,938 ($35,066)#
</TABLE>
- ----------
# Fees paid or accrued for the period from December 1, 1995 through October
31, 1996.
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight and
record keeping for the assets held in the portfolios of each Fund. Chase also
provides fund accounting services for the income, expenses and shares
outstanding for such Funds. Chase is located at 3 Metrotech Center, Brooklyn, NY
11245.
INDEPENDENT ACCOUNTANTS
The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended October 31, 1996, and
the related financial highlights which appear in the Prospectuses, have been
incorporated herein and included in the Prospectuses in reliance on the reports
of Price Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036,
independent accountants of the Funds, given on the authority of said firm as
experts in accounting and auditing. Price Waterhouse LLP provides the Funds with
audit services, tax return preparation and assistance and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission.
CERTAIN REGULATORY MATTERS
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in the Prospectus and this Statement of Additional Information without
violating such laws. If future changes in these laws or interpretations required
Chase to alter or discontinue any of these services, it is expected that the
Board of Trustees would recommend alternative arrangements and that investors
would not suffer adverse financial consequences. State securities laws may
differ from the interpretations of banking law described above and banks may be
required to register as dealers pursuant to state law.
53
<PAGE>
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of any
of the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Funds' distributor or affiliates of the distributor. Chase will
not invest any Fund assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction my limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by any Fund. Chase has informed the Funds that in making its investment
decision, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the division
that performs services for the Trust as custodian, or in the possession of any
affiliate of Chase. Shareholders of the Funds should be aware that, subject to
applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholder and his
account. Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, non-diversified management investment
company organized as Massachusetts business trust under the laws of the
Commonwealth of Massachusetts in 1987. The Trust currently consists of 17 series
of shares of beneficial interest, par value $.001 per share. With respect to
certain Funds, the Trust may offer more than one class of shares. The Trust has
reserved the right to create and issue additional series or classes. Each share
of a series or class represents an equal proportionate interest in that series
or class with each other share of that series or class. The shares of each
series or class participate equally in the earnings, dividends and assets of the
particular series or class. Expenses of the Trust which are not attributable to
a specific series or class are allocated amount all the series in a manner
believed by management of the Trust to be fair and equitable. Shares have no
pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each share held. Shares of each series or class generally vote together,
except when required under federal securities laws to vote separately on matters
that only affect a particular class, such as the approval of distribution plans
for a particular class. With respect to shares purchased through a Shareholder
Servicing Agent and, in the event written proxy instructions are not received by
a Fund or its designated agent prior to a shareholder meeting at which a proxy
is to be voted and the shareholder does not attend the meeting in person, the
Shareholder Servicing Agent for such shareholder will be authorized pursuant to
an applicable agreement with the shareholder to vote the shareholder's
outstanding shares in the same proportion as the votes cast by other Fund
shareholders represented at the meeting in person or by proxy.
Certain Funds offer both Class A and Class B shares. The classes of shares
have several different attributes relating to sales charges and expenses, as
described herein and in the Prospectuses. In addition to such differences,
expenses borne by each class of a Fund may differ slightly because of the
allocation of other class-specific expenses. For example, a higher transfer
agency fee may be imposed on Class B shares than on Class A shares. The relative
impact of initial sales charges, contingent deferred sales charges, and ongoing
annual expenses will depend on the length of time a share is held.
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
54
<PAGE>
matters for a shareholder vote. Shareholders have, under certain circumstances,
the right to communicate with other shareholders in connection with requesting a
meeting of shareholders for the purpose of removing one or more Trustees.
Shareholders also have, in certain circumstances, the right to remove one or
more Trustees without a meeting. No material amendment may be made to the
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each portfolio affected by the amendment.
The Trust's Declaration of Trust provides that, at any meeting of shareholders
of the Trust or of any series or class, a Shareholder Servicing Agent may vote
any shares as to which such Shareholder Servicing Agent is the agent of record
and which are not represented in person or by proxy at the meeting,
proportionately in accordance with the votes cast by holders of all shares of
that portfolio otherwise represented at the meeting in person or by proxy as to
which such Shareholder Servicing Agent is the agent of record. Any shares so
voted by a Shareholder Servicing Agent will be deemed represented at the meeting
for purposes of quorum requirements. Shares have no preemptive or conversion
rights. Shares, when issued, are fully paid and non-assessable, except as set
forth below. Any series or class may be terminated (i) upon the merger or
consolidation with, or the sale or disposition of all or substantially all of
its assets to, another entity, if approved by the vote of the holders of
two-thirds of its outstanding shares, except that if the Board of Trustees
recommends such merger, consolidation or sale or disposition of assets, the
approval by vote of the holders of a majority of the series' or class'
outstanding shares will be sufficient, or (ii) by the vote of the holders of a
majority of its outstanding shares, or (iii) by the Board of Trustees by written
notice to the series' or class' shareholders. Unless each series and class is so
terminated, the Trust will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to shares
that may be redeemed through expedited or automated procedures established by a
Shareholder Servicing Agent. No certificates are issued for Class B shares due
to their conversion feature. No certificates are issued for Institutional
Shares.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Board of Trustees has adopted a code of ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The code has been designated to address potential conflicts of
interest that can arise in connection with personal trading activities of such
persons. Persons subject to the code are generally permitted to engage in
personal securities transactions, subject to certain prohibitions, pre-clearance
requirements and blackout periods.
