As filed via EDGAR with the Securities and Exchange Commission on
February 28, 1997
File No. 811-5151
Registration No. 33-14196
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 41 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Post-Effective Amendment No. 80 |X|
-------------------------------
MUTUAL FUND GROUP
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue
New York, New York 10178
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(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 492-1600
George Martinez, Esq. Niall L. O'Toole, 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
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(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
|X| immediately upon filing pursuant to | | on ( ) pursuant to
paragraph (b) paragraph (b)
| | 60 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(1) paragraph (a)(1)
|_| 75 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(2) paragraph (a)(2) rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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The Registrant has registered an indefinite number or amount of its shares of
common stock for each of its series under the Securities Act of 1933 pursuant to
Rule 24f-2 under the Investment Company Act of 1940 on July 18, 1994 and
Registrant's Rule 24f-2 Notice was filed on November 27, 1995.
The Trustees of the Hub Portfolios have also executed this registration
statement.
<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) NEW GROWTH 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
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<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>
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<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
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<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
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<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
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<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>
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<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
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<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>
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<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) AMERICAN VALUE FUND
Investment Strategy: Total Return
February 28, 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 February 28, 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>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights 6
How the Fund has performed
Fund Objective 7
Investment Policies 7
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management 11
Chase Manhattan Bank, the Fund's adviser; Van Deventer & Hoch, the Fund's
sub-adviser, and the individuals who manage the Fund
How to Buy, Sell and Exchange Shares 12
How the Fund Values Its Shares 15
How Distributions Are Made; Tax Information 16
How the Fund distributes its earnings, and tax treatment related to those
earnings
Other Information Concerning the Fund 17
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 20
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 21
</TABLE>
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 example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price) None
Maximum Deferred Sales Charge (as a percentage of the
lower of original purchase price or redemption proceeds) None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)* 0.00%
12b-1 Fee (after estimated waiver)* ** 0.00%
Shareholder Servicing Fee (after estimated waiver)* 0.00%
Other Expenses (after estimated waiver)* 1.32%
------
Total Fund Operating Expenses (after waivers of fees)* 1.32%
======
Example
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years
----- --------
Shares $13 $42
* Reflects current waiver arrangements to maintain Total Fund
Operating Expenses at the level indicated in the table above.
Absent such waivers, the Investment Advisory Fee, 12b-1 Fee,
Shareholder Servicing Fee and Other Expenses would be 0.70%,
0.25%, 0.25% and 1.30%, respectively, and Total Fund Operating
Expenses would be 2.50%. Chase has agreed to waive fees payable
to it and/or reimburse expenses until May 6, 1998 to the extent
necessary to prevent annualized Total Fund Operating Expenses
from exceeding 2.18% of average net assets during such period.
** Long-term shareholders in mutual funds with 12b-1 fees, such as
shareholders of the Fund, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by
rules of the National Association of Securities Dealers, Inc.
4
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
5
<PAGE>
FINANCIAL HIGHLIGHTS
On May 3, 1996, The Hanover American Value Fund (the "Predecessor Fund")
merged into the Vista American Value Fund, which was created to be the
successor to the Predecessor Fund. The table set forth below provides
selected per share data and ratios for one Share of the Predecessor Fund
outstanding through May 3, 1996, and one Share of the Vista American Value
Fund outstanding for the periods thereafter. This information is supplemented
by financial statements and accompanying notes appearing in the Predecessor
Fund's Annual Report to Shareholders for the fiscal year ended November 30,
1995 and the Fund's Annual Report to Shareholders for the period ended
October 31, 1996, which are both incorporated by reference into the SAI.
Shareholders may obtain a copy of these annual reports by contacting the Fund
or their Shareholder Servicing Agent. The financial statements and notes, as
well as the financial information set forth in the table below, for the
period ended October 31, 1996 have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is included in the Fund's
Annual Report to Shareholders. Periods ended prior to December 1, 1995 were
audited by other independent accountants, whose report expressed an
unqualified opinion thereon.
Vista American Value Fund
<TABLE>
<CAPTION>
December 1, 1995+
through October Period End November
31, 1996 30, 1995*
--------------- -------------------
Per Share Operating Performance
<S> <C> <C>
Net Asset Value, Beginning of Period $ 12.11 $10.00
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Income from Investment Operations:
Net Investment Income 0.152 0.180
Net Gain on Securities (both realized and
unrealized) 1.694 2.000
------- ------
Total from Investment Operations 1.846 2.180
------- ------
Less Distributions:
Dividends from Net Investment Income 0.196 0.070
Distributions from Capital Gains 0.270 --
------- ------
Total Distributions 0.466 0.070
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Net Asset Value, End of Period $ 13.49 $12.11
======= ======
Total Return 15.76% 21.80%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $ 9,609 $8,399
Ratio of Expenses to Average Net Assets# 1.37% 1.23%
Ratio of Net Investment Income to Average Net Assets# 1.38% 1.97%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 2.52% 2.03%
Ratio of Net Investment Income without waivers and
its fiscal year end
assumption of expenses to Average Net Assets 0.23% 1.17%
Portfolio Turnover Rate 25% 11%
Average Commission Rate Paid per share $0.0793 --
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</TABLE>
* Fund commenced operations on February 3, 1995.
+ In 1996, the Fund changed from November 30 to October 31.
# Short periods have been annualized.
6
<PAGE>
FUND OBJECTIVE
- --------------
Vista American Value Fund seeks to maximize total return, consisting of
capital appreciation (both realized and unrealized) and income, by investing
primarily in the equity securities of well-established U.S. companies (i.e.,
companies with at least a five-year operating history) which, in the opinion
of the Fund's advisers, are undervalued by the market. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The equity securities in which the Fund invests generally consist of common
stock, preferred stock and securities convertible into or exchangeable for
common or preferred stock. Under normal market conditions, at least 65% of
the value of the Fund's total assets will be invested in the equity
securities of U.S. companies. The Fund may invest in companies without regard
to market capitalization, although it generally does not expect to invest in
companies with market capitalizations of less than $200 million. The
securities in which the Fund invests are expected to be either listed on an
exchange or traded in an over-the-counter market.
In selecting investments for the Fund, its advisers generally seek companies
which they believe exhibit characteristics of financial soundness and are
undervalued by the market. In seeking to identify financially sound
companies, the Fund's advisers look for companies with strongly capitalized
balance sheets, an ability to generate substantial cash flow, relatively low
levels of leverage, an ability to meet debt service requirements and a
history of paying dividends. In seeking to identify undervalued companies,
the advisers look for companies with substantial tangible assets such as
land, timber, oil and other natural resources, or important brand names,
patents, franchises or other intangible assets which may have greater value
than what is reflected in the company's financial statements. The Fund's
advisers will often select investments for the Fund which are considered to
be unattractive by other investors or are unpopular with the financial press.
Although the Fund invests primarily in equity securities, it may invest up to
25% of the value of its total assets in high quality, short- term money
market instruments, repurchase agreements and cash. In addition, the Fund may
make substantial temporary investments in investment grade U.S. debt
securities and invest without limit in money market instruments when the
Fund's advisers believe a defensive posture is warranted. To the extent that
the Fund departs from its investment policies during temporary defensive
periods, its investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities law.
Instead of investing directly in underlying securities, the Fund is
authorized to seek to achieve its objective by investing all of its
7
<PAGE>
investable asets in an investment company having substantially the same
investment objective and policies as the Fund.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in
foreign securities, including American Depositary Receipts, which are
described below. The Fund expects that its investments in foreign issuers, if
any, will generally be in companies which generate substantial revenues from
U.S. operations and which are listed on U.S. securities exchanges. 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 Fund's investments in certain foreign countries. Foreign laws may
restrict the ability to invest in certain issuers or countries and special
tax considerations will apply to foreign securities. The risks can increase
if the Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form of
American Depositary Receipts, which are securities representing securities of
foreign issuers. The Fund treats American Depositary Receipts as interests in
the underlying securities for purposes of its investment policies. The Fund will
limit its investment in American Depositary Receipts not sponsored by the issuer
of the underlying securities to no more than 5% of the value of its net assets
(at the time of investment).
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. These may include U.S. Government
securities, commercial paper of domestic issuers and obligations of domestic
banks.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated,
8
<PAGE>
determined by the advisers to be of comparable quality.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow 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 during unfavorable market
conditions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, which
are securities generally offering fixed interest or dividend yields which may
be converted either at a stated price or stated rate for common or preferred
stock. Although to a lesser extent than with fixed-income securities
generally, the market value of convertible securities tends to decline as
interest rates increase, and increase as interest rates decline. Because of
the conversion feature, the market value of convertible securities also tends
to vary with fluctuations in the market value of the underlying common or
preferred stock.
CORPORATE REORGANIZATIONS. The Fund may invest in securities for which a
tender or exchange offer has been made or announced and in securities of
companies for which a merger, consolidation, liquidation or similar
reorganization proposal has been announced if, in the judgment of its
advisers, there is a reasonable prospect of capital appreciation
significantly greater than the added portfolio turnover expenses inherent in
the short-term nature of such transactions. The principal risk is that such
offers or proposals may not be consummated within the time and under the
terms contemplated at the time of investment, in which case, unless such
offers or proposals are replaced by equivalent or increased offers or
proposals which are consummated, the Fund may sustain a loss.
9
<PAGE>
WARRANTS. The Fund may invest up to 5% of the value of its total assets (at
the time of investment) in warrants or rights (other than those acquired in
units or attached to other securities) which entitle the holder to buy equity
securities at a specific price during or at the end of a specific period of
time. The Fund will not invest more than 2% of the value of its total assets
in warrants or rights which are not listed on the New York or American Stock
Exchanges.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its
total assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund has no current intention to
invest in derivative and related instruments, but the Fund is authorized to
utilize these instruments to hedge various market risks or to increase the
Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; and (iii) employ forward
contracts.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Fund invests
may be particularly sensitive to changes in prevailing economic conditions and
market value. The ability of the Fund to successfully utilize these instruments
may depend in part upon the ability of 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
10
<PAGE>
additional information concerning derivatives, related instruments and 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with equity investing, as well as the risks
discussed herein.
Some of the securities in which the Fund may invest may be of smaller
companies. The securities of smaller companies often trade less frequently
and in more limited volume, and may be subject to more abrupt or erratic
price movements, than securities of larger, more established companies. Such
companies may have limited product lines, markets or financial resources, or
may depend on a limited management group.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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
11
<PAGE>
company. Chase and its predecessors have over 100 years of money management
experience.
For its investment advisory services to the Fund, Chase is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.70% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Van Deventer & Hoch ("VDH"), a registered investment adviser, is the Fund's
sub-investment adviser under a Sub-Investment Advisory Agreement between VDH
and Chase. VDH is a 50% owned indirect subsidiary of The Chase Manhattan
Corporation. VDH makes investment decisions for the Fund on a day-to-day
basis. For these services, VDH is entitled to receive a fee, payable by Chase
from its advisory fee, at an annual rate equal to 0.35% of the Fund's average
daily net assets. VDH is located at 800 North Brand Boulevard, Suite 300,
Glendale, California 91203.
PORTFOLIO MANAGER. Richard Trautwein, Executive Vice President of VDH, has
been responsible for the day-to-day management of the Fund's portfolio since
the Fund's inception, and prior thereto was responsible for the day-to-day
management of The Hanover American Value Fund, the Fund's predecessor. Mr.
Trautwein joined VDH in 1972, heads the firm's portfolio group and is a
member of the firm's investment policy committee.
HOW TO BUY, SELL AND EXCHANGE SHARES
- ------------------------------------
HOW TO BUY SHARES
You can open a Fund account with as little as $2,500 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 $100 or more per transaction through automatic periodic deduction from
your bank checking
12
<PAGE>
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 in proper form 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 are in proper form only after
funds are converted to federal funds. Orders paid by check and received by 2:00
p.m., Eastern Time will generallybe available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your shares unless you request them.
OFFERING PRICE
The public offering price of Fund shares is the net asset value. The Fund
receives the net asset value.
HOW TO SELL SHARES
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will forward redemption payments on redeem shares for which it has
collected payment of the purchase price.
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of instruction to
the Vista Service Center, along with any certificates that represent shares
you want to sell. The price you will receive is the next net asset value
calculated after the Fund receives your request in proper form. In order to
receive that day's net asset value, the Vista Service Center must receive
your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the signatures
of registered owners or their legal representatives must be guaranteed by a
bank, broker-dealer or certain other financial institutions. See the SAI for
more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on
13
<PAGE>
Vista's records, a signature guarantee is required. The Fund may require
additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner. Contact the
Vista Service Center for details.
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
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan. Call the Vista Service
Center at 1-800-34-VISTA for complete instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
14
<PAGE>
documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions or if you purchase through the
Systematic Investment Plan and fail to meet the Fund's investment minimum
within a twelve month period. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Class A shares of certain other Vista funds
at net asset value plus any applicable sales charge beginning 15 days after
purchase. Not all Vista funds offer all classes of shares. The prospectus of
the other Vista fund into which shares are being exchanged should be read
carefully and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
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 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.
HOW THE FUND VALUES ITS SHARES
- ------------------------------
The net asset value of the Fund's shares is determined once daily based upon
prices determined as of the close of regular trading on the New York Stock
Exchange (normally 4:00 p.m., Eastern time, however, options are priced at
4:15 p.m., Eastern time), on each business day of the Fund, by dividing the
net assets of the Fund by the total number of outstanding shares. Values of
assets held by the Fund are determined on the basis of their market or other
fair value, as described in the SAI.
15
<PAGE>
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
- -------------------------------------------
The Fund distributes any net investment income at least annually and any net
realized capital gains at least annually. Capital gains are distributed after
deducting any available capital loss carryovers.
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 Fund. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in
another Vista fund.If the Vista Service Center does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if the Fund or the
Vista Service Center sends you correspondence returned as "undeliverable,"
distributions will automaticallybe 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 thedistribution 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.
16
<PAGE>
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 a Rule 12b-1 distribution plan for the Fund's shares, which
provides for the payment of distribution fees at annual rates of up to 0.25%
of the average daily net assets attributable to the shares of the Fund.
Payments under the distribution plans shall be used to compensate or
reimburse the Fund's distributor and broker- dealers for services provided
and expenses incurred in connection with the sale of the Fund's shares, and
are not tied to the amount of actual expenses incurred. Payments may be used
to compensate broker- dealers with trail or maintenance commissions at an
annual rate of up to 0.25% of the average daily net asset value of shares
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 the Fund's shares will be conducted generally by the Vista
Family of Funds, and activities intended to promote the Fund's shares may
also benefit other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater for entertainment for broker-deals and their guests; and
payment or reimbursement for their guests; and payment or reimbursement for
travel expenses, including lodging and meals, in connection with attendance
at training and educational meetings within and outside the U.S.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own shares of the Fund. These services include
assisting with purchase and redemption transactions, maintaining shareholder
accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily
net assets of shares of the Fund held by investors for whom the shareholder
servicing agent maintains a servicing relationship. Shareholder
17
<PAGE>
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.
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.
Chase and/or VFD may from time to time, at their own expense out of
compensation retained by them 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 Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub- administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
18
<PAGE>
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. Service providers to the Fund may, from time to time, voluntarily waive
all or a portion of any fees to which they are entitled.
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted.
The business and affairs of the Trust are managed under the general direction
and supervision of 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,
19
<PAGE>
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. "Yield" for the shares is calculated by
dividing the annualized net investment income per share during a recent
30-day period by the maximum public offering price per share of such class on
the last day of the period.
"Total return" for the one-, five- and ten-year periods (or 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. Total return may also be
presented for other periods. Any quotation of investment performance not
reflecting a maximum initial sales charge or contingent deferred sales charge
would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio and the Fund's operating expenses. Investment performance
also often reflects the risks associated with the Fund's investment
objectives and policies. These factors should be considered when comparing
the Fund's investment results to those of other mutual funds and other
investment vehicles. Quotation of investment performance for any period when
a fee waiver or expense limitation was in effect will be greater than if the
waiver or limitation had not been in effect. The Fund's performance may be
compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
20
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund
shareholder.
(bullet) SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
(bullet) SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of
$5,000 is required to establish a systematic withdrawal plan.
(bullet) SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
(bullet) EXCHANGE PRIVILEGE--Exchange money between Vista funds in the same
class of shares. The exchange privilege allows you to adjust your
investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans
for systematic investment or exchange and systematic withdrawal or
exchange.
(bullet) REINSTATEMENT PRIVILEGE--Shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of
the redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
21
<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 Equity Fund
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 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 Money Market 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.
22
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<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
VAMV-1-297X
<PAGE>
PROSPECTUS
VISTA(SM) BALANCED FUND
CLASS A AND B SHARES
---------------------------------
INVESTMENT STRATEGY: TOTAL RETURN
---------------------------------
February 28, 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 February 28, 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>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights 6
How the Fund has performed
Fund Objective 8
Investment Policies 8
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management 15
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 16
Choosing a share class
How to Buy, Sell and Exchange Shares 16
How the Fund Values Its Shares 23
How Distributions Are Made; Tax Information 24
How the Fund distributes its earnings, and tax treatment related to those
earnings
Other Information Concerning the Fund 25
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 29
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 31
</TABLE>
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 expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------- -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price) 4.50% None
Maximum Deferred Sales Charge (as a percentage of the
lower of original purchase price or redemption
proceeds)* None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver) ** 0.45% 0.45%
12b-1 Fee*** 0.25% 0.75%
Shareholder Servicing Fee (after estimated waiver, where
indicated) 0.00%** 0.25%
Other Expenses 0.55% 0.55%
----- ------
Total Fund Operating Expenses (after waivers of fees)** 1.25% 2.00%
====== ======
</TABLE>
<TABLE>
<CAPTION>
Examples
Your investment of $1,000 would incur the
following expenses, assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- ---------
<S> <C> <C> <C> <C>
Class A Shares+ $57 $83 $111 $189
Class B Shares:
Assuming complete redemption at the end
of the period++ +++ $72 $96 $131 $213
Assuming no redemptions+++ $20 $63 $108 $213
</TABLE>
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "Other Information Concerning the Fund."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.50% for Class A and Class B shares,
the Shareholder Servicing Fee would be 0.25% for Class A shares, and Total
Fund Operating Expenses would be 1.55% and 2.05% for Class A and Class B
shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
4
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
5
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for both
Class A and Class B shares outstanding for each period shown. This information
is supplemented by and should be read in conjunction with financial statements
and accompanying notes appearing in the Fund's Annual Report to Shareholders for
the fiscal year ended October 31, 1996, which is incorporated by reference into
the SAI. Shareholders can obtain a copy of this Annual Report by contacting the
Fund or their Shareholder Servicing Agent. The financial statements and notes,
as well as the financial information set forth in the table below, have been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
is also included in the Annual Report to Shareholders.
VISTA BALANCED FUND
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------- --------------------------------
Year Ended Year Ended
----------------------------- 11/4/92* --------------------- 11/4/93**
through through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/96 10/31/95 10/31/94
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $12.45 $11.09 $11.38 $10.00 $12.36 $11.03 $11.22
Income from Investment Operations:
Net Investment Income 0.353 0.382 0.356 0.410 0.283 0.309 0.345
Net Gains or (Losses) in Securities (both
realized and unrealized) 1.692 1.517 (0.187) 1.344 1.656 1.502 (0.117)
----- ----- ----- ----- ----- ----- -----
Total from Investment Operations 2.045 1.899 0.169 1.754 1.939 1.811 0.228
----- ----- ----- ----- ----- ----- -----
Less Distributions:
Dividends from Net Investment Income 0.345 0.408 0.359 0.375 0.279 0.131 0.318
Distributions from Capital Gains 0.320 0.131 0.100 -- 0.320 0.350 0.100
----- ----- ----- ----- ----- ----- -----
Total Distributions 0.665 0.539 0.459 0.375 0.599 0.481 0.418
----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period $ 13.83 $ 12.45 $ 11.09 $ 11.38 $ 13.70 $ 12.36 $ 11.03
======= ======= ======= ======= ======= ======= ========
Total Return (1) 16.89% 17.70% 1.56% 17.74% 16.10% 16.93% 2.17%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $55,233 $33,733 $21,705 $13,920 $ 9,737 $ 6,336 $ 3,543
Ratio of Expenses to Average Net Assets# 1.25% 1.06% 0.58% -- 2.00% 1.82% 1.50%
Ratio of Net Investment Income to Average Net Assets# 2.97% 3.48% 3.21% 3.87% 2.21% 2.68% 2.46%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 1.78% 2.20% 2.20% 3.07% 2.29% 2.72% 2.69%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average Net Assets# 2.44% 2.34% 1.59% 0.80% 1.92% 1.78% 1.24%
Portfolio Turnover Rate 149% 68% 77% 65% 149% 68% 77%
Average Commission Rate Paid per share $0.0598 -- -- -- $0.0598 -- --
-------- -------- -------- --------- ------- ------- -------
</TABLE>
* Commencement of operations.
** Commencement of offering of class of shares.
(1) Total return figures do not take into account the effect of any sales load.
# Short periods have been annualized.
6 & 7
<PAGE>
FUND OBJECTIVE
Vista Balanced Fund seeks to maximize total return through long-term capital
growth and current income. There is no assurance that the Fund will achieve its
objective.
INVESTMENT POLICIES
Investment Approach
The Fund will invest in equity and debt securities. Under normal market
conditions, 35% to 70% of the Fund's total assets will be invested in equity
securities. The majority of the Fund's equity investments will be in well-known,
established companies with market capitalizations of at least $200 million which
are traded on established securities markets or over-the-counter. The equity
securities in which the Fund may invest include common stocks, preferred stocks,
securities convertible into common and preferred stocks and warrants to purchase
common stocks.
Under normal market conditions, at least 25% of the Fund's total assets will be
invested in investment grade fixed-income securities. The fixed income
securities in which the Fund may invest include non-convertible corporate debt
securities and U.S. Government obligations. Corporate debt securities in which
the Fund invests will be rated at the time of purchase in the category Baa or
higher by Moody's Investors Service Inc. ("Moody's"), or BBB or higher by
Standard & Poor's Corporation ("S&P") or the equivalent by another national
rating organization, or, if unrated, determined by the Fund's advisers to be of
comparable quality.
The Fund's advisers may alter the relative portion of the Fund's assets invested
in equity and fixed income securities depending on their judgment as to general
market and economic conditions and trends, yields and interest rates and changes
in monetary policies. The average maturity of the Fund's fixed income
investments will vary based upon the advisers' assessment of the relative yields
available on securities of different maturities.
The Fund may invest any portion of its assets not invested as described above in
high quality money market instruments and repurchase agreements. For temporary
defensive purposes, the Fund may invest without limitation in these instruments.
To the extent that the Fund departs from its investment policies during
temporary defensive periods, its investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities law.
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 objective
and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking the total return potential of equity and fixed-income securities
o Are investing for goals at least 3-5 years away
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<PAGE>
o Own or plan to own other types of investments for diversification purposes
o Can assume market risk of stocks and bonds
This Fund may NOT be appropriate for investors who are unable to tolerate
moderate up and down price changes, are investing for short-term goals or who
are in need of high growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices when
consistent with its 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 Fund's investments in certain foreign countries. Foreign
laws may restrict the ability to invest in certain countries or issuers and
special tax considerations will apply to foreign securities. The risks can
increase if the Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form of
American Depositary Receipts, European Depositary Receipts, Global Depositary
Receipts or other similar securities representing securities of foreign issuers
(collectively, "Depositary Receipts"). The Fund treats Depositary Receipts as
interests in the underlying securities for purposes of its investment policies.
The Fund will limit its investment in Depositary Receipts not sponsored by the
issuer of the underlying securities to no more than 5% of the value of its net
assets (at the time of investment).
SUPRANATIONAL AND ECU OBLIGATIONS. The Fund may invest in debt securities issued
by supranational organizations, which include organizations such as The World
Bank, the European Community, the European Coal and Steel Community and the
Asian Development Bank. The Fund may also invest in securities denominated in
the ECU, which is a "basket" consisting of specified amounts of the currencies
of certain member states of the European Community. These securities are
typically issued by European
9
<PAGE>
governments and supranational organizations.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. 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.
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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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 in convertible
10
<PAGE>
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. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. Payment-in-kind obligations are obligations on which the
interest is payable in additional securities rather than cash. The Fund may also
invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
INVERSE FLOATERS AND INTERESTRATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation. Interest rate caps are financial instruments under which payments
occur if an interest rate index exceeds a certain predetermined interest rate
level, known as the cap rate, which is tied to a specific index. These financial
products will be more volatile in price than securities which do not include
such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which
11
<PAGE>
underlie the securities. Early repayment of principal on mortgage pass-through
securities held by the Fund (due to prepayments of principal on the underlying
mortgage loans) may result in a lower rate of return when the Fund reinvests
such principal. In addition, as with callable fixed-income securities generally,
if the Fund purchased the securities at a premium, sustained early repayment
would limit the value of the premium. Like other fixed-income securities, when
interest rates rise the value of a mortgage-related security generally will
decline; however, when interest rates decline, the value of mortgage- related
securities with prepayment features may not increase as much as other
fixed-income, fixed-maturity securities which have no prepayment or call
features.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the U.S.
Government, or by agencies or instrumentalities of the U.S. Government (which
guarantees are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Certain mortgage pass-through
securities created by nongovernmental issuers may be supported by various forms
of insurance or guarantees, while other such securities may be backed only by
the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage Obligations
("CMOs"), which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass-through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, monthly. CMOs
may be collateralized by whole residential or commercial mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs are
structured into multiple classes, with each class having a different expected
average life and/or stated maturity. Monthly payments of principal, including
prepayments, are allocated to different classes in accordance with the terms of
the instruments, and changes in prepayment rates or assumptions may
significantly affect the expected average life and value of a particular class.
Stripped mortgage-backed securities have greater volatility than other types of
mortgage-related securities. Stripped mortgage-backed securities which are
purchased at a substantial premium or discount generally are extremely sensitive
not only to changes in prevailing interest rates but also to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on such securities' yield to maturity. In addition, stripped mortgage
securities may be illiquid.
The Fund expects that governmental, government-related or private entities may
create other mortgage-related securities in addition to those described above.
12
<PAGE>
As new types of mortgage-related securities are developed and offered to
investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the 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. 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 completing the transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency and interest rate contracts;
and (iv) purchase and sell structured products, which are instruments designed
to restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Fund invests
may be particularly sensitive to changes in prevailing economic conditions and
market value. The ability of the Fund to successfully utilize these instruments
may depend in part upon the ability of 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
13
<PAGE>
contracts, there is a greater potential that a counterparty or broker may
default. In the event of a default, the Fund may experience a loss. For
additional information concerning derivatives, related instruments and the
associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Fund's 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to 75%
of its total assets, holding more than 10% of the voting securities of any
issuer or investing more than 5% of its total assets in the securities of any
one issuer (other than U.S. Government obligations); (b) investing more than 15%
of its net assets in illiquid securities (which include securities restricted as
to resale unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than 25%
of its total asset in any one industry. A complete description of these and
other investment policies is included in the SAI. Except for the Fund's
investment objective, restriction (c) above and investment policies designated
as fundamental in the SAI, the Fund's investment policies are not fundamental.
The Trustees may change any non- fundamental investment policy without
shareholder approval.
RISK FACTORS
The Fund does not constitute a complete investment program, and the net asset
value of its shares will fluctuate based on the value of the securities in the
Fund's portfolio. The Fund is subject to the general risks and considerations
associated with equity and fixed income investing, as well as the risks
discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. The performance of the Fund will also depend on the
quality of its investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities in
which the Fund may invest, while of investment-grade quality, may be of lesser
credit quality. Securities rated in the category Baa by Moody's or BBB by S&P
lack certain investment characteristics and may have speculative
characteristics.
The Fund may invest in the securities of smaller companies, which often trade
less frequently and in lower volume. Consequently, price changes may be more
abrupt or erratic than securities of larger, more established companies. Such
14
<PAGE>
companies may have limited product lines, markets or financial resources, or
may depend on a limited management group.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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
0.50% of the Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.25% of the Fund's average daily net assets. CAM was
recently formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function. The same individuals who serve as portfolio managers for
Chase also serve as portfolio managers for CAM. CAM is located at 1211 Avenue of
the Americas, New York, New York 10036.
PORTFOLIO MANAGERS. Greg Adams and Susan Huang, Vice Presidents of Chase, have
been responsible for the management of the Fund's portfolio since its inception
in 1993, and June 1996, respectively. Mr. Adams joined Chase in 1987 and
oversees the equity trading of the Fund and is a manager of Vista Growth and
Income Portfolio and Vista Large Cap Equity Fund. Ms. Huang is responsible for
developing the allocation and risk management strategy for U.S. fixed income
portfolios, and managing the institutional U.S. fixed income assets under
management. Prior to joining Chase in June of 1995, Ms. Huang was Director of
the Insurance Asset Management Group at Hyperion Capital Management Inc. Prior
to joining Hyperion, Ms. Huang was a senior portfolio manager with CS First
Boston. Prior to joining CS First Boston in 1992, Ms. Huang spent 14 years at
The Equitable, where she worked in the pension consulting group and the U.S.
Fixed Income Management Group. Ms. Huang is also a manager of Vista Bond Fund,
Vista Short-Term Bond Fund, Vista
15
<PAGE>
U.S. Government Securities Fund and Vista U.S. Treasury Income Fund.
Patrick Quilty Jr. also participates in the management of the Fund. Mr. Quilty
joined Chase in December 1996. Prior to joining Chase, from 1994 to 1996, Mr.
Quilty was a Vice President and Portfolio Manager at ARM Capital Advisors, Inc.
where he managed mutual fund and institutional portfolios. From 1991 to 1994,
Mr. Quilty was a Portfolio Strategist at Lehman Brothers, Inc. where he analyzed
taxable fixed income portfolios.
ABOUT YOUR INVESTMENT
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" 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
16
<PAGE>
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 purchase 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
$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 in proper form 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 are in proper form only 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.
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<PAGE>
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
percentage of:
-------------------------
Amount of sales charge
Amount of transaction at Offering Net amount reallowed to dealers as a
offering price($) price invested percentage of offering price
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under 100,000 4.50 4.71 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
</TABLE>
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC will be
imposed if you redeem shares within a specified period after purchase, as shown
in the table below. The following types of shares may be redeemed without charge
at any time: (i) shares acquired by reinvestment of distributions and (ii)
shares otherwise exempt from the CDSC, as described below. For other shares, the
amount of the charge is determined as a percentage of the lesser of the current
market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- --------------------------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will first
redeem shares not subject to any charge, and then shares held longest during the
CDSC period. When a share that has appreciated in value is redeemed during the
CDSC period, a CDSC is assessed only on its initial purchase price. For
information on how sales charges are calculated if you exchange your shares, see
"How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
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<PAGE>
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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker- dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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
19
<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or agent.
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.
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.
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<PAGE>
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of instruction to the
Vista Service Center, along with any certificates that represent shares you want
to sell. The price you will receive is the next net asset value calculated after
the Fund receives your request in proper form, less any applicable CDSC. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the signatures
of registered owners or their legal representatives must be guaranteed by a
bank, broker-dealer or certain other financial institutions. See the SAI for
more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your address
as it appears on Vista's records, a signature guarantee is required. The Fund
may require additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner. Contact the Vista
Service Center for details.
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
21
<PAGE>
representative. The Telephone Redemption Privilege is not available if you
were issued certificates for shares that remain outstanding. The Telephone
Redemption Privilege may be modified or terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. In the event of any such redemption, you will receive at least 60 days
notice prior to the redemption. In the event the Fund redeems Class B shares
pursuant to this provision, no CDSC will be imposed.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
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
22
<PAGE>
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 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 reinstatement 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.
23
<PAGE>
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. 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 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 an
established account of 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
24
<PAGE>
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 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 for 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
25
<PAGE>
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily
net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their customers,
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 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 Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 450 West 33rd
Street, New York, New York 10001-2603.
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.
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<PAGE>
EXPENSES
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory and
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or a
portion of any fees to which they are entitled.
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to Class A
and Class B shares of the Fund. The Fund may offer other classes of shares in
addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which would affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may
27
<PAGE>
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.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience higher
pro rata operating expenses, thereby producing lower returns. Additionally, the
Portfolio could become less diverse, resulting in increased portfolio risk.
However, this possibility also exists for traditionally structured funds which
have large or institutional investors. Funds with a greater pro rata ownership
in a Portfolio could have effective voting control of such Portfolio. Under this
master/feeder investment approach, whenever the Trust was requested to vote on
matters pertaining to a Portfolio, the Trust would hold a meeting of
shareholders of the Fund and would cast all of its votes in the same proportion
as did the Fund's shareholders. Shares of the Fund for which no voting
instructions had been received would be voted in the
28
<PAGE>
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-34-VISTA. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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
29
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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.
30
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MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
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Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
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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
VBF-1-297X
<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA(SM) BOND FUND
Class A and B Shares
---------------------------
Investment Strategy: Income
---------------------------
February 28, 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 February 28, 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 ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ................................................................ 12
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 13
Choosing a share class
How to Buy, Sell and Exchange Shares ...................................... 14
How the Fund Values Its Shares ............................................ 21
How Distributions Are Made; Tax Information ............................... 21
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ..................................... 22
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information ................................................... 27
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 28
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
--------- --------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .................... 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ................ None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)** ....... 0.00% 0.00%
12b-1 Fee*** ............................................. 0.25% 0.75%
Shareholder Servicing Fee
(after estimated waiver, where indicated) .............. 0.00%** 0.25%
Other Expenses (after estimated waiver)** ................ 0.65% 0.65%
---- ----
Total Fund Operating Expenses
(after waivers of fees)** .............................. 0.90% 1.65%
==== ====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: ................ 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ........................... $ 54 $ 72 $ 93 $151
Class B Shares:
Assuming complete redemption at the
end of the period++ +++ ................. $ 68 $ 85 $113 $175
Assuming no redemptions +++ ............. $ 17 $ 52 $ 90 $175
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.30% for Class A and Class B shares,
the Shareholder Servicing Fee would be 0.25% for Class A shares, the Other
Expenses would be .75% for Class A and Class B shares, and Total Fund
Operating Expenses would be 1.55% and 2.05% for Class A and Class B shares,
respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
3
<PAGE>
Charges and credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
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<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for
both Class A and Class B Shares outstanding throughout the period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1996, which is incorporated by reference into the SAI.
Shareholders may obtain a copy of this annual report by contacting the Fund
or their Shareholder Servicing Agent. The financial statements and notes, as
well as the financial information set forth in the table below, has been
audited by Price Waterhouse LLP, independent accountants, whose report
thereon is also included in the Annual Report to Shareholders.