55
<PAGE>
Principal Holders
As of April 30, 1997, the following persons owned of record 5% or more of
the outstanding shares of the following classes of the following Funds:
VISTA AMERICAN VALUE FUND
CHEMICAL BANK NY 43.78%
INVESTMENT SERVICES DEPT.
270 PARK AVE 31ST FL.
NEW YORK NY 10017-2014
CHEMICAL BANK 7.32%
CUSTODIAN FOR THE IRA OF
DONALD F. GRANNIS
100 NO. SAN RAFAEL AVE
PASADENA CA 91105
VISTA BALANCED FUND - A SHARES
TESTA AND CO 17.41%
C/O CHASE MANHATTAN BANK NA
ATTN: MUTUAL FUNDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
CHASE MANHATTAN BANK N/A 15.39%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN NY 11245
THE INSTITUTE OF ELECTRICAL AND 10.68%
ELECTRONICS ENGINEERS INC.
445 HOES LANE
PO BOX 1331
PISCATAWAY NJ 08855-1331
TRULIN & CO 8.78%
C/O CHASE MANHATTAN BANK
ATTN: MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
VISTA BOND FUND - A SHARES
PBG EB 37.24%
1211 6TH AVE
NEW YORK NY 10036-8701
PBG EB 1211 AVE 23.31%
1211 6TH AVE
NEW YORK NY 10036-8701
PERLE BURNETT & 8.28%
KENNETH BURNETT
JT TEN
6101 SHERIDAN RD E-35D
CHICAGO IL 60660-6823
56
<PAGE>
CHEMICAL BANK CUST 401K 6.91%
FBO CRANE & EGER
A/C 298641947619
ATTN: MARGARET LONG
4 NEW YORK PLAZA FL 12
NEW YORK NY 10004-2413
IFTC CUST IRA A/C 6.10%
DENNIS A CHENOVIC
905 HIGHLAND ST
HELENA MT 59601-5119
VISTA BOND FUND - B SHARES
MARILYN M WHITE TTEE 24.87%
U/A DTD AUG 10 90
MARILYN M WHITE SURVIVORS TRUST
6211 PROSPECT ROAD
SAN JOSE CA 95129-4740
PHYLLIS REUDY TTEE 12.25%
U/A DTD JUN 30 84
MATHILDE R RUEDY TRUST
195 CYPRESS PL
SAUSALITO CA 94965-1566
IFTC CUST IRA A/C 6.61%
SEYMOUR SPIEGEL
6 WISTERIA PL
SYOSSET NY 11791-2824
NFSC FEBO # AMG-583553 5.09%
MYRTLE H. FLETCHER TRUST
3200 NORTH MILITARY TRAIL
SUITE 201
BOCA RATON FL 33431-6311
VISTA BOND FUND - INSTITUTIONAL SHARES
TRULIN & CO 69.54%
C/O CHASE MANHATTAN BANK
ATTN: MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
TEXAS COMMERCE BANK 10.19%
AVESTA
MSC 101111F 342
ASSET TRADING UNIT
PO BOX 2558
HOUSTON TX 77252-2558
57
<PAGE>
VISTA CAPITAL GROWTH FUND - A SHARES
CHARLES SCHWAB & CO INC. 6.92%
REINVEST ACCOUNT
ATTN: MUTUAL FUNDS DEPT.