VISTA BOND FUND
Class A Class B
-------- ----------
5/6/96* 5/6/96*
through through
10/31/96 10/31/96
-------- ----------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................... $10.39 $10.39
------ ------
Income from Investment Operations
Net Investment Income ................................. 0.288 0.233
Net Gains or (Losses) in Securities
(both realized and unrealized) ...................... 0.310 0.368
------ ------
Total from Investment Operations ....................... 0.598 0.601
------ ------
Less dividends from net investment income ................ 0.278 0.231
------ ------
Net Asset Value, End of Period ........................... $10.71 $10.76
====== ======
Total Return (1) ......................................... 5.95% 6.12%
------ ------
Ratios/Supplemental Data
Net Assets, End of Perod (000 omitted) .................. $ 988 $ 821
------ ------
Ratio of Exepnses to Average Net Assets # ............... 0.90% 1.65%
------ ------
Ratio of Net Investment Income to Average Net Assets # .. 5.75% 4.97%
------ ------
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets # ................... 2.39% 2.93%
------ ------
Ratio of Net Investment Income without waivers
and assumption of expenses to Average Net Assets # .... 4.26% 3.69%
------ ------
Portfolio Turnover Rate .................................. 122% 122%
------ ------
* Commencement of offering class of shares.
(1) Total return figures do not take into account effect of any sales charges.
# Short periods have been annualized.
5
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FUND OBJECTIVE
- --------------
Vista Bond Fund seeks as high a level of income as is consistent with reasonable
risk. The Fund is not intended to be a complete investment program, and there is
no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund invests primarily in a broad range of investment-grade corporate
bonds as well as other fixed-income securities. Under normal market
conditions, the Fund invests at least 65% of its total assets in debt
obligations of the U.S. Government, its agencies and instrumentalities, and
investment- grade fixed income securities. Investment-grade fixed income
securities are securities rated in the category Baa or higher by Moody's
Investors Service, Inc. ("Moody's"), or BBB or higher by Standard & Poor's
Corporation ("S&P") or the equivalent by another national rating
organization, and unrated securities determined by the Fund's advisers to be
of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of debt securities based upon their appraisal
of changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset- backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments.
For temporary defensive purposes, the Fund may invest without limitation in
high quality money market instruments and repurchase agreements, which
generally carry lower yields than longer-term securities.
The Fund is classified as a "diversified" fund under federal securities law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking current income
o Are investing for mid- to long-term investment goals
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o Own or plan to own other types of investments for diversification purposes
o Can assume bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate any
up and down price changes, are investing for very short-term goals or who are
in need of high growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. 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.
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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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
7
<PAGE>
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.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. Payment-in-kind obligations are obligations on which the
interest is payable in additional securities rather than cash. The Fund may also
invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. The Fund may
invest in floating rate securities, whose interest rates adjust automatically
whenever a specified interest rate changes, and variable rate securities, whose
interest rates are periodically adjusted. Certain of these instruments permit
the holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. The securities
in which the Fund may invest include participation certificates and certificates
of indebtedness or safekeeping. Participation certificates are pro rata
interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. As a result of the floating or variable rate nature of these
investments, the Fund's yield may decline and it may forego the opportunity for
capital appreciation during periods when interest rates decline; however, during
periods when interest rates increase, the Fund's yield may increase and it may
have reduced risk of capital depreciation. Demand features on certain floating
or variable rate securities may obligate the Fund to pay a "tender fee" to a
third party. Demand features provided by foreign banks involve certain risks
associated with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation. Interest rate caps are financial instruments under which payments
occur if an interest rate index exceeds a certain predetermined interest rate
level, known as the cap
8
<PAGE>
rate, which is tied to a specific index. These financial products will be
more volatile in price than securities which do not include such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities. Early repayment of principal on mortgage pass-through securities
held by the Fund (due to prepayments of principal on the underlying mortgage
loans) may result in a lower rate of return when the Fund reinvests such
principal. In addition, as with callable fixed- income securities generally, if
the Fund purchased the securities at a premium, sustained early repayment would
limit the value of the premium. Like other fixed- income securities, when
interest rates rise the value of a mortgage- related security generally will
decline; however, when interest rates decline, the value of mortgage- related
securities with prepayment features may not increase as much as other
fixed-income, fixed-maturity securities which have no prepayment or call
features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage- backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
The Fund may invest in principal- only or interest-only stripped
mortgage-backed securities. Stripped mortgage-backed securities have greater
volatility than other
9
<PAGE>
types of mortgage-related securities. Stripped mortgage-backed securities
which are purchased at a substantial premium or discount generally are
extremely sensitive not only to changes in prevailing interest rates but also
to the rate of principal payments (including prepayments) on the related
underlying mortgage assets, and a rapid rate of principal payments may have a
material adverse effect on such securities' yield to maturity. In addition,
stripped mortgage securities may be illiquid.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the 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. 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 completing the transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset- backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies, when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of
10
<PAGE>
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 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 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the Fund's investment policies (including its
investment objectives) are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
11
<PAGE>
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with the types of investments it may make, as
described above, as well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities
in which the Fund may invest, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.30% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.15% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary
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<PAGE>
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.
Patrick Quilty Jr., a Senior Fixed Income Portfolio Manager
at Chase, and Susan Huang, a Vice President and the Director of Fixed Income
Management of Chase, have been responsible for the management of the Fund since
December 1996 and May 1996, respectively. Mr. Quilty joined Chase in December
1996. Prior to joining Chase, from 1994 through 1996, Mr. Quilty was a Vice
President and Portfolio Manager at ARM Capital Advisors, Inc. where he managed
mutual fund and institutional portfolios. From 1991 to 1994, Mr. Quilty was a
Portfolio Strategist at Lehman Brothers, Inc. where he analyzed taxable fixed
income portfolios. Mr. Quilty is also a manager of Vista Balanced Fund.
Ms. Huang is responsible for developing the allocation and risk management
strategy for U.S. fixed income portfolios, and managing the institutional
U.S. fixed income assets under management. Prior to joining Chase in June of
1995, Ms. Huang was Director of the Insurance Asset Management Group at
Hyperion Capital Management Inc. Prior to joining Hyperion, Ms. Huang was a
senior portfolio manager with CS First Boston. Prior to joining CS First
Boston in 1992, Ms. Huang spent 14 years at The Equitable, where she worked
in the pension consulting group and the U.S. Fixed Income Management Group.
Ms. Huang is also a manager of Vista Balanced Fund, Vista Short-Term Bond
Fund, Vista U.S. Government Securities Fund and Vista U.S. Treasury Income
Fund.
ABOUT YOUR INVESTMENT
- ---------------------
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" 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
13
<PAGE>
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 purchase check clears, which may
take the 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
$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
14
<PAGE>
offering price, the Vista Service Center must receive your order in proper
form 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 are in
proper form only after funds are converted to federal funds. Orders paid by
check and received by 2:00 p.m., Eastern Time will generally be available for
the purchase of shares the following business day.
If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares
with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
Class A Shares
--------------
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of:
-------------------- Amount of sales charge
Amount of transaction at Offering Net amount reallowed to dealers as a
offering price($) Price invested percentage of offering price
- ---------------------------- -------- ---------- ----------------------------
Under 100,000 4.50 4.71 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commission on net sales of Class A
shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
15
<PAGE>
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 the Vista funds may be
combined with the other mutual funds in the same program when determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker- dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or
16
<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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
17
<PAGE>
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.
SIGNATURE GUARANTEES. If you sell shares having a net asset value of $100,000 or
more, the signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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
18
<PAGE>
have notified the Vista Service Center of an address change within the
preceding 30 days. Telephone redemption requests in excess of $25,000 will
only be made by wire to a bank account on record with the Fund. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions 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.
19
<PAGE>
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you redeem the
shares acquired through the exchange, the redemption may be subject to the
CDSC, depending upon when you originally purchased the shares. The CDSC will
be computed using the schedule of any fund into or from which you have
exchanged your shares that would result in your paying the highest CDSC
applicable to your class of shares. In computing the CDSC, the length of time
you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
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 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.
20
<PAGE>
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 reinstatement 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 declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes 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 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 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 an
established account of another Vista fund without a sales charge. If the
Vista
21
<PAGE>
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 reimburse the Fund's distributor and
broker-dealers for services provided and expenses incurred in connection with
the sale of Class A and Class B shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.25% of the
average daily net asset value of Class A or Class B shares maintained in
22
<PAGE>
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 for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.
SHAREHOLDER
SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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
23
<PAGE>
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 Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub- administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
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.
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
24
<PAGE>
and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
UNIQUE CHARACTERISTICS OF
MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the
25
<PAGE>
Fund, a Portfolio could also sell beneficial interests to other mutual funds
or institutional investors. Such investors would invest in such Portfolio on
the same terms and conditions and would pay a proportionate share of such
Portfolio's expenses. However, other investors in a Portfolio would not be
required to sell their shares at the same public offering price as the Fund,
and might bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in a
Portfolio. Such differences in return are also present in other mutual fund
structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-34-VISTA. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
26
<PAGE>
PERFORMANCE
INFORMATION
- -----------
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares, in the manner described in the SAI. "Yield" for each class
of shares is calculated by dividing the annualized net investment income
calculated pursuant to federal rules per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or 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.
27
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund
shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o 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.
28
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
29
<PAGE>
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<PAGE>
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<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
VDF-1-297X
<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA(SM) BOND FUND
INSTITUTIONAL SHARES
---------------------------
INVESTMENT STRATEGY: INCOME
---------------------------
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-662-4273. 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 ........................................................... 3
Financial Highlights ...................................................... 4
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
Management ................................................................ 12
How to Purchase, Redeem and Exchange Shares ............................... 13
How the Fund Values Its Shares ............................................ 16
How Distributions Are Made; Tax Information ............................... 16
Other Information Concerning the Fund ..................................... 17
Performance Information ................................................... 21
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)* .................. 0.00%
12b-1 Fee .......................................................... None
Shareholder Servicing Fee (after estimated waiver)* ................ 0.00%
Other Expenses ..................................................... 0.60%
----
Total Fund Operating Expenses (after waivers of fees)* ............. 0.60%
====
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares $6 $19 $33 $75
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers,
the Investment Advisory Fee and Shareholder Servicing Fee would be 0.30%
and 0.25%, respectively, and Total Fund Operating Expenses would be 1.15%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The following information on selected per share data and ratios for one
Institutional share with respect to each of the five fiscal periods commencing
after June 30, 1992, and the related financial statements, have been audited by
Price Waterhouse LLP, independent accountants, whose report expressed an
unqualified opinion thereon. The information on selected per share data and
ratios with respect to the fiscal year ended June 30, 1992 and the period
November 30, 1990 to June 30, 1991, has been audited by other independent
accountants, whose report expressed an unqualified opinion thereon. The
following information should be read in conjunction with the financial
statements and notes thereto appearing in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 1996, which is incorporated
by reference into the SAI.
VISTA BOND FUND
<TABLE>
<CAPTION>
Year Ended 7/1/92** Year 11/1/90*
---------------------------------------- through Ended through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92 6/30/92 6/30/91
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ................... $ 10.91 $ 10.08 $ 11.30 $ 10.76 $ 10.70 $ 10.14 $ 10.00
------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income ................................ 0.665 0.687 0.667 0.622 0.240 0.760 0.410
Net gain or (Losses) in Securities (both realized
and unrealized) .................................... (0.148) 0.854 (1.140) 0.629 0.110 0.570 0.080
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations ..................... 0.517 1.541 (0.473) 1.251 0.350 1.330 0.490
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ................ 0.662 0.687 0.667 0.684 0.240 0.760 0.350
Distributions from Capital Gains ..................... 0.055 0.024 0.081 0.026 0.050 0.010 --
------- ------- ------- ------- ------- ------- -------
Total Distributions: ................................. 0.717 0.711 0.748 0.710 0.290 0.770 0.350
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ......................... $ 10.71 $ 10.91 $ 10.08 $ 11.30 $ 10.76 $ 10.70 $ 10.14
======= ======= ======= ======= ======= ======= =======
Total Return ........................................... 4.90% 15.83% (4.30%) 12.63% 3.36% 13.67% 4.82%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ............... $17,777 $57,285 $52,439 $61,155 $45,401 $41,321 $36,791
Ratio of Expenses to Average Net Assets# .............. 0.36% 0.31% 0.31% 0.31% 0.30% 0.30% 0.29%
Ratio of Net Investment Income to Average Net Assets# . 6.23% 6.56% 6.27% 6.15% 6.74% 7.20% 7.30%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets# .................. 0.87% 0.87% 0.92% 0.82% 0.73% 1.03% 1.04%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average Net Assets# ... 5.72% 6.00% 5.66% 5.64% 6.31% 6.47% 6.55%
Portfolio Turnover Rate ................................ 122% 30% 17% 20% 3% 31% 35%
</TABLE>
* Commencement of operations.
** In 1992, the fund's fiscal year-end was changed from June 30 to October
31.
# Short periods have been annualized.
4-5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Bond Fund seeks as high a level of income as is consistent with
reasonable risk. The Fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund invests primarily in a broad range of investment-grade corporate
bonds as well as other fixed-income securities. Under normal market
conditions, the Fund invests at least 65% of its total assets in debt
obligations of the U.S. Government, its agencies and instrumentalities, and
investment-grade fixed income securities. Investment-grade fixed income
securities are securities rated in the category Baa or higher by Moody's
Investors Service, Inc. ("Moody's"), or BBB or higher by Standard & Poor's
Corporation ("S&P") or the equivalent by another national rating
organization, and unrated securities determined by the Fund's advisers to be
of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of debt securities based upon their appraisal
of changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset-backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments.
For temporary defensive purposes, the Fund may invest without limitation in
high quality money market instruments and repurchase agreements, which
generally carry lower yields than longer-term securities.
The Fund is classified as a "diversified" fund under the federal securities
law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking current income
6
<PAGE>
o Are investing for mid- to long-term investment goals
o Own or plan to own other types of investments for diversification purposes
o Can assume bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate any
up and down price changes, are investing for short-term goals or who are in
need of high growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. 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.
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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including those
sometimes referred to as stand-by commitments, with respect to securities in its
portfolio. In these transactions, the Fund would
7
<PAGE>
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.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. Payment-in-kind obligations are obligations on which the
interest is payable in additional securities rather than cash. The Fund may also
invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. The Fund may
invest in floating rate securities, whose interest rates adjust automatically
whenever a specified interest rate changes, and variable rate securities, whose
interest rates are periodically adjusted. Certain of these instruments permit
the holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. The securities
in which the Fund may invest include participation certificates and certificates
of indebtedness or safekeeping. Participation certificates are pro rata
interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. As a result of the floating or variable rate nature of these
investments, the Fund's yield may decline and it may forego the opportunity for
capital appreciation during periods when interest rates decline; however, during
periods when interest rates increase, the Fund's yield may increase and it may
have reduced risk of capital depreciation. Demand features on certain floating
or variable rate securities may obligate the Fund to pay a "tender fee" to a
third party. Demand features provided by foreign banks involve certain risks
associated with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation.
8
<PAGE>
Interest rate caps are financial instruments under which payments occur if an
interest rate index exceeds a certain predetermined interest rate level,
known as the cap rate, which is tied to a specific index. These financial
products will be more volatile in price than securities which do not include
such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities. Early repayment of principal on mortgage pass-through securities
held by the Fund (due to prepayments of principal on the underlying mortgage
loans) may result in a lower rate of return when the Fund reinvests such
principal. In addition, as with callable fixed- income securities generally, if
the Fund purchased the securities at a premium, sustained early repayment would
limit the value of the premium. Like other fixed- income securities, when
interest rates rise the value of a mortgage- related security generally will
decline; however, when interest rates decline, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income, fixed maturity securities which have no prepayment or call
features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
9
<PAGE>
The Fund may invest in principal-only or interest-only stripped mortgage-backed
securities. Stripped mortgage-backed securities have greater volatility than
other types of mortgage-related securities. Stripped mortgage-backed securities
which are purchased at a substantial premium or discount generally are extremely
sensitive not only to changes in prevailing interest rates but also to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on such securities' yield to maturity. In addition, stripped mortgage
securities may be illiquid.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the 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. 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 completing the transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
10
<PAGE>
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 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 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the Fund's investment policies (including its
investment objective) are not fundamental. The Trustees may change any non-
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<PAGE>
fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with the types of investments it may make, as
described above, as well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the values of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While securities issued or guaranteed by the U.S.
Government generally are of high quality, the other fixed income securities
in which the Fund may invest, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.30% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.15% of the
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<PAGE>
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. Patrick Quilty Jr., a Senior Fixed Income Portfolio Manager
at Chase, and Susan Huang, a Vice President and the Director of Fixed Income
Management of Chase, have been responsible for the management of the Fund since
December 1996 and May 1996, respectively. Mr. Quilty joined Chase in December
1996. Prior to joining Chase, from 1994 through 1996, Mr. Quilty was a Vice
President and Portfolio Manager at ARM Capital Advisors, Inc. where he managed
mutual fund and institutional portfolios. From 1991 to 1994, Mr. Quilty was a
Portfolio Strategist at Lehman Brothers, Inc. where he analyzed taxable fixed
income portfolios. Mr. Quilty is also a manager of Vista Balanced Fund.
Ms. Huang is responsible for developing the allocation and risk management
strategy for U.S. fixed income portfolios, and managing the institutional
U.S. fixed income assets under management. Prior to joining Chase in June of
1995, Ms. Huang was Director of the Insurance Asset Management Group at
Hyperion Capital Management Inc. Prior to joining Hyperion, Ms. Huang was a
senior portfolio manager with CS First Boston. Prior to joining CS First
Boston in 1992, Ms. Huang spent 14 years at The Equitable, where she worked
in the pension consulting group and the U.S. Fixed Income Management Group.
Ms. Huang is also a manager of Vista Balanced Fund, Vista Short-Term Bond
Fund, Vista U.S. Government Securities Fund and Vista U.S. Treasury Income
Fund.
HOW TO PURCHASE, REDEEM
AND EXCHANGE SHARES
- -------------------
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are
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<PAGE>
responsible for forwarding orders for the purchase of shares on a timely
basis. Institutional Shares will be maintained in book entry form and share
certificates will not be issued. Management reserves the right to refuse to
sell shares of the Fund to any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone to
the Vista Service Center. For telephone redemptions, call the Vista Service
Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
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
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<PAGE>
Fund may be liable for any losses due to unauthorized or fraudulent
instructions. An investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents will be liable for any loss,
liability, cost or expense arising out of any redemption request, including
any fraudulent or unauthorized request. For information, consult the Vista
Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request before
the close of regular trading on the New York Stock Exchange to receive that
day's net asset value. Your Dealer will be responsible for furnishing all
necessary documentation to the Vista Service Center, and may charge you for its
services.
REDEMPTION OF ACCOUNTS OF LESS THAN $1,000,000. The Fund may involuntarily
redeem your shares if at such time the aggregate net asset value of the shares
in your account is less than $1,000,000 due to redemptions. In the event of any
such redemption, you will receive at least 60 days notice prior to the
redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer Institutional Shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully prior to any
exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available. Call
the Vista Service Center for procedures for telephone transactions. Ask your
investment representative or the Vista Service Center for prospectuses of other
Vista funds. Shares of certain Vista funds are not available to residents of all
states.
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 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
15
<PAGE>
Service Center before requesting an exchange. The exchange privilege is
subject to change or termination. See the SAI to find out more about the
exchange privilege.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at
least annually. Capital gains are distributed after deducting any available
capital loss carryover.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares; (2) receive distributions
from net investment income in cash or by Automated Clearing House (ACH) to a
pre- established bank account while reinvesting capital gains distributions in
additional shares; or (3) receive all distributions in cash or by ACH. You can
change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the same share class. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in an
established account of 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
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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
- -------------------
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 from the Fund or other sources
17
<PAGE>
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
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
SUB-ADMINISTRATOR
AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub- administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 450 West 33rd Street, New York, New York 10001-2603.
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
18
<PAGE>
to the Fund may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
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<PAGE>
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
UNIQUE CHARACTERISTICS
OF MASTER/FEEDER
FUND STRUCTURE
- --------------
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust
20
<PAGE>
serve as Trustees of the Portfolio. The Trustees of the Trust, including a
majority of the disinterested Trustees, have adopted procedures they believe
are reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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 public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
21
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
22
<PAGE>
(This Page Intentionally Left Blank)
<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
INDF-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) CAPITAL GROWTH FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 28, 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 February 28, 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.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Capital Growth Portfolio (the
"Portfolio"), an open-end management investment company with an investment
objective identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this
investment structure, see "Unique Characteristics of Master/Feeder Fund
Structure" on page 25.
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>
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 6
How the Fund has performed
Fund Objective ............................................................ 8
Investment Policies ....................................................... 8
The kinds of securities in which the Fund invests,
investment policies and techniques, and risks
Management ................................................................ 12
Chase Manhattan Bank, the Portfolio's adviser; Chase Asset Management,
the Portfolio's sub-adviser, and the individuals who manage
the Portfolio
About Your Investment ..................................................... 13
Choosing a share class
How to Buy, Sell and Exchange Shares ...................................... 14
How the Fund Values Its Shares ............................................ 21
How Distributions Are Made; Tax Information ............................... 21
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ..................................... 22
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and master/feeder Fund structure
Performance Information ................................................... 27
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 28
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 expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
-------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ...................... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original purchase
price or redemption proceeds)* ........................... None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee .................................... 0.40% 0.40%
12b-1 Fee** ................................................ 0.25% 0.75%
Shareholder Servicing Fee .................................. 0.25% 0.25%
Other Expenses ............................................. 0.40% 0.40%
---- ----
Total Fund Operating Expenses .............................. 1.30% 1.80%
==== ====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: .................. 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ............................. $ 60 $ 87 $115 $197
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ ......................... $ 70 $ 90 $121 $198
Assuming no redemptions +++ ................ $ 18 $ 57 $ 97 $198
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge generally
declines by 1% annually thereafter (except in the fourth year), reaching
zero after six years. See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the Fund, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by rules of
the National Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
4
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs directly
and through the Portfolio. The examples should not be considered
representations of past or future expenses or returns; actual expenses and
returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
5
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares outstanding for each of the periods shown.
This information is supplemented by and should be read in conjunction with
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the fiscal year ended October 31, 1996, which is
incorporated by reference into the SAI. Shareholders can obtain a copy of
this Annual Report
VISTA CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
Class A
Year ended October 31,
---------------------------------------------------
1996 1995 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................... $ 35.65 $ 32.17 $ 32.01 $ 25.12
-------- -------- -------- --------
Income from Investment Operations:
Net Investment Income (Loss) .......................... 0.147 0.189 0.099@ 0.064
Net Gains or (Losses) in Securities
(both realized and unrealized) ...................... 7.270 4.160 0.719 7.173
-------- -------- -------- --------
Total from Investment Operations ...................... 7.417 4.349 0.818 7.237
-------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income .................. 0.117 0.189 0.027 0.093
Distributions from Capital Gains ...................... 1.355 0.676 0.631 0.257
-------- -------- -------- --------
Total Distributions ................................... 1.472 0.865 0.658 0.350
-------- -------- -------- --------
Net Asset Value, End of Period .......................... $ 41.60 $ 35.65 $ 32.17 $ 32.01
======== ======== ======== ========
Total Return (1) ........................................ 21.48% 13.89% 2.62% 29.06%
Ratios/Supplemental Data (2):
Net Assets, End of Period (000 omitted) ................ $767,998 $747,575 $549,411 $225,235
Ratio of Expenses to Average Net Assets # .............. 1.37% 1.51% 1.49% 1.49%
Ratio of Net Investment Income to Average Net
Assets # ............................................. 0.39% 0.54% 0.33% 0.12%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets # .............................................. 1.37% 1.53% 1.50% 1.49%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average
Net Assets # ......................................... 0.39% 0.52% 0.32% 0.12%
Portfolio Turnover Rate ................................. -- -- -- 43%
</TABLE>
6
<PAGE>
by contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below for each of the periods ended October 31, 1996, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders.
<TABLE>
<CAPTION>
Class A
Year ended October 31 Class B
- ------------------------------------------------------------------------- ---------------------------------------
9/23/87* Year Year 11/4/93**
to Ended Ended through
1992 1991 1990 1989 1988 10/31/87 10/31/96 10/31/95 10/31/94
------ ------ ------ ------ ------ ------ -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$22.02 $12.33 $16.23 $11.56 $10.00 $10.00 $ 35.39 $ 32.03 $ 31.38
------ ------ ------ ------ ------ ------ -------- -------- --------
0.078 (0.011) 0.436 0.500 0.117 -- (0.076) 0.044 0.011@
3.044 9.805 (3.141) 5.164 1.498 -- 7.246 4.100 1.296
------ ------ ------ ------ ------ ------ -------- -------- --------
3.122 9.794 (2.705) 5.664 1.615 -- 7.170 4.144 1.307
------ ------ ------ ------ ------ ------ -------- -------- --------
0.017 0.109 0.592 0.320 0.055 -- -- 0.111 0.026
-- -- 0.598 0.675 -- -- 1.355 0.676 0.631
------ ------ ------ ------ ------ ------ -------- -------- --------
0.017 0.109 1.190 0.995 0.055 -- 1.355 0.787 0.657
------ ------ ------ ------ ------ ------ -------- -------- --------
$25.12 $22.02 $12.33 $16.23 $11.56 $10.00 $ 41.21 $ 35.39 $ 32.03
====== ====== ====== ====== ====== ====== ======== ======== ========
14.16% 79.96% (18.11%) 52.12% 16.15% 0.00% 20.88% 13.34% 4.19%
$39,836 $9,334 $4,749 $4,652 $ 561 $ 13 $333,703 $260,376 $124,223
1.40% 1.27% 1.04% 0.00% 0.00% 0.00% 1.87% 2.01% 2.00%
0.32% (0.09%) 2.82% 3.87% 1.55% 0.00% (0.21%) 0.02% (0.09%)
1.77% 3.44% 2.50% 2.50% 2.00% 2.00% 1.87% 2.02% 2.02%
(0.05%) (2.26%) 1.36% 1.37% (0.45%) (2.00%) (0.21%) 0.01% (0.11%)
67% 83% 139% 189% 229% 0% -- -- --
</TABLE>
* Commencement of operations.
** Commencement of offering of class of shares.
@ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any sales loads.
(2) Ratios include the Fund's share of portfolio income and expenses, as
appropriate.
# Short periods have been annualized.
7
<PAGE>
FUND OBJECTIVE
- --------------
Vista Capital Growth Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it will
achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio will invest primarily in a broad
portfolio of common stocks. Under normal market conditions, the Portfolio
will invest at least 80% of its total assets in common stocks. The Portfolio
will seek to invest in stocks of companies with capitalizations of $750
million to $4.0 billion. Current income, if any, is a consideration
incidental to the Portfolio's objective of long-term capital growth. The
Portfolio's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Portfolio is classified as a "non-diversified" fund under federal
securities law.
The Portfolio may invest any portion of its assets not invested in common
stocks in high quality money market instruments and repurchase agreements.
For temporary defensive purposes, the Portfolio may invest without limitation
in these instruments. At times when the Portfolio's advisers deem it
advisable to limit the Portfolio's exposure to the equity markets, the
Portfolio may invest up to 20% of its total assets in U.S. Government
obligations (exclusive of any investments in money market instruments). To
the extent that the Portfolio departs from its investment policies during
temporary defensive periods, the Fund's investment objective may not be
achieved.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking long-term growth of capital
o Are investing for goals several years away
o Own or plan to own other types of investments for diversification purposes
o Can assume above-average stock 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.
FUND STRUCTURE
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees
determine that it is in the best interest of the Fund to do so. Upon any such
withdrawal, the Trustees would consider what action might be taken, including
investing all of the Fund's investable assets in another pooled investment
entity having substantially the same objective and policies as the Fund or
retaining an investment adviser to manage the Fund's assets directly.
8
<PAGE>
OTHER INVESTMENT PRACTICES
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These
practices, and certain associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. The Portfolio may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts, which are described below.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio'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 Portfolio's assets held abroad. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, taxation by withholding Portfolio 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
Portfolio invests in emerging market securities.
The Portfolio may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Portfolio treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Portfolio will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of
investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Portfolio 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.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Portfolio
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Portfolio also has the ability to lend portfolio securities
in an amount equal to not more than 30% of its total assets to generate
additional
9
<PAGE>
income. These transactions must be fully collateralized at all times. The
Portfolio may purchase securities for delivery at a future date, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money from
banks for temporary or short-term purposes, but will not borrow money to buy
additional securities, known as "leveraging." The Portfolio may also sell and
simultaneously commit to repurchase a portfolio security at an agreed-upon price
and time. This practice may be used to generate cash for shareholder redemptions
without selling securities during unfavorable market conditions. Whenever the
Portfolio enters into a reverse repurchase agreement, it will establish a
segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Portfolio would be required to pay interest on amounts obtained through
reverse repurchase agreements, which are considered borrowing under federal
securities laws.
STAND-BY COMMITMENTS. The Portfolio may enter into put transactions, including
those sometimes referred to as stand-by commitments, with respect to securities
in its portfolio. In these transactions, the Portfolio would acquire the right
to sell a security at an agreed upon price within a specified period prior to
its maturity date. These transactions involve some risk to the Portfolio if the
other party should default on its obligation and the Portfolio is delayed or
prevented from recovering the collateral or completing the transaction. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed interest
or dividend yields which may be converted either at a stated price or stated
rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
10
<PAGE>
STRIPS. The Portfolio 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 Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
its advisers to forecast these factors correctly. Inaccurate forecasts could
expose the Portfolio to a risk of loss. There can be no guarantee that there
will be a correlation between price movements in a hedging instrument and in
the portfolio assets being hedged. The Portfolio is not required to use any
hedging strategies. Hedging strategies, while reducing risk of loss, can also
reduce the opportunity for gain. Derivatives transactions not involving
hedging may have speculative characteristics, involve leverage and result in
losses that may exceed the original investment of the Portfolio. There can be
no assurance that a liquid market will exist at a time when the Portfolio
seeks to close out a derivatives position. Activities of large traders in the
futures and securities markets involving arbitrage, "program trading," and
other investment strategies may cause price distortions in derivatives
markets. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default. In the event of a default, the Portfolio
may experience a loss. For additional information concerning derivatives,
related instruments and the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Portfolio's buy and sell transactions
will vary from year
11
<PAGE>
to year. The Portfolio's investment policies may lead to frequent changes in
investments, particularly in periods of rapidly changing market conditions.
High portfolio turnover rates would generally result in higher transaction
costs, including brokerage commissions or dealer mark-ups, and would make it
more difficult for the Portfolio to qualify as a registered investment
company under federal tax law. See "How Distributions are Made; Tax
Information."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio 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 Portfolio); 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 Portfolio and the Fund (including their investment objective)
are not fundamental. Shareholder approval is not required to change any
non-fundamental investment policy. However, in the event of a change in the
Fund's or Portfolio's investment objective, shareholders will be given at
least 30 days' prior written notice.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities held by the Portfolio. The Portfolio is subject to the general
risks and considerations associated with equity investing, as well as the
risks discussed herein.
Because the Portfolio is "non- diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE PORTFOLIO'S ADVISERS
The Chase Manhattan Bank ("Chase") is the Portfolio's investment adviser
under an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Portfolio, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience.
For its investment advisory services to the Portfolio, Chase is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.40% of the Portfolio's average daily net assets. Chase is located
at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Portfolio's sub-
12
<PAGE>
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 Portfolio on a day-to-daybasis. For these
services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.20% of the Portfolio's average
daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
PORTFOLIO MANAGERS. David Klassen, Director, U.S. Funds Management and Equity
Research at Chase, and Tony Gleason, a Vice President of Chase, have been
responsible for the management of the Portfolio since September 1995. Mr.
Klassen is responsible for asset allocation and investment strategy for Chase's
domestic equity portfolios. Mr. Klassen joined Chase in March 1992. Prior to
joining Chase, Mr. Klassen was a vice president and portfolio manager at Dean
Witter Reynolds, responsible for managing several mutual funds and other
accounts. Mr. Klassen is also a manager of Vista Small Cap Equity Fund and Vista
Growth and Income Portfolio. Mr. Gleason is also responsible for managing Vista
Equity Income Fund. Mr. Gleason joined Chase in 1995 with 10 years of investment
experience. Prior to joining Chase, Mr. Gleason spent nine years as a Vice
President and Portfolio Manager with Prudential Equity Management.
ABOUT YOUR INVESTMENT
- ---------------------
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" 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
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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
$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 in proper
form before the close of regular trading on the New York
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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 are in proper form only 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.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
----------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price ($) Price invested offering price
- ------------------------------ -------- ---------- ---------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 1.00% of the amount under $2.5
million, 0.75% of the next $7.5 million, 0.50% of the next $40 million and
0.20% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
--------------
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares
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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 determining 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 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.
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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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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
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<PAGE>
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 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.
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<PAGE>
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions 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
19
<PAGE>
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 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 reinstatement 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
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<PAGE>
the redemption of the Class B shares.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least semi- annually and
any net realized capital gains at least annually. 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 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 an
established account of 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
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<PAGE>
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 reimburse the Fund's distributor and
broker-dealers for services provided and expenses incurred in connection with
the sale of Class A and Class B shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.20% of the
average daily net asset value of Class A shares, or 0.25% of the average
daily net asset value of the Class B shares 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.
Class A shares are also permitted to pay an additional fee at an annual rate
of up to 0.05% of its average
22
<PAGE>
daily net asset value in anticipation of, or as reimbursement for, expenses
incurred in connection with print or electronic media advertising in
connection with the sale of Fund shares. When such expenses are incurred, the
maximum compensation paid by the Class A shares under the Class A
distribution plan would be at an annual rate of 0.25% of its average daily
net asset value.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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
23
<PAGE>
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 for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their average
daily net assets.
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 450 West 33rd Street, New York, New York 10001-2603.
CUSTODIAN
Chase acts as the custodian and fund accountant for the Fund and the
Portfolio and receives compensation under separate agreements with the Trust
and the Portfolio. Portfolio 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 and the Portfolio. 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 for custody services, 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 or Portfolio; 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 or
Portfolio may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust").
24
<PAGE>
The Trust has reserved the right to create and issue additional series and
classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or
class. The shares of each series or class participate equally in the
earnings, dividends and assets of the particular series or class. Shares have
no preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one
vote for each whole share held, and each fractional share shall be entitled
to a proportionate fractional vote, except that Trust shares held in the
treasury of the Trust shall not be voted. Shares of each class of the Fund
generally vote together except when required under federal securities laws to
vote separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
UNIQUE CHARACTERISTICS
OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a
shareholder's interest in the Portfolio's securities is indirect. In addition
to selling a beneficial interest to the Fund, the Portfolio
25
<PAGE>
may sell beneficial interests to other mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, other investors investing in the Portfolio are not required to sell
their shares at the same public offering prices as the Fund, and may bear
different levels of ongoing expenses than the Fund. Shareholders of the Fund
should be aware that these differences may result in differences in returns
experienced in the different funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns. Additionally,
the Portfolio may become less diverse, resulting in increased portfolio risk.
However, this possibility also exists for traditionally structured funds
which have large or institutional investors. Funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Trust is requested to vote on
matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same
proportion as do the Fund's shareholders. Shares of the Fund for which no
voting instructions have been received will be voted in the same proportion
as those shares for which voting instructions are received. Certain changes
in the Portfolio's objective, policies or restrictions may require the Trust
to withdraw the Fund's interest in the Portfolio. Any withdrawal could result
in a distribution in kind of portfolio securities (as opposed to a cash
distribution from the Portfolio). The Fund could incur brokerage fees or
other transaction costs in converting such securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-34-VISTA.
26
<PAGE>
PERFORMANCE INFORMATION
- -----------------------
The Fund's investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares, in the manner described in the SAI. "Yield" for each class
of shares is calculated by dividing the annualized net investment income per
share during a recent 30-day period by the maximum public offering price per
share of such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or 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.
27
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund
shareholder.
o 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.
o SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or seminannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal
plan for Class A accounts.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o 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.
28
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
29
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<PAGE>
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<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
VCG-1-297X
<PAGE>
[LOGO]
PROSPECTUS
VISTA(SM) CAPITAL GROWTH FUND
INSTITUTIONAL SHARES
INVESTMENT STRATEGY: CAPITAL GROWTH
February 28, 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 February 28, 1997 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Vista Service Center at 1-800-622-4273. 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.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Capital Growth Portfolio (the
"Portfolio"), an open-end management investment company with an investment
objective identical to those of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this investment
structure, see "Unique Characteristics of Master/Feeder Fund Structure" on page
18.
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>
<PAGE>
TABLE OF CONTENTS
Expense Summary 4
Financial Highlights 5
Fund Objective 6
Investment Policies 6
Management 10
How to Purchase, Redeem and Exchange Shares 11
How the Fund Values Its Shares 14
How Distributions Are Made; Tax Information 14
Other Information Concerning the Fund 15
Performance Information 19
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 expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee 0.40%
12b-1 Fee None
Shareholder Servicing Fee 0.25%
Other Expenses 0.26%
------
Total Fund Operating Expenses 0.91%
======
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares $9 $29 $50 $112
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 directly
and through the Portfolio. The example should not be considered a
representation of past or future expenses or returns; actual expenses and
returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Institutional Class Share outstanding throughout the period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year ended
October 31, 1996, which is incorporated by reference into the SAI. Shareholders
may obtain a copy of this annual report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below, has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is also included
in the Annual Report to Shareholders.
VISTA CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
1/25/96*
through
10/31/96
-------
<S> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $35.26
Income From Investment Operations
Net Investment Income 0.172
Net Gains or (Losses) in Securities (both realized and unrealized) 6.336
Total from Investment Operations 6.508
Less Distributions
Dividends from Net Investment Income 0.122
Distributions from Capital Gains --
Total Distributions 0.122
Net Asset Value, End of Period $41.65
======
Total Return 18.13%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $31,556
Ratio of Expenses to Average Net Assets# 1.25%
Ratio of Net Investment Income to Average Net Assets# 0.81%
Ratio of Expenses without waivers and assumption of expenses
to Average Net Assets# 1.25%
Ratio of Net Investment Income without waivers and assumption of
expenses to Average Net Assets# 0.81%
* Commencement of offering class of shares.
# Short periods have been annualized.
</TABLE>
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Capital Growth Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
INVESTMENT APPROACH
- -------------------
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio will invest primarily in a broad
portfolio of common stocks. Under normal market conditions, the Portfolio
will invest at least 80% of its total assets in common stocks. The Portfolio
will seek to invest in stocks of companies with capitalizations of $750
million to $4.0 billion. Current income, if any, is a consideration
incidental to the Portfolio's objective of long- term capital growth. The
Portfolio's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Portfolio is classified as a "non-diversified" fund under federal
securities law.
The Portfolio may invest any portion of its assets not invested in common
stocks in high quality money market instruments and repurchase agreements, as
described below. For temporary defensive purposes, the Portfolio may invest
without limitation in these instruments. At times when the Portfolio's
advisers deem it advisable to limit the Portfolio's exposure to the equity
markets, the Portfolio may invest up to 20% of its total assets in U.S.
Government obligations (exclusive of any investments in money market
instruments). To the extent that the Portfolio departs from its investment
policies during temporary defensive periods, the Fund's investment objective
may not be achieved.
FUND STRUCTURE
- --------------
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees
determine that it is in the best interest of the Fund to do so. Upon any such
withdrawal, the Trustees would consider what action might be taken, including
investing all of the Fund's investable assets in another pooled investment
entity having substantially the same objective and policies as the Fund or
retaining an investment adviser to manage the Fund's assets directly.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
Are seeking long-term growth of capital
o Are investing for goals several years away
o Own or plan to own other types of investments for diversification purposes
o Can assume above-average stock 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.
6
<PAGE>
OTHER INVESTMENT PRACTICES
- --------------------------
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These
practices, and certain associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. The Portfolio may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts, which are described below.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio'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 Portfolio'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
Portfolio invests in in emerging market securities.
The Portfolio may invest its assets in securities of foreign issuers in
the form of American Depositary Receipts, European Depositary Receipts,
Global Depositary Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The
Portfolio treats Depositary Receipts as interests in the underlying
securities for purposes of its investment policies. The Portfolio will limit
its investment in Depositary Receipts not sponsored by the issuer of the
underlying securities to no more than 5% of the value of its net assets (at
the time of investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Portfolio may invest in cash or high-quality,
short-term money market instruments. These instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Portfolio
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Portfolio also has the ability to lend portfolio securities
in an amount equal to not more than 30% of its
7
<PAGE>
total assets to generate additional income. These transactions must be fully
collateralized at all times. The Portfolio may purchase securities for
delivery at a future date, which may increase its overall investment exposure
and involves a risk of loss if the value of the securities declines prior to
the settlement date. These transactions involve some risk to the Portfolio if
the other party should default on its obligation and the Portfolio is delayed
or prevented from recovering the collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
from banks for temporary or short- term purposes, but will not borrow money to
buy additional securities, known as "leveraging." The Portfolio may also sell
and simultaneously commit to repurchase a portfolio security at an agreed-upon
price and time. This practice may be used to generate cash for shareholder
redemptions without selling securities during unfavorable market conditions.
Whenever the Portfolio enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
STAND-BY COMMITMENTS. The Portfolio may enter into put transactions, including
those sometimes referred to as stand-by commitments, with respect to securities
in its portfolio. In these transactions, the Portfolio would acquire the right
to sell a security at an agreed upon price within a specified period prior to
its maturity date. These transactions involve some risk to the Portfolio if the
other party should default on its obligation and the Portfolio is delayed or
prevented from recovering the collateral or completing the transaction. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed interest
or dividend yields which may be converted either at a stated price or stated
rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
STRIPS. The Portfolio may invest up to 20% of its total assets in stripped
obligations (i.e., separately traded principal and interest
8
<PAGE>
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 Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
its advisers to forecast these factors correctly. Inaccurate forecasts could
expose the Portfolio to a risk of loss. There can be no guarantee that there
will be a correlation between price movements in a hedging instrument and in
the portfolio assets being hedged. The Portfolio is not required to use any
hedging strategies. Hedging strategies, while reducing risk of loss, can also
reduce the opportunity for gain. Derivatives transactions not involving
hedging may have speculative characteristics, involve leverage and result in
losses that may exceed the original investment of the Portfolio. There can be
no assurance that a liquid market will exist at a time when the Portfolio
seeks to close out a derivatives position. Activities of large traders in the
futures and securities markets involving arbitrage, "program trading," and
other investment strategies may cause price distortions in derivatives
markets. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default. In the event of a default, the Portfolio
may experience a loss. For additional information concerning derivatives,
related instruments and the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Portfolio's buy and sell transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
9
<PAGE>
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information.
LIMITING INVESTMENT RISKS
- -------------------------
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio 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 Portfolio); 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 Portfolio and the Fund (including their investment objective)
are not fundamental. Shareholder approval is not required to change any
non-fundamental investment policy. However, in the event of a change in the
Fund's or Portfolio's investment objective, shareholders will be given at
least 30 days' prior written notice.
RISK FACTORS
- ------------
The Fund does not constitute a balanced or complete investment program, and the
net asset value of its shares will fluctuate based on the value of the
securities held by the Portfolio. The Portfolio is subject to the general risks
and considerations associated with equity investing, as well as the risks
discussed herein.
Because the Fund is "non-diversified," the value of the Fund's shares is more
susceptible to developments affecting issuers in which the Fund invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
THE PORTFOLIO'S ADVISERS
- ------------------------
The Chase Manhattan Bank ("Chase") is the Portfolio's investment adviser under
an Investment Advisory Agreement and has overall responsibility for investment
decisions of the Portfolio, subject to the oversight of the Board of Trustees.
Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank
holding company. Chase and its predecessors have over 100 years of money
management experience.
For its investment advisory services to the Portfolio, Chase is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.40% of the Portfolio's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
10
<PAGE>
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the Portfolio'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 Portfolio on a day-to-day
basis. For these services, CAM is entitled to receive a fee, payable by Chase
from its advisory fee, at an annual rate equal to 0.20% of the Portfolio's
average daily net assets. CAM was recently formed for the purpose of
providing discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York,
New York 10036.
PORTFOLIO MANAGERS. David Klassen, Director, U.S. Funds Management and Equity
Research at Chase, and Tony Gleason, a Vice President of Chase, have been
responsible for the management of the Portfolio since September 1995. Mr.
Klassen is responsible for asset allocation and investment strategy for Chase's
domestic equity portfolios. Mr. Klassen joined Chase in March 1992. Prior to
joining Chase, Mr. Klassen was a vice president and portfolio manager at Dean
Witter Reynolds, responsible for managing several mutual funds and other
accounts. Mr. Klassen is also a manager of Vista Small Cap Equity Fund and Vista
Growth and Income Portfolio. Mr. Gleason is also responsible for managing Vista
Equity Income Fund. Mr. Gleason joined Chase in 1995 with 10 years of investment
experience. Prior to joining Chase, Mr. Gleason spent nine years as a Vice
President and Portfolio Manager with Prudential Equity Management.
HOW TO PURCHASE, REDEEM
AND EXCHANGE SHARES
- -------------------
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are purchased at their public offering price, which
is their next determined net asset value. Orders received by Dealers in
proper form prior to the New York Stock Exchange closing time are confirmed
at that day's net asset value, provided the order is received by the Vista
Service Center prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a timely basis. Institutional
Shares will be maintained in book entry
11
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form and share certificates will not be issued. Management reserves the right
to refuse to sell shares of the Fund to any institution.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone to
the Vista Service Center. For telephone redemptions, call the Vista Service
Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
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
12
<PAGE>
permitted by applicable law, neither the Fund nor its agents will be liable
for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request before
the close of regular trading on the New York Stock Exchange to receive that
day's net asset value. Your Dealer will be responsible for furnishing all
necessary documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000 due to redemptions. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista funds
offer Institutional Shares. The prospectus of the other Vista fund into which
shares are being exchanged should be read carefully prior to any exchange and
retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of
shares and generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available. Call
the Vista Service Center for procedures for telephone transactions. Ask your
investment representative or the Vista Service Center for prospectuses of other
Vista funds. Shares of certain Vista funds are not available to residents of all
states.
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 terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in a
year or three in a calendar quarter will be charged a $5.00 administration fee
for each such exchange. Shareholders would be notified of any such action to the
extent required by law. Consult the Vista Service Center before requesting an
exchange. The exchange privilege is subject to change or termination. See the
SAI to find out more about the exchange privilege.
13
<PAGE>
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m, Eastern time), on each Fund Business Day, by dividing
the net assets of the Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Fund (i.e.,
the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least semi- annually and
any net realized capital gains at least annually. Capital gains are
distributed after deducting any available capital loss carryovers.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares; (2) receive distributions
from net investment income in cash or by Automated Clearing House (ACH) to a
pre- established bank account while reinvesting capital gains distributions in
additional shares; or (3) receive all distributions in cash or by ACH. You can
change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the same share class. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund or in an established account of 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.
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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.
A portion of the ordinary income dividends paid by the Fund may qualify
for the 70% dividends- received deduction for corporate shareholders.
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
- -------------------
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services
15
<PAGE>
for their customers. These services include maintaining account records,
processing orders to purchase, redeem and exchange Fund shares and responding
to certain customer inquiries. The amount of such compensation may be up to
0.10% annually of the average net assets of the Fund attributable to shares
of the Fund held by customers of such selected dealers. Such compensation
does not represent an additional expense to the Fund or its shareholders,
since it will be paid by Chase.
ADMINISTRATOR
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets.
SUB-ADMINISTRATOR AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub- administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the 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 450 West 33rd Street, New York, New York 10001-2603.
CUSTODIAN
Chase acts as the custodian and fund accountant for the Fund and the
Portfolio and receives compensation under separate agreements with the Trust
and the Portfolio. Portfolio 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 and the Portfolio. 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 for custody services, 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 or Portfolio; 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 or
Portfolio may, from
16
<PAGE>
time to time, voluntarily waive all or a portion of any fees to which they
are entitled.
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only
to Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general
direction and supervision of 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.
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<PAGE>
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a
shareholder's interest in the Portfolio's securities is indirect. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, other
investors investing in the Portfolio are not required to sell their shares at
the same public offering prices as the Fund, and may bear different levels of
ongoing expenses than the Fund. Shareholders of the Fund should be aware that
these differences may result in differences in returns experienced in the
different funds that invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may experience higher
pro rata operating expenses, thereby producing lower returns. Additionally,
the Portfolio may become less diverse, resulting in increased portfolio risk.
However, this possibility also exists for traditionally structured funds
which have large or institutional investors. Funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Trust is requested to vote on
matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same
proportion as do the Fund's shareholders. Shares of the Fund for which no
voting instructions have been received will be voted in the same proportion
as those shares for which voting instructions are received. Certain changes
in the Portfolio's objective, policies or restrictions may require the Trust
to withdraw the Fund's interest in the Portfolio. Any withdrawal could result
in a distribution in kind of portfolio securities (as opposed to a cash
distribution from the Portfolio). The Fund could incur brokerage fees or
other transaction costs in converting such securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested
18
<PAGE>
Trustees, have adopted procedures they believe are reasonably appropriate to
deal with resulting potential conflicts of interest, up to and including
creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-622-4273.
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 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 public offering price. Total return may also be
presented for other periods.
All performance data is based on the Fund's past investment results and
does not predict future performance. Investment performance, which will vary,
is based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
19
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
20
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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
INCG-1-297X
<PAGE>
PROSPECTUS
VISTA(SM) EQUITY INCOME FUND
CLASS A AND CLASS B SHARES
------------------------------------
INVESTMENT STRATEGY: INCOME. CAPITAL
APPRECIATION IS A SECONDARY
CONSIDERATION.
------------------------------------
February 28, 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 February 28, 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>
<PAGE>
TABLE OF CONTENTS
Expense Summary .......................................................... 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights ..................................................... 6
How the Fund has performed
Fund Objective ........................................................... 7
Investment Policies ...................................................... 7
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ............................................................... 12
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment .................................................... 13
Choosing a share class
How to Buy, Sell and Exchange Shares ..................................... 13
How the Fund Values Its Shares ........................................... 20
How Distributions Are Made; Tax Information .............................. 21
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund .................................... 22
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information .................................................. 26
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ................................... 28
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 expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ......................... 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original purchase price
or redemption proceeds)* .................................... None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)** ............ 0.25% 0.25%
12b-1 Fee*** .................................................. 0.25% 0.75%
Shareholder Servicing Fee
(after estimated waiver, where indicated) ................... 0.00%** 0.25%
Other Expenses ................................................ 1.00% 1.00%
---- ----
Total Fund Operating Expenses (after waivers of fees)** ....... 1.50% 2.25%
==== ====
EXAMPLES
Your investment of $1,000 would incur
the following expenses, assuming 5%
annual return: ............................. 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ............................ $60 $ 90 $123 $216
Class B Shares:
Assuming complete redemption at the
end of the period++ +++ .................. $74 $103 $143 $240
Assuming no redemptions+++ ................ $23 $ 70 $120 $240
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.40%, the Shareholder Servicing Fee
would be 0.25% for Class A shares, and Total Fund Operating Expenses would
be 1.90% and 2.40% for Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the Fund, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by rules of the
National Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
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>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for a
Class A and Class B share outstanding for each period shown. This information
is supplemented by and should be read in conjunction with the financial
statements and accompanying notes appearing in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 1996, which is
incorporated by reference into the SAI. Shareholders may obtain a copy of
this Annual Report by contacting the Fund or their Shareholder Servicing
Agent. The financial statements and notes, as well as the financial
information set forth in the table below, have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders.
VISTA EQUITY INCOME FUND
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------------------------- --------
Year Ended 07/15/93* 5/7/96**
---------------------------------------- through through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/96
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Per Share Operating Performance:
Net Asset Value, Beginning of Period .................... $ 13.39 $ 12.12 $ 13.84 $ 13.14 $14.56
------- ------- ------- ------- ------
Income from Investment Operations:
Net Investment Income ................................. 0.348 0.347 0.290 0.078 0.134
Net Gains or (Losses) in Securities
(both realized and unrealized) ....................... 3.434 1.698 (0.477) 0.700 1.376
------- ------- ------- ------- ------
Total from Investment Operations ..................... 3.782 2.045 (0.187) 0.778 1.510
------- ------- ------- ------- ------
Less Distributions:
Dividends from Net Investment Income .................. 0.329 0.366 0.258 0.078 0.151
Distributions from Capital Gains ...................... 0.863 0.410 1.275 -- --
Total distributions ................................... 1.192 0.776 1.533 0.078 0.151
------- ------- ------- ------- ------
Net Asset Value, End of Period .......................... $ 15.98 $ 13.39 $ 12.12 $ 13.84 $15.92
======= ======= ======= ======= ======
Total Return (1) ........................................ 29.79% 17.97% (1.35%) 5.91% 10.43%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................ $17,493 $11,737 $11,409 $15,321 $ 560
Ratio of Expenses to Average Net Assets# ............... 1.50% 1.50% 1.50% 1.50% 2.25%
Ratio of Net Investment Income to
Average Net Assets# ................................... 2.41% 2.81% 2.31% 1.72% 1.75%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets# ........................................... 2.32% 2.19% 2.02% 2.40% 2.75%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# ................................... 1.59% 2.12% 1.79% 0.82% 1.25%
Portfolio Turnover Rate ................................. 114% 91% 75% 54% 114%
Average Commission Rate Paid per share .................. $0.0587 -- -- -- $0.0587
* Commencement of operations.
** Commencement of offering of class of shares.
(1) Total return figures do not include the effect of any sales loads.
# Short periods have been annualized.
</TABLE>
6
<PAGE>
FUND OBJECTIVE
- --------------
Vista Equity Income Fund seeks to obtain income. The Fund pursues this
objective primarily by investing in income-producing equity securities. The
Fund is not intended to be a complete investment program, and there is no
assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 65% of its
total assets in income-producing equity securities. Capital appreciation is a
secondary consideration. The income-producing equity securities in which the
Fund invests include common stocks, preferred stocks and convertible
securities. The Fund attempts to achieve a yield which exceeds the composite
yield on the securities comprising the Standard and Poor's 500 Stock Price
Index.
It is anticipated that the major portion of the Fund's assets will be
invested in common stocks traded on a national securities exchange or on
NASDAQ. A significant portion of the Fund's assets may be invested in
convertible bonds or convertible preferred stock.
The Fund may invest any portion of its assets not invested as described above
in investment grade debt securities, high quality money market instruments
and repurchase agreements. For temporary defensive purposes, the Fund may
invest without limitation in these instruments. To the extent that the Fund
departs from its investment policies during temporary defensive periods, its
investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking current income while maintaining an opportunity to benefit from
growth in the equity market
o Are investing for goals at least 3-5 years away
o Own or plan to own other types of investments for diversification purposes
o Can assume stock market risk
This Fund may NOT be appropriate for investors who are unable to tolerate
moderate up and down price changes, are investing for very short-term goals
or who are in need of higher growth potential.
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.
7
<PAGE>
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 Fund's investments in certain foreign countries. Foreign
laws may restrict the ability to invest in certain issuers or countries and
special tax considerations will apply to foreign securities. The risks can
increase if the Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
SUPRANATIONAL AND ECU OBLIGATIONS. The Portfolio may invest in debt securities
issued by supranational organizations, which include organizations such as The
World Bank, the European Community, the European Coal and Steel Community and
the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
CONVERTIBLE SECURITIES. The Fund may invest in convertible securities, which are
securities generally offering fixed interest or dividend yields which may be
converted either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of
8
<PAGE>
the underlying common or preferred stock.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include 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.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow 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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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
9
<PAGE>
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.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment 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. Govrnment, 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.
REAL ESTATE INVESTMENT TRUSTS. The Fund's equity securities may include shares
of real estate investment trusts ("REITs"). REITs are pooled investment vehicles
which invest primarily in income-producing real estate ("equity trust") or real
estate related loans or interests ("mortgage trusts"). The value of equity
trusts will depend upon the value of the underlying properties, and the value of
the mortgage trusts will be sensitive to the value of the underlying loans or
interests. The value of REITs may decline when interest rates rise.
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.
10
<PAGE>
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 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
Investment restrictions help the Fund limit investment risks for its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the Fund's investment policies (including its
investment objective) are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval. However, in the
event of a change in the Fund's investment objective, shareholders will be
given at least 30 days' prior written notice.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the
11
<PAGE>
general risks and considerations associated with equity investing, as well as
the risks discussed herein.
To the extent the Fund invests in convertible securities or other fixed
income securities, the performance of the Fund will depend in part on
interest rate changes. As interest rates increase, the value of fixed income
securities held by the Fund tends to decrease. To the extent the Fund invests
in fixed income securities with longer maturities, the volatility of the Fund
in response to changes in interest rates can be expected to be greater than
if the Fund had invested in comparable securities with shorter maturities. In
addition, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.40% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.20% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
PORTFOLIO MANAGER. Tony Gleason, a Vice President of Chase, has been responsible
for the day-to-day management of the Fund's portfolio since September 1995. Mr.
Gleason is also a manager of Vista Capital Growth Portfolio. Mr. Gleason joined
Chase in 1995 with 10 years of investment experience. Prior to joining Chase,
Mr. Gleason spent nine years as a Vice President and Portfolio Manager with
Prudential Equity Management.
12
<PAGE>
ABOUT YOUR INVESTMENT
- ---------------------
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 Your Shares" and "Other
Information Concerning the Fund."
CLASS B SHARES. Class B shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This
discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Fund."
Which arrangement is best for you?The decision as to which class of shares
provides a more suitable investment for 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
13
<PAGE>
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
$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 in proper
form 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 are in
proper form only 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.
14
<PAGE>
Class A Shares
--------------
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of: Amount of sales
--------------------- charge reallowed
Amount of transaction at Offering Net amount to dealers as a percentage
offering price ($) Price invested of offering price
- ---------------------------- ------- --------- --------------------------
Under 100,000 4.50 4.71 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
--------------
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price of
shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value is
redeemed during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are calculated if you
exchange your shares, see "How to Exchange Your Shares." The Fund's
distributor pays broker-dealers a commission of 4.00% of the offering price
on sales of Class B shares, and the distributor receives the entire amount of
any CDSC you pay.
15
<PAGE>
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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker-dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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
16
<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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
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shares for which it has collected payment of the purchase price.
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of instruction to the
Vista Service Center, along with any certificates that represent shares you want
to sell. The price you will receive is the next net asset value calculated after
the Fund receives your request in proper form, less any applicable CDSC. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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
18
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redemption request, as described above, or contact your investment
representative. The Telephone Redemption Privilege is not available if you
were issued certificates for shares that remain outstanding. The Telephone
Redemption Privilege may be modified or terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. 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 due to redemptions 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
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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 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 reinstatement 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.
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HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. 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 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 an
established account of 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
21
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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 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 for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.
SHAREHOLDER
SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
22
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transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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 Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
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.
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EXPENSES
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory
and administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent
accountants, of legal counsel and of any transfer agent, registrar or
dividend disbursing agent of the Trust; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, shares of the
Fund. Shareholder servicing and distribution fees are allocated to specific
classes of the Fund. In addition, the Fund may allocate transfer agency and
certain other expenses by class. Service providers to the Fund may, from time
to time, voluntarily waive all or a portion of any fees to which they are
entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to Class
A and Class B shares of the Fund. The Fund may offer other classes of shares
in addition to these classes. The categories of investors that are eligible
to purchase shares and minimum investment requirements may differ for each
class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which would affect
the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may
24
<PAGE>
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.
UNIQUE CHARACTERISTICS OF
MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for
25
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which voting instructions had been received. Certain changes in a Portfolio's
objective, policies or restrictions might require the Trust to withdraw the
Fund's interest in such Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution from such Portfolio). The Fund could incur brokerage fees or
other transaction costs in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-34-VISTA. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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
26
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investment objectives and policies. These factors should be considered when
comparing the Fund's investment results to those of other mutual funds and
other investment vehicles. Quotation of investment performance for any period
when a fee waiver or expense limitation was in effect will be greater than if
the waiver or limitation had not been in effect. The Fund's performance may
be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
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MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund
shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
<PAGE>
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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
VEQ-1-297X
<PAGE>
[Chase Vista Logo]
PROSPECTUS
VISTA(SM) GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
--------------------
INVESTMENT STRATEGY:
GROWTH AND INCOME
--------------------
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. 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.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Growth and Income Portfolio (the
"Portfolio"), an open-end management investment company with investment
objectives identical to those of the Fund. Investors should carefully
consider this investment approach. For additional information regarding this
investment structure, see "Unique Characteristics of Master/Feeder Fund
Structure" on page 18.
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.
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TABLE OF CONTENTS
Expense Summary ....................................... 4
Financial Highlights ................................. 5
Fund Objectives ....................................... 6
Investment Policies ................................... 6
Management ............................................ 11
How to Purchase, Redeem and Exchange Shares .......... 12
How the Fund Values Its Shares ........................ 14
How Distributions Are Made; Tax Information .......... 14
Other Information Concerning the Fund ................ 15
Performance Information .............................. 19
3
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EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee ........................... 0.40%
12b-1 Fee ......................................... None
Shareholder Servicing Fee ......................... 0.25%
Other Expenses .................................... 0.25%
----
Total Fund Operating Expenses ..................... 0.90%
====
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------- -------- -------- -----------
Institutional Shares ........ $9 $29 $50 $111
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 directly
and through the Portfolio. The example should not be considered a
representation of past or future expenses or returns; actual expenses and
returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
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FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Institutional Class Share outstanding throughout the period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1996, which is incorporated by reference into the SAI.
Shareholders may obtain a copy of this annual report by contacting the Fund
or their Shareholder Servicing Agent. The financial statements and notes, as
well as the financial information set forth in the table below, has been
audited by Price Waterhouse LLP, independent accountants, whose report
thereon is also included in the Annual Report to Shareholders.
VISTA GROWTH AND INCOME FUND
1/25/96*
through
10/31/96
--------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............................... $ 34.80
Income From Investment Operations
Net Investment Income ............................................ 0.467
Net Gains or (Losses) in Securities (both realized and unrealized) 4.459
Total from Investment Operations ................................. 4.926
Less Distributions
Dividends from Net Investment Income ............................. 0.471
Distributions from Capital Gains ................................. --
-------
Total Distributions ................................................ 0.471
Net Asset Value, End of Period ..................................... $ 39.26
=======
Total Return ....................................................... 13.39%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ........................... $27,974
Ratio of Expenses to Average Net Assets# .......................... 1.24%
Ratio of Net Investment Income to Average Net Assets# ............. 1.73%
Ratio of Expenses without waivers and assumption of expenses
to Average Net Assets# .......................................... 1.24%
Ratio of Net Investment Income without waivers and assumption of
expenses to Average Net Assets# .................................. 1.73%
* Commencement of offering of class of shares.
# Short periods have been annualized.
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FUND OBJECTIVES
Vista Growth and Income Fund seeks to provide long-term capital appreciation
and dividend income. The Fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objectives.
INVESTMENT POLICIES
INVESTMENT APPROACH
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio invests in common stocks of issuers
with a broad range of market capitalizations. Under normal market conditions,
the Portfolio will invest at least 80% of its total assets in common stocks.
In addition, the Portfolio may invest up to 20% of its total assets in
convertible securities.
The Portfolio's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The advisers believe that the market risk involved in seeking capital
appreciation will be moderated to an extent by the anticipated dividend
returns on the stocks in which the Portfolio invests.
The Portfolio is classified as a "non-diversified" fund under federal
securities law.
The Portfolio may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Portfolio may invest without limitation in
these instruments as well as investment grade debt securities. At times when
the Portfolio's advisers deem it advisable to limit the Portfolio's exposure
to the equity markets, the Portfolio may invest up to 20% of its total assets
in U.S. Government obligations (exclusive of any investments in money market
instruments). To the extent that the Portfolio departs from its investment
policies during temporary defensive periods, the Fund's investment objective
may not be achieved.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking long-term growth potential with dividend income
o Are investing for goals at least 3-5 years away
o Own or plan to own other types of investments for diversification purposes
o Can assume stock market risk
This Fund may NOT be appropriate for investors who are unable to tolerate
moderate up and down price changes, are investing for short-term goals or who
are in need of more aggressive growth potential.
FUND STRUCTURE
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees
determine that it is in the best interest of the Fund to do so. Upon any such
withdrawal, the Trustees would consider what action might be taken, including
investing all of the Fund's investable assets in another pooled investment
entity
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having substantially the same objective and policies as the Fund or retaining
an investment adviser to manage the Fund's assets directly.
OTHER INVESTMENT PRACTICES
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These
practices, and certain associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. The Portfolio may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts, which are described below.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio'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 Portfolio's assets held abroad. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, taxation by withholding Portfolio 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
Portfolio invests in emerging market securities.
The Portfolio may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Portfolio treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Portfolio will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of
investment).
SUPRANATIONAL AND ECU OBLIGATIONS. The Portfolio may invest in debt securities
issued by supranational organizations, which include organizations such as The
World Bank, the European Community, the European Coal and Steel Community and
the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets in
convertible
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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.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Portfolio may invest in cash or high-quality,
short-term money market instruments. These instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by another national rating organiztion, or, if unrated, determined by
the advisers to be of comparable quality.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Portfolio
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Portfolio also has the ability to lend portfolio securities
in an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all times.
The Portfolio may purchase securities for delivery at a future date, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
from banks for temporary or short-term purposes, but will not borrow money to
buy additional securities, known as "leveraging." The Portfolio may also sell
and simultaneously commit to repurchase a portfolio security at an agreed-upon
price and time. This practice may be used to generate cash for shareholder
redemptions without selling securities during unfavorable market conditions.
Whenever the Portfolio enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained
8
<PAGE>
through reverse repurchase agreements, which are considered borrowings under
federal securities laws.
STAND-BY COMMITMENTS. The Portfolio 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 Portfolio would acquire the right
to sell a security at an agreed upon price within a specified period prior to
its maturity date. These transactions involve some risk to the Portfolio if the
other party should default on its obligation and the Portfolio is delayed or
prevented from recovering the collateral or completing the transaction. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its total
assets in shares of other investment 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 Portfolio 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 Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
its advisers to forecast these factors correctly. Inaccurate forecasts could
expose the Portfolio to a risk of loss. There can be no guarantee that there
will be a correlation between price
9
<PAGE>
movements in a hedging instrument and in the portfolio assets being hedged.
The Portfolio is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in losses that may exceed the
original investment of the Portfolio. There can be no assurance that a liquid
market will exist at a time when the Portfolio seeks to close out a
derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Portfolio may experience a
loss. For additional information concerning derivatives, related instruments
and the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Portfolio's buy and sell transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Portfolio limit investment risks
for the Fund's shareholders. These restrictions prohibit the Portfolio 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); 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 (including
their investment objective) of the Portfolio and the Fund are not
fundamental. Shareholder approval is not required to change any
non-fundamental investment policy. However, in the event of a change in the
Fund's or Portfolio's investment objective, shareholders will be given at
least 30 days prior written notice.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities held by the Portfolio. The Fund is subject to the general risks
and considerations associated with equity investing.
10
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Because the Portfolio is "non-diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
THE PORTFOLIO'S ADVISERS
The Chase Manhattan Bank ("Chase") is the Portfolio's investment adviser
under an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Portfolio, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience.
For its investment advisory services to the Portfolio, Chase is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.40% of the Portfolio's average daily net assets. Chase is located
at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Portfolio'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 Portfolio on a day-to-day basis. For these
services, CAM is entitled to receive a fee, payable by Chase from its advisory
fee, at an annual rate equal to 0.20% of the Portfolio's average daily net
assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
PORTFOLIO MANAGERS. Greg Adams, a Senior Portfolio Manager at Chase, and David
Klassen, Director, U.S. Funds Management and Equity Research at Chase, have been
responsible for the management of the Portfolio since March 1995. Mr. Adams
joined Chase in 1987 and is also a manager of Vista Balanced Fund and Vista
Large Cap Equity Fund. In addition, Mr. Adams has been responsible for
overseeing the proprietary computer model program used in the U.S. equity
selection process.
Mr. Klassen is responsible for asset allocation and investment strategy for
Chase's domestic equity portfolios. Mr. Klassen joined Chase in March 1992.
Prior to joining Chase, Mr. Klassen was a vice president and portfolio
manager at Dean Witter Reynolds, responsible for managing several mutual
funds and other accounts. In addition to managing Vista Growth and Income
Portfolio, Mr. Klassen is a manager of Vista Small
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Cap Equity Fund and Vista Capital Growth Portfolio.
HOW TO PURCHASE, REDEEM, AND EXCHANGE SHARES
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone by
calling the Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request
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before the close of regular trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
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 or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request before
the close of regular trading on the New York Stock Exchange to receive that
day's net asset value. Your Dealer will be responsible for furnishing all
necessary documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000 due to redemptions. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer Institutional Shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully prior to any
exchange and retained for future reference.
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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. 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 terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in a
year or three in a calendar quarter will be charged a $5.00 administration fee
for each such exchange. Shareholders would be notified of any such action to the
extent required by law. Consult the Vista Service Center before requesting an
exchange. The exchange privilege is subject to change or termination. See the
SAI to find out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. Capital gains are distributed after
deducting any available capital loss carryovers.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares; (2) receive distributions
from net investment income in cash or by Automated Clearing House (ACH) to a
pre- established bank account while reinvesting capital gains distributions in
additional shares; or (3) receive all distributions in cash or by ACH. You can
change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
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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 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 an
established account of 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.
A portion of the ordinary income dividends paid by the Fund may qualify for
the 70% dividends-received deduction for corporate shareholders.