101 MONTGOMERY STREET
SAN FRANCISCO CA 94107-4122
VISTA CAPITAL GROWTH FUND - INSTITUTIONAL SHARES
BANKERS TRUST OF THE SOUTHWEST 34.48%
AS TTEE FOR THE MAPCO INC. & SUBSIDY
PROFIT SHARING AND SAVINGS PLAN
ATTN: DEBORAH L TURRI
648 GRASSMERE PARK DRIVE
NASHVILLE TN 37211-3658
TESTA AND CO 28.69%
C/O CHASE MANHATAN BANK NA
ATTN: MUTUAL FUNDS/ T-C
PO BOX 1412
ROCHESTER NY 14603-1412
BANKERS TRUST TRUSTEE 18.76%
ALIANCE COAL CORP PSSP
ATTN: ELIJAH OUTEN
34 EXCHANGE PL
JERSEY CITY NJ 07302-3901
INTERNATIONAL WIRE 13.33%
RETIREMENT SAVINGS PLAN
770 BROADWAY FLR 10
NEW YORK NY 10003-9522
VISTA GROWTH AND INCOME FUND - INSTITUTIONAL SHARES
CHASE MANHATTAN BANK N/A 92.77%
GLOBAL SEC SERVICES OMNIBUS
CMB THRIFT INCENTIVE PLAN
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER FLR 7
BROOKLYN NY 11245-0001
VISTA LARGE CAP EQUITY FUND - A SHARES
HAMILL & COMPANY 23.51%
PO BOX 2558 16HCB09
HOUSTON TX 77252-2558
CHEMICAL BANK CUST 401K 6.31%
FBO CRANE & EGER
A/C 298641947619
ATTN: MARGARET LONG
4 NEW YORK PLAZA FL 12
NEW YORK NY 10004-2413
HAMILL AND COMPANY 6.18%
FBO BURRUS & MATTHEWS
PO BOX 2558 16HCB09
HOUSTON TX 77252
VISTA LARGE CAP EQUITY FUND - B SHARES
LEONARD S WEINMAN TTEE U/A DTD 8-24 5.17%
- -93 RESTATING IN ITS ENTIRETY THE
LEONARD S WEINMAN REV LIV TR AGREEMENT
DTD 9-5-89
255O NW 64TH BLVD
BOCA RATON FL 33496-2008
VISTA LARGE CAP EQUITY FUNDS - INSTITUTIONAL SHARES
TRULIN & CO 27.11%
C/O CHASE MANHATTAN BANK
ATTN: MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
TESTA AND CO 7.26%
C/O CHASE MANHATTAN BANK NA
ATTN: MUTUAL FUNDS/ T-C
PO BOX 1412
ROCHESTER NY 14603-1412
58
<PAGE>
CHEMICAL BANK 5.67%
FBA JERICHO
OCI PENSION PLAN SLARIED EE'S
200 JERICHO QUAD 2ND NE FLR
PO BOX 2000
JERICHO NY 11753
VISTA SHORT TERM BOND FUND - A SHARES
MASS MUTUAL AGENTS HEALTH 25.31%
BENEFIT TRUST
C/O RICHARD PECK D113
1295 STATE ST
SPRINGFIELD MA 01111-0001
VOLUNTARY HOSPITALS OF 19.48%
AMERICA SOUTHWEST INC
14901 QUORUM DR STE 300
DALLAS TX 75240-6731
CHEMICAL BANK 9.41%
PERSONAL CUSTODY
270 PARK AVE
NEW YORK NY 10017-2014
VISTA SHORT TERM BOND FUND - INSTITUTIONAL SHARES
TRULIN & CO 66.57%
C/O CHASE MANHATTAN BANK
ATTN: MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
TESTA AND CO 14.42%
C/O CHASE MANHATTAN BANK NA
ATTN: MUTUAL FUNDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
VISTA SMALL CAP EQUITY FUND - A SHARES
CHARLES SCHWAB & CO INC. 13.57%
REINVEST ACCOUNT
ATTN: MUTUAL FUNDS DEPT
101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4122
VISTA SMALL CAP EQUITY FUND - INSTITUTIONAL SHARES
CHASE MANHATTAN BANK N/A 99.58%
GLOBAL SEC SERVICES OMNIBUS
59
<PAGE>
VISTA US GOV'T SECURITIES FUND - A SHARES
HAMILL & COMPANY 28.49%
PO BOX 2558 16HCB09
HOUSTON TX 77252-2558
CHEMICAL BANK 10.22%
CUSTODIAN FOR THE IRA OF
ROSE FAGGAN
7 E 14TH STREET APT 19-T
NEW YORK NY 10003-3127
CHEMICAL BANK 9.92%
CUSTODIAN FOR 401K FBO
STRUCTURE TONE INC
ATTN: MARGARET LONG
4 NY PLAZA 12TH FLOOR
NEW YORK NY 10004
CHEMICAL BANK 7.94%
CUSTODIAN FOR THE IRA OF
EDWARD MCCABE
226 WEST BROADWAY
NEW YORK NY 10013-2408
CHEMICAL BANK 6.71%
CUSTODIAN FOR 401K FBO
RW ZANT CO
ATTN: MARGARET LONG
4 NEW YORK PLAZA
NEW YORK NY 10004-2413
JOHN J MANN 5.11%
21 CLAREMONT AVE
NEW YORK NY 10027-6802
VISTA US GOV'T SECURITIES FUND - INSTITUTIONAL SHARES
CHEMICAL BANK 6.83%
FBA JERICHO RBS PLASTICS
200 JERICHO QUAD 2ND NE FLR
PO BOX 2000
JERICHO NY 11753
CHEMICAL BANK 6.59%
FBA JERICHO ROCKAWAY
200 JERICHO QUAD 2ND NE FLR
PO BOX 2000
JERICHO NY 11753
CHEMICAL BANK 5.40%
FBA JERICHO
NORTH GENERAL HOSPITAL
200 JERICHO QUAD 2ND NE FLR
PO BOX 2000
JERICHO NY 11753
60
<PAGE>
VISTA US TREASURY INCOME FUND - A SHARES
TRULIN & CO 24.74%
C/O CHASE MANHATTAN BANK
ATTN: MUTUAL FUNDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
CARRIERS ILA CFS TRUST FUND 14.96%
C/O CCC INC
ONE EVERTRUST PLAZA
JERSEY CITY NJ 07302-3051
CARRIER ILA CONTAINER ROYALTY FUND 9.97%
ONE EVERTRUST PLAZA
JERSEY CITY NJ 07302-3051
TESTA AND CO 7.09%
C/O CHASE MANHATTAN BANK NA
ATTN: MUTUAL FUNDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
Financial Statements
The 1996 Annual Report to Shareholders of each Fund, including the reports
of independent accounts, financial highlights and financial statements for the
fiscal year ended October 31, 1996 contained therein, are incorporated herein by
reference.