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
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing
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agents have agreed to provide certain support services to their customers who
beneficially own Institutional Shares of the Fund. These services include
assisting with purchase and redemption transactions, maintaining shareholder
accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily
net assets of Institutional Shares of the Fund held by investors for whom the
shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder servicing agent may establish its own terms and
conditions, including limitations on the amounts of subsequent transactions,
with respect to such services. Certain shareholder servicing agents may
(although they are not required by the Trust to do so) credit to the accounts
of their customers from whom they are already receiving other fees an amount
not exceeding such other fees or the fees for their services as shareholder
servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
ADMINISTRATOR
Chase acts as the administrator for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets.
SUB-ADMINISTRATOR AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub- administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the 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 450 West 33rd Street, New York, New York 10001-2603.
16
<PAGE>
CUSTODIAN
Chase acts as the custodian and fund accountant for the Fund and the
Portfolio and receives compensation under separate agreements with the Trust
and the Portfolio. Portfolio 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 and the Portfolio. 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 for custody services, 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 or Portfolio; 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 or
Portfolio may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships,
17
<PAGE>
corporations, qualified and other retirement plans and fiduciary accounts
opened by a bank, trust company or thrift institution which exercises
investment authority over such accounts. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares may differ for each class of Fund shares. In
addition, other classes of Fund shares may be subject to differences in sales
charge arrangements, ongoing distribution and service fee levels, and levels
of certain other expenses, which will affect the relative performance of the
different classes. Investors may call 1-800-622-4273 to obtain additional
information about other classes of shares of the Fund that are offered. Any
person entitled to receive compensation for selling or servicing shares of
the Fund may receive different levels of compensation with respect to one
class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a
shareholder's interest in the Portfolio's securities is indirect. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, other
investors investing in the Portfolio are not required to sell their shares at
the same public offering prices as the Fund, and may bear different levels of
ongoing expenses than the Fund. Shareholders of the Fund should be aware that
these differences may result in differences in returns experienced in the
different funds that invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining
18
<PAGE>
funds may experience higher pro rata operating expenses, thereby producing
lower returns. Additionally, the Portfolio may become less diverse, resulting
in increased portfolio risk. However, this possibility also exists for
traditionally structured funds which have large or institutional investors.
Funds with a greater pro rata ownership in the Portfolio could have effective
voting control of the operations of the Portfolio. Whenever the Trust is
requested to vote on matters pertaining to the Portfolio, the Trust will hold
a meeting of shareholders of the Fund and will cast all of its votes in the
same proportion as do the Fund's shareholders. Shares of the Fund for which
no voting instructions have been received will be voted in the same
proportion as those shares for which voting instructions are received.
Certain changes in the Portfolio's objective, policies or restrictions may
require the Trust to withdraw the Fund's interest in the Portfolio. Any
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Fund could incur
brokerage fees or other transaction costs in converting such securities to
cash. In addition, a distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-622-4273.
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 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 public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered
19
<PAGE>
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's
performance may be compared to other mutual funds, relevant indices and
rankings prepared by independent services. See the SAI.
20
<PAGE>
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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
21
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
(This Page Intentionally Left Blank)
<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
INGI-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) GROWTH AND INCOME FUND
CLASS A AND B SHARES
--------------------
INVESTMENT STRATEGY:
GROWTH AND INCOME
--------------------
February 28, 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 February 28, 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.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in Growth and Income Portfolio (the
"Portfolio"), an open-end management investment company with investment
objectives identical to those of the Fund. Investors should carefully
consider this investment approach. For additional information regarding this
investment structure, see "Unique Characteristics of Master/Feeder Fund
Structure" on page 26.
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>
<PAGE>
TABLE OF CONTENTS
Expense Summary ........................................................... 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 6
How the Fund has performed
Fund Objectives ........................................................... 8
Investment Policies ....................................................... 8
The kinds of securities in which the Fund invests, investment
policies and techniques, and risks
Management ................................................................ 13
Chase Manhattan Bank, the Portfolio's adviser; Chase Asset Management,
the Portfolio's sub-adviser, and the individuals who manage
the Portfolio
About Your Investment ..................................................... 14
Choosing a share class
How to Buy, Sell and Exchange Shares ...................................... 14
How the Fund Values Its Shares ............................................ 21
How Distributions Are Made; Tax Information ............................... 22
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ..................................... 23
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information ................................................... 27
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 29
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 expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ...................... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* .................. None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee .................................... 0.40% 0.40%
12b-1 Fee ** ............................................... 0.25% 0.75%
Shareholder Servicing Fee .................................. 0.25% 0.25%
Other Expenses ............................................. 0.37% 0.37%
---- ----
Total Fund Operating Expenses .............................. 1.27% 1.77%
==== ====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: ............. 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ........................ $60 $86 $114 $194
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ ....... $70 $89 $119 $195
Assuming no redemptions+++ ............ $18 $56 $ 96 $195
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
4
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs directly
and through the Portfolio. The examples should not be considered
representations of past or future expenses or returns; actual expenses and
returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
5
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares outstanding throughout each of the periods
shown. This information is supplemented by financial statements and
accompanying notes appearing in the Fund's Annual Report to Shareholders for
the fiscal year ended October 31, 1996, which is incorporated by reference
into the SAI. Shareholders can obtain a copy of this annual report by
contacting the Fund or
VISTA GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
Class A
Year ended October 31,
---------------------------------------------------------------
1996 1995 1994 1993
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ....... $ 34.96 $ 30.26 $ 30.99 $ 26.60
---------- ---------- ---------- --------
Income from Investment Operations:
Net Investment Income .................... 0.599 0.614 0.466 0.341
Net Gains or (Losses) in Securities (both
realized and unrealized) ................ 5.960 4.710 (0.429) 5.007
---------- ---------- ---------- --------
Total from Investment Operations ......... 6.559 5.324 0.037 5.348
---------- ---------- ---------- --------
Less Distributions:
Dividends from Net Investment Income ..... 0.549 0.621 0.422 0.338
Distributions from Capital Gains ......... 1.762 -- 0.345 0.620
---------- ---------- ---------- --------
Total Distributions ...................... 2.311 0.621 0.767 0.958
---------- ---------- ---------- --------
Net Asset Value, End of Period ............. $ 39.21 $ 34.96 $ 30.26 $ 30.99
========== ========== ========== ========
Total Return (1) ........................... 19.60% 17.79% 0.15% 20.47%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ... $1,590,893 $1,521,489 $1,413,899 $949,465
Ratio of Expenses to Average Net Assets# .. 1.32% 1.43% 1.40% 1.39%
Ratio of Net Investment
Income to Average Net Assets# ............ 1.46% 1.93% 1.60% 1.07%
Ratio of Expenses without waivers
and assumption of expenses to Average
Net Assets# .............................. 1.32% 1.45% 1.40% 1.39%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ...................... 1.46% 1.91% 1.60% 1.07%
Portfolio Turnover Rate .................... -- -- -- 41%
</TABLE>
6
<PAGE>
their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below for each of the periods ended October 31, 1996, has been audited
by Price Waterhouse LLP, independent accountants, whose report thereon is
also included in the Annual Report to Shareholders.
[table restubbed]
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------------------- ---------------------
9/23/87* Year Year
to Ended Ended
1992 1991 1990 1989 1988 10/31/87 10/31/96 10/31/95
-------- ------- ------- ------ ------ -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ...... $ 25.49 $ 16.49 $ 18.12 $14.08 $10.00 $10.00 $ 34.81 $ 30.12
-------- ------- ------- ------ ------ ------ -------- --------
Income from Investment Operations:
Net Investment Income ................... 0.313 0.388 0.707 0.633 0.225 -- 0.366 0.463
Net Gains or (Losses) in Securities (both
realized and unrealized) ............... 2.702 9.521 (0.573) 5.033 4.050 -- 5.984 4.700
-------- ------- ------- ------ ------ ------ -------- --------
Total from Investment Operations ........ 3.015 9.909 0.134 5.666 4.275 -- 6.350 5.163
-------- ------- ------- ------ ------ ------ -------- --------
Less Distributions:
Dividends from Net Investment Income .... 0.313 0.339 0.698 0.611 0.195 -- 0.379 0.470
Distributions from Capital Gains ........ 1.587 0.574 1.063 1.015 -- -- 1.762 --
-------- ------- ------- ------ ------ ------ -------- --------
Total Distributions ..................... 1.900 0.913 1.761 1.626 0.195 -- 2.141 0.470
-------- ------- ------- ------ ------ ------ -------- --------
Net Asset Value, End of Period ............ $ 26.60 $ 25.49 $ 16.49 $18.12 $14.08 $10.00 $ 39.02 $ 34.81
======== ======= ======= ====== ====== ====== ======== ========
Total Return (1) .......................... 12.34% 62.60% 0.05% 44.40% 42.87% 0.00% 19.02% 17.21%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) .. $149,506 $43,261 $17,994 $8,097 $1,197 $ 13 $370,496 $273,685
Ratio of Expenses to Average Net Assets# . 1.43% 1.25% 1.09% 0.00% 0.00% 0.00% 1.81% 1.93%
Ratio of Net Investment
Income to Average Net Assets# ........... 1.19% 1.24% 3.65% 4.56% 2.64% 0.00% 0.95% 1.38%
Ratio of Expenses without waivers
and assumption of expenses to Average
Net Assets# ............................ 1.46% 1.76% 2.06% 2.50% 2.00% 2.00% 1.81% 1.94%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ................... 1.16% 0.73% 2.68% 2.06% 0.64% (2.00%) 0.95% 1.37%
Portfolio Turnover Rate ................... 56% 103% 160% 319% 109% 0% -- --
</TABLE>
[end table restubbed]
Class B
----------------
11/4/93**
through
10/31/94
---------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ...... $ 30.39
--------
Income from Investment Operations:
Net Investment Income .................... 0.336
Net Gains or (Losses) in Securities (both
realized and unrealized) ................ 0.109
--------
Total from Investment Operations ......... 0.445
--------
Less Distributions:
Dividends from Net Investment Income ..... 0.370
Distributions from Capital Gains ......... 0.345
--------
Total Distributions ...................... 0.715
--------
Net Asset Value, End of Period ............. $ 30.12
========
Total Return (1) ........................... 1.55%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ... $160,375
Ratio of Expenses to Average Net Assets# .. 1.89%
Ratio of Net Investment
Income to Average Net Assets# ............ 1.21%
Ratio of Expenses without waivers
and assumption of expenses to Average
Net Assets# .............................. 1.89%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ..................... 1.21%
Portfolio Turnover Rate .................... --
[end restubbed table]
* Commencement of operations.
** Commencement of offering of class of shares.
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
7
<PAGE>
FUND OBJECTIVES
- ---------------
Vista Growth and Income Fund seeks to provide long-term capital appreciation and
dividend income. The Fund is not intended to be a complete investment program,
and there is no assurance it will achieve its objectives.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio invests in common stocks of issuers
with a broad range of market capitalizations. Under normal market conditions,
the Portfolio will invest at least 80% of its total assets in common stocks.
In addition, the Portfolio may invest up to 20% of its total assets in
convertible securities.
The Portfolio's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The advisers believe that the market risk involved in seeking capital
appreciation will be moderated to an extent by the anticipated dividend
returns on the stocks in which the Portfolio invests.
The Portfolio is classified as a "non-diversified" fund under federal
securities law.
The Portfolio may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Portfolio may invest without limitation in
these instruments as well as investment grade debt securities. At times when
the Portfolio's advisers deem it advisable to limit the Portfolio's exposure
to the equity markets, the Portfolio may invest up to 20% of its total assets
in U.S. Government obligations (exclusive of any investments in money market
instruments). To the extent that the Portfolio departs from its investment
policies during temporary defensive periods, the Fund's investment objective
may not be achieved.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking long-term growth potential with dividend income
o Are investing for goals at least 3-5 years away
o Own or plan to own other types of investments for diversification purposes
o Can assume stock market risk
This Fund may NOT be appropriate for investors who are unable to tolerate
moderate up and down price changes, are investing for short-term goals or who
are in need of more aggressive growth potential.
FUND STRUCTURE
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees
determine that it is in the best interest of the Fund to do so. Upon any such
withdrawal, the Trustees would consider what action might be taken, including
investing all of the Fund's investable assets in another pooled
8
<PAGE>
investment entity having substantially the same objective and policies as the
Fund or retaining an investment adviser to manage the Fund's assets directly.
OTHER INVESTMENT PRACTICES
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These
practices, and certain associated risks, are more fully described in the SAI.
FOREIGN SECURITIES. The Portfolio may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts, which are described below.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio'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 Portfolio's assets held abroad. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, taxation by withholding Portfolio 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
Portfolio invests in emerging market securities.
The Portfolio may invest its assets in securities of foreign issuers in the
form of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Portfolio treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Portfolio will limit its investment in
Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of
investment).
SUPRANATIONAL AND ECU OBLIGATIONS. The Portfolio may invest in debt securities
issued by supranational organizations, which include organizations such as The
World Bank, the European Community, the European Coal and Steel Community and
the Asian Development Bank. The Portfolio may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of
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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.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Portfolio 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.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Portfolio
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Portfolio also has the ability to lend portfolio securities
in an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all times.
The Portfolio may purchase securities for delivery at a future date, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
from banks for temporary or short- term purposes, but will not borrow money to
buy additional securities, known as "leveraging." The Portfolio may also sell
and simultaneously commit to repurchase a portfolio security at an agreed-upon
price and time. This practice may be used to generate cash for shareholder
redemptions without selling securities during unfavorable market conditions.
Whenever the Portfolio enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase
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agreements, which are considered borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Portfolio 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 Portfolio would acquire the right
to sell a security at an agreed upon price within a specified period prior to
its maturity date. These transactions involve some risk to the Portfolio if the
other party should default on its obligation and the Portfolio is delayed or
prevented from recovering the collateral or completing the transaction. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its total
assets in shares of other investment 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 Portfolio 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 Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency contracts; and (iv) purchase and sell structured products, which are
instruments designed to restructure or reflect the characteristics of certain
other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Portfolio invests may be particularly sensitive to changes in prevailing
economic conditions and market value. The ability of the Portfolio to
successfully utilize these instruments may depend in part upon the ability of
its advisers to forecast these factors correctly. Inaccurate forecasts could
expose the Portfolio to a risk of loss. There can be no guarantee that there
will be a correlation between price movements in a hedging instrument
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<PAGE>
and in the portfolio assets being hedged. The Portfolio is not required to
use any hedging strategies. Hedging strategies, while reducing risk of loss,
can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in losses that may exceed the original investment of the Portfolio.
There can be no assurance that a liquid market will exist at a time when the
Portfolio seeks to close out a derivatives position. Activities of large
traders in the futures and securities markets involving arbitrage, "program
trading," and other investment strategies may cause price distortions in
derivatives markets. In certain instances, particularly those involving
over-the-counter transactions or forward contracts, there is a greater
potential that a counterparty or broker may default. In the event of a
default, the Portfolio may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
PORTFOLIO TURNOVER. The frequency of the Portfolio's buy and sell transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information" and "Other Information Concerning the Fund."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Portfolio
limit investment risks for the Fund's shareholders. These restrictions prohibit
the Portfolio 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); 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 (including their
investment objective) of the Portfolio and the Fund are not fundamental.
Shareholder approval is not required to change any non-fundamental investment
policy. However, in the event of a change in the Fund's or Portfolio's
investment objective, shareholders will be given at least 30 days prior written
notice.
RISK FACTORS
The net asset value of the Fund's shares will fluctuate based on the value of
the securities held by the Portfolio. The Fund does not constitute a balanced
or complete investment program. The Fund is subject to the general risks and
considerations associated with equity investing.
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Because the Portfolio is "non- diversified," the value of the Fund's shares
is more susceptible to developments affecting issuers in which the Portfolio
invests.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE PORTFOLIO'S ADVISERS
The Chase Manhattan Bank ("Chase") is the Portolio's investment adviser under
an Investment Advisory Agreement and has overall responsibility for
investment decisions of the Portfolio, subject to the oversight of the Board
of Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan
Corporation, a bank holding company. Chase and its predecessors have over 100
years of money management experience.
For its investment advisory services to the Portfolio, Chase is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 0.40% of the Portfolio's average daily net assets. Chase is located
at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Portfolio'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 Portfolio on a day-to-day
basis. For these services, CAM is entitled to receive a fee, payable by Chase
from its advisory fee, at an annual rate equal to 0.20% of the Portfolio's
average daily net assets. CAM was recently formed for the purpose of
providing discretionary investment advisory services to institutional clients
and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York,
New York 10036.
PORTFOLIO MANAGERS.
Greg Adams, a Senior Portfolio Manager at Chase, and David Klassen, Director,
U.S. Funds Management and Equity Research at Chase, have been responsible for
the management of the Portfolio since March 1995. Mr. Adams joined Chase in
1987 and is also a manager of Vista Balanced Fund and Vista Large Cap Equity
Fund. In addition, Mr. Adams has been responsible for overseeing the
proprietary computer model program used in the U.S. equity selection process.
Mr. Klassen is responsible for asset allocation and investment strategy for
Chase's domestic equity portfolios. Mr. Klassen joined Chase in March 1992.
Prior to joining Chase, Mr. Klassen was a vice president and portfolio
manager at Dean Witter Reynolds, responsible for managing several mutual
funds and other accounts. In addition to managing Vista Growth and Income
Portfolio, Mr. Klassen is a manager of Vista Small Cap Equity Fund and Vista
Capital Growth Portfolio.
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ABOUT YOUR INVESTMENT
- ---------------------
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" 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
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<PAGE>
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
$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 in proper
form 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 are in
proper form only 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.
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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.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
------------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price($) price invested offering price
- ------------------------------- -------- ----------- ---------------
Under 100,000 ................. 4.75 4.99 4.00
100,000 but under 250,000 ..... 3.75 3.90 3.25
250,000 but under 500,000 ..... 2.50 2.56 2.25
500,000 but under 1,000,000 ... 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 1.00% of the amount under $2.5
million, 0.75% of the next $7.5 million, 0.50% of the next $40 million and
0.20% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
--------------
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be 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.
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GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement
of intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges 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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker-dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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
17
<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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.
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<PAGE>
SELLING SHARES DIRECTLY TO THE FUND. Send a signed letter of instruction to the
Vista Service Center, along with any certificates that represent shares you want
to sell. The price you will receive is the next net asset value calculated after
the Fund receives your request in proper form, less any applicable CDSC. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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
19
<PAGE>
representative. The Telephone Redemption Privilege is not available if you
were issued certificates for shares that remain outstanding. The Telephone
Redemption Privilege may be modified or terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions 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
20
<PAGE>
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 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 reinstatement 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
(i.e., the value of its investment in the Portfolio and its other assets) are
determined on the basis of their market or other fair value, as described in
the SAI.
21
<PAGE>
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. 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 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 an
established account of 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
22
<PAGE>
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 reimburse the Fund's distributor and
broker-dealers for services provided and expenses incurred in connection with
the sale of Class A and Class B shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers
with trail or maintenance commissions at an annual rate of up to 0.20% of the
average daily net asset value of Class A shares, or 0.25% of the average
daily net asset value of the Class B shares 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.
Class A shares are also permitted to pay an additional fee at an annual rate
of up to 0.05% of its average daily net asset value in anticipation of, or as
reimbursement for, expenses incurred in connection with print or electronic
media advertising in connection with the sale of Fund shares. When such
expenses are incurred, the maximum compensation paid by the Class A shares
under the Class A distribution plan would be at an annual rate of 0.25% of
its average daily net asset value.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at
23
<PAGE>
training and educational meetings within and outside the U.S.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own or Class A and Class B shares of the Fund.
These services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of or Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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 for the Fund and the Portfolio and is
entitled to receive from each of the Fund and the Portfolio a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these
24
<PAGE>
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 450
West 33rd Street, New York, New York 10001-2603.
CUSTODIAN
Chase acts as the custodian and fund accountant for the Fund and the
Portfolio and receives compensation under separate agreements with the Trust
and the Portfolio. Portfolio 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 and the Portfolio. 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 for custody services, 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 or Portfolio; 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 or
Portfolio may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the
25
<PAGE>
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
UNIQUE CHARACTERISTICS OF
MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund invests all of its investable assets in the
Portfolio, a separate registered investment company. Therefore, a
shareholder's interest in the Portfolio's securities is indirect. In addition
to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and
will pay a proportionate share of the Portfolio's expenses. However, other
investors investing in the Portfolio are not required to sell their shares at
the same public offering prices as the Fund, and may bear different levels of
ongoing expenses than the Fund. Shareholders of the Fund should be aware that
these differences may result in differences in returns experienced in the
different funds that invest in the Portfolio. Such differences in returns are
also present in other mutual fund structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws
26
<PAGE>
from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the
Portfolio may become less diverse, resulting in increased portfolio risk.
However, this possibility also exists for traditionally structured funds
which have large or institutional investors. Funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Trust is requested to vote on
matters pertaining to the Portfolio, the Trust will hold a meeting of
shareholders of the Fund and will cast all of its votes in the same
proportion as do the Fund's shareholders. Shares of the Fund for which no
voting instructions have been received will be voted in the same proportion
as those shares for which voting instructions are received. Certain changes
in the Portfolio's objective, policies or restrictions may require the Trust
to withdraw the Fund's interest in the Portfolio. Any withdrawal could result
in a distribution in kind of portfolio securities (as opposed to a cash
distribution from the Portfolio). The Fund could incur brokerage fees or
other transaction costs in converting such securities to cash. In addition, a
distribution in kind may result in a less diversified portfolio of
investments or adversely affect the liquidity of the Fund.
The same individuals who are desinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with any resulting conflicts of interest up to
and including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-34-VISTA.
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 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.
27
<PAGE>
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.
28
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund
shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o 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.
29
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
30
<PAGE>
(This Page Intentionally Left Blank)
<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
VGI-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) SOUTHEAST ASIAN FUND
VISTA(SM) JAPAN FUND
VISTA(SM) EUROPEAN FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 28, 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 Funds in their February 28, 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 Funds' Annual Report to
Shareholders and other information regarding the Funds 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 Funds are not bank deposits or obligations of, or guaranteed
or endorsed by, The Chase Manhattan Bank or any of its affiliates and are not
insured by 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>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights 6
How the Funds have performed
Fund Objectives 8
Investment Approaches 8
The kinds of securities in which the Vista Southeast Asian Fund, the Vista Japan
Fund and the Vista European Fund invest
Common Investment Policies 9
The common investment policies of the Funds
Other Investment Practices 11
The investment techniques and risks of the Funds
Management 15
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management, the Funds'
sub-adviser, and the individuals who manage the Funds
About Your Investment 17
Choosing a share class
How to Buy, Sell and Exchange Shares 17
How the Funds Value Their Shares 24
How Distributions Are Made; Tax Information 24
How the Funds distribute their earnings, and the taxes related to those earnings
Other Information Concerning the Funds 26
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 29
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 30
</TABLE>
3
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in each of the Funds based on
estimated expenses for the current fiscal year. The examples show the
cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
<TABLE>
<CAPTION>
Class A Class B
Shares Shares
------ -------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) 4.75% None
Maximum Deferred Sales Charge (as a percentage of the lower of
original purchase price or redemption proceeds)* None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waivers)** 0.00% 0.00%
12b-1 Fee*** 0.25% 0.75%
Shareholder Servicing Fee None 0.25%
Other Expenses (after estimated waivers and reimbursements)** 1.50% 1.50%
----- -------
Total Fund Operating Expenses
(after waivers of fees and expense reimbursements)** 1.75% 2.50%
===== =======
</TABLE>
EXAMPLES
Your investment of $1,000 would incur the
following expenses, assuming 5% annual return: 1 Year 3 Years
----- --------
Class A Shares+ $64 $100
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ $77 $110
Assuming no redemptions+++ $25 $ 78
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Reflects current fee waiver and expense reimbursement arrangements to
maintain Total Fund Operating Expenses at the levels indicated in the table
above. Absent such arrangements, the Investment Advisory Fee and Other
Expenses would be 1.00%, and 1.65%, respectively, for Class A and Class B
shares, and Total Fund Operating Expenses would be 2.90% and 3.65% for
Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Funds, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by rules of the
National Association of Securities Dealers, Inc.
4
<PAGE>
+ 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
Funds and your share of the operating expenses that a Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with
investments in the Funds. The Funds understand that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Funds with respect
to those accounts. See "Other Information Concerning the Funds."
5
<PAGE>
Financial Highlights
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares outstanding for each Fund throughout the
periods shown. This information is supplemented by financial statements and
accompanying notes appearing in the Funds' Annual Report to Shareholders for
the fiscal year ended October 31, 1996, which is incorporated by reference
into the SAI. Shareholders may receive a copy of this Annual Report by
contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below, have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is also included in the Annual Report to
Shareholders.
VISTA EUROPEAN FUND
VISTA SOUTHEAST ASIAN FUND
VISTA JAPAN FUND
<TABLE>
<CAPTION>
Vista European
Fund
---------------------------
Class A Class B
---------- -----------
11/02/95* 11/03/95**
through through
10/31/96 10/31/96
---------- -----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 10.00 $ 9.97
------- -------
Income From Investment Operations:
Net Investment Income ........................ 0.146 0.066
Net Gains or (Losses) in Securities
(both realized and unrealized) ............. 1.929 1.961
------- -------
Total from Investment Operations ............. 2.075 2.027
------- -------
Less Distributions:
Dividends from Net Investment Income ......... 0.085 0.067
Distributions from Capital Gains ............. -- --
------- -------
Total Distributions .......................... 0.085 0.067
------- -------
Net Asset Value, End of Period ................. $ 11.99 $ 11.93
------- -------
Total Return (1) ............................... 20.78% 20.35%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ....... $ 6,358 $ 190
Ratios to Average Net Assets:#
Ratio of Expenses to Average Net Assets# ..... 1.75% 2.47%
Ratio of Net Investment Income to Average
Net Assets# ................................ 1.44% 0.80%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# .................................... 3.49% 3.83%
Ratio of Net Investment Income without
waivers and assumptions of expenses to
Average Net Assets# ........................ (0.30%) (0.56%)
Portfolio Turnover Rate ....................... 186% 186%
Average Commission Rate Paid per share ........ $0.0242 $0.0242
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Vista Southeast Asian Fund Vista Japan Fund
-------------------------- ---------------------------
Class A Class B Class A Class B
-------- -------- -------- ---------
11/02/95* 11/03/95** 11/02/95* 11/03/95**
through through through through
10/31/96 10/31/96 10/31/96 10/31/96
-------- -------- --------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 10.00 $ 10.01 $ 10.00 $ 10.00
------- ------- ------- -------
Income From Investment Operations:
Net Investment Income ........................ (0.013) (0.055) (0.083) (0.022)
------- -------
Net Gains or (Losses) in Securities
(both realized and unrealized) ............. 1.983 1.935 (0.497) (0.628)
------- ------- ------- -------
Total from Investment Operations ............. 1.970 1.880 (0.580) (0.650)
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ......... -- -- -- --
Distributions from Capital Gains ............. -- -- -- --
------- ------- ------- -------
Total Distributions .......................... -- -- -- --
------- ------- ------- -------
Net Asset Value, End of Period ................. 11.97 $ 11.89 $ 9.42 $ 9.35
======= ======= ======= =======
Total Return (1) ............................... 19.70% 18.78% (5.80%) (6.50%)
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ....... $ 8,451 $ 1,222 $ 4,781 $ 162
Ratios to Average Net Assets:#
Ratio of Expenses to Average Net Assets# ..... 1.74% 2.52% 1.75% 2.52%
Ratio of Net Investment Income to Average
Net Assets# ................................ (0.12%) (0.90%) (0.91%) (0.40%)
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# .................................... 3.26% 3.70% 3.60% 4.00%
Ratio of Net Investment Income without
waivers and assumptions of expenses to
Average Net Assets# ........................ (1.64%) (2.08%) (2.76%) (1.88%)
Portfolio Turnover Rate ....................... 149% 149% 121% 121%
Average Commission Rate Paid per share ........ 0.0129 $0.0129 $0.0499 $0.0499
</TABLE>
* Commencement of operations.
** Commencement of offering of class of shares
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
7
<PAGE>
FUND OBJECTIVES
Each Fund seeks total return from long-term capital growth. No Fund is intended
to be a complete investment program, and there is no assurance that a Fund will
achieve its objective.
INVESTMENT APPROACHES
VISTA SOUTHEAST ASIAN FUND
The Fund will invest principally in a broad portfolio of equity securities of
foreign companies located in countries throughout the Pacific and Far East
regions, with the exception of Japan. Under normal market conditions, the Fund
will invest at least 65% of its total assets in equity securities of Southeast
Asian issuers.
The Fund's advisers seek to identify those countries and industries throughout
the Pacific and Far East region (other than Japan) where economic and political
factors are likely to produce above-average growth rates. The Fund's advisers
attempt to identify those companies in such countries and industries that are
best positioned and managed to take advantage of these economic and political
factors. Emphasis will be placed on companies in Singapore, Malaysia, Thailand,
the Philippines and Indonesia, but the Fund will also invest in companies in
other countries in the Pacific and Far East region (other than Japan), including
Hong Kong, Australia, New Zealand, Taiwan and Korea.
VISTA JAPAN FUND
The Fund will invest principally in equity securities of foreign companies
located in countries throughout the Pacific and Far East regions. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of Japanese issuers. Investments by the Fund may,
from time to time, also be made in securities traded in other securities
markets of the Pacific and Far East regions as determined by the Fund's
advisers. Under current market conditions, the Fund's advisers anticipate
that the major portion of the Fund's assets will be invested in securities
traded in the securities markets of Japan.
VISTA EUROPEAN FUND
The Fund will invest principally in equity securities of companies with
principal business activities in countries located throughout Western Europe.
Under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of European issuers.
The Fund's advisers seek to identify those Western European countries and
industries where economic and political factors are likely to produce
above-average growth rates. The Fund's advisers attempt to identify those
companies in such countries and industries that are best positioned and managed
to take advantage of these economic and political factors. Western European
countries in which the Fund may invest include Austria, Belgium, Denmark,
Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom, as well as
other Western European countries that the Fund's
8
<PAGE>
advisers deem to be of investment grade. The Fund's advisers anticipate that
the Fund generally will be invested in a number of different Western European
countries, although it may at times invest most or all of its assets in a
single country.
WHO MAY WANT TO INVEST
Vista Southeast Asian, Vista Japan and Vista European Funds may be most suitable
for investors who . . .
o Are seeking long-term growth of capital
o Are investing for goals several years away
o Own or plan to own other types of investments for diversification purposes
o Can assume market risk and the risk of investing internationally
The Funds may NOT be appropriate for investors who are unable to tolerate
frequent up and down price changes and the potential instability of foreign
markets; who are investing for short-term goals or who are in need of current
income.
COMMON INVESTMENT
POLICIES
Instead of investing directly in underlying securities, each 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 objective
and policies as such Fund.
The equity securities in which the Funds may invest include common stocks,
preferred stocks, securities convertible into common stocks and warrants to
purchase common stocks. Investments will be selected based on their potential
for capital growth.
For purposes of the investment policies described above, a security is deemed to
be issued by an issuer of one of the countries or regions indicated above if (i)
the principal trading market for the security is in one of those countries or
regions, (ii) the issuer is organized under the laws of a jurisdiction of one of
those countries or regions or (iii) the issuer derives at least fifty percent of
its revenues or profits from those countries or regions or has at least 50
percent of its assets situated in those countries or regions.
The Funds' advisers will allocate each Fund's investments among securities
denominated in the U.S. dollar, other major reserve currencies and currencies of
countries referred to above in which that Fund is permitted to invest. The
advisers may adjust a Fund's exposure to each such currency based on their
perception of the most favorable markets and issuers. The percentage of a Fund's
assets invested in securities of a particular country or denominated in a
particular currency will vary in accordance with the advisers' assessment of the
relative yield and appreciation potential of such securities and the current and
anticipated relationship of a country's currency to the U.S. dollar. Fundamental
economic strength, earnings growth, quality of management, industry growth,
credit quality and interest rate trends are some of the principal factors which
may be considered by the Funds' advisers in determining whether to increase or
decrease the
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<PAGE>
emphasis placed upon a particular type of security, industry sector, country
or currency within a Fund's investment portfolio. Securities purchased by a
Fund may be denominated in a currency other than that of the country in which
the issuer is domiciled. No Fund is limited as to the amount of its assets
that may be invested in any one country. However, each Fund will attempt to
allocate investments among a wide range of industries and companies. Each
Fund will place primary emphasis on equity securities and securities with
equity features. However, each Fund may also invest in any type of investment
grade debt security and various derivative securities if the advisers believe
that doing so may result in capital growth. Vista Southeast Asian Fund and
Vista European Fund will not invest more than 25% of their respective net
assets in debt securities denominated in a single currency other than the
U.S. dollar, or invest more than 25% of their respective net assets in debt
securities issued by a single foreign government or supranational
organization.
The Funds' advisers will review economic and political events in the countries
in which the Funds are invested on an ongoing basis.
The Funds may invest in securities of companies of various sizes, including
smaller companies whose securities may be more volatile and less liquid than
securities of larger companies. With respect to certain countries in which
capital markets are either less developed or not easily accessed, investments by
the Funds may be made through investment in closed-end investment companies that
in turn are authorized to invest in the securities of such countries.
Each Fund is classified as a "non-diversified" fund under federal securities
law.
Each Fund may, for defensive purposes and in periods in which it is felt that
investment returns may be greater or volatility may be less, invest less than
65% of its net assets in the equity securities in which it normally invests by
investing in debt securities issued in various currencies by companies,
governments and supranational entities located in countries in which the Fund is
permitted to invest. For temporary defensive purposes, a Fund's assets may be
invested in short-term debt instruments, including high quality money market
instruments and securities issued or guaranteed by the government of any member
country of the Organization for Economic Cooperation and Development or its
agencies or instrumentalities. At times when its advisers deem it advisable to
limit a Fund's exposure to the equity markets in which it ordinarily invests,
each Fund may invest up to 20% of its total assets in U.S. Government
obligations (exclusive of any investments in money market instruments).To the
extent that a Fund departs from its investment policies during such periods, its
investment objective may not be achieved.
For a discussion of certain risks associated with an investment in the Funds,
see "Risk Factors" and "Other Investment Practices" below.
10
<PAGE>
OTHER INVESTMENT
PRACTICES
Each Fund may also engage in the following investment practices, when consistent
with such Fund's overall objective and policies. These practices, and certain
associated risks, are more fully described in the SAI.
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. Each 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.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service, Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
DEPOSITARY RECEIPTS. Each Fund may invest its assets in securities of foreign
issuers in the form of American Depositary Receipts, European Depositary
Receipts, Global Depositary Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The Funds
treat Depositary Receipts as interests in the underlying securities for purposes
of their investment policies. Each Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
SUPRANATIONAL AND ECU OBLIGATIONS. Each Fund may invest in debt securities
issued by supranational organizations, which include organizations such as The
World Bank, the European Community, the European Coal and Steel Community and
the Asian Development Bank. Vista European Fund may also invest in securities
denominated in the ECU, which is a "basket" consisting of specified amounts of
the currencies of certain member states of the European Community. These
securities are typically issued by European governments and supranational
organizations.