61
<PAGE>
<TABLE>
Specimen Computations of Offering Prices Per Share
U.S. Treasury Income Fund (specimen computations)
<S> <C>
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $11.13
Maximum Offering Price per Share ($11.13 divided by .955) (reduced on purchases of
$100,000 or more).................................................................. $11.65
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $11.11
Growth and Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $39.21
Maximum Offering Price per Share ($39.21 divided by .9525) (reduced on purchases of
$100,000 or more).................................................................. $41.17
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $39.02
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $39.26
</TABLE>
62
<PAGE>
<TABLE>
Capital Growth Fund (specimen computations)
<S> <C>
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $41.60
Maximum Offering Price per Share ($41.60 divided by .9525) (reduced on purchases of
$100,000 or more .................................................................. $43.67
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $41.21
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $41.65
Equity Income Fund (specimen computations)
A Shares
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $15.98
Maximum Offering Price per Share ($15.98 divided by .955) (reduced on purchases of
$100,000 or more .................................................................. $16.73
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $15.92
Balanced Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $13.83
Maximum Offering Price per Share ($13.83 divided by .955) (reduced on purchases of
$100,000 or more).................................................................. $14.48
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $13.70
Large Cap Equity Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $13.25
Maximum Offering Price per Share ($13.25 divided by .955) (reduced on purchases of
$100,000 or more).................................................................. $13.91
</TABLE>
63
<PAGE>
<TABLE>
<S> <C>
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $13.22
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $13.27
Bond Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $10.71
Maximum Offering Price per Share ($10.71 divided by .955) (reduced on purchases of
$100,000 or more).................................................................. $11.21
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $10.76
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $10.71
Short-Term Bond Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $10.10
Maximum Offering Price per Share ($10.10 divided by .9850) (reduced on purchases of
$100,000 or more).................................................................. $10.25
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $10.12
Small Cap Equity Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $19.19
Maximum Offering Price per Share ($19.19 divided by .9525) (reduced on purchases of
$100,000 or more).................................................................. $20.15
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 .................................................................. $19.00
</TABLE>
64
<PAGE>
<TABLE>
<S> <C>
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ............................................................... $19.22
American Value Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ............................................................... $13.49
U.S. Government Securities Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ............................................................... $9.90
Maximum Offering Price per Share ($9.90 divided by .955) (reduced on purchases of
$100,000 or more) ............................................................... $10.37
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ............................................................... $9.89
</TABLE>
65
<PAGE>
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government are guaranteed by the U.S.
Government.
FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing Administration
of the U.S. Government and are guaranteed by the U.S. Government.
FHA Insured Notes--are bonds issued by the Farmers Home Administration of
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which represent a partial
ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA and
the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or FHA-insured
mortgages underlying the Certificates. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures may result in the return of the greater part of principal invested
far in advance of the maturity of the mortgages in the pool. Foreclosures impose
no risk to principal investment because of the GNMA guarantee. As the prepayment
rate of individual mortgage pools will vary widely, it is not possible to
accurately predict the average life of a particular issue of GNMA Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates. Principal which is so prepaid will be reinvested although possibly
at a lower rate. In addition, prepayment of mortgages included in the mortgage
pool underlying a GNMA Certificate purchased at a premium could result in a loss
to a Fund. Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate. If agency
securities are purchased at a premium above principal, the premium is not
guaranteed by the issuing agency and a decline in the market value to par may
result in a loss of the premium, which may be particularly likely in the event
of a prepayment. When and if available, U.S. Government obligations may be
purchased at a discount from face value.
FHLMC Certificates and FNMA Certificates--are mortgage-backed bonds issued
by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage
Association, respectively, and are guaranteed by the U.S. Government.
A-1
<PAGE>
GSA Participation Certificates--are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed by
the U.S. Government.
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of Housing
and Urban Development of the U.S. Government, the payment of which is secured by
the U.S. Government.
Penn Central Transportation Certificates--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds--are bonds issued by
the Washington Metropolitan Area Transit Authority. Some of the bonds issued
prior to 1993 are guaranteed by the U.S. Government.
FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and bonds--are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds--are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import Bank
of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
<PAGE>
APPENDIX B
DESCRIPTION OF RATINGS
A description of the rating policies of Moody's, S&P and Fitch with respect to
bonds and commercial paper appears below.
Moody's Investors Service's Corporate Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality and carry
the smallest degree of investment risk. Interest payments are protected by a
large or by an exceptionally stable margin, and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated "A" possess many favorable investment qualities and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated "Ba" are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguared
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in
high degree.
Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its rating
classifications. The modifier "1" indicates that the security ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
B-1
<PAGE>
AA--Bonds rated "AA" also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and differs from "AAA" issues only in
small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations. "Prime-1"
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and well-
established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime rating
categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is current assessment of the likelihood of timely
payment of debt having an original maturity of no more than 365 days. Ratings
are graded in several categories, ranging from "A-1" for the highest quality
obligations to "D" for the lowest. The four categories are as follows:
B-2
<PAGE>
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B--Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
AAA--Bonds rated AAA by Fitch are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds rated AA by Fitch are considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and repay principal
is very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issues is generally
rated F-1+ by Fitch.
A--Bonds rated A by Fitch are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse consequences on
these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of a
credit within a rating category. Plus and minus signs, however, are not used in
the AAA category.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
B-3
<PAGE>
F-1--Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance for
timely payment but the margin of safety is not as great as for issues assigned
F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the degree
of assurance for timely payment is adequate, although near-term adverse changes
could cause these securities to be rated below investment grade.
LOC--The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are considered
to have adequate capacity to pay principal and interest. However, such bonds may
have speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds.
After purchase by a Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by such Fund. Neither event will
require a sale of such security by a Fund. However, a Fund's investment manager
will consider such event in its determination of whether such Fund should
continue to hold the security. To the extent the ratings given by Moody's, S&P
or Fitch may change as a result of changes in such organizations or their rating
systems, a Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the Statement of Additional Information.
B-4
<PAGE>
PART C
MUTUAL FUND GROUP
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial statements
In Part A: Financial Highlights
In Part B: Financial Statements and the Reports
thereon for the Funds filed herein are
incorporated by reference into Part B
as part of the 1996 Annual Reports to
Shareholders for such Funds as filed with the
Securities and Exchange Commission by Mutual
Fund Group on Form N-30D on January 3, 1997,
accession number 0000950123-97-000025, which
are incorporated into Part B by reference.
In Part C: None.
(b) Exhibits:
Exhibit
Number
- -------
1(a) Declaration of Trust, as amended. (1)
1(b) Certificate of Amendment to Declaration of Trust dated December 14,
1995.(12)
1(c) Certificate of Amendment to Declaration of Trust dated October 19,
1995.(12)
1(d) Certificate of Amendment to Declaration of Trust dated July 25,
1993.(12)
2 By-laws, as amended. (1)
3 None.
4 Specimen share certificate. (1)
5(a) Investment Advisory Agreements and Sub-Advisory Agreements(6)
5(b) Form of Investment Advisory Agreement for Vista Small Cap Equity
Fund. (9)
5(c) Administration Agreement.(6)
5(d) Form of Interim Investment Advisory Agreement.(12)
5(e) Form of Proposed Investment Advisory Agreement.(12)
5(f) Form of Proposed Sub-Advisory Agreement between The Chase Manhattan
Bank and Chase Asset Management, Inc.(12)
5(g) Form of Administration Agreement.(12)
5(h) Form of Proposed Investment Subadvisory Agreement between The Chase
Manhattan Bank and [Chase Asset Management, Inc./Van Deventer &
Hoch(12)].
6(a) Distribution and Sub-Administration Agreement.(6)
6(b) Distribution and Sub-Administration Agreement dated August 21,
1995.(12)
7(a) Retirement Plan for Eligible Trustees.(12)
7(b) Deferred Compensation Plan for Eligible Trustees.(12)
8(a) Custodian Agreement. (1)
8(b) Sub-Custodian Agreement. (1)
9(a) Transfer Agency Agreement. (1)
9(b) Administrative Services Plan. (1)
9(c) Shareholder Servicing Agreement of Vista Mutual Funds. (1)
9(d) Form of Shareholder Servicing Agreement of Vista Premier Funds.(1)
9(e) Form of Shareholder Servicing Agreement. (12)
C-1
<PAGE>
9(f) Agreement and Plan of Reorganization and Liquidation.(12)
10 Opinion re: Legality of Securities being Registered.(1)
11 Consent of Price Waterhouse LLP.(13)
12 None.
13 Not Applicable
14 None.
15(a) Rule 12b-1 Distribution Plan of Vista Mutual Funds including
Selected Dealer Agreement and Shareholder Service Agreement. (1)
15(b) Rule 12b-1 Distribution Plan of Vista Premier Funds including
Selected Dealer Agreement and Shareholder Service Agreement. (1)
15(c) Rule 12b-1 Distribution Plan for each of Vista Bond Fund, Vista
Short-Term Bond Fund, Vista Equity Fund and Vista U.S. Government
Money Market Fund including Selected Dealer Agreement and
Shareholder Service Agreement.(3)
15(d) Form of Rule 12b-1 Distribution Plan for Class B shares of the Vista
Prime Money Market Fund.(8)
15(e) Form of Rule 12b-1 Distribution Plan for Vista Asian Oceanic Shares
Fund, Vista Japan Pacific Shares Fund, Vista U.S. Government
Securities Fund and Vista European Shares Fund.(8)
15(f) Form of Rule 12b-1 Distribution Plan for Vista Small Cap Equity
Fund.(9)
15(g) Proposed Rule 12b-1 Distribution Plan - Class A Shares - Vista
American Value Fund (including forms of Selected Dealer Agreement
and Shareholder Servicing Agreement).(12)
15(h) Rule 12b-1 Distribution Plan - Class B Shares (including forms of
Selected Dealer Agreement and Shareholder Servicing Agreement).(12)
16 Schedule for Computation for Each Performance Quotation.(11)
17 Financial Data Schedule.(13)
18 Form of Rule 18f-3 Multi-Class Plan.(12)
- --------------------
(1) Filed as an exhibit to Amendment No. 6 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange Commission on March 23, 1990.