INDEXED INVESTMENTS. Each Fund may invest in instruments which are indexed to
certain specific foreign currency exchange rates. The terms of such instruments
may provide that their pincipal amounts or just their coupon interest rates are
adjusted upwards or downwards (but not below zero) at maturity or on established
coupon payment dates to reflect changes in the exchange rate between two or more
currencies while the obligation is outstanding. Such indexed investments entail
the risk of loss of principal and/or interest payments from currency movements
in
11
<PAGE>
addition to principal risk, but offer the potential for realizing gains as a
result of changes in foreign currency exchange rates.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. Each Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. Each Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. Each Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to a Fund if the other party should default on its obligation and such
Fund is delayed or prevented from recovering the collateral or completing the
transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. Each Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow money to buy
additional securities, known as "leveraging." The Funds 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 during unfavorable market conditions.
Whenever a Fund enters into a reverse repurchase agreement, it will establish a
segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest). A
Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. Each Fund may enter into put transactions, including those
sometimes referred to as stand-by commitments, with respect to securities in its
portfolio. In these transactions, a Fund would acquire the right to sell a
security at an agreed upon price within a specified period prior to its maturity
date. These transactions involve some risk to a Fund if the other party should
default on its obligation and such Fund is delayed or prevented from recovering
the collateral or completing the transaction. A put transaction will increase
the cost of the underlying security and consequently reduce the available yield.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities, which
are securities generally offering fixed interest or dividend yields which may be
converted either at a stated price or stated rate for common or preferred stock.
Although to a lesser extent than with fixed-income securities generally, the
market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market
12
<PAGE>
value of the underlying common or preferred stock.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, each Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
STRIPS. Each 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 obligation is 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. Each Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
its income or gain. Some of these instruments will be subject to asset
segregation requirements to cover a Fund's obligations. Each Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency and interest rate contracts;
and (iv) purchase and sell structured products, which are instruments designed
to restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which a
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Funds to successfully utilize
these instruments may depend in part upon the ability of their advisers to
forecast these factors correctly. Inaccurate forecasts could expose a Fund to
a risk of loss. There can be no guarantee that there will be a correlation
between price movements in a hedging instrument and in the portfolio assets
being hedged. The Funds are not required to use any hedging strategies.
Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. Derivatives transactions not involving hedging may have
speculative characteristics, involve leverage and result in 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 a Fund seeks to close out a
derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other
investment strategies may cause price
13
<PAGE>
distortions in derivatives markets. In certain instances, particularly those
involving over-the-counter transactions or forward contracts, there is a
greater potential that a counterparty or broker may default. In the event of
a default, a Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
PORTFOLIO TURNOVER. The frequency of each Fund's buy and sell transactions will
vary from year to year. A Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and would
make it more difficult for a Fund to qualify as a registered investment company
under federal tax law. See "How Distributions are Made; Tax Information."
LIMITING INVESTMENT RISKS
Specific investment restrictions help each Fund limit investment risks for
its shareholders. These restrictions prohibit each 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); 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 each Fund's investment objective, restriction
(b) above and investment policies designated as fundamental in the SAI, the
Funds' investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
RISK FACTORS
The net asset value of the shares of each Fund will fluctuate based on the
value of the securities in such Fund's portfolio. As each Fund invests
primarily in equity securities of companies outside the U.S., an investment
in its shares involves a higher degree of risk than an investment in a U.S.
equity fund. An investment in any of the Funds should not be considered a
complete investment program and may not be appropriate for all investors.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of a Fund's foreign investments may be 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 a Fund's assets held abroad. In particular, settlement
procedures in Korea are somewhat less developed and reliable than
14
<PAGE>
those in the U.S. and in other developed securities markets, and the Vista
Southeast Asian Fund may experience settlement delays or other material
difficulties and be subject to significant delays or limitations on the
volume of trading during any particular period as a result of these factors.
The foregoing factors could impede the ability of a Fund to effect portfolio
transactions on a timely basis and could have an adverse impact on the net
asset value of a Fund's shares.
It is possible that nationalization or expropriation of assets, imposition of
currency exchange controls, taxation by withholding Fund assets, political or
financial instability and diplomatic developments could affect the value of a
Fund's investments in certain foreign countries. Foreign laws may restrict the
ability to invest in certain countries or issuers and special tax considerations
will apply to foreign securities.
Investments in securities of issuers based in developing countries entails
certain additional risks, including greater risks of expropriation, taxation by
withholding Fund assets, nationalization, and less social, political and
economic stability. The small size of markets for securities of issuers based in
such countries and the low or non-existent volume of trading may result in a
lack of liquidity and in price volatility. Certain national policies may
restrict the investment opportunities, including restrictions on investing in
issuers or industries deemed sensitive to relevant national interests. There may
be an absence of developed legal structures governing private or foreign
investment and private property.
In addition, some of the foreign equity securities in which the Funds may invest
may be issued by smaller companies. The securities of smaller companies, whether
foreign or domestic, often trade less frequently and in lower volume than
securities of larger, more established companies. Consequently, price changes
may be more abrupt or erratic. Such companies may have limited product lines,
markets or financial resources, or may depend on a limited management group.
Securities rated in the category Baa by Moody's or BBB by S&P lack certain
investment characteristics and may have speculative characteristics.
Because each Fund is "non-diversified," the value of its shares may be more
susceptible to developments affecting the specific companies whose securities
are owned by a Fund.
For a discussion of certain other risks associated with each Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") is the Funds' investment adviser under an
Investment Advisory Agreement and has overall responsibility for investment
decisions of the Funds, subject to the oversight of the Board of Trustees. Chase
is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank holding
company. Chase and its predecessors have over 100 years of money management
experience.
15
<PAGE>
For its investment advisory services to the Funds, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal to
1.00% of each Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to Vista Southeast Asian Fund and Vista Japan Fund 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 Funds 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 0.50% of each Fund's
average daily net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for CAM.
CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
Chase Asset Management (London) Limited ("CAM London"), a registered
investment adviser, is the sub-investment adviser to Vista European Fund
under a Sub-Investment Advisory Agreement between CAM London and Chase. CAM
London is a wholly-owned operating subsidiary of Chase. CAM London makes
investment decisions for the Fund on a day-to-day basis. For these services,
CAM London is entitled to receive a fee, payable by Chase from its advisory
fee, at an annual rate equal to 0.50% of the average daily net assets of the
Fund. CAM London 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 with respect to Vista European Fund
also serve as portfolio managers of CAM London. CAM London is located at
Colvile House, 32 Curzon Street, London W1Y 8AL.
PORTFOLIO MANAGERS. David Webb, a Vice President of Chase, has been responsible
for the management of Vista Southeast Asian Fund and Vista Japan Fund since
their inception. Mr. Webb is responsible for investment management and equity
research in the Asia region. Mr. Webb joined Chase in 1992. Prior to joining
Chase, Mr. Webb was with Hambros Bank Limited where he was responsible for the
management of the Hambros Equus Pacific Trust and Hambros Japan Trust. Mr. Webb
is also a manager of Vista International Equity Fund. Michael Browne, a Vice
President of Chase, has been responsible for the management of Vista European
Fund since its inception. Mr. Browne is responsible for investment management
and equity research for European equities. Mr. Browne joined Chase in 1994.
Prior to joining Chase, Mr. Browne was Assistant Director of European equity
fund management at BZW Investment Management in
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<PAGE>
London. Mr. Browne is also a manager of Vista International Equity Fund.
ABOUT YOUR INVESTMENT
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" and "Other
Information Concerning the Funds." Class B shares.
CLASS B SHARES. Class B Shares are sold without an initial sales charge,
but are subject to a contingent deferred sales charge ("CDSC") if redeemed
within a specified period after purchase. Class B shares also have higher
combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative net
asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Funds."
WHICH ARRANGEMENT IS BEST FOR YOU? The decision as to which class of shares
provides a more suitable investment for 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 a 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 Funds'
distributor by calling the Vista Service Center, or through the Systematic
Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, credit cards and cash will not be accepted. The
Funds reserve the right to reject any purchase order or cease offering shares
for
17
<PAGE>
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 FUNDS' DISTRIBUTOR. Complete and return the enclosed
application and your check in the amount you wish to invest to the Vista Service
Center.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments of
$100 or more per transaction through automatic periodic deduction from your bank
checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter 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 in proper form 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 are in proper form only after
funds are converted to federal funds. Orders paid by check and received by 2:00
p.m., Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, a Fund will not issue
certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Funds
receive the net asset value. The sales charge is allocated between your
broker-dealer and the Funds' distributor as shown in the following table,
except when the Funds' distributor, in its discretion, allocates the entire
amount to your broker-dealer.
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Amount of
Sales charge as a sales charge
percentage of: reallowed to
-------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price($) price invested offering price
- ------------------------------- -------- --------- ---------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million or
more.
The Funds' distributor pays broker-dealers commissions on net sales of
Class A shares of $1 million or more based on an investor's cumulative
purchases of shares of a Fund. Such commissions are paid at the rate of 1.00%
of the amount under $2.5 million, 0.75% of the next $7.5 million, 0.50% of
the next $40 million and 0.20% thereafter. The Funds' distributor may
withhold such payments with respect to short-term investments.
Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC will be
imposed if you redeem shares within a specified period after purchase, as shown
in the table below. The following types of shares may be redeemed without charge
at any time: (i) shares acquired by reinvestment of distributions and (ii)
shares otherwise exempt from the CDSC, as described below. For other shares, the
amount of the charge is determined as a percentage of the lesser of the current
market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, each Fund will first
redeem shares not subject to any charge, and then shares held longest during the
CDSC period. When a share that has appreciated in value is redeemed during the
CDSC period, a CDSC is assessed only on its initial purchase price. For
information on how sales charges are calculated if you exchange your shares, see
"How to Exchange Your Shares." The Funds' distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
disributor receives the entire amount of any CDSC you pay.
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult your
investment representative or the Vista Service Center for details about Vista's
combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in the enclosed application and in the SAI. In
addition, sales charges are waived if you are using redemption proceeds received
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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 determining 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 Funds may sell Class A shares at net asset value without an initial sales
charge to the Funds'current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Funds' distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Funds' distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Funds' distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares), financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of the Funds' 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 Funds' 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 Funds' 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 Funds or (ii) by clients of such investment adviser or financial
planner who place trades for their own accounts, if such accounts are linked to
a master account of such investment adviser or financial planner on the books
and records of the broker or agent. Such purchases may also be made for
retirement and deferred compensation plans and trusts used to fund those plans.
Investors may incur a fee if they effect transactions through a broker or agent.
Purchases of the Funds' Class A shares may be made with no initial sales charge
in accounts opened by a bank, trust company or thrift institution
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which is acting as a fiduciary exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the particular Funds, the Funds' distributor or the Vista
Service Center.
Shareholders of record of any Vista fund as of November 30, 1990 and certain
immediate family members may purchase the Funds' 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.
The Funds may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Funds of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B shares arising out of death or disability or in connection
with certain withdrawals from IRA or other retirement plans. Up to 12% of the
value of Class B shares subject to a systematic withdrawal plan may also be
redeemed each year without a CDSC, provided that the Class B account had a
minimum balance of $20,000 with respect to the applicable Fund at the time the
systematic withdrawal plan was established. The SAI contains additional
information about purchasing the Funds' shares at reduced sales charges.
The Funds reserve the right to change any of these policies on purchases without
an initial sales charge at any time and may reject any such purchase request.
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 Funds at net asset
value.
HOW TO SELL SHARES
You can sell your Fund shares any day the New York Stock Exchange is open,
either directly to a Fund or through your investment representative. A Fund will
only forward redemption payments on shares for which it has collected payment of
the purchase price.
SELLING SHARES DIRECTLY TO A FUND. Send a signed letter of instruction to the
Vista Service Center, along with any certificates that represent shares you want
to sell. The price you will receive is the next net asset value calculated after
the particular Fund receives your request in proper form, less any applicable
CDSC. In order to receive that day's net asset value, the Vista Service Center
must receive your request before the close of regular trading on the New York
Stock Exchange.
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SIGNATURE GUARANTEES. If you sell shares having a net asset value of $100,000 or
more, the signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your address
as it appears on Vista's records, a signature guarantee is required. A Fund may
require additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner. Contact the Vista
Service Center for details.
DELIVERY OF PROCEEDS. A Fund generally sends you payment for your shares the
business day after your request is received in proper form, assuming the Fund
has collected payment of the purchase price of your shares. Under unusual
circumstances, the Funds may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
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 Funds. Unless an investor indicates otherwise on the account
application, the Funds will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any person claiming to
act as his or her representative, who can provide the Funds with his or her
account registration and address as it appears on the Funds' records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails to
employ reasonable procedures, a Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither a Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written 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
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$5,000 is required to establish a systematic withdrawal plan for Class A
accounts. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. Each Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions or if you purchase through the
Systematic Investment Plan and fail to meet that Fund's investment minimum
within a twelve month period. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption. In the event a Fund
redeems Class B shares pursuant to this provision, no CDSC will be imposed.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for shares of the same class of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista funds
offer all classes of shares. The prospectus of the other Vista fund into which
shares are being exchanged should be read carefully and retained for future
reference. If you exchange shares subject to a CDSC, the transaction will not be
subject to the CDSC. However, when you redeem the shares acquired through the
exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
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
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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 Funds, the
Funds reserve the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving a Fund in a
year or three in a calendar quarter will be charged a $5.00 administration fee
for each such exchange. Shareholders would be notified of any such action to the
extent required by law. Consult the Vista Service Center before requesting an
exchange. See the SAI to find out more about the exchange privilege.
REINSTATEMENT PRIVILEGE. Upon written request, Class A shareholders have a one
time privilege of reinstating their investment in a Fund at net asset value
within 90 calendar days of the redemption. The reinstatement 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 FUNDS
VALUE THEIR SHARES
The net asset value of each class of each Fund's shares is determined once daily
based upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced at
4:15 p.m., Eastern time), on each business day of the Funds, by dividing the net
assets of the particular Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Funds are
determined on the basis of their market or other fair value, as described in the
SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
Each Fund distributes any net investment income at least semi-annually and any
net realized capital gains at least annually. Capital gains are distributed
after deducting any available capital loss carryovers. Distributions paid by the
Funds with respect to Class A shares will generally be greater than those paid
with respect to Class B shares because expenses attributable to Class B shares
will generally be higher.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in
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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
reinvestment of distributions in additional Fund shares promptly following the
quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the applicable Fund
or in an established account of another Vista fund without a sales charge. If
the Vista Service Center does not receive your election, the distribution will
be reinvested in the particular Fund. Similarly, if a Fund or the Vista Service
Center sends you correspondence returned as "undeliverable," distributions will
automatically be reinvested in such Fund.
Each Fund intends to qualify as a "regulated investment company" for federal
income tax purposes and to meet all other requirements that are necessary for it
to be relieved of federal taxes on income and gains it distributes to
shareholders. Each Fund intends to distribute substantially all of its ordinary
income and capital gain net income on a current basis. If a Fund does not
qualify as a regulated investment company for any taxable year or does not make
such distributions, the Fund will be subject to tax on all of its income and
gains.
TAXATION OF DISTRIBUTIONS. Distributions by the Funds 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 distributions is the same whether received
in cash or in shares through the reinvestment of distributions.
Investment income received by the Funds from sources within foreign countries
may be subject to foreign taxes withheld at the source. Since more than 50% of
the value of the total assets of each Fund at the close of the Fund's taxable
year is anticipated to be stock or securities of foreign corporations, each Fund
may elect to "pass through" to its shareholders the amount of foreign taxes paid
by such Fund.
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 each Fund will notify you of the amount
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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 a Fund. You should consult your tax adviser to determine the
precise effect of an investment in a Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION
CONCERNING THE FUNDS
DISTRIBUTION PLANS
The Funds' distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares, which
provide 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 each Fund, respectively. Payments under the distribution plans shall be used
to compensate or reimburse the Funds' distributor and broker-dealers for
services provided and expenses incurred in connection with the sale of Class A
and Class B shares, and are not tied to the amount of actual expenses incurred.
Payments may be used to compensate broker-dealers with trail or maintenance
commissions at an annual rate of up to 0.25% of the average daily net asset
value of Class A or Class B shares invested in a Fund by customers of these
broker-dealers. Trail or maintenance commissions are paid to broker-dealers
beginning the 13th month following the purchase of shares by their customers.
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 a Fund's Class A or Class B shares may also benefit the Fund's other
shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater for entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class B shares of the Funds. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily net
assets
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of Class B shares of each Fund held by investors for whom the shareholder
servicing agent maintains a servicing relationship. Shareholder servicing agents
may subcontract with other parties for the provision of shareholder support
services.
Shareholder servicing agents may offer additional services to their customers,
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 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 Funds' administrator and is entitled to receive a fee computed
daily and paid monthly at an annual rate equal to 0.10% of each Fund's average
daily net assets.
VFD provides certain sub-administrative services to the Funds' pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from each Fund at an annual rate equal to 0.05% of each
Funds' average daily net assets. VFD has agreed to use a portion of this fee to
pay for certain expenses incurred in connection with organizing new series of
the Trust and certain other ongoing expenses of the Trust. VFD is located at 450
West 33rd Street, New York, New York 10001-2603.
CUSTODIAN
Chase acts as the Funds' 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
Each Fund pays the expenses incurred in its operations, including each Fund's
pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the
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compensation of the Trustees; registration fees; interest charges; taxes;
expenses connected with the execution, recording and settlement of security
transactions; fees and expenses of the Fund's custodian for all services to the
Funds, including safekeeping of funds and securities and maintaining required
books and accounts; expenses of preparing and mailing reports to investors and
to government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance premiums;
and expenses of calculating the net asset value of, and the net income on,
shares of the Funds. Shareholder servicing and distribution fees are allocated
to specific classes of each of the Funds. In addition, the Funds may allocate
transfer agency and certain other expenses by class. Service providers to a Fund
may, from time to time, voluntarily waive all or a portion of any fees to which
they are entitled.
ORGANIZATION AND DESCRIPTION OF SHARES
Each Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of a Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
Each Fund issues multiple classes of shares. This Prospectus relates to Class A
and Class B shares of each Fund. The Funds may offer other classes of shares in
addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
each Fund's shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which would affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Funds that
are offered. Any person entitled to receive compensation for selling or
servicing shares of a Fund may receive different levels of compensation with
respect to one class of shares over another.
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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
Each Fund's investment performance may from time to time be included in
advertisements about the Funds. Performance is calculated separately for each
class of shares, in the manner described in the SAI. "Yield" for each class of
shares is calculated by dividing the annualized net investment income per share
during a recent 30-day period by the maximum public offering price per share of
such class on the last day of that period.
"Total return" for the one-, five- and ten-year periods (or 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 a Fund invested at the
maximum public offering price (in the case of Class A shares) or reflecting the
deduction of any applicable contingent deferred sales charge (in the case of
Class B shares). Total return may also be presented for other periods or without
reflecting sales charges. Any quotation of investment performance not reflecting
the maximum initial sales charge or contingent deferred sales charge would be
reduced if such sales charges were used.
All performance data is based on each Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of each
Fund's portfolio, each Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Funds' investment objectives and policies. These factors should be
considered when comparing each Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment performance
for any period when a fee waiver or expense limitation was in effect will be
greater than if the waiver or limitation had not been in effect. Each Fund's
performance may be compared to other mutual funds, relevant indices and rankings
prepared by independent services. See the SAI.
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MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in their Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders of a Fund who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares of that Fund with no initial
sales charge (in an amount not in excess of their redemption proceeds) if the
purchase occurs within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
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Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
31
<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
VEJA-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) INTERNATIONAL EQUITY FUND
CLASS A AND B SHARES
---------------------------------
INVESTMENT STRATEGY: TOTAL RETURN
---------------------------------
February 28, 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 February 28, 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.
The Fund, unlike many other investment companies which directly acquire and
manage their own portfolios of securities, seeks its investment objective by
investing all of its investable assets in International Equity Portfolio (the
"Portfolio"), an open-end management investment company with an investment
objective identical to that of the Fund. Investors should carefully consider
this investment approach. For additional information regarding this
investment structure, see "Unique Characteristics of Master/Feeder Fund
Structure" on page 28.
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>
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................. 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights ........................................................ 6
How the Fund has performed
Fund Objective .............................................................. 8
Investment Policies ......................................................... 8
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management .................................................................. 15
Chase Manhattan Bank, the Portfolio's adviser; Chase Asset Management,
the Portfolio's sub-adviser, and the individuals who manage the Portfolio
About Your Investment ....................................................... 15
Choosing a share class
How to Buy, Sell and Exchange Shares ........................................ 16
How the Fund Values Its Shares .............................................. 23
How Distributions Are Made; Tax Information ................................. 23
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ....................................... 25
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and master/feeder Fund structure
Performance Information ..................................................... 29
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ...................................... 30
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 expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ...................... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* .................. None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)** ......... 0.00% 0.00%
12b-1 Fee*** ............................................... 0.25% 0.75%
Shareholder Servicing Fee .................................. 0.25% 0.25%
Other Expenses ............................................. 1.50% 1.50%
---- ----
Total Fund Operating Expenses (after waiver of fee)** ...... 2.00% 2.50%
==== ====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ........................ $67 $107 $150 $269
Class B Shares:
Assuming complete redemption at
the end of the period++ +++ .......... $77 $110 $156 $271
Assuming no redemptions+++ ............ $25 $ 78 $133 $271
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waiver, the
Investment Advisory Fee would be 1.00% for Class A and Class B shares, and
Total Fund Operating Expenses would be 3.00% and 3.50% for Class A and Class
B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
and Class B shareholders of the Fund, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by rules of the
National Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
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 directly
and through the Portfolio. The examples should not be considered
representations
4
<PAGE>
of past or future expenses or returns; actual expenses and returns may be
greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
5
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for
both Class A and Class B shares for the periods shown. This information is
supplemented by and should be read in conjunction with financial statements
and accompanying notes appearing in the Fund's Annual Report to Shareholders
for the fiscal year ended October 31, 1996, which is incorporated by
reference into the SAI. The financial statements and notes, as well as the
financial information set forth in the table below, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders. Shareholders can obtain a copy
of this Annual Report by contacting the Fund or their Shareholder Servicing
Agent.
VISTA INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ -----------------------------------
Year Ended 12/31/92+ Year Year 11/4/93+++
------------------------------- through Ended Ended through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/96 10/31/95 10/31/94
-------- -------- --------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period .............. $ 12.02 $ 12.31 $ 11.82 $ 10.00 $11.89 $12.23 $11.69
------- ------- ------- ------- ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss) .................... 0.056 0.039 (0.022) (0.010) 0.013 (0.026) (0.053
Net Gains or (Losses) in Securities
(both realized and unrealized) ................. 0.367 (0.190) 0.566 1.830 0.350 (0.180) 0.647
------- ------- ------- ------- ------ ------ ------
Total from Investment Operations ................ 0.423 (0.151) 0.544 1.820 0.363 (0.206) 0.594
------- ------- ------- ------- ------ ------ ------
Less Distributions:
Dividends from Net Investment Income ............ 0.063 -- -- -- -- -- --
Distribution from Capital Gains ................. -- 0.137 0.054 -- 0.010 0.137 0.054
------- ------- ------- ------- ------ ------ ------
Total Distributions ............................. 0.063 0.137 0.054 -- 0.010 0.137 0.054
Net Asset Value, End of Period .................... $ 12.38 $ 12.02 $ 12.31 $ 11.82 $12.24 $11.89 $12.23
======= ======= ======= ======= ====== ====== ======
Total Return (1) .................................. 3.53% (1.19%) 4.61% 22.23% 3.03% (1.61%) 5.09%
Ratios/Supplemental Data**
Net Assets, End of Period (in 000's) ............. $24,904 $26,287 $37,926 $14,290 $7,819 $6,759 $7,182
Ratio of Expenses to Average Net Assets* (2) ..... 2.00% 2.01% 2.00% 2.13% 2.50% 2.50% 2.50%
Ratio of Net Investment Income (Loss)
to Average Net Assets* .......................... 0.03% (0.10%) (0.27%) (0.14%) (0.43%) (0.53%) (0.94%)
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets* .............. 2.86% 2.86% 2.86% 2.86% 3.36% 3.36% 3.36%
Ratio of Net Investment (Loss) Income
without waivers and assumption of expenses
to Average Net Assets* .......................... (0.89%) (0.96%) (1.13%) (0.87%) (1.29%) (1.40%) (1.80%)
</TABLE>
+ Commencement of operations.
++ Commencement of offering of class of shares.
** Includes the Fund's share of Portfolio income and expenses, as appropriate.
(1) Total return figures do not include the effect of any sales load.
(2) Not to exceed maximum statutory expense ratio.
* Short periods have been annualized.
6-7
<PAGE>
FUND OBJECTIVE
- --------------
Vista International Equity Fund seeks total return from long-term capital growth
and income. The Fund is not intended to be a complete investment program, and
there is no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund seeks to achieve its objective by investing all of its investable
assets in the Portfolio. The Portfolio will invest principally (under normal
market conditions, at least 65% of its total assets) in a broad portfolio of
marketable equity securities of established foreign companies organized in
countries other than the U.S, and foreign subsidiaries of U.S. companies
participating in foreign economies. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in equity securities.
These will include common stocks, preferred stocks, securities convertible into
common stocks, and warrants to purchase common stocks.
The Portfolio's advisers seek to identify those countries and industries where
economic and political factors, including currency movements, are likely to
produce above-average growth rates. The Portfolio's advisers attempt to identify
those companies in such countries and industries that are best positioned and
managed to take advantage of these economic and political factors. The Portfolio
will seek to diversify investments broadly among issuers in various countries
and normally to have represented in the Portfolio business activities of not
less than three different countries other than the U.S. The Portfolio may invest
a substantial portion of its assets in one or more of such countries.
The Portfolio intends to invest in companies based in (or governments located
in) the Far East (including Japan, Hong Kong, Singapore and Malaysia), Western
Europe (including the United Kingdom, Germany, Netherlands, France, Switzerland,
Italy and Spain), Scandinavia, Australia, Canada and such other areas and
countries as the Portfolio's advisers may determine from time to time. Because
the Fund invests a large portion of its assets in countries comprising the
Morgan Stanley Capital International Europe, Australia and Far East Index, which
is heavily weighted towards companies based in Japan and the United Kingdom, a
substantial portion of the Fund's assets may be invested in companies based in
Japan, the United Kingdom and/or other countries represented in the Index.
However, investments may be made from time to time in companies in, or
governments of, developing countries as well as developed countries.
The Portfolio's advisers will allocate investments among securities denominated
in the U.S. dollar and currencies of foreign countries. The advisers may adjust
the Portfolio's exposure to each currency based on their perception of the most
favorable markets and issuers. The percentage of the Portfolio's assets invested
in securities of a particular country or denominated in a particular currency
will vary in
8
<PAGE>
accordance with the advisers' assessment of the relative yield and
appreciation potential of such securities and the current and anticipated
relationship of a country's currency to the U.S. dollar. Fundamental economic
strength, earnings growth, quality of management, industry growth, credit
quality and interest rate trends are some of the principal factors which may
be considered by the Portfolio's advisers in determining whether to increase
or decrease the emphasis placed upon a particular type of security, industry
sector, country or currency. Securities purchased by the Portfolio may be
denominated in a currency other than that of the country in which the issuer
is domiciled.
Primary emphasis will be placed on equity securities and securities with equity
features. However, the Portfolio may invest in any type of investment grade debt
security including, but not limited to, other convertible securities, bonds,
notes and other debt securities of foreign governmental and private issuers, and
various derivative securities.
The Portfolio will not invest more than 25% of its net assets in debt securities
denominated in a single currency other than the U.S. dollar, nor will it invest
more than 25% of its net assets in debt securities issued by a single foreign
government or supranational organization.
The Portfolio may invest in securities of companies of various sizes, including
smaller companies whose securities may be more volatile and less liquid than
securities of larger companies. With respect to certain countries in which
capital markets are either less developed or not easily accessed, investments by
the Portfolio may be made through investment in closed-end investment companies
that in turn are authorized to invest in the securities of such countries.
The Portfolio is classified as a "non-diversified" fund under federal securities
law.
The Portfolio may invest any portion of its assets not invested as described
above in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Portfolio may invest without limitation in
these instruments. At times when its 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 (exclusive of any investments in
money market instruments). To the extent that the Portfolio departs from its
investment policies during temporary defensive periods, the Fund's investment
objective may not be achieved.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking total return from long-term capital growth and income
o Are investing for goals several years away
9
<PAGE>
o Own or plan to own other types of investments for diversification purposes
o Can assume market risk and the risk of investing internationally
The Fund may NOT be appropriate for investors who are unable to tolerate
frequent up and down price changes and the potential instability of foreign
markets; who are investing for short-term goals or who are in need of current
income.
FUND STRUCTURE
The Portfolio has an objective identical to that of the Fund. The Fund may
withdraw its investment from the Portfolio at any time if the Trustees determine
that it is in the best interest of the Fund to do so. Upon any such withdrawal,
the Trustees would consider what action might be taken, including investing all
of the Fund's investable assets in another pooled investment entity having
substantially the same objective and policies as the Fund or retaining an
investment adviser to manage the Fund's assets directly.
OTHER INVESTMENT PRACTICES
The Portfolio may also engage in the following investment practices, when
consistent with the Portfolio's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
DEPOSITARY RECEIPTS. The Portfolio may invest its assets in securities of
foreign issuers in the form of American Depositary Receipts, European Depositary
Receipts, Global Depository Receipts or other similar securities representing
securities of foreign issuers (collectively, "Depositary Receipts"). The
Portfolio treats Depositary Receipts as interests in the underlying securities
for purposes of its investment policies. The Portfolio will limit its investment
in Depositary Receipts not sponsored by the issuer of the underlying securities
to no more than 5% of the value of its net assets (at the time of investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Portfolio 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.
INVESTMENT GRADE DEBT SECURITIES. Investment grade debt securities are
securities rated in the category BBB or higher by Standard & Poor's Corporation
("S&P"), or Baa or higher by Moody's Investors Service Inc. ("Moody's") or the
equivalent by another national rating organization, or, if unrated, determined
by the advisers to be of comparable quality.
SUPRANATIONAL AND ECU OBLIGATIONS. The Portfolio may invest in debt securities
issued by supranational organizations, which include organizations such as The
World Bank, the European
10
<PAGE>
Community, the European Coal and Steel Community and the Asian Development
Bank. The Portfolio may also invest in securities denominated in the ECU,
which is a "basket" consisting of specified amounts of the currencies of
certain member states of the European Community. These securities are
typically issued by European governments and supranational organizations.
INDEXED INVESTMENTS. The Portfolio may invest in instruments which are indexed
to certain specific foreign currency exchange rates. The terms of such
instruments may provide that their principal amounts or just their coupon
interest rates are adjusted upwards or downwards (but not below zero) at
maturity or on established coupon payment dates to reflect changes in the
exchange rate between two or more currencies while the obligation is
outstanding. Such indexed investments entail the risk of loss of principal
and/or interest payments from currency movements in addition to principal risk,
but offer the potential for realizing gains as a result of changes in foreign
currency exchange rates.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Portfolio
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Portfolio also has the ability to lend portfolio securities
in an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all times.
The Portfolio may purchase securities for delivery at a future date, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date. These
transactions involve some risk to the Portfolio if the other party should
default on its obligation and the Portfolio is delayed or prevented from
recovering the collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow money
from banks for temporary or short-term purposes, but will not borrow money to
buy additional securities, known as "leveraging." The Portfolio may also sell
and simultaneously commit to repurchase a portfolio security at an agreed-upon
price and time. This practice may be used to generate cash for shareholder
redemptions without selling securities during unfavorable market conditions.
Whenever the Portfolio enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Portfolio would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
STAND-BY COMMITMENTS. The Portfolio may enter into put transactions, including
those sometimes referred to as stand-by commitments, with respect to securities
in its portfolio. In these transactions, the Portfolio would acquire the right
to sell a security at an agreed upon price within a specified period prior to
its maturity date. These transactions involve
11
<PAGE>
some risk to the Portfolio if the other party should default on its
obligation and the Portfolio is delayed or prevented from recovering the
collateral or completing the transaction. A put transaction will increase the
cost of the underlying security and consequently reduce the available yield.
CONVERTIBLE SECURITIES. The Portfolio may invest in convertible securities,
which are securities generally offering fixed interest or dividend yields which
may be converted either at a stated price or stated rate for common or preferred
stock. Although to a lesser extent than with fixed-income securities generally,
the market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
OTHER INVESTMENT COMPANIES. The Portfolio may invest up to 10% of its total
assets in shares of other investment companies 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 obligation is backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS." The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
DERIVATIVES AND RELATED INSTRUMENTS. The Portfolio may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Portfolio's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Portfolio's obligations. The
Portfolio may (i) purchase, write and exercise call and put options on
securities and securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency and interest rate contracts; and (iv) purchase and sell structured
products, which are instruments designed to restructure or reflect the
characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Portfolio
invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Portfolio to successfully
utilize these instruments may depend in part upon the ability of its advisers to
12
<PAGE>
forecast these factors correctly. Inaccurate forecasts could expose the
Portfolio to a risk of loss. There can be no guarantee that there will be a
correlation between price movements in a hedging instrument and in the
portfolio assets being hedged. The Portfolio is not required to use any
hedging strategies. Hedging strategies, while reducing risk of loss, can also
reduce the opportunity for gain. Derivatives transactions not involving
hedging may have speculative characteristics, involve leverage and result in
losses that may exceed the original investment of the Portfolio. There can be
no assurance that a liquid market will exist at a time when the Portfolio
seeks to close out a derivatives position. Activities of large traders in the
futures and securities markets involving arbitrage, "program trading," and
other investment strategies may cause price distortions in derivatives
markets. In certain instances, particularly those involving over-the-counter
transactions or forward contracts, there is a greater potential that a
counterparty or broker may default. In the event of a default, the Portfolio
may experience a loss. For additional information concerning derivatives,
related instruments and the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Portfolio's buy and sell transactions
will vary from year to year. The Portfolio's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions. High portfolio turnover rates would generally result in
higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Portfolio to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Portfolio limit investment risks for
the Fund's shareholders. These restrictions prohibit the Portfolio 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 Portfolio); 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 the Fund's investment objective, restriction (b)
above and investment policies designated as fundamental in the SAI, the
investment policies of the Portfolio and the Fund are not fundamental.
Shareholder approval is not required to change any non-fundamental investment
policy.
RISK FACTORS
The net asset value of the Fund's shares will fluctuate based on the value of
the securities held by the Portfolio. As the Portfolio invests primarily in
equity securities of companies outside the U.S., an investment in the Fund's
shares involves a higher degree of risk than an investment in a U.S. equity
fund.