(2) Filed as an exhibit to Amendment No. 11 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange Commission on June 8, 1992 to register shares of
the Vista Balanced Fund and IEEE Spectrum Fund series of the Trust.
(3) Filed as an exhibit to Amendment No. 15 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) as filed with the
Securities and Exchange Commission on October 30, 1992.
(4) Filed as an exhibit to Amendment No. 16 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on December 28, 1992.
(5) Filed as an exhibit to Amendment No. 19 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on June 30, 1993.
(6) Filed as an exhibit to Amendment No. 23 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on December 30, 1993.
(7) Filed as an exhibit to Amendment No. 24 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on February 10, 1994.
(8) Filed as an Exhibit to Amendment No. 26 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on June 30, 1994.
(9) Filed as an Exhibit to Amendment No. 27 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on October 3, 1994.
(10) Filed as an Exhibit to Amendment No. 30 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on July 19, 1995.
(11) Filed as an Exhibit to Amendment No. 31 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on November 13, 1995.
(12) Filed as an Exhibit to Amendment No. 32 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on December 28, 1995.
(13) Filed as an Exhibit to Amendment No. 42 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on February 28, 1997.
ITEM 25. Persons Controlled by or Under Common
Control with Registrant
Not applicable
C-2
<PAGE>
ITEM 26. Number of Holders of Securities
Number of Record Holders
Mutual Fund Group as of April 30, 1997
- ----------------- -----------------------------
A B Institutional
Shares Shares Shares
------ ------ -------------
VISTA U.S. Treasury Income Fund 2,180 704 n/a
VISTA U.S. Government Securities Fund 71 n/a 90
VISTA Balanced Fund 2,010 890 n/a
VISTA Short-Term Bond Fund 128 n/a 64
VISTA Bond Fund 78 66 66
VISTA Large Cap Equity Fund 426 217 193
VISTA American Value Fund 194 n/a n/a
VISTA Equity Income Fund 1,298 601 n/a
VISTA Small Cap Equity Fund 9,274 7,574 12
VISTA Growth and Income Fund 71,104 24,845 9
VISTA Capital Growth Fund 35,932 24,445 12
VISTA International Equity Fund 2,252 1,162 n/a
VISTA Southeast Asian Fund 450 244 n/a
VISTA European Fund 201 166 n/a
VISTA Japan Fund 94 37 n/a
VISTA Select Growth and Income Fund n/a n/a none
ITEM 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser, administrator and distributor are insured under
an errors and omissions liability insurance policy. The Registrant and its
officers are also insured under the fidelity bond required by Rule 17g-1 under
the Investment Company Act of 1940.
Under the terms of the Registrant's Declaration of Trust, the
Registrant may indemnify any person who was or is a Trustee, officer or employee
of the Registrant to the maximum extent permitted by law; provided, however,
that any such indemnification (unless ordered by a court) shall be made by the
Registrant only as authorized in the specific case upon a determination that
indemnification of such persons is proper in the circumstances. Such
determination shall be made (i) by the Trustees, by a majority vote of a quorum
which consists of Trustees who are neither in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the proceeding, or (ii) if the required
quorum is not obtainable or, if a quorum of such Trustees so directs, by
independent legal counsel in a written opinion. No indemnification will be
provided by the Registrant to any Trustee or officer of the Registrant for any
liability to the Registrant or shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
Insofar as the conditional advancing of indemnification monies for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
that amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable
C-3
<PAGE>
insurance or an equivalent form of security which assures that any repayments
may be obtained by the Registrant without delay or litigation, which bond,
insurance or other form of security must be provided by the recipient of the
advance, or (b) a majority of a quorum of the Registrant's disinterested,
non-party Trustees, or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts, that the recipient of
the advance ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of it counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
ITEM 28(a). Business and Other Connections of Investment Adviser
The Chase Manhattan Bank (the "Adviser") is a commercial bank
providing a wide range of banking and investment services.
To the knowledge of the Registrant, none of the Directors or
executive officers of the Adviser, except those described below, are or have
been, at any time during the past two years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
Directors and executive officers of the Adviser also hold or have held various
positions with bank and non-bank affiliates of the Adviser, including its
parent, The Chase Manhattan Corporation. Each Director listed below is also a
Director of The Chase Manhattan Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
Thomas G. Labreque President and Chief Operating Officer Chairman, Chief Executive Officer
and Director and a Director of The Chase
Manhattan
Corporation
and
a
Director
of
AMAX,
Inc.