13
<PAGE>
An investment in the Fund should not be considered a complete investment
program and may not be appropriate for all investors.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Portfolio'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 Portfolio's assets held abroad. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, taxation by withholding Portfolio 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. Investments in securities of
issuers based in developing countries entails certain additional risks,
including greater risks of expropriation, taxation by withholding Portfolio
assets, nationalization, and less social, political and economic stability.
The small size of markets for securities of issuers based in such countries and
the low or non-existent volume of trading may result in a lack of liquidity and
in price volatility. Certain national policies may restrict the investment
opportunities, including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests. There may be an absence of
developed legal structures governing private or foreign investment and private
property.
The Portfolio may invest in the securities of smaller companies, which, whether
foreign or domestic, often trade less frequently and in lower volume.
Consequently, price changes may be more abrupt or erratic than securities of
larger, more established companies. Such companies may have limited product
lines, markets or financial resources, or may depend on a limited management
group.
Securities rated in the category Baa by Moody's or BBB by S&P lack certain
investment characteristics and may have speculative characteristics.
Because the Portfolio is "non-diversified," the value of the Fund's shares may
be more susceptible to developments affecting the specific companies whose
securities are owned by the Portfolio.
For a discussion of certain other risks associated with the Portfolio's
additional investment activities, see "Other Investment Practices" above.
14
<PAGE>
MANAGEMENT
- ----------
THE PORTFOLIO'S ADVISERS
The Chase Manhattan Bank ("Chase") is the Portfolio's investment adviser under
an Investment Advisory Agreement and has overall responsibility for investment
decisions of the Portfolio, subject to the oversight of the Board of Trustees.
Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank
holding company. Chase and its predecessors have over 100 years of money
management experience.
For its investment advisory services to the Portfolio, Chase is entitled to
receive an annual fee computed daily and paid monthly based at an annual rate
equal to 1.00% of the Portfolio's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management (London) Limited ("CAM London"), a registered investment
adviser, is the Portfolio's sub-investment adviser under a Sub-Investment
Advisory Agreement between CAM London and Chase. CAM London is a wholly-owned
operating subsidiary of Chase. CAM London makes investment decisions for the
Portfolio on a day-to-day basis. For these services, CAM London is entitled to
receive a fee, payable by Chase from its advisory fee, at an annual rate equal
to 0.50% of the average daily net assets of the Portfolio. CAM London 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 with respect to the Portfolio also serve as portfolio managers of CAM
London. CAM London is located at Colvile House, 32 Curzon Street, London W1Y
8AL.
PORTFOLIO MANAGERS. Michael Browne and David Webb, Vice Presidents of Chase,
have been responsible for the management of the fund's portfolio since August
1996. Mr. Browne is responsible for investment management and equity research
for European equities. Mr. Browne joined Chase in 1994. Prior to joining Chase,
Mr. Browne was Assistant Director of European equity fund management at BZW
Investment Management in London. Mr. Browne also manages Vista European Fund.
Mr. Webb is responsible for investment management and equity research in the
Asia region. Mr. Webb joined Chase in 1992. Prior to joining Chase, Mr. Webb was
with Hambros Bank Limited where he was responsible for the management of the
Hambros Equus Pacific Trust and Hambros Japan Trust. Mr. Webb also manages Vista
Southeast Asian Fund and Vista Japan Fund.
ABOUT YOUR INVESTMENT
- ---------------------
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" and "Other
Information Concerning the Fund."
15
<PAGE>
CLASS B SHARES. Class B shares are sold without an initial sales charge, but are
subject to a contingent deferred sales charge ("CDSC") if redeemed within a
specified period after purchase. Class B shares also have higher combined 12b-1
and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative net
asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This discussion
will include information about how shares acquired through reinvestment of
distributions are treated for conversion purposes. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
WHICH ARRANGEMENT IS BEST
FOR YOU?
The decision as to which class of shares provides a more suitable investment for
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 purchase 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.
16
<PAGE>
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments of
$100 or more per transaction through automatic periodic deduction from your bank
checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter 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 in proper form 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 are in proper form only after
funds are converted to federal funds. Orders paid by check and received by 2:00
p.m., Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your Class A shares unless you request them. Due to the
conversion feature of Class B shares, certificates for Class B shares will not
be issued and all Class B shares will be held in book entry form.
Class A Shares
--------------
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives the
net asset value. The sales charge is allocated between your broker-dealer and
the Fund's distributor as shown in the following table, except when the Fund's
distributor, in its discretion, allocates the entire amount to your
broker-dealer.
Sales charge as a
percentage of:
--------------------- Amount of sales charge
Amount of transaction at Offering Net Amount reallowed to dealers as a
offering price ($) Price Invested percentage of offering price
- --------------------------- -------- ---------- ----------------------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
17
<PAGE>
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 1.00% of the amount under $2.5
million, 0.75% of the next $7.5 million, 0.50% of the next $40 million and
0.20% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
--------------
Class B shares are sold without an initial sales charge, although a CDSC will be
imposed if you redeem shares within a specified period after purchase, as shown
in the table below. The following types of shares may be redeemed without charge
at any time: (i) shares acquired by reinvestment of distributions and (ii)
shares otherwise exempt from the CDSC, as described below. For other shares, the
amount of the charge is determined as a percentage of the lesser of the current
market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- -----------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will
first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. When a share that has appreciated in value 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 determining 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.
18
<PAGE>
The Fund may sell Class A shares at net asset value without an initial
sales charge to the current and retired Trustees (and their immediate
families), current and retired employees (and their immediate families) of
Chase, the Fund's distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and
their immediate families) of broker-dealers having selected dealer
agreements with the Fund's distributor, employees (and their immediate
families) of financial institutions having selected dealer agreements with
the Fund's distributor (or otherwise having an arrangement with a
broker-dealer or financial institution with respect to sales of Vista fund
shares), financial institution trust departments investing an aggregate of $1
million or more in the Vista Family of Funds and clients of certain
administrators of tax-qualified plans when proceeds from repayments of loans
to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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.
Investors may incur a fee if they effect transactions through a broker or agent.
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.
19
<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.
SIGNATURE GUARANTEES. 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
20
<PAGE>
by a corporation, partnership, agent or fiduciary, or a surviving joint
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
21
<PAGE>
Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions 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
22
<PAGE>
best interests of the Fund, the Fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of exchanges or
reject any exchange. In addition, any shareholder who makes more than ten
exchanges of shares involving the Fund in a year or three in a calendar
quarter will be charged a $5.00 administration fee for each such exchange.
Shareholders would be notified of any such action to the extent required by
law. Consult the Vista Service Center before requesting an exchange. See the
SAI to find out more about the exchange privilege.
REINSTATEMENT PRIVILEGE. 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 reinstatement 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 (i.e., the value of its
investment in the Portfolio and its other assets) are determined on the basis of
their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least semi-annually and any
net realized capital gains at least annually. 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.
23
<PAGE>
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 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 an
established account of 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 distributions is the same whether received in cash
or in shares through the reinvestment of distributions.
Investment income received by the Fund from sources within foreign countries may
be subject to foreign taxes withheld at the source. Since more than 50% of the
value of the total assets of the Fund at the close of the Fund's taxable year is
anticipated to be stock or securities of foreign corporations, the Fund may
elect to "pass through" to its shareholders the amount of foreign taxes paid by
the Fund.
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).
24
<PAGE>
OTHER INFORMATION
CONCERNING THE FUND
- -------------------
DISTRIBUTION PLANS
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A and Class B shares, which
provide 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 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 for entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
SHAREHOLDER
SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their customers
such as pre-authorized or systematic purchase and
25
<PAGE>
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 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 for the Fund and the Portfolio and is entitled
to receive from each of the Fund and the Portfolio a fee computed daily and paid
monthly at an annual rate equal to 0.05% of their respective average daily net
assets.
VFD provides certain sub-administrative services to the Fund pursuant to its
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 450 West 33rd
Street, New York, New York 10001-2603.
CUSTODIAN
Chase acts as the custodian and fund accountant for the Fund and the Portfolio
and receives compensation under separate agreements with the Trust and the
Portfolio. Portfolio 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 and the Portfolio. 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
for custody services, including safekeeping of funds and
26
<PAGE>
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 or Portfolio; 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 or
Portfolio may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of the Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates to Class A
and Class B shares of the Fund. The Fund may offer other classes of shares in
addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which would affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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
27
<PAGE>
desirable to submit matters for a shareholder vote. The Trustees will
promptly call a meeting of shareholders to remove a trustee(s) when requested
to do so in writing by record holders of not less than 10% of all outstanding
shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
UNIQUE CHARACTERISTICS
OF MASTER/FEEDER FUND
STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, the Fund invests all of its investable assets in the Portfolio, a
separate registered investment company. Therefore, a shareholder's interest in
the Portfolio's securities is indirect. In addition to selling a beneficial
interest to the Fund, the Portfolio may sell beneficial interests to other
mutual funds or institutional investors. Such investors will invest in the
Portfolio on the same terms and conditions and will pay a proportionate share of
the Portfolio's expenses. However, other investors investing in the Portfolio
are not required to sell their shares at the same public offering prices as the
Fund, and may bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in the
Portfolio. Such differences in returns are also present in other mutual fund
structures.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. However, this
possibility also exists for traditionally structured funds which have large or
institutional investors. Funds with a greater pro rata ownership in the
Portfolio could have effective voting control of the operations of the
Portfolio. Whenever the Trust is requested to vote on matters pertaining to the
Portfolio, the Trust will hold a meeting of shareholders of the Fund and will
cast all of its votes in the same proportion as do the Fund's shareholders.
Shares of the Fund for which no voting instructions have been received will be
voted in the same proportion as those shares for which voting instructions are
received. Certain changes in the Portfolio's objective, policies or restrictions
may require the Trust to withdraw the Fund's interest in the Portfolio. Any
withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution from the Portfolio). The Fund could incur
brokerage fees or other transaction costs in converting such securities to cash.
In addition, a distribution in
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<PAGE>
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are reasonably
appropriate to deal with resulting potential conflicts of interest, up to and
including creating a separate Board of Trustees.
Investors in the Fund may obtain information about whether an investment in
the Portfolio may be available through other funds by calling the Vista
Service Center at 1-800-34-VISTA.
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 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.
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MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
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<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
VIE-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) LARGE CAP EQUITY FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 28, 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 February 28, 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 ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ................................................................ 10
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 11
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 ................................................... 24
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 26
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ....................... 4.75% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ................... None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)** .......... 0.00% 0.00%
12b-1 Fee*** ................................................ 0.25% 0.75%
Shareholder Servicing Fee ................................... 0.25% 0.25%
Other Expenses (after estimated waiver)** ................... 0.60% 0.60%
---- ----
Total Fund Operating Expenses (after waiver of fee)** ....... 1.10% 1.60%
==== ====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+.................... $58 $81 $105 $175
Class B Shares:
Assuming complete redemption
at the end of the period++ +++. $68 $84 $111 $177
Assuming no redemptions+++....... $16 $50 $ 87 $177
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waiver,
the Investment Advisory Fee and Other Expenses would be 0.40% and .70% for
Class A and Class B shares and Total Fund Operating Expenses would be 1.60%
and 2.10% for Class A and Class B shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The examples
should not be considered representations of past or future expenses or returns;
actual expenses and returns may be greater or less than shown.
3
<PAGE>
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for both
Class A and Class B Shares outstanding throughout the period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year ended
October 31, 1996, which is incorporated by reference into the SAI. Shareholders
may obtain a copy of this annual report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below, has been audited by Price
Waterhouse LLP, independent accountants, whose report thereon is also included
in the Annual Report to Shareholders.
VISTA LARGE CAP EQUITY FUND
Class A Class B
------- -------
5/8/96* 5/7/96*
through through
10/31/96 10/31/96
-------- --------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................... $ 12.06 $ 12.06
Income from Investment Operations
Net Investment Income ................................ 0.050 0.050
Net Gains or (Losses) in Securities
(both realized and unrealized) ..................... 1.209 1.187
Total from Investment Operations ................... 1.259 1.237
------- -------
Less dividends from Net Investment Income ............... 0.069 0.077
------- -------
Net Asset Value, End of Period .......................... $ 13.25 $ 13.22
======= =======
Total Return (1) ........................................ 10.84% 6.66%
Ratios/Supplemental Data
Net Assets, End of Perod (000 omitted) ................ $ 8,349 $ 305
Ratio of Expenses to Average Net Assets # ............. 1.38% 1.88%
Ratio of Net Investment Income to
Average Net Assets # ................................ 0.84% 0.14%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets # .................. 1.87% 2.38%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average Net Assets # ... 0.35% (0.36%)
Portfolio Turnover Rate ................................. 89% 89%
Average Commission Rate Paid per share .................. $0.0598 $0.0598
* Commencement of offering class of shares.
(1) Total return figures do not take into account effect of any sales charge.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Large Cap Equity Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its total
assets in equity securities and at least 65% of its total assets in equity
securities of established companies with market capitalizations in excess of $10
billion. Such companies typically have a large number of publicly held shares
and high trading volume, resulting in a high degree of liquidity.
The Fund's advisers intend to utilize both quantitative and fundamental research
to identify undervalued stocks with a catalyst for positive change. The Fund's
advisers will evaluate companies by assessing the strongest sectors of the
market over the economic cycle, identifying those companies with favorable
earnings prospects, and then selecting the most attractive values. The Fund's
advisers will consider industry diversification as an important factor and will
try to maintain representation in a variety of market sectors, although sector
emphasis will shift as a result of changes in the outlook for earnings among
market sectors.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. 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
(exclusive of any investments in money market instruments). To the extent
that the Fund departs from its investment policies during temporary defensive
periods, its investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking long-term growth of capital
o Are investing for goals several years away
o Own or plan to own other types of investments for diversification purposes
o Can assume stock 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.
6
<PAGE>
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 Fund's investments in certain foreign countries. Foreign laws may
restrict the ability to invest in certain countries or issuers and special
tax considerations will apply to foreign securities. The risks can increase
if the Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include 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.
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
7
<PAGE>
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 during unfavorable market
conditions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including
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. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its
total assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other investment companies.
8
<PAGE>
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 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
9
<PAGE>
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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies (including its
investment objective) designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with equity investing.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.40% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Fund's sub- investment adviser under a Sub- Investment Advisory Agreement
between CAM and Chase. CAM is a wholly-owned operating subsidiary
10
<PAGE>
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis. For
these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.20% of the Fund's average daily net
assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
PORTFOLIO MANAGER. Greg Adams, a Senior Portfolio Manager at Chase, has been
primarily responsible for the management of the Fund since February 1994. Mr.
Adams joined Chase in 1987 and is also a manager of Vista Growth and Income
Portfolio and Vista Balanced Fund. In addition, Mr. Adams has been
responsible for overseeing the proprietary computer model program used in the
U.S. equity selection process. Tracy Hutt, an Associate Portfolio Manager at
Chase, participates in the management of the Fund. Prior to joining Chase in
1995, Ms. Hutt spent two years at the Bank of New York analyzing consumer and
health care companies. Prior to joining Bank of New York, Ms. Hutt spent four
years at ABN-AMRO Bank as a U.S. equity generalist and portfolio manager.
ABOUT YOUR INVESTMENT
- ---------------------
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" 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."
11
<PAGE>
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 $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 in proper
form 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 are in
proper form only after funds are
12
<PAGE>
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.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
--------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price($) price invested offering price
- ------------------------- -------- ---------- --------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 1.00% of the amount under $2.5
million, 0.75% of the next $7.5 million, 0.50% of the next $40 million and
0.20% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
Class B Shares
--------------
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be 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
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<PAGE>
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 determining 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 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
14
<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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
15
<PAGE>
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.
SIGNATURE GUARANTEES. If you sell shares having a net asset value of $100,000
or more, the signatures of registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or certain other financial
institutions. See the SAI for more information about where to obtain a
signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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.
16
<PAGE>
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or ($100 for
Class B accounts) monthly, quarterly or semiannually. A minimum account
balance of $5,000 is required to establish a systematic withdrawal plan for
Class A accounts. Call the Vista Service Center at 1-800-34-VISTA for
complete instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions 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
17
<PAGE>
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 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 reinstatement 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
18
<PAGE>
of their redemption proceeds) if the purchase occurs within 90 days of the
redemption of the Class B shares.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. 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 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 an
established account of 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
19
<PAGE>
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 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
20
<PAGE>
$100 per person annually; an occasional meal, ticket to a sporting event or
theater for 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 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 Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate
21
<PAGE>
equal to 0.10% of the Fund's average daily net assets.
VFD provides certain sub- administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
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.
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
22
<PAGE>
each class of the Fund generally vote together except when required under
federal securities laws to vote separately on matters that only affect a
particular class, such as the approval of distribution plans for a particular
class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
UNIQUE CHARACTERISTICS
OF MASTER/FEEDER
FUND STRUCTURE
- --------------
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a
23
<PAGE>
Portfolio. Such differences in return are also present in other mutual fund
structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-34-VISTA. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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
24
<PAGE>
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.
25
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund
shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account
to another on a regular, prearranged basis. There is no additional charge
for this service.
o 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.
o 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.
26
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
27
<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
VLC-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) LARGE CAP EQUITY FUND
INSTITUTIONAL SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. 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 ................................. 3
Financial Highlights ............................ 4
Fund Objective .................................. 6
Investment Policies ............................. 6
Management ...................................... 10
How to Purchase, Redeem and Exchange Shares ..... 11
How the Fund Values Its Shares .................. 13
How Distributions Are Made; Tax Information ..... 14
Other Information Concerning the Fund ........... 15
Performance Information ......................... 19
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)* .................. 0.00%
12b-1 Fee .......................................................... None
Shareholder Servicing Fee .......................................... 0.25%
Other Expenses ..................................................... 0.35%
------
Total Fund Operating Expenses (after waiver of fee)* ............... 0.60%
======
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares .............. $6 $19 $33 $75
*Reflects current waiver arrangement to maintain Total Fund Operating Expenses
at the level indicated in the table above. Absent such waiver, the Investment
Advisory Fee would be 0.40% and Total Fund Operating Expenses would be 1.00%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following information on selected per share data and ratios for one
Institutional Share with respect to each of the five fiscal periods
commencing after June 30, 1992, and the related financial statements, have
been audited by Price Waterhouse LLP, independent accountants, whose report
expressed an unqualified opinion thereon. The information on selected per
share data and ratios with respect to the fiscal year ended June 30, 1992 and
the period November 30, 1990 to June 30, 1991, have been audited by other
independent accountants, whose report expressed an unqualified opinion
thereon. The following information should be read in conjunction with the
financial statements and notes thereto appearing in the Fund's Annual Report
to Shareholders for the fiscal year ended October 31, 1996, which is
incorporated by reference into the SAI.
VISTA LARGE CAP EQUITY FUND*
<TABLE>
<CAPTION>
Year Ended
-----------------------------------
10/31/96 10/31/95 10/31/94
--------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............. $ 12.24 $ 13.16 $13.65
------- ------- ------
Income From Investment Operations:
Net Investment Income ........................... 0.227 0.277 0.298
Net Gain in Securities
(both realized and unrealized) ................. 2.597 1.744 0.263
------- ------- ------
Total from Investment Operations ................ 2.824 2.021 0.561
------- ------- -----
Less Distributions:
Dividends from Net Investment Income ............ 0.224 0.282 0.290
Distributions from Capital Gains ................ 1.570 2.659 0.761
------- ------- ------
Total Distributions: ............................ 1.794 2.941 1.051
------- ------- ------
Net Asset Value, End of Period .................... $ 13.27 $ 12.24 $ 13.16
======= ======= =======
TOTAL RETURNS 25.65% 20.41% 4.37%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) .......... $99,025 $55,417 $67,818
Ratio of Expenses to Average Net Assets # ........ 0.40% 0.31% 0.31%
Ratio of Net Investment Income to
Average Net Assets # ........................... 1.86% 2.41% 2.30%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets # ............. 0.96% 0.90% 0.95%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets # .. 1.30% 1.82% 1.66%
Portfolio turnover rate ........................... 89% 45% 53%
Average Commission Rate Paid per share ............ $0.0598 -- --
</TABLE>
[RESTUB TABLE]
<TABLE>
<CAPTION>
7/1/92*** Year 11/30/90**
through ended through
10/31/93 10/31/92 6/30/92 6/30/91
-------- -------- ------- ----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............ $ 12.56 $ 12.50 $ 11.43 $ 10.00
-------- -------- ------- -------
Income From Investment Operations:
Net Investment Income .......................... 0.302 0.080 0.240 0.170
Net Gain in Securities
(both realized and unrealized) ............... 1.153 0.500 1.230 1.350
-------- -------- ------- -------
Total from Investment Operations ............... 1.455 0.580 1.470 1.520
-------- -------- ------- -------
Less Distributions:
Dividends from Net Investment Income ........... 0.304 0.140 0.290 0.090
Distributions from Capital Gains ............... 0.062 0.380 0.110 --
-------- -------- ------- -------
Total Distributions: ............................ 0.366 0.520 0.400 0.090
-------- -------- ------- -------
Net Asset Value, End of Period ................... $ 13.65 $ 12.56 $ 12.50 $ 11.43
======== ======== ======= =======
TOTAL RETURNS 11.73% 4.78% 12.99% 15.25%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ........... $120,635 $106,088 $92,261 $95,440
Ratio of Expenses to Average Net Assets # ......... 0.31% 0.30% 0.30% 0.28%
Ratio of Net Investment Income to
Average Net Assets # ............................ 2.30% 1.96% 2.29% 2.81%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets # .............. 0.88% 0.80% 1.02% 1.13%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets # .. 1.73% 1.46% 1.57% 1.96%
Portfolio turnover rate ............................ 33% 5% 14% 19%
Average Commission Rate Paid per share ............. -- -- -- --
</TABLE>
* Formerly known as Vista Equity Fund.
** Commencement of operations.
*** In 1992, the Fund's fiscal year-end was changed from June 30 to October 31.
# Short periods have been annualized.
4&5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Large Cap Equity Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of established companies with market capitalizations in
excess of $10 billion. Such companies typically have a large number of
publicly held shares and high trading volume, resulting in a high degree of
liquidity.
The Fund's advisers intend to utilize both quantitative and fundamental
research to identify undervalued stocks with a catalyst for positive change.
The Fund's advisers will evaluate companies by assessing the strongest
sectors of the market over the economic cycle, identifying those companies
with favorable earnings prospects, and then selecting the most attractive
values. The Fund's advisers will consider industry diversification as an
important factor and will try to maintain representation in a variety of
market sectors, although sector emphasis will shift as a result of changes in
the outlook for earnings among market sectors.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. 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
(exclusive of any investments in money market instruments). To the extent
that the Fund departs from its investment policies during temporary defensive
periods, its investment objective may not be achieved.
The Fund is clasified as a "diversified" fund under federal securities law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking long-term growth of capital
o Are investing for goals several years away
o Own or plan to own other types of investments for diversification purposes
o Can assume stock 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.
6
<PAGE>
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 Fund's investments in certain foreign countries. Foreign laws may
restrict the ability to invest in certain countries or issuers and special
tax considerations will apply to foreign securities. The risks can increase
if the Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include 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 instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be
7
<PAGE>
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 during unfavorable market
conditions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including
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. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its
total assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other investment companies.
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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 equirements 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 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
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<PAGE>
investments, particularly in periods of rapidly changing market conditions.
High portoflio turnover rates would generally result in higher transaction
costs, including brokerage commissions or dealer mark-ups, and would make it
more difficult for the Fund to qualify as a registered investment company
under federal tax law. See "How Distributions are Made; Tax Information."
LIMITING INVESTMENT RISKS
Specific investment restrictions help the Fund limit investment risks for its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for restriction (c) above and investment policies designated as
fundamental in the SAI, the Fund's investment policies (including its
investment objective) are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with equity investing.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.40% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Fund's sub-investment adviser under a Sub- Investment Advisory Agreement between
CAM and Chase. CAM is a wholly-owned operating subsidiary
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<PAGE>
of Chase. CAM makes investment decisions for the Fund on a day-to-day basis. For
these services, CAM is entitled to receive a fee, payable by Chase from its
advisory fee, at annual rate equal to 0.20% of the Fund's average daily net
assets. CAM was recently formed for the purpose of providing discretionary
investment advisory services to institutional clients and to consolidate Chase's
investment management function. The same individuals who serve as portfolio
managers for Chase also serve as portfolio managers for CAM. CAM is located at
1211 Avenue of the Americas, New York, New York 10036.
PORTFOLIO MANAGER. Greg Adams, a Senior Portfolio Manager at Chase, has been
primarily responsible for the management of the Fund since February 1994. Mr.
Adams joined Chase in 1987 and is also a manager of Vista Growth and Income
Portfolio and Vista Balanced Fund. In addition, Mr. Adams has been responsible
for overseeing the proprietary computer model program used in the U.S. equity
selection process. Tracy Hutt, an Associate Portfolio Manager at Chase,
participates in the management of the Fund. Prior to joining Chase in 1995, Ms.
Hutt spent two years at the Bank of New York analyzing consumer and health care
companies. Prior to joining Bank of New York, Ms. Hutt spent four years at
ABN-AMRO Bank as a U.S. equity generalist and portfolio manager.
HOW TO PURCHASE, REDEEM AND EXCHANGE SHARES
- -------------------------------------------
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
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<PAGE>
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone to
the Vista Service Center. For telephone redemptions, call the Vista Service
Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions,
or postpone payment for more than seven days, as permitted by federal
securities law.
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,
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<PAGE>
you may experience delays in contacting the Vista Service Center by
telephone. In this event, you may wish to submit a written redemption request
or contact your Dealer. The Telephone Redemption Privilege may be modified or
terminated without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000 due to redemptions. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer Institutional Shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully prior to any
exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available.
Call the Vista Service Center for procedures for telephone transactions. Ask
your investment representative or the Vista Service Center for prospectuses
of other Vista funds. Shares of certain Vista funds are not available to
residents of all states.
EXCHANGE PARAMETERS. he exchange privilege is not intended as a vehicle for
short-term trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to limit
excessive exchange activity and in other circumstances where Vista management
or the Trustees believe doing so would be in the best interests of the Fund,
the Fund reserves the right to revise or terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange. In addition,
any shareholder who makes more than ten exchanges of shares involving the
Fund in a year or three in a calendar quarter will be charged a $5.00
administration fee for each such exchange. Shareholders would be notified of
any such action to the extent required by law. Consult the Vista Service
Center before requesting an exchange. The exchange privilege is subject to
change or termination. See the SAI to find out more about the exchange
privilege.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices
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<PAGE>
determined as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time, however, options are priced at 4:15 p.m.,
Eastern time), on each Fund Business Day, by dividing the net assets of the
Fund attributable to that class by the total number of outstanding shares of
that class. Values of assets held by the Fund are determined on the basis of
their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE MADE;
TAX INFORMATION
- ---------------------------
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. Capital gains are distributed after
deducting any available capital loss carryovers.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares; (2) receive distributions
from net investment income in cash or by Automated Clearing House (ACH) to a
pre-established bank account while reinvesting capital gains distributions in
additional shares; or (3) receive all distributions in cash or by ACH. You can
change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the same share class. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in an
established account of 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.
A portion of the ordinary income dividends paid by the Fund may
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<PAGE>
qualify for the 70% dividends- received deduction for corporate shareholders.
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
- -------------------
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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
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<PAGE>
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
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
SUB-ADMINISTRATOR
AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub- administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 450 West 33rd Street, New York, New York 10001-2603.
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.
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
16
<PAGE>
and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
17
<PAGE>
UNIQUE CHARACTERISTICS
OF MASTER/FEEDER
FUND STRUCTURE
- ----------------------
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
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<PAGE>
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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 public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies.
These factors should be considered when comparing the Fund's investment
results to those of other mutual funds and other investment vehicles.
Quotation of investment performance for any period when a fee waiver or
expense limitation was in effect will be greater than if the waiver or
limitation had not been in effect. The Fund's performance may be compared to
other mutual funds, relevant indices and rankings prepared by independent
services. See the SAI.
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Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
20
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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
INLC-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) SHORT-TERM BOND FUND
CLASS A SHARES
---------------------------
INVESTMENT STRATEGY: INCOME
---------------------------
February 28, 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 February 28, 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 ............................................................. 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ........................................................ 4
Fund Objective .............................................................. 5
Investment Policies ......................................................... 5
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
How to Buy, Sell and Exchange Shares ........................................ 12
How the Fund Values Its Shares .............................................. 18
How Distributions Are Made; Tax Information ................................. 18
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ....................................... 19
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
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ................................... 1.50%
Maximum Deferred Sales Charge (as a percentage of the lower
of original purchase price or redemption proceeds) ................... None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)* ....................... 0.00%
12b-1 Fee (after estimated waiver) * ** ................................. 0.15%
Shareholder Servicing Fee* .............................................. 0.15%
Other Expenses (after estimated waiver)* ................................ 0.45%
----
Total Fund Operating Expenses (after waivers of fees)* .................. 0.75%
====
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ -------- -------- --------
Class A Shares+ $23 $39 $56 $107
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such
waivers, the Investment Advisory Fee, 12b-1 Fee, and Other Expenses
would be 0.25%, 0.25% and 0.55%, respectively, and Total Fund Operating
Expenses would be 1.30%.
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
shareholders of the Fund, may pay more than the economic equivalent of
the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Class A Share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended October 31, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain a copy
of this annual report by contacting the Fund or their Shareholder Servicing
Agent. The financial statements and notes, as well as the financial information
set forth in the table below, has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is also included in the Annual
Report to Shareholders.
VISTA SHORT-TERM BOND FUND
--------------------------
Class A
5/6/96*
through
10/31/96
--------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ................................... $10.03
Income From Investment Operations
Net Investment Income ................................................ 0.262
Net Gains or (Losses) in Securities (both realized and unrealized) ... 0.072
------
Total from Investment Operations ..................................... 0.334
Less dividends from net investment income .............................. 0.264
Net Asset Value, End of Period ......................................... $10.10
======
Total Return (1) ....................................................... 3.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ............................... $9.416
Ratio of Expenses to Average Net Assets# .............................. 0.75%
Ratio of Net Investment Income to Average Net Assets# ................. 5.28%
Ratio of Expenses without waivers and assumption of expenses
to Average Net Assets# .............................................. 1.45%
Ratio of Net Investment Income without waivers and assumption of
expenses to Average Net Assets# ...................................... 4.58%
Portfolio Turnover Rate ................................................ 158%
* Commencement of offering class of shares.
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
4
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FUND OBJECTIVE
- --------------
Vista Short Term Bond Fund seeks a high level of current income, consistent
with preservation of capital. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund will invest at least 65% of its total assets in bonds which have a
maturity of three years or less, and the dollar weighted average maturity of
its portfolio will not exceed three years. The Fund normally will invest
substantially all of its assets in investment-grade fixed-income securities
of all types. The maturity of securities with put features will be measured
based on the next put date, and the maturity of mortgage- and asset-backed
securities will be measured based upon their weighted average lives.
Investment-grade fixed-income securities are securities rated in the category
Baa or higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or
higher by Standard & Poor's Corporation ("S&P") or the equivalent by another
national rating organization, and unrated securities determined by the Fund's
advisers to be of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of securities based upon their appraisal of
changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset-backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments,
as discussed below.
The Fund is classified as a "diversified" fund under federal securities law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking current income
o Are investing for relatively short-term goals
o Own or plan to own other types of investments for diversification purposes
o Can assume a moderate degree of bond market risk
This Fund may NOT be appropriate for investors who are unable to tolerate any
up and down price changes or who are in need of capital growth potential.
5
<PAGE>
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in
the SAI.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. 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.
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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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.
6
<PAGE>
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. Payment-in-kind obligations are obligations on which the
interest is payable in additional securities rather than cash. The Fund may also
invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk
is greater when the period to maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. The Fund may
invest in floating rate securities, whose interest rates adjust automatically
whenever a specified interest rate changes, and variable rate securities, whose
interest rates are periodically adjusted. Certain of these instruments permit
the holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. The securities
in which the Fund may invest include participation certificates and certificates
of indebtedness or safekeeping. Participation certificates are pro rata
interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. As a result of the floating or variable rate nature of these
investments, the Fund's yield may decline and it may forego the opportunity for
capital appreciation during periods when interest rates decline; however, during
periods when interest rates increase, the Fund's yield may increase and it may
have reduced risk of capital depreciation. Demand features on certain floating
or variable rate securities may obligate the Fund to pay a "tender fee" to a
third party. Demand features provided by foreign banks involve certain risks
associated with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation. Interest rate caps are financial instruments under which payments
occur if an interest rate index exceeds a certain predetermined interest rate
level, known as the cap rate, which is tied to a specific index. These financial
products will be more volatile in price than securities which do not include
such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests
7
<PAGE>
in "pools" of mortgages in which payments of both interest and principal on
the securities are made monthly, in effect "passing through" monthly payments
made by the individual borrowers on the residential mortgage loans which
underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on
the underlying mortgage loans) may result in a lower rate of return when the
Fund reinvests such principal. In addition, as with callable fixed-income
securities generally, if the Fund purchased the securities at a premium,
sustained early repayment would limit the value of the premium. Like other
fixed-income securities, when interest rates rise the value of a mortgage-
related security generally will decline; however, when interest rates
decline, the value of mortgage-related securities with prepayment features
may not increase as much as other fixed-income, fixed-maturity securities
which have no prepayment or call features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
The Fund may invest in principal-only or interest-only stripped
mortgage-backed securities. Stripped mortgage-backed securities have greater
volatility than other types of mortgage-related securities. Stripped
mortgage-backed securities which are purchased at a substantial premium or
discount generally are extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material
8
<PAGE>
adverse effect on such securities' yield to maturity. In addition, stripped
mortgage securities may be illiquid.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the 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. 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 completing the transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of its advisers to
forecast these factors correctly. Inaccurate forecasts could expose the Fund
to a risk of loss.
9
<PAGE>
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 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 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with the types of investments it may make, as
described above, as well as the risks discussed herein.
10
<PAGE>
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. Although the Fund invests at
least 65% of its assets in bonds which have a maturity of less than three
years, to the extent the Fund invests in securities with longer maturities,
the volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While U.S. Government securities generally are of
high quality, government securities that are not backed by the full faith and
credit of the U.S. Treasury may be affected by changes in the
creditworthiness of the agency that issued them and the non-U.S. Government
securities held by the Fund, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.25% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.10% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the
11
<PAGE>
Americas, New York, New York 10036.
PORTFOLIO MANAGERS. Susan Huang, a Vice President and the Director of U.S. Fixed
Income Management of Chase, has been responsible for the day-to-day management
of the Fund's portfolio since June 1996. Ms. Huang is responsible for developing
the allocation and risk management strategy for U.S. fixed income portfolios,
and managing the institutional U.S. fixed income assets under management. Prior
to joining Chase in June of 1995, Ms. Huang was Director of the Insurance Asset
Management Group at Hyperion Capital Management Inc. Prior to joining Hyperion,
Ms. Huang was a senior portfolio manager with CS First Boston. Prior to joining
CS First Boston in 1992, Ms. Huang spent 14 years at The Equitable, where she
worked in the pension consulting group and the U.S. Fixed Income Management
Group. Ms. Huang is also a manager of Vista Balanced Fund, Vista Bond Fund,
Vista U.S. Government Securities Fund and Vista U.S. Treasury Income Fund.
Andrew Russell, a Second Vice President of Chase, participates in the
management of the Short-Term Bond Fund. Since joining Chase in 1990, Mr.
Russell has held several positions within the U.S. fixed income area,
including taxable fixed-income trader, assistant trader and portfolio
analyst. Mr. Russell is a member of the U.S. fixed income area's quantitative
research team where he specializes in the analysis of asset-backed
securities.
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, 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
$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
12
<PAGE>
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 in proper
form 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 are in
proper form only after funds are converted to federal funds. Orders paid by
check and received by 2:00 p.m., Eastern Time will generally be available for
the purchase of shares the following business day.
If you are considering redeeming or exchanging shares or transferring shares
to another person shortly after purchase, you should pay for those shares
with a certified check to avoid any delay in redemption, exchange or
transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
OFFERING PRICE
--------------
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table,
except when the Fund's distributor, in its discretion, allocates the entire
amount to your broker-dealer.
Sales charge as a
percentage of:
-------------------- Amount of sales charge
Amount of transaction at Offering Net amount reallowed to dealers as a
offering price($) price invested percentage of offering price
- --------------------------------------------------------------------------------
100,000 1.50 1.52 1.00
100,000 but under 250,000 1.00 1.00 0.50
250,000 but under 500,000 0.50 0.50 0.25
500,000 but under 1,000,000 0.25 0.25 0.25
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
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
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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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker-dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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 Class A shares of the Fund may be made with no
initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed
through an omnibus account with the Fund or (ii) by clients of such
investment adviser or financial planner who place trades for their own
accounts, if such accounts are linked to a master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may also be made for retirement and deferred compensation
plans and trusts used to fund those plans.
Investors may incur a fee if they effect transactions through a broker or
agent.
14
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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 The Hanover Short Term U.S. Government Fund 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 the Fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The SAI contains additional
information about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases
without an initial sales charge at any time and may reject any such purchase
request.
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. 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
15
<PAGE>
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions.
See the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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 monthly,
quarterly or semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan. Call the Vista Service Center at
1-800-34-VISTA for complete instructions.
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<PAGE>
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions or if you purchase through the
Systematic Investment Plan and fail to meet the Fund's investment minimum within
a twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption.
HOW TO EXCHANGE
YOUR SHARES
You can exchange your shares for shares of the same class of certain other
Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista
fund into which shares are being exchanged should be read carefully and
retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
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 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 reinstatement
17
<PAGE>
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.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at
least annually. Capital gains are distributed after deducting any available
capital loss carryover.
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 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 an
established account of 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 corespondence 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
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<PAGE>
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 PLAN
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted a Rule 12b-1 distribution plan for Class A shares, which provides
for the payment of distribution fees at annual rates of up to 0.25% of the
average daily net assets attributable to Class A shares of the Fund. Payments
under the distribution plans shall be used to compensate or reimburse the
Fund's distributor and broker-dealers for services provided and expenses
incurred in connection with the sale of Class A shares, and are not tied to
the amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or maintenance commissions at an annual rate of up
to 0.25% of the average daily net asset value of Class A shares 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 intended for
the sale of Class A shares will be conducted generally by the Vista Family of
Funds, and activities intended to promote the Fund's Class A shares may also
benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater for 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.
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<PAGE>
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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 administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
20
<PAGE>
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.
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 shares of the Fund. The Fund offers other classes of shares in
addition to this class. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class
of Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service
fee levels, and levels of certain other expenses, which will affect the
relative performance of
21
<PAGE>
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.
UNIQUE CHARACTERISTICS OF
MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio,
22
<PAGE>
the Trust would hold a meeting of shareholders of the Fund and would cast all
of its votes in the same proportion as did the Fund's shareholders. Shares of
the Fund for which no voting instructions had been received would be voted in
the same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust serve as
Trustees of the Portfolio. The Trustees of the Trust, including a majority of
the disinterested Trustees, have adopted procedures they believe are
reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-34-VISTA. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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, which are not currently offered).
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
23
<PAGE>
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.
o 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.
o SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more monthly,
quarterly or semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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
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27
<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
VST-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) SHORT-TERM BOND FUND
INSTITUTIONAL SHARES
---------------------------
INVESTMENT STRATEGY: INCOME
---------------------------
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. 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 ............................................................. 3
Financial Highlights ........................................................ 4
Fund Objective .............................................................. 6
Investment Policies ......................................................... 6
Management .................................................................. 12
How to Purchase, Redeem and Exchange Shares ................................. 13
How the Fund Values Its Shares .............................................. 16
How Distributions Are Made; Tax Information ................................. 16
Other Information Concerning the Fund ....................................... 17
Performance Information ..................................................... 21
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)* ...................... 0.00%
12b-1 Fee .............................................................. None
Shareholder Servicing Fee (after estimated waiver)* .................... 0.10%
Other Expenses (after estimated waiver)* ............................... 0.32%
----
Total Fund Operating Expenses (after waivers of fees)* ................. 0.42%
====
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares $4 $13 $24 $53
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers,
the Investment Advisory Fee, Shareholder Servicing Fee and Other Expenses
would be 0.25%, 0.25% and 0.42%, respectively, and Total Fund Operating
Expenses would be .92%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges and credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with
an investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The following information on selected per share data and ratios for one
Institutional Share with respect to each of the five fiscal periods
commencing after June 30, 1992, and the related financial statements, have
been audited by Price Waterhouse LLP, independent accountants, whose report
expressed an unqualified opinion thereon. The information on selected per
share data and ratios with respect to the fiscal year ended June 30, 1992 and
the period November 30, 1990 to June 30, 1991, have been audited by other
independent accountants, whose report expressed an unqualified opinion
thereon. The following information should be read in conjunction with the
financial statements and notes thereto appearing in the Fund's Annual Report
to Shareholders for the fiscal year ended October 31, 1996, which is
incorporated by reference into the SAI.
VISTA SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
Year Ended 7/1/92** Year 11/30/90*
--------------------------------------- through Ended through
10/31/96 10/31/95 10/31/94 10/31/93 10/31/92 6/30/92 6/30/91
-------- -------- -------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................. $ 10.08 $ 9.91 $ 10.14 $ 10.26 $ 10.28 $ 10.13 $ 10.00
------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income ............................... 0.561 0.542 0.465 0.489 0.190 0.600 0.370
Net Gains or (Losses) in securities
(both realized and unrealized) ..................... 0.035 0.168 (0.230) (0.073) (0.010) 0.190 0.070
------- ------- ------- ------- ------- ------- -------
Total from Investment Operations: ................... 0.596 0.710 0.235 0.416 0.180 0.790 0.440
------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ................ 0.556 0.542 0.465 0.536 0.200 0.630 0.310
Distributions from Capital Gains .................... -- -- -- -- -- 0.010 --
------- ------- ------- ------- ------- ------- -------
Total Distributions: ................................ 0.556 0.542 0.465 0.536 0.200 0.640 0.310
------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period ........................ $ 10.12 $ 10.08 $ 9.91 $ 10.14 $ 10.26 $ 10.28 $ 10.13
======= ======= ======= ======= ======= ======= =======
Total Return .......................................... 6.10% 7.37% 2.38% 4.73% 1.67% 8.07% 4.39%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) .............. $43,242 $36,246 $35,987 $70,693 $81,327 $70,960 $70,745
Ratio of Expenses to Average Net Assets# ............. 0.35% 0.32% 0.31% 0.31% 0.30% 0.30% 0.29%
Ratio of Net Investment Income to
Average Net Assets# ................................. 5.59% 5.41% 4.59% 5.25% 5.66% 6.12% 6.56%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# ....... 0.89% 0.90% 0.86% 0.76% 0.66% 0.94% 0.99%
Ratio of Net Investment Income without
waivers and assumption of expenses
to Average Net Assets# .............................. 5.05% 4.83% 4.05% 4.80% 5.30% 5.48% 5.86%
Portfolio Turnover Rate ............................... 158% 62% 44% 17% 0% 29% 1%
</TABLE>
* Commencement of operations.
** In 1992 the Fund's fiscal year-end was changed from June 30 to October 31.
# Short periods have been annualized.
4-5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Short Term Bond Fund seeks a high level of current income, consistent
with preservation of capital. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
The Fund will invest at least 65% of its total assets in bonds which have a
maturity of three years or less, and the dollar weighted average maturity of
its portfolio will not exceed three years. The Fund normally will invest
substantially all of its assets in investment-grade fixed-income securities
of all types. The maturity of securities with put features will be measured
based on the next put date, and the maturity of mortgage-and asset-backed
securities will be measured based upon their weighted average lives.
Investment-grade fixed-income securities are securities rated in the category
Baa or higher by Moody's Investors Service, Inc. ("Moody's"), or BBB or
higher by Standard & Poor's Corporation ("S&P") or the equivalent by another
national rating organization, and unrated securities determined by the Fund's
advisers to be of comparable quality.
In making investment decisions for the Fund, its advisers consider many
factors in addition to current yield, including preservation of capital,
maturity and yield to maturity. They will adjust the Fund's investments in
particular securities or types of securities based upon their appraisal of
changing economic conditions and trends. The Fund's advisers may sell one
security and purchase another security of comparable quality and maturity to
take advantage of what they believe to be short-term differentials in market
values or yield disparities.
Fixed-income securities in the Fund's portfolio may include, in any
proportion, bonds, notes, mortgage-backed securities, asset-backed
securities, government and government agency and instrumentality obligations,
zero coupon securities, convertible securities and money market instruments,
as discussed below.
The Fund is classified as a "diversified" fund under the federal securities
law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
Are seeking current income
o Are investing for relatively short-term goals
o Own or plan to own other types of investments for diversification purposes
o Can assume a moderate degree of bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate any
up and down price changes or who are in need of capital growth potential.
6
<PAGE>
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. 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.
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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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
7
<PAGE>
security and consequently reduce the available yield.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. Payment-in-kind obligations are obligations on which the
interest is payable in additional securities rather than cash. The Fund may also
invest in stripped obligations, which are separately traded principal and
interest components of an underlying obligation. The value of these instruments
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. The Fund may
invest in floating rate securities, whose interest rates adjust automatically
whenever a specified interest rate changes, and variable rate securities, whose
interest rates are periodically adjusted. Certain of these instruments permit
the holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. The securities
in which the Fund may invest include participation certificates and certificates
of indebtedness or safekeeping. Participation certificates are pro rata
interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. As a result of the floating or variable rate nature of these
investments, the Fund's yield may decline and it may forego the opportunity for
capital appreciation during periods when interest rates decline; however, during
periods when interest rates increase, the Fund's yield may increase and it may
have reduced risk of capital depreciation. Demand features on certain floating
or variable rate securities may obligate the Fund to pay a "tender fee" to a
third party. Demand features provided by foreign banks involve certain risks
associated with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation. Interest rate caps are financial instruments under which payments
occur if an interest rate index exceeds a certain predetermined interest rate
level, known as the cap rate, which is tied to a specific index. These financial
products will be more volatile in price than securities which do not include
such a structure.
8
<PAGE>
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related securities.
Mortgage pass-through securities are securities representing interests in
"pools" of mortgages in which payments of both interest and principal on the
securities are made monthly, in effect "passing through" monthly payments made
by the individual borrowers on the residential mortgage loans which underlie the
securities. Early repayment of principal on mortgage pass-through securities
held by the Fund (due to prepayments of principal on the underlying mortgage
loans) may result in a lower rate of return when the Fund reinvests such
principal. In addition, as with callable fixed-income securities generally, if
the Fund purchased the securities at a premium, sustained early repayment would
limit the value of the premium. Like other fixed-income securities, when
interest rates rise the value of a mortgage-related security generally will
decline; however, when interest rates decline, the value of mortgage-related
securities with prepayment features may not increase as much as other
fixed-income, fixed-maturity securities which have no prepayment or call
features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage-backed bonds and mortgage pass-through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments,and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
The Fund may invest in principal-only or interest-only stripped
mortgage-backed securities. Stripped mortgage-backed securities have greater
volatility than other types of mortgage-related securities. Stripped
mortgage-backed securities which are purchased at a substantial premium or
discount generally are extremely sensitive not only to changes in prevailing
interest rates
9
<PAGE>
but also to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments
may have a material adverse effect on such securities' yield to maturity. In
addition, stripped mortgage securities may be illiquid.
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the 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. 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 completing the transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; (iv)
purchase and sell mortgage-backed and asset-backed securities; and (v) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully
10
<PAGE>
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 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 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the
11
<PAGE>
general risks and considerations associated with the types of investments it
may make, as described above, as well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. Although the Fund invests at
least 65% of its assets in bonds which have a maturity of less than three
years, to the extent the Fund invests in securities with longer maturities,
the volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. The performance of the Fund will also depend on the
quality of its investments. While U.S. Government securities generally are of
high quality, government securities that are not backed by the full faith and
credit of the U.S. Treasury may be affected by changes in the
creditworthiness of the agency that issued them and the non-U.S. Government
securities held by the Fund, while of investment-grade quality, may be of
lesser credit quality. Securities rated in the category Baa by Moody's or BBB
by S&P lack certain investment characteristics and may have speculative
characteristics.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.25% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.10% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
12
<PAGE>
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. Susan Huang, a Vice President and the Director of U.S Fixed
Income Management of Chase, has been responsible for the day-to-day management
of the Fund's portfolio since June 1996. Ms. Huang is responsible for developing
the allocation and risk management strategy for U.S. fixed income portfolios,
and managing the institutional U.S. fixed income assets under management. Prior
to joining Chase in June of 1995, Ms.Huang was Director of the Insurance Asset
Management Group at Hyperion Capital Management Inc. Prior to joining Hyperion,
Ms. Huang was a senior portfolio manager with CS First Boston. Prior to joining
CS First Boston in 1992, Ms. Huang spent 14 years at The Equitable, where she
worked in the pension consulting group and the U.S. Fixed Income Management
Group. Ms. Huang is also a manager of Vista Balanced Fund, Vista Bond Fund,
Vista U.S. Government Securities Fund and Vista U.S. Treasury Income Fund.
Andrew Russell, a Second Vice President of Chase, participates in the
management of the Short-Term Bond Fund. Since joining Chase in 1990, Mr.
Russell has held several positions within the U.S. fixed income area,
including taxable fixed-income trader, assistant trader and portfolio
analyst. Mr. Russell is a member of the U.S. fixed income area's quantitative
research team where he specializes in the analysis of asset-backed
securities.
HOW TO PURCHASE,
REDEEM AND
EXCHANGE SHARES
- ---------------
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the
13
<PAGE>
right to refuse to sell shares of the Fund to any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone to
the Vista Service Center. For telephone redemptions, call the Vista Service
Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
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 of her
account registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable
14
<PAGE>
for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. For information,
consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request before
the close of regular trading on the New York Stock Exchange to receive that
day's net asset value. Your Dealer will be responsible for furnishing all
necessary documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000 due to redemptions. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES You can exchange your shares for Institutional
Shares of certain other Vista funds at net asset value beginning 15 days after
purchase. Not all Vista funds offer Institutional Shares. The prospectus of the
other Vista fund into which shares are being exchanged should be read carefully
prior to any exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available. Call
the Vista Service Center for procedures for telephone transactions. Ask your
investment representative or the Vista Service Center for prospectuses of other
Vista funds. Shares of certain Vista funds are not available to residents of all
states.
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 terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in a
year or three in a calendar quarter will be charged a $5.00 administration fee
for each such exchange. Shareholders would be notified of any such action to the
extent required by law. Consult the Vista Service Center before requesting an
exchange. The exchange privilege is subject to change or termination. See the
SAI to find out more about the exchange privilege.
15
<PAGE>
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at
least annually. Capital gains are distributed after deducting any available
capital loss carryover.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares; (2) receive distributions
from net investment income in cash or by Automated Clearing House (ACH) to a
pre-established bank account while reinvesting capital gains distributions in
additional shares; or (3) receive all distributions in cash or by ACH. You can
change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the same share class. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in an
established account of 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
16
<PAGE>
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.
A portion of the ordinary income dividends paid by the Fund may qualify for
the 70% dividends-received deduction for corporate shareholders.
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
- -------------------
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 from the Fund or other sources available to
them, make additional
17
<PAGE>
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
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
SUB-ADMINISTRATOR AND
DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 450 West 33rd Street, New York, New York 10001-2603.
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
18
<PAGE>
to the Fund may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
19
<PAGE>
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
UNIQUE CHARACTERISTICS
OF MASTER/FEEDER
FUND STRUCTURE
- --------------
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
The same individuals who are disinterested Trustees of the Trust
20
<PAGE>
serve as Trustees of the Portfolio. The Trustees of the Trust, including a
majority of the disinterested Trustees, have adopted procedures they believe
are reasonably appropriate to deal with resulting potential conflicts of
interest, up to and including creating a separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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 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 public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase.
Investment performance also often reflects the risks associated with the
Fund's investment objectives and policies. These factors should be considered
when comparing the Fund's investment results to those of other mutual funds
and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's
performance may be compared to other mutual funds, relevant indices and
rankings prepared by independent services. See the SAI.
21
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
22
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<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
INST-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) SMALL CAP EQUITY FUND
INSTITUTIONAL SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. 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 ........................................................... 3
Financial Highlights ...................................................... 4
Fund Objective ............................................................ 5
Investment Policies ....................................................... 5
Management ................................................................ 9
How to Purchase, Redeem and Exchange Shares ............................... 10
How the Fund Values Its Shares ............................................ 13
How Distributions Are Made; Tax Information ............................... 13
Other Information Concerning the Fund ..................................... 14
Performance Information ................................................... 17
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee ................................................. 0.65%
12b-1 Fee ............................................................... None
Shareholder Servicing Fee (after estimated waiver)* ..................... 0.22%
Other Expenses .......................................................... 0.23%
----
Total Fund Operating Expenses (after waiver of fee)* .................... 1.10%
====
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Institutional Shares $11 $35 $61 $134
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waiver, the
Shareholder Servicing Fee would be 0.25% and Total Fund Operating Expenses
would be 1.13%. Chase has agreed to waive fees payable to it and/or
reimburse expenses until May 6, 1998 to the extent necessary to prevent
annualized Total Fund Operating Expenses of Institutional Share of the Fund
from exceeding 1.22% during such period.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Institutional Class Share outstanding throughout the period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year
ended October 31, 1996, which is incorporated by reference into the SAI.
Shareholders may obtain a copy of this annual report by contacting the Fund
or their Shareholder Servicing Agent. The financial statements and notes, as
well as the financial information set forth in the table below, has been
audited by Price Waterhouse LLP, independent accountants, whose report
thereon is also included in the Annual Report to Shareholders.
VISTA SMALL CAP EQUITY FUND
5/7/96*
through
10/31/96
--------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............................... $ 18.44
-------
Income from Investment Operations
Net Investment Income ............................................. 0.023
Net Gains or (Losses) in Securities (both realized and unrealized) 0.757
-------
Total from Investment Operations .............................. 0.780
-------
Less dividends from Net Investment Income .......................... --
-------
Net Asset Value, End of Period ..................................... $ 19.22
=======
Total Return ....................................................... 4.23%
Ratios/Supplemental Data
Net Assets, End of Perod (000 omitted) ............................ $51,542
Ratio of Expenses to Average Net Assets # ......................... 1.10%
Ratio of Net Investment Income to Average Net Assets # ............ 0.27%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets # .............................. 1.27%
Ratio of Net Investment Income without waivers and
assumption of Expenses to Average Net Assets# .................... 0.10%
Portfolio Turnover Rate ........................................... 78%
Average Commission Rate Paid per share ............................ $0.0595
* Commencement of offering class of shares.
# Annualized.
4
<PAGE>
FUND OBJECTIVE
- --------------
Vista Small Cap Equity Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of smaller companies. (The Fund defines smaller companies
as those with market capitalizations of $750 million or less at the time the
security is purchased.) The Fund's advisers intend to utilize both
quantitative and fundamental research to identify undervalued stocks with a
catalyst for positive change. Current income is an incidental consideration
to the Fund's objective. You should be aware that an investment in smaller
companies may be more volatile than investments in larger, well-established
companies, as described under "Risk Factors" below.
To retain investment flexibility, the Fund may determine to discontinue
selling new shares of the Fund when the net assets of the Fund reach
approximately $500 million. Were the Fund to do so, existing shareholders of
the Fund would be permitted to continue making additional purchases of Fund
shares.
The Fund is classified as a "non- diversified" fund under federal securities
law.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. 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
(exclusive of any investments in money market instruments). To the extent
that the Fund departs from its investment policies during temporary defensive
periods, its 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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking long-term growth of capital
o Are investing for goals several years away
0 Own or plan to own other types of investments for diversification purposes
o Can assume above-average stock 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.
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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 Fund's investments in certain foreign countries. Foreign
laws may restrict the ability to invest in certain issuers and special tax
considerations will apply to foreign securities. The risks can increase if the
Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form
of American Depositary Receipts, European Depositary Receipts, Global
Depositary Receipts or other similar securities representing securities of
foreign issuers (collectively, "Depositary Receipts"). The Fund treats
Depositary Receipts as interests in the underlying securities for purposes of
its investment policies. The Fund will limit its investment in Depositary
Receipts not sponsored by the issuer of the underlying securities to no more
than 5% of the value of its net assets (at the time of investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include 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.
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
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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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
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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 the
associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Fund's buy and sell transactions will
vary from year to
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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 its
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); 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 the Fund's investment objective, restriction (b) and investment
policies designated as fundamental in the SAI, the Fund's investment policies
are not fundamental. The Trustees may change any non-fundamental policy
without shareholder approval.
RISK FACTORS
The net asset value of the Fund's shares will fluctuate based on the value of
the securities in the Fund's portfolio. The Fund is aggressively managed and,
therefore, the value of its shares is subject to greater fluctuation and an
investment in its shares involves a higher degree of risk than an investment
in a conservative equity fund or a growth fund investing entirely in proven
growth equities. An investment in the Fund should not be considered a
complete investment program and may not be appropriate for all investors.
The securities of smaller companies often trade less frequently and in lower
volume than securities of larger, more established companies. Consequently,
share price changes may be more abrupt or erratic. 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 its shares may be more susceptible to developments affecting the specific
companies whose stock is owned by the Fund.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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.
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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, a Vice President of Chase, and David
Klassen, Director, U.S. Funds Management and Equity Research at Chase, are
responsible for the management of the Fund's portfolio. Mr. Klassen and Ms.
Greenwald have managed the Fund since its inception. 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. Klassen is responsible for asset allocation and investment strategy for
Chase's domestic equity portfolios. Mr. Klassen joined Chase in March 1992.
Prior to joining Chase, Mr. Klassen was a vice president and portfolio
manager at Dean Witter Reynolds, responsible for managing several mutual
funds and other accounts. In addition to managing the Fund, Mr. Klassen is a
manager of Vista Growth and Income Portfolio and Vista Capital Growth
Portfolio.
HOW TO PURCHASE,
REDEEM AND
EXCHANGE SHARES
- ---------------
HOW TO PURCHASE SHARES
As of the date of this Prospectus, shares of the Fund may be purchased only
through accounts which had been established prior to January 20, 1997.
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
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Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista Funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone to
the Vista Service Center. For telephone redemptions, call the Vista Service
Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven days, as permitted by federal securities
law.
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
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the Fund with his or her representative, who can provide the fund with his or
her account registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request before
the close of regular trading on the New York Stock Exchange to receive that
day's net asset value. Your Dealer will be responsible for furnishing all
necessary documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000 due to redemptions. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer Institutional Shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully prior to any
exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available. Call
the Vista Service Center for procedures for telephone transactions. Ask your
investment representative or the Vista Service Center for prospectuses of other
Vista funds. Shares of certain Vista funds are not available to residents of all
states.
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
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terminate the exchange privilege, limit the amount or number of exchanges or
reject any exchange. In addition, any shareholder who makes more than ten
exchanges of shares involving the Fund in a year or three in a calendar
quarter will be charged a $5.00 administration fee for each such exchange.
Shareholders would be notified of any such action to the extent required by
law. Consult the Vista Service Center before requesting an exchange. The
exchange privilege is subject to change or termination. See the SAI to find
out more about the exchange privilege.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each Fund Business Day, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund 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.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options: (1)
reinvest all distributions in additional Fund shares; (2) receive distributions
from net investment income in cash or by Automated Clearing House (ACH) to a
pre-established bank account while reinvesting capital gains distributions in
additional shares; or (3) receive all distributions in cash or by ACH. You can
change your distribution option by notifying the Vista Service Center in
writing. If you do not select an option when you open your account, all
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the same share class. You will receive a
statement confirming reinvestment of distributions in additional Fund shares
promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in an
established account of 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
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<PAGE>
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.
A portion of the ordinary income dividends paid by the Fund may qualify for
the 70% dividends-received deduction for corporate shareholders.
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
- -------------------
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, such as pre-authorized or systematic purchase and redemption
plans. Each shareholder
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<PAGE>
servicing agent may establish its own terms and conditions, including
limitations on the amounts of subsequent transactions, with respect to such
services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers
from whom they are already receiving other fees an amount not exceeding such
other fees or the fees for their services as shareholder servicing agents.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
ADMINISTRATOR
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
SUB-ADMINISTRATOR AND
DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 450 West 33rd Street, New York, New York 10001-2603.
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
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<PAGE>
independent accountants, of legal counsel and of any transfer agent,
registrar or dividend disbursing agent of the Trust; insurance premiums; and
expenses of calculating the net asset value of, and the net income on, shares
of the Fund. Shareholder servicing and distribution fees are allocated to
specific classes of the Fund. In addition, the Fund may allocate transfer
agency and certain other expenses by class. Service providers to the Fund
may, from time to time, voluntarily waive all or a portion of any fees to
which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general direction
and supervision of its Board of Trustees. The Trust is not required to hold
annual meetings of shareholders but will hold special
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<PAGE>
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 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 public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
18
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(This Page Intentionally Left Blank)
<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
INSC-1-297X
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) SMALL CAP EQUITY FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 28, 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 February 28, 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 ........................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights ...................................................... 5
How the Fund has performed
Fund Objective ............................................................ 6
Investment Policies ....................................................... 6
The kinds of securities in which the Fund invests,
investment policies and techniques, and risks
Management ................................................................ 10
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ..................................................... 11
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 ................................................... 24
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges .................................... 25
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ....................... 4.75% 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 ................................... 0.04%*** 0.25%
Other Expenses .............................................. 0.50% 0.50%
---- ----
Total Fund Operating Expense ................................ 1.44% 2.15%
==== ====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares+ ....................... $61 $ 91 $122 $212
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ ...... $73 $100 $138 $230
Assuming no redemptions+++ ........... $22 $ 67 $115 $230
* 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.
*** A shareholder servicing fee of up to 0.25% of the average daily net assets
of Class A shares is payable to certain shareholder servicing agents who are
not affiliated with Chase. See "Other Information Concerning the
Fund--Shareholder Servicing Agents."
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
3
<PAGE>
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Class A Share and one Class B Share outstanding throughout the period shown.
This information is supplemented by financial statements and accompanying
notes appearing in the Fund's Annual Report to Shareholders for the fiscal
year ended October 31, 1996, which is incorporated by reference into the SAI.
Shareholders may obtain a copy of this annual report by contacting the Fund
or their Shareholder Servicing Agent. The financial statements and notes, as
well as the financial information set forth in the table below, has been
audited by Price Waterhouse LLP, independent accountants, whose report
thereon is also included in the Annual Report to Shareholders.
<TABLE>
<CAPTION>
VISTA SMALL CAP EQUITY FUND
Class A Class B
------------------------- --------------------------
Year 12/20/94* Year 3/28/95**
Ended through Ended through
10/31/96 10/31/95 10/31/96 10/31/95
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period ........................... $ 15.07 $ 10.00 $ 15.01 $ 11.39
Income from Investment Operations:
Net Investment Income (Loss) ................................. 0.005 0.060 (0.074) (0.018)
Net Gains or (Losses) in Securities
(both realized and unrealized) ............................. 4.328 5.056 4.248 3.669
Total from Investment Operations ............................. 4.333 5.116 4.174 3.651
-------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ......................... 0.033 0.042 -- 0.027
Distributions from Capital Gains ............................. 0.180 0.004 0.180 0.004
-------- ------- ------- -------
Total Distributions .......................................... 0.213 0.046 0.180 0.031
-------- ------- ------- -------
Net Asset Value, End of Period ................................. $ 19.19 $ 15.07 $ 19.00 $ 15.01
======== ======= ======= =======
Total Return (1) ............................................... 29.06% 51.25% 28.04% 32.09%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ....................... $144,763 $43,739 $72,722 $21,624
Ratio of Expenses to Average Net Assets# ...................... 1.50% 1.51% 2.22% 2.24%
Ratio of Net Investment Income to
Average Net Assets# .......................................... 0.03% 0.52% (0.68%) (0.25%)
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# .............................. 1.52% 2.67% 2.25% 3.23%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# ................ 0.01% (0.64%) (0.71%) (1.24%)
Portfolio Turnover Rate ........................................ 78% 75% 78% 75%
Average Commission Rate Paid per share ......................... $ 0.0595 -- $0.0595 --
</TABLE>
* Commencement of operations.
** Commencement of offering class of shares.
(1) Total rates of return do no take into account the effect of any sales
load.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista Small Cap Equity Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its
total assets in equity securities and at least 65% of its total assets in
equity securities of smaller companies. (The Fund defines smaller companies
as those with market capitalizations of $750 million or less at the time the
security is purchased.) The Fund's advisers intend to utilize both
quantitative and fundamental research to identify undervalued stocks with a
catalyst for positive change. Current income is an incidental consideration
to the Fund's objective. You should be aware that an investment in smaller
companies may be more volatile than investments in larger, well- established
companies, as described under "Risk Factors" below.
To retain investment flexibility, the Fund may determine to discontinue
selling new shares of the Fund when the net assets of the Fund reach
approximately $500 million. Were the Fund to do so, existing shareholders of
the Fund would be permitted to continue making additional purchases of Fund
shares.
The Fund is classified as a "non-diversified" fund under federal securities law.
The Fund may invest any portion of its assets not invested in equity
securities in high quality money market instruments and repurchase
agreements. For temporary defensive purposes, the Fund may invest without
limitation in these instruments. 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
(exclusive of any investments in money market instruments). To the extent
that the Fund departs from its investment policies during temporary defensive
periods, its 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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking long-term growth of capital
o Are investing for goals several years away
o Own or plan to own other types of investments for diversification purposes
o Can assume above-average stock 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.
6
<PAGE>
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 Fund's investments in certain foreign countries. Foreign
laws may restrict the ability to invest in certain issuers and special tax
considerations will apply to foreign securities. The risks can increase if the
Fund invests in 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 Fund treats Depositary Receipts as interests in
the underlying securities for purposes of its investment policies. The Fund
will limit its investment in Depositary Receipts not sponsored by the issuer
of the underlying securities to no more than 5% of the value of its net
assets (at the time of investment).
U.S. GOVERNMENT OBLIGATIONS. U.S. Government obligations include 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.
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
7
<PAGE>
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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
8
<PAGE>
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 the
associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Portfolio's buy and sell transactions
will vary
9
<PAGE>
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 its
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); 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 the Fund's investment objective, restriction (b) and investment
policies designated as fundamental in the SAI, the Fund's investment policies
are not fundamental. The Trustees may change any non-fundamental policy
without shareholder approval.
RISK FACTORS
The net asset value of the Fund's shares will fluctuate based on the value of
the securities in the Fund's portfolio. The Fund is aggressively managed and,
therefore, the value of its shares is subject to greater fluctuation and an
investment in its shares involves a higher degree of risk than an investment
in a conservative equity fund or a growth fund investing entirely in proven
growth equities. An investment in the Fund should not be considered a
complete investment program and may not be appropriate for all investors.
The securities of smaller companies often trade less frequently and in lower
volume than securities of larger, more established companies. Consequently,
share price changes may be more abrupt or erratic. 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 its shares may be more susceptible to developments affecting the specific
companies whose stock is owned by the Fund.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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.
10
<PAGE>
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, a Vice President of Chase, and David
Klassen, Director, U.S. Funds Management and Equity Research at Chase, are
responsible for the management of the Fund's portfolio. Mr. Klassen and Ms.
Greenwald have managed the Fund since its inception. 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. Klassen is responsible for asset allocation and investment strategy for
Chase's domestic equity portfolios. Mr. Klassen joined Chase in March 1992.
Prior to joining Chase, Mr. Klassen was a vice president and portfolio
manager at Dean Witter Reynolds, responsible for managing several mutual
funds and other accounts. In addition to managing the Fund, Mr. Klassen is a
manager of Vista Growth and Income Portfolio and Vista Capital Growth
Portfolio.
ABOUT YOUR INVESTMENT
- ---------------------
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" 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
11
<PAGE>
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 may 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. As of the date
of this Prospectus, shares of the Fund may be purchased only through accounts
which had been established prior to January 20, 1997. 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
$100 or more per transaction through automatic periodic deduction from your bank
checking or savings account. Current shareholders may begin such a plan at any
time by sending a signed
12
<PAGE>
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 in proper
form 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 are in
proper form only 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.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
----------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price ($) Price invested offering price
- ------------------------------ -------- ---------- ---------------
Under 100,000 4.75 4.99 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 1.00% of the amount under $2.5
million,
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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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives
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<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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 The Hanover Small Capitalization Growth Fund 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 the Fund following this date, provided there is no change in
account registration.
The Fund may sell Class A shares at net asset value without an initial
15
<PAGE>
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 that had an account in the Fund as of
January 20, 1997 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.