M. Anthony Burns Director Chairman of the Board, President
and Chief Executive Officer of
Ryder System, Inc.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director of
Amoco Corporation and Director of
Abbott Laboratories
Paul W. MacAvoy Director Dean of Yale School of
Organization and Management
David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of each
of ARCO Chemical Company and
Westinghouse Electric Corporation
Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer, Inc.,
Celgene Corp., General Motors
Corporation and International Paper
Company
Henry B. Schacht Director Chairman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
each of American Telephone and
Telegraph Company and CBS Inc.
Donald H. Trautlein Director Retired Chairman and
Chief Executive Officer
of Bethlehem Steel
Corporation
</TABLE>
C-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
James L. Ferguson Director Retired Chairman and Chief
Executive Officer of General Foods
Corporation
William H. Gray III Director President and Chief Executive
Officer of the United Negro College
Fund, Inc.
David T. Kearns Director Retired Chairman and Chief
Executive Officer of the Xerox
Corporation
Delano E. Lewis Director President and Chief Executive
Officer of National Public Radio
John H. McArthur Director Dean of the Harvard Graduate
School of Business Administration
Frank A. Bennack, Jr. Director President and Chief Executive Officer
The Hearst Corporation
Michael C. Bergerac Director Chairman of the Board and
Chief Executive Officer Bergerac & Co., Inc.
Susan V. Berresford Director President, The Ford Foundation
Randolph W. Bromery Director President, Springfield College; President,
Geoscience Engineering Corporation
Charles W. Duncan, Jr. Director Private Investor
Melvin R. Goodes Director Chairman of the Board and Chief Executive
Officer, The Warner-Lambert Company
George V. Grune Director Retired Chairman and Chief Executive
Officer, The Reader's Digest Association,
Inc.; Chairman, The DeWitt Wallace-
Reader's Digest Fund; The Lila-Wallace
Reader's Digest Fund
William B. Harrison, Jr. Vice Chairman of the Board
Harold S. Hook Director Chairman and Chief Executive Officer,
General Corporation
Helen L. Kaplan Director Of Counsel, Skadden, Arps, Slate, Meagher
& Flom
E. Michael Kruse Vice Chairman of the Board
J. Bruce Llewellyn Director Chairman of the Board, The Philadelphia
Coca-Cola Bottling Company, The Coca-
Cola Bottling Company of Wilmington,
Inc., Queen City Broadcasting, Inc.
John P. Mascotte Director Chairman, The Missouri Corporation of
Johnson & Higgins
John F. McGillicuddy Director Retired Chairman of the Board and
Chief Executive Officer
Edward D. Miller Senior Vice Chairman
of the Board
Walter V. Shipley Chairman of the Board and
Chief Executive Officer
Andrew C. Sigler Director Chairman of the Board and Chief
Executive Officer, Champion International
Corporation
Michael I. Sovern Director President, Emeritus and Chancellor Kent,
Professor of Law, Columbia University
John R. Stafford Director Chairman, President and Chief Executive
Officer, American Home Products
Corporation
W. Bruce Thomas Director Private Investor
Marina v. N. Whitman Director Professor of Business Administration and
Public Policy, University of Michigan
Richard D. Wood Director Retired Chairman of the Board, Eli Lilly
and Company
</TABLE>
<PAGE>
Item 28(b)
Chase Asset Management ("CAM") is an Investment Advisor providing investment
services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of the CAM, except those described below, are or have been, at any time
during the past two years, engaged in any other business, profession, vocation
or employment of a substantial nature, except that certain Directors and
executive officers of the CAM also hold or have held various positions with bank
and non-bank affiliates of the Advisor, including its parent, The Chase
Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
James Zeigon Chairman and Director Director of Chase
Asset Management
(London) Limited
Steven Prostano Executive Vice President Chief Operating Officer
and Chief Operating Officer and Director of Chase
Asset Management
(London) Limited
Mark Richardson President and Chief Chief Investment Officer
Investment Officer and Director of Chase
Asset Management
(London) Limited
Item 28(c)
Chase Asset Management (London) Limited ("CAM London") is an Investment
Advisor providing investment services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of CAM London, except those described below, are or have been, at any
time during the past two years, engaged in any other business, profession,
vocation or employment of a substantial nature, except that certain Directors
and executive officers of CAM London also hold or have held various positions
with bank and non-bank affiliates of the Advisor, including its parent, The
Chase Manhattan Corporation.
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
Michael Browne Director Fund Manager, The Chase Manhattan
Bank, N.A.; Fund Manager, BZW
Investment Management
David Gordon Ross Director Head of Global
Fixed Income Management, Chase Asset
Management, Inc.; Vice President, The
Chase Manhattan Bank, N.A.
Brian Harte Director Investment Manager, The Chase
Manhattan Bank, N.A.
Cornelia L. Kiley Director
James Zeigon Director Chairman and Director of Chase
Asset Management, Inc.
Mark Richardson Chief Investment Director, President and Chief
Officer and Director Operating Officer of Chase Asset
Management, Inc.
Steve Prostano Chief Operating Director, Executive Vice President
Officer and and Chief Operating Officer of Chase
Director Asset Management, Inc.
<PAGE>
ITEM 29. Principal Underwriters
(a) Vista Fund Distributors, Inc., a wholly-owned subsidiary of
The BISYS Group, Inc. is the underwriter for Mutual Fund Group, Mutual Fund
Trust and Mutual Fund Select Trust.
(b) The following are the Directors and officers of Vista Fund
Distributors, Inc. The principal business address of each of these persons, is
listed below.
<TABLE>
<CAPTION>
Position and Offices Position and Offices
Name and Address with Distributor with the Registrant
- ---------------- -------------------- --------------------
<S> <C> <C>
Lynn J. Mangum Chairman None
150 Clove Street
Little Falls, NJ 07424
Robert J. McMullan Director and Exec. Vice President None
150 Clove Street
Little Falls, NJ 07424
Lee W. Schultheis President None
101 Park Avenue, 16th Floor
New York, NY 10178
George O. Martinez Senior Vice President None
3435 Stelzer Road
Columbus, OH 43219
Irimga McKay Vice President None
1230 Columbia Street
5th Floor, Suite 500
San Diego, CA 92101
Michael Burns Vice President/Compliance None
3435 Stelzer Road
Columbus, OH 43219
William Blundin Vice President None
125 West 55th Avenue
11th Floor
New York, NY 10019
Dennis Sheehan Vice President None
150 Clove Street
Little Falls, NJ 07424
Annamaria Porcaro Assistant Secretary None
150 Clove Street
Little Falls, NJ 97424
Robert Tuch Assistant Secretary None
3435 Stelzer Road
Columbus, OH 43219
Stephen Mintos Executive Vice President/COO None
3435 Stelzer Road
Columbus, OH 43219
Dale Smith Vice President/CFO None
3435 Stelzer Road
Columbus, OH 43219
William J. Tomko Vice President None
3435 Stelzer Road
Columbus, OH 43219
</TABLE>
(c) Not applicable
C-6
<PAGE>
ITEM 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
---- -------
Vista Fund Distributors, Inc. 101 Park Avenue,
New York, NY 10178
DST Systems, Inc. 210 W. 10th Street,
Kansas City, MO 64105
The Chase Manhattan Bank 270 Park Avenue,
New York, NY 10017
Chase Asset Mangement, Inc. 1211 Avenue of the
Americas,
New York, NY 10036
Chase Asset Management, Ltd. (London) Colvile House
32 Curzon Street
London, England W1Y8AL
The Chase Manhattan Bank One Chase Square,
Rochester, NY 14363
ITEM 31. Management Services
Not applicable
ITEM 32. Undertakings
(1) Registrant undertakes that its trustees shall promptly
call a meeting of shareholders of the Trust for the purpose of voting upon the
question of removal of any such trustee or trustees when requested in writing so
to do by the record holders of not less than 10 per centum of the outstanding
shares of the Trust. In addition, the Registrant shall, in certain
circumstances, give such shareholders assistance in communicating with other
shareholders of a fund as required by Section 16(c) of the Investment Company
Act of 1940.
(2) The Registrant, on behalf of the Funds, undertakes,
provided the information required by Item 5A is contained in the latest annual
report to shareholders, to furnish to each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the Registrant's
latest annual report to shareholders.
(3) Registrant undertakes to file a post-effective amendment,
using reasonably current financial statements which need not be certified,
within four to six months from the date of commencement of investment operations
for Vista Small Cap Opportunities Fund.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and the
State of New York on the 13th day of May, 1997.
MUTUAL FUND GROUP
By /s/ H. Richard Vartabedian
--------------------------
H. Richard Vartabedian
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
* Chairman and Trustee May 13, 1997
- -------------------------------
Fergus Reid, III
* Trustee May 13, 1997
- -------------------------------
William J. Armstrong
* Trustee May 13, 1997
- -------------------------------
John R.H. Blum
* Trustee May 13, 1997
- -------------------------------
Joseph J. Harkins
* Trustee May 13, 1997
- -------------------------------
Richard E. Ten Haken
* Trustee May 13, 1997
- -------------------------------
Stuart W. Cragin, Jr.
* Trustee May 13, 1997
- -------------------------------
Irv Thode
/s/ H. Richard Vartabedian President May 13, 1997
_______________________________ and Trustee
H. Richard Vartabedian
*
- ------------------------------- Trustee May 13, 1997
W. Perry Neff
*
- ------------------------------- Trustee May 13, 1997
Roland R. Eppley, Jr.
*
- ------------------------------- Trustee May 13, 1997
W.D. MacCallan
C-8
<PAGE>
/s/ Martin R. Dean Treasurer and May 13, 1997
_______________________________ Principal Financial
Martin R. Dean Officer
/s/ H. Richard Vartabedian Attorney in May 13, 1997
_______________________________ Fact
H. Richard Vartabedian