SIGNATURE GUARANTEES. 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
16
<PAGE>
by a corporation, partnership, agent or fiduciary, or a surviving joint
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
17
<PAGE>
Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions or if you purchase through the
Systematic Investment Plan and fail to meet the Fund's investment minimum of
$1,000 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
18
<PAGE>
believe doing so would be in the best interests of the Fund, the Fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. In addition, any
shareholder who makes more than ten exchanges of shares involving the Fund in
a year or three in a calendar quarter will be charged a $5.00 administration
fee for each such exchange. Shareholders would be notified of any such action
to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
REINSTATEMENT PRIVILEGE. 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 reinstatement 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. Fou 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
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<PAGE>
by ACH will be reinvested in shares of the same share class. You will receive
a statement confirming reinvestment of distributions in additional Fund
shares promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in an
established account of 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 distributions 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
20
<PAGE>
shares of the Fund, respectively. Payments under the distribution plans shall
be used to compensate or reimburse the Fund's distributor and broker-dealers
for services provided and expenses incurred in connection with the sale of
Class A and Class B shares, and are not tied to the amount of actual expenses
incurred. Payments may be used to compensate broker-dealers with trail or
maintenance commissions at an annual rate of up to 0.25% of the average daily
net asset value of Class A or Class B shares 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 for 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 under which the shareholder servicing agents
have agreed to provide certain support services to their customers who
beneficially own Class A and Class B shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A or Class B shares, as the case may be, of
the Fund held by investors for whom the shareholder servicing agent maintains
a servicing relationship. With respect to the Fund's Class A shares, such
fees are payable only to shareholder servicing agents other than Chase or its
affiliates. 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
21
<PAGE>
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 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 Fund's administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
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
22
<PAGE>
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all
or a portion of any fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ
for each class of Fund shares. In addition, other classes of Fund shares may
be subject to differences in sales charge arrangements, ongoing distribution
and service fee levels, and levels of certain other expenses, which will
affect the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
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
23
<PAGE>
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 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.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC with such
redemption may purchase Class A shares with no initial sales charge (in an
amount not in excess of their redemption proceeds) if the purchase occurs
within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
25
<PAGE>
Vista 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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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
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(This Page Intentionally Left Blank)
<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
VSC-1-297X
<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND
CLASS A SHARES
---------------------------------
Investment Strategy: Total Return
---------------------------------
February 28, 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 February 28, 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 COMISSION, 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.
1
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights 5
Fund Objective 6
Investment Policies 6
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management 13
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the Fund's
sub-adviser, and the individuals who manage the Fund
How to Buy, Sell and Exchange Shares 14
How the Fund Values Its Shares 20
How Distributions Are Made; Tax Information 20
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund 21
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 24
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 26
</TABLE>
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 example shows the cumulative expenses
attributable to a hypothetical $1,000 investment over specified periods.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) 4.50%
Maximum Deferred Sales Charge (as a percentage of the
lower of original
purchase price or redemption proceeds) None
Annual Fund Operating Expenses (as a percentage of
average net assets)
Investment Advisory Fee 0.30%
12b-1 Fee* 0.00%
Shareholder Servicing Fee (after estimated waiver)** 0.00%
Other Expenses 0.75%
-----
Total Fund Operating Expenses(after waiver of fee)** 1.05%
=====
Example
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years
---- --------
Class A Shares+ $55 $77
*Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
shareholders of the Fund, may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National Association
of Securities Dealers, Inc.
**Reflects current waiver arrangement to maintain Total Fund Operating Expenses
at the level indicated in the table above. Absent such waiver, the 12b-1 Fee
and the Shareholder Servicing Fee would be 0.25% and 0.25%, respectively, and
Total Fund Operating Expenses would be 1.55%.
+ Assumes deduction at the time of purchase of the maximum sales charge.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The example
should not be considered a representation of past or future expenses or returns;
actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an investment
in the Fund. The Fund understands that Shareholder Servicing Agents may credit
to the accounts of their customers from whom they are already receiving other
fees amounts not exceeding such other fees or the fees received by the
Shareholder Servicing Agent from the Fund with respect to those accounts. See
"Other Information Concerning the Fund."
4
.9
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Class A Share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended October 31, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain a copy
of this annual report by contacting the Fund or their Shareholder Servicing
Agent. The financial statements and notes, as well as the financial information
set forth in the table below, has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is also included in the Annual
Report to Shareholders.
VISTA U.S. GOVERNMENT SECURITIES FUND
Class A
-------
5/6/96*
through
10/31/96
-------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 9.62
------
Net Investment Income 0.259
Net Gains or Losses in Securities (both realized and unrealized) 0.255
------
Total from Investment Operations 0.514
------
Less Dividends from Net Investment Income 0.234
------
Net Asset Value, End of Period $ 9.90
=======
Total Return (1) 5.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $3,333
Ratio of Expenses to Average Net Assets# 1.05%
Ratio of Net Investment Income to Average Net Assets# 5.50%
Ratio of Expenses without waivers and assumption of expenses
to Average Net Assets# 1.55%
Ratio of Net Investment Income without waivers and assumption of
expenses to Average Net Assets# 5.00%
Portfolio Turnover Rate 101%
* Commencement of offering of class of shares.
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista U.S. Government Securities Fund seeks as high a level of total return as
is consistent with the preservation of capital. Total return consists of income
and capital appreciation. The Fund is not intended to be a complete investment
program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 65% of its total
assets in securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, and related repurchase agreements. There is no restriction
on the maturity of the Fund's portfolio or any individual portfolio security,
and the Fund's advisers are free to take advantage of the entire range of
maturities of securities eligible for the Fund's portfolio. The Fund may invest
extensively in mortgage-backed securities issued or guaranteed by certain
agencies of the U.S. Government, as described below.
The Fund's advisers may adjust the average maturity of the Fund's portfolio
based upon their assessment of the relative yields available on securities of
different maturities and their expectations of future changes in interest rates.
Since the Fund invests extensively in U.S. Government securities, certain of
which have less credit risk than that associated with other securities, the
level of income achieved by the Fund may not be as high as that of other funds
which invest in lower quality securities.
The Fund may invest the portion of its assets not invested in U.S. Government
securities and related repurchase agreements in nonconvertible corporate debt
securities of domestic and foreign issuers, such as bonds and debentures. These
securities must be rated, at the time of investment, at least in the category A
or the equivalent by Moody's Investors Service, Inc., or Standard & Poor's
Corporation, or Fitch Investor's Service Inc., or another national rating
organization, or if unrated, of comparable quality as determined by the Fund's
advisers.
The Fund may invest any portion of its assets not invested as described above in
high quality money market instruments and repurchase agreements. For temporary
defensive purposes, the Fund may invest without limitation in these instruments.
To the extent that the Fund departs from its investment policies during
temporary defensive periods, its investment objective may not be achieved.
The Fund is classified as a "diversified" fund under federal securities law.
.
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 objective
and policies.
6
<PAGE>
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking current income as well as some growth potential
o Are investing for mid- to long- term investment goals
o Own or plan to own other types of investments for diversification purposes
o Can assume bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate any up
and down price changes, are investing for very short-term goals or who are in
need of higher growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when consistent
with the Fund's overall objective and policies. These practices, and certain
associated risks, are more fully described in the SAI.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Treasury obligations,
which are bills, notes and bonds backed by the full faith and credit of the U.S.
Government as to payment of principal and interest which generally differ only
in their interest rates and maturities. The Fund also may invest in securities
issued or guaranteed by U.S. Government agencies and instrumentalities,
including obligations that are supported by the full faith and credit of the
U.S. Treasury, the limited authority of the issuer or guarantor to borrow from
the U.S. Treasury, or only the credit of the issuer or guarantor. In the case of
obligations not backed by the full faith and credit of the U.S. Treasury, the
agency issuing or guaranteeing the obligation is principally responsible for
ultimate repayment.
FOREIGN SECURITIES. The Fund may invest in foreign obligations issued or
guaranteed by foreign governments and supranational entities, and in
non-convertible corporate debt securities of foreign issuers. Supranational
entities include organizations such as The World Bank, the European Community,
the European Coal and Steel Community and the Asian Development Bank. Since
foreign securities are normally denominated and traded in foreign currencies,
the values of the Fund's foreign investments may be 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 Fund's investments in certain foreign countries. Foreign
laws may restrict the ability to invest in certain countries or issuers and
special tax
7
<PAGE>
considerations will apply to foreign securities. The risks can increase if
the Fund invests in emerging market securities.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. These instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, which may increase its
overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS
. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow 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 during unfavorable market conditions.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis in
an amount at least equal to the repurchase price (including accrued interest).
The Fund would be required to pay interest on amounts obtained through reverse
repurchase agreements, which are considered borrowings under federal securities
laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including 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.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and private
issuers. Zero coupon securities are
8
<PAGE>
debt securities that do not pay regular interest payments, and instead are sold
at substantial discounts from their value at maturity. Payment-in-kind
obligations are obligations on which the interest is payable in additional
securities rather than cash. The Fund may also invest in stripped obligations,
which are separately traded principal and interest components of an underlying
obligation. The value of these instruments tends to fluctuate more in response
to changes in interest rates than the value of ordinary interest-paying debt
securities with similar maturities. The risk is greater when the period to
maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. The Fund may
invest in floating rate securities, whose interest rates adjust automatically
whenever a specified interest rate changes, and variable rate securities, whose
interest rates are periodically adjusted. Certain of these instruments permit
the holder to demand payment of principal and accrued interest upon a specified
number of days' notice from either the issuer or a third party. The securities
in which the Fund may invest include participation certificates and certificates
of indebtedness or safekeeping. Participation certificates are pro rata
interests in securities held by others; certificates of indebtedness or
safekeeping are documentary receipts for such original securities held in
custody by others. As a result of the floating or variable rate nature of these
investments, the Fund's yield may decline and it may forego the opportunity for
capital appreciation during periods when interest rates decline; however, during
periods when interest rates increase, the Fund's yield may increase and it may
have reduced risk of capital depreciation. Demand features on certain floating
or variable rate securities may obligate the Fund to pay a "tender fee" to a
third party. Demand features provided by foreign banks involve certain risks
associated with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse floaters
and in securities with interest rate caps. Inverse floaters are instruments
whose interest rates bear an inverse relationship to the interest rate on
another security or the value of an index. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation. Interest rate caps are financial instruments under which payments
occur if an interest rate index exceeds a certain predetermined interest rate
level, known as the cap rate, which is tied to a specific index. These financial
products will be more volatile in price than securities which do not include
such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest extensively in
mortgage-related securities issued or guaranteed by certain agencies of the
U.S. Government. Mortgage pass- through securities are securities
representing interests in "pools" of mortgages in which payments of
9
<PAGE>
both interest and principal on the securities are made monthly, in effect
"passing through" monthly payments made by the individual borrowers on the
residential mortgage loans which underlie the securities. Early repayment of
principal on mortgage pass-through securities held by the Fund (due to
prepayments of principal on the underlying mortgage loans) may result in a lower
rate of return when the Fund reinvests such principal. In addition, as with
callable fixed- income securities generally if the Fund purchased the securities
at a premium, sustained early repayment would limit the value of the premium.
Like other fixed- income securities, when interest rates rise the value of a
mortgage- related security generally will decline; however, when interest rates
decline, the value of mortgage- related securities with prepayment features may
not increase as much as other fixed-income, fixed-maturity securities which have
no prepayment or call features.
Payment of principal and interest on some mortgage pass-through securities (but
not the market value of the securities themselves) may be guaranteed by the U.S.
Government, or by agencies or instrumentalities of the U.S. Government (which
guarantees are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Certain mortgage pass-through
securities created by nongovernmental issuers may be supported by various forms
of insurance or guarantees, while other such securities may be backed only by
the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage Obligations
("CMOs"), which are hybrid instruments with characteristics of both
mortgage-backed bonds and mortgage pass- through securities. Similar to a bond,
interest and prepaid principal on a CMO are paid, in most cases, monthly. CMOs
may be collateralized by whole residential or commercial mortgage loans but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by the U.S. Government or its agencies or instrumentalities. CMOs are
structured into multiple classes, with each class having a different expected
average life and/or stated maturity. Monthly payments of principal, including
prepayments, are allocated to different classes in accordance with the terms of
the instruments, and changes in prepayment rates or assumptions may
significantly affect the expected average life and value of a particular class.
The Fund may also invest in principal-only or interest-only stripped
mortgage-backed securities. Stripped mortgage- backed securities have greater
volatility than other types of mortgage-related securities. Stripped
mortgage-backed securities which are purchased at a substantial premium or
discount generally are extremely sensitive not only to changes in prevailing
interest rates but also to the rate of principal payments (including
prepayments) on the related underlying mortgage assets, and a rapid rate of
principal payments may have a material adverse effect on such securities' yield
to maturity. In addition,
10
<PAGE>
stripped mortgage securities may be illiquid.
The Fund expects that governmental, government-related or private entities may
create other mortgage-related securities in addition to those described above.
As new types of mortgage-related securities are developed and offered to
investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the 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. 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 completing the transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities, which
represent a participation in, or are secured by and payable from, a stream of
payments generated by particular assets, most often a pool of assets similar to
one another, such as motor vehicle receivables or credit card receivables.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its total
assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency and interest rate contracts;
(iv) purchase and sell mortgage- backed and asset-backed securities; and (v)
purchase and sell structured products, which are instruments designed to
restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Fund invests
may be particularly sensitive to changes in prevailing economic conditions and
market value. The ability of the Fund to successfully utilize these instruments
may depend in part upon the ability of 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
11
<PAGE>
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 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 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to 75%
of its assets, holding more than 10% of the voting securities of any issuer or
investing more than 5% of its net assets in the securities of any one issuer
(other than U.S. Government obligations); (b) investing more than 15% of its net
assets in illiquid securities (which include securities restricted as to resale
unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than 25%
of its total assets in any one industry. A complete description of these and
other investment policies is included in the SAI. Except for the Fund's
investment objective, restriction (c) above and investment policies designated
as fundamental in the SAI, the Fund's investment policies are not fundamental.
The Trustees may change any nonfundamental investment policy without shareholder
approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and the
net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks and
considerations associated with the types of investments it may make, as
described above, as well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the
12
<PAGE>
value of the fixed income securities held by the Fund tends to decrease. This
effect will be more pronounced with respect to investments by the Fund in
mortgage-related securities, the value of which are more sensitive to interest
rate changes. There is no restriction on the maturity of the Fund's portfolio or
any individual portfolio security, and to the extent the Fund invests in
securities with longer maturities, the volatility of the Fund in response to
changes in interest rates can be expected to be greater than if the Fund had
invested in comparable securities with shorter maturities. The performance of
the Fund will also depend on the quality of its investments. While U.S.
Government securities generally are of high quality, government securities that
are not backed by the full faith and credit of the U.S. Treasury may be affected
by changes in the creditworthiness of the agency that issued them. Guarantees of
principal and interest on obligations that may be purchased by the Fund are not
guarantees of the market value of such obligations, nor do they extend to the
value of shares of the Fund. Other fixed-income securities in which the Fund may
invest, while of investment-grade quality, may be of lesser credit quality than
U.S. Government securities.
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
0.30% of the Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.15% of the Fund's average daily net assets. CAM was
recently formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function. The same individuals who serve as portfolio managers for
Chase also serve as portfolio managers for CAM. CAM is located at 1211 Avenue of
the Americas, New York, New York 10036.
PORTFOLIO MANAGERS. Susan Huang, a Vice President and the Director of Fixed
Income
13
<PAGE>
Management of Chase, and Michael Bennis, a Vice President of Chase, have been
responsible for the day-to-day management of the Fund's portfolio since June
and December of 1996, respectively. Ms. Huang is responsible for developing
the allocation and risk management strategy for U.S. fixed income portfolios,
and managing the institutional U.S. fixed income assets under management.
Prior to joining Chase in June of 1995, Ms. Huang was Director of the
Insurance Asset Management Group at Hyperion Capital Management Inc. Prior to
joining Hyperion, Ms. Huang was a senior portfolio manager with CS First
Boston. Prior to joining CS First Boston in 1992, Ms. Huang spent 14 years at
The Equitable, where she worked in the pension consulting group and the U.S.
Fixed Income Management Group. Ms. Huang is also a manager of Vista Balanced
Fund, Vista Bond Fund, Vista Short-Term Bond Fund and Vista U.S. Treasury
Income Fund.
Prior to joining Chase in 1996, Mr. Bennis was a senior analyst/trader at Union
Bank of Switzerland Asset Management. Prior to joining Union Bank of
Switzerland, Mr. Bennis was a fixed income analyst at Donaldson, Lufkin &
Jenrette.
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 purchase 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
$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
14
<PAGE>
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 in proper form 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 are in proper form only after
funds are converted to federal funds. Orders paid by check and received by 2:00
p.m., Eastern Time will generally be available for the purchase of shares the
following business day.
If you are considering redeeming or exchanging shares or transferring shares to
another person shortly after purchase, you should pay for those shares with a
certified check to avoid any delay in redemption, exchange or transfer.
Otherwise the Fund may delay payment until the purchase price of those shares
has been collected or, if you redeem by telephone, until 15 calendar days after
the purchase date. To eliminate the need for safekeeping, the Fund will not
issue certificates for your shares unless you request them.
Offering Price
--------------
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives the
net asset value. The sales charge is allocated between your broker-dealer and
the Fund's distributor as shown in the following table, except when the Fund's
distributor, in its discretion, allocates the entire amount to your
broker-dealer.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
------------------ dealers as a
Amount of transaction at Offering Net amount percentage of
offering price Price invested offering price
- ------------------------------ -------- ---------- --------------
Under 100,000 4.50 4.71 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.5 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million or
more.
The Fund's distributor pays broker-dealers commissions on net sales of Class A
shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 0.75% of the amount under $2.5 million,
0.50% of the next $7.5 million, 0.25% of the next $40 million and 0.15%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
15
<PAGE>
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 determining 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 current and retired Trustees (and their families), current and
retired employees (and their families) of Chase, the Fund's distributor and
transfer agent or any affiliates or subsidiaries thereof, registered
representatives and other employees (and their families) of broker-dealers
having selected dealer agreements with the Fund's distributor, employees (and
their families) of financial institutions having selected dealer agreements with
the Fund's distributor (or otherwise having an arrangement with a broker-dealer
or financial institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of tax-qualified
plans when proceeds from repayments of loans to participants are invested (or
reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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
16
<PAGE>
linked to a master account of such investment adviser or financial planner on
the books and records of the broker or agent. Such purchases may be also made
for retirement and deferred compensation plans and trusts used to fund those
plans.
Investors may incur a fee if they effect transactions through a broker or agent.
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.
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company. The SAI contains additional information
about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on purchases without
an initial sales charge at any time and may reject any such purchase request.
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. 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.
17
<PAGE>
SIGNATURE GUARANTEES. If you sell shares having a net asset value of $100,000 or
more, the signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than your address
as it appears on Vista's records, a signature guarantee is required. The Fund
may require additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner. Contact the Vista
Service Center for details.
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
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic
18
<PAGE>
withdrawal plan. Call the Vista Service Center at 1-800-34-VISTA for complete
instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions or if you purchase through the
Systematic Investment Plan and fail to meet the Fund's investment minimum within
a twelve month period. In the event of any such redemption, you will receive at
least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for shares of the same class of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista funds
offer all classes of shares. The prospectus of the other Vista fund into which
shares are being exchanged should be read carefully and retained for future
reference.
For federal income tax purposes, an exchange is treated as a sale of shares and
generally results in a capital gain or loss.
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 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
19
<PAGE>
value within 90 calendar days of the redemption. The reinstatement 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.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once daily
based upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced at
4:15 p.m., Eastern time), on each business day of the Fund, by dividing the net
assets of the Fund attributable to that class by the total number of outstanding
shares of that class. Values of assets held by the Fund are determined on the
basis of their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income at
least monthly. The Fund distributes any net realized capital gains at least
annually. Capital gains are distributed after deducting any available capital
loss carryover.
DISTRIBUTION PAYMENT OPTIONS. 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 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 an
established account of 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
20
<PAGE>
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.
Distributions may also be subject to state and local taxes. However, the laws of
most states and localities except from some types of taxes distributions such as
those made by the Fund to the extent such distributions are attributable to
interest from obligations of the U.S. Government and certain of its agencies and
instrumentalities.
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 a Rule 12b-1 distribution plan which provides for the payment of
distribution fees at annual rates of up to 0.25% of the average daily net assets
attributable to Class A shares of the Fund. Payments under the distribution
plans shall be used to compensate or reimburse the Fund's distributor and
broker-dealers for services provided and expenses incurred in connection with
the sale of Class A shares, and are not tied to the amount of actual expenses
incurred. Payments may be used to compensate broker-dealers with trail or
maintenance commissions at an annual rate of up to 0.25% of the average daily
net asset value of Class A shares 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 shares will be conducted
generally by the Vista Family of Funds, and activities intended to promote the
Fund's Class A shares may also benefit the Fund's other shares and other Vista
funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These
21
<PAGE>
incentives may include gifts of up to $100 per person annually; an occasional
meal, ticket to a sporting event or theater for entertainment for broker-dealers
and their guests; and payment or reimbursement for travel expenses, including
lodging and meals, in connection with attendance at training and educational
meetings within and outside the U.S.
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements, transmitting
shareholder reports and communications to customers and other similar
shareholder liaison services. For performing these services, each shareholder
servicing agent receives an annual fee of up to 0.25% of the average daily net
assets of Class A shares of the Fund held by investors for whom the shareholder
servicing agent maintains a servicing relationship. Shareholder servicing agents
may subcontract with other parties for the provision of shareholder support
services.
Shareholder servicing agents may offer additional services to their customers,
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 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 administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets.
22
<PAGE>
VFD provides certain sub- administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VFD is located at 450 West 33rd
Street, New York, New York 10001-2603.
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.
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
23
<PAGE>
separately on matters that only affect a particular class, such as the approval
of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A shares of the Fund. The Fund offers other classes of shares in addition
to this class. The categories of investors that are eligible to purchase shares
and minimum investment requirements may differ for each class of Fund shares. In
addition, other classes of Fund shares may be subject to differences in sales
charge arrangements, ongoing distribution and service fee levels, and levels of
certain other expenses, which will affect the relative performance of the
different classes. Investors may call 1-800-34- VISTA to obtain additional
information about other classes of shares of the Fund that are offered. Any
person entitled to receive compensation for selling or servicing shares of the
Fund may receive different levels of compensation with respect to one class of
shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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 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 and reflects the deduction of the maximum initial
sales charge. Total return may also be presented for other periods or without
reflecting sales charges. Any quotation of investment performance not reflecting
the maximum initial sales charge or contingent deferred sales charge would be
reduced if such sales charges were used.
24
<PAGE>
All performance data is based on the Fund's past investment results and does not
predict future performance. Investment performance, which will vary, is based on
many factors, including market conditions, the composition of the Fund's
portfolio, the Fund's operating expenses. Investment performance also often
reflects the risks associated with the Fund's investment objectives and
policies. These factors should be considered when comparing the Fund's
investment results to those of other mutual funds and other investment vehicles.
Quotation of investment performance for any period when a fee waiver or expense
limitation was in effect will be greater than if the waiver or limitation had
not been in effect. The Fund's performance may be compared to other mutual
funds, relevant indices and rankings prepared by independent services. See the
SAI.
25
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund shareholder.
o 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.
o SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more monthly,
quarterly or semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for
this service.
o 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.
o REINSTATEMENT PRIVILEGE--Class A shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
26
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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 variableannuity 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.
27
<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
VUSG-1-297X
28
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND
INSTITUTIONAL SHARES
----------------------------------
INVESTMENT STRATEGY: TOTAL RETURN
----------------------------------
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Vista Service Center at 1-800-622-4273. 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>
<PAGE>
TABLE OF CONTENTS
Expense Summary ................................................ 4
Financial Highlights ........................................... 5
Fund Objective ................................................. 6
Investment Policies ............................................ 6
Management ..................................................... 13
How to Purchase, Redeem and Exchange Shares .................... 14
How the Fund Values Its Shares ................................. 16
How Distributions Are Made; Tax Information .................... 17
Other Information Concerning the Fund .......................... 18
Performance Information ........................................ 21
2
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on estimated
expenses for the current fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee ........................................... 0.30%
12b-1 Fee ......................................................... None
Shareholder Servicing Fee (after estimated waiver)* ............... 0.21%
Other Expenses .................................................... 0.34%
----
Total Fund Operating Expenses (after waiver of fee)* .............. 0.85%
====
EXAMPLE
Your investment of $1,000 would incur the
following expenses, assuming 5% annual return: 1 Year 3 Years
------ -------
Institutional Shares ................................. $ 9 $ 27
* Reflects current waiver arrangement to maintain Total Fund Operating Expenses
at the level indicated in the table above. Absent such waiver, the Shareholder
Servicing Fee would be 0.25% and Total Fund Operating Expenses would be .89%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
example should not be considered a representation of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
On May 3, 1996, The Hanover U.S. Government Securities Fund (the "Predecessor
Fund") merged into the Vista U.S. Government Securities Fund, which was
created to be the successor to the Predecessor Fund. The table set forth
below provides selected per share data and ratios for one Share of the
Predecessor Fund outstanding through May 3, 1996, and one Institutional Share
of the Vista U.S. Government Securities Fund outstanding for the periods
thereafter. This information is supplemented by financial statements and
accompanying notes appearing in the Predecessor Fund's Annual Report to
Shareholders for the fiscal year ended November 30, 1995 and the Fund's
Annual Report to Shareholders for the period ended October 31, 1996, which
are both incorporated by reference into the SAI. Shareholders may obtain a
copy of these annual reports by contacting the Fund or their Shareholder
Servicing Agent. The financial statements and notes, as well as the financial
information set forth in the table below, for the period ended October 31,
1996 have been audited by Price Waterhouse LLP, independent accountants,
whose report thereon is included in the Fund's Annual Report to Shareholders.
Periods ended prior to December 1, 1995 were audited by other independent
accountants.
VISTA U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
December 1,
1995 (1) Years ended
through November 30,
October 31, ----------------------------
1996 1995 1994 1993*
----------- ---- ---- -----
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .... $ 10.18 $ 9.23 $ 10.27 $ 10.00
Income From Investment Operations
Net Investment Income ................. 0.501 0.560 0.500 0.340
Net Gain (Loss) on Securities
(both realized and unrealized) ...... (0.302) 0.950 (0.940) 0.270
------- ------- ------- -------
Total from Investment Operations ...... 0.199 1.510 (0.440) 0.610
Less Distributions:
Dividends from Net Investment
Income .............................. 0.489 (0.560) (0.500) (0.340)
Distributions from Capital Gains ...... -- -- (0.100) --
------- ------- ------- -------
Total Distributions ................... 0.489 (0.560) (0.600) (0.340)
------- ------- ------- -------
Net Asset Value, End of Period .......... $ 9.89 $ 10.18 $ 9.23 $ 10.27
======= ======= ======= =======
Total Return* ........................... 2.09% 16.82% (4.41%) 6.16%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) ............................. $67,980 $83,304 $83,649 $86,089
Ratio of Expenses to Average Net Assets# 0.85% 0.85% 0.85% 0.85%
Ratio of Net Investment Income to
Average Net Assets# .................. 5.55% 5.78% 5.15% 4.26%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets# .......................... 1.04% 1.11% 1.04% 1.04%
Ratio of Net Investment Income
without waivers and
assumption of expenses to Average
Net Assets# .......................... 5.36% 5.52% 4.96% 4.07%
Portfolio Turnover Rate ................. 101% 220% 134% 37%
</TABLE>
(1) In 1996, the Fund changed its fiscal year end from November 30 to October
31.
* Fund commenced operations on February 19, 1993.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista U.S. Government Securities Fund seeks as high a level of total return
as is consistent with the preservation of capital. Total return consists of
income and capital appreciation. The Fund is not intended to be a complete
investment program, and there is no assurance it will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 65% of its
total assets in securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, and related repurchase agreements. There is no
restriction on the maturity of the Fund's portfolio or any individual
portfolio security, and the Fund's advisers are free to take advantage of the
entire range of maturities of securities eligible for the Fund's portfolio.
The Fund may invest extensively in mortgage-backed securities issued or
guaranteed by certain agencies of the U.S. Government, as described below.
The Fund's advisers may adjust the average maturity of the Fund's portfolio
based upon their assessment of the relative yields available on securities of
different maturities and their expectations of future changes in interest
rates. Since the Fund invests extensively in U.S. Government securities,
certain of which have less credit risk than that associated with other
securities, the level of income achieved by the Fund may not be as high as
that of other funds which invest in lower quality securities.
The Fund may invest the portion of its assets not invested in U.S. Government
securities and related repurchase agreements in nonconvertible corporate debt
securities of domestic and foreign issuers, such as bonds and debentures.
These securities must be rated, at the time of investment, at least in the
category A or the equivalent by Moody's Investors Service, Inc., or Standard
& Poor's Corporation, or Fitch Investor's Service Inc., or another national
rating organization, or if unrated, of comparable quality as determined by
the Fund's advisers.
The Fund may invest any portion of its assets not invested as described above
in high quality money market instruments and repurchase agreements. For
temporary defensive purposes, the Fund may invest without limitation in these
instruments. To the extent that the Fund departs from its investment policies
during temporary defensive periods, its investment objective may not be
achieved.
The Fund is classified as a "diversified" fund under federal securities law.
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 objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking current income as well as some growth potential
6
<PAGE>
o Are investing for mid- to long- term investment goals
o Own or plan to own other types of investments for diversification purposes
o Can assume bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate any
up and down price changes, are investing for very short-term goals or who are
in need of higher growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
U.S. GOVERNMENT SECURITIES. The Fund may invest in U.S. Treasury
obligations, which are bills, notes and bonds backed by the full faith and
credit of the U.S. Government as to payment of principal and interest which
generally differ only in their interest rates and maturities. The Fund also
may invest in securities issued or guaranteed by U.S. Government agencies and
instrumentalities, including obligations that are supported by the full faith
and credit of the U.S. Treasury, the limited authority of the issuer or
guarantor to borrow from the U.S. Treasury, or only the credit of the issuer
or guarantor. In the case of obligations not backed by the full faith and
credit of the U.S. Treasury, the agency issuing or guaranteeing the
obligation is principally responsible for ultimate repayment.
FOREIGN SECURITIES. The Fund may invest in foreign obligations issued or
guaranteed by foreign governments and supranational entities, and in
non-convertible corporate debt securities of foreign issuers.
Supranational entities include organizations such as The World Bank, the
European Community, the European Coal and Steel Community and the Asian
Development Bank. Since foreign securities are normally denominated and
traded in foreign currencies, the values of the Fund's foreign investments
may be 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 Fund's investments in certain foreign
countries. Foreign laws may restrict the ability to invest in certain
countries or issuers and special tax considerations will apply to foreign
securities. The risks can increase if
7
<PAGE>
the Fund invests in emerging market securities.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. These instruments may include U.S.
Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money
market instruments may involve certain risks associated with foreign
investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Fund may borrow money from
banks for temporary or short-term purposes, but will not borrow 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 during unfavorable market
conditions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including
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.
ZERO COUPON SECURITIES, PAYMENT-IN-KIND OBLIGATIONS AND STRIPPED OBLIGATIONS.
The Fund may invest in zero coupon securities issued by governmental and
private issuers. Zero coupon securities are debt securities that do not pay
regular interest payments, and
8
<PAGE>
instead are sold at substantial discounts from their value at maturity.
Payment-in-kind obligations are obligations on which the interest is payable
in additional securities rather than cash. The Fund may also invest in
stripped obligations, which are separately traded principal and interest
components of an underlying obligation. The value of these instruments tends
to fluctuate more in response to changes in interest rates than the value of
ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
FLOATING AND VARIABLE RATE SECURITIES; PARTICIPATION CERTIFICATES. The Fund
may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
Participation certificates are pro rata interests in securities held by
others; certificates of indebtedness or safekeeping are documentary receipts
for such original securities held in custody by others. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate the Fund to pay a "tender fee" to a third party.
Demand features provided by foreign banks involve certain risks associated
with foreign investments.
INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse
floaters and in securities with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index. The market value of an
inverse floater will vary inversely with changes in market interest rates,
and will be more volatile in response to interest rates changes than that of
a fixed-rate obligation. Interest rate caps are financial instruments under
which payments occur if an interest rate index exceeds a certain
predetermined interest rate level, know as the cap rate, which is tied to a
specific index. These financial products will be more volatile in price than
securities which do not include such a structure.
MORTGAGE-RELATED SECURITIES. The Fund may invest extensively in
mortgage-related securities issued or guaranteed by certain agencies of the
U.S. Government. Mortgage pass- through securities are securities
representing interests in "pools" of mortgages in which payments of both
interest and principal on the securities are made monthly, in effect "passing
through" monthly
9
<PAGE>
payments made by the individual borrowers on the residential mortgage loans
which underlie the securities. Early repayment of principal on mortgage
pass-through securities held by the Fund (due to prepayments of principal on
the underlying mortgage loans) may result in a lower rate of return when the
Fund reinvests such principal. Inaddition, as with callable fixed- income
securities generally, if the Fund purchased the securities at a premium,
sustained early repayment would limit the value of the premium. Like other
fixed- income securities, when interest rates rise the value of a mortgage-
related security generally will decline; however, when interest rates
decline, the value of mortgage- related securities with prepayment features
may not increase as much as other fixed-income, fixed-maturity securities
which have no prepayment or call features.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by
the U.S. Government, or by agencies or instrumentalities of the U.S.
Government (which guarantees are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Certain mortgage pass-through securities created by nongovernmental issuers
may be supported by various forms of insurance or guarantees, while other
such securities may be backed only by the underlying mortgage collateral.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage- backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
The Fund may invest in principal-only or interest-only stripped mortgage-backed
securities. Stripped mortgage-backed securities have greater volatility than
other types of mortgage-related securities. Stripped mortgage-backed securities
which are purchased at a substantial premium or discount generally are extremely
sensitive not only to changes in prevailing interest rates but also to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on such securities' yield to maturity. In addition, stripped mortgage
securities may be illiquid.
10
<PAGE>
The Fund expects that governmental, government-related or private entities
may create other mortgage-related securities in addition to those described
above. As new types of mortgage-related securities are developed and offered
to investors, the Fund will consider making investments in such securities.
DOLLAR ROLLS. The Fund may enter into mortgage "dollar rolls" in which the
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. 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 completing the
transaction.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities,
which represent a participation in, or are secured by and payable from, a
stream of payments generated by particular assets, most often a pool of
assets similar to one another, such as motor vehicle receivables or credit
card receivables.
OTHER INVESTMENT COMPANIES. Apart from being able to invest all of its
investable assets in another investment company having substantially the same
investment objectives and policies, the Fund may invest up to 10% of its
total assets in shares of other investment companies when consistent with its
investment objective and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other investment companies.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject
to asset segregation requirements to cover the Fund's obligations. The Fund
may (i) purchase, write and exercise call and put options on securities and
securities indexes (including using options in combination with securities,
other options or derivative instruments); (ii) enter into swaps, futures
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts; (iv) purchase and sell mortgage- backed and
asset-backed securities; and (v) purchase and sell structured products, which
are instruments designed to restructure or reflect the characteristics of
certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of 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
11
<PAGE>
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 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 portoflio turnover rates would generally result in
higher transaction costs, including 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 its
shareholders. These restrictions prohibit the Fund from: (a) with respect to
75% of its total assets, holding more than 10% of the voting securities of
any issuer or investing more than 5% of its total assets in the securities of
any one issuer (other than U.S. Government obligations); (b) investing more
than 15% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable
in accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry. A complete
description of these and other investment policies is included in the SAI.
Except for the Fund's investment objective, restriction (c) above and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any non-
fundamental investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio. The Fund is subject to the general risks
and considerations associated with the types of investments it may make, as
described above, as well as the risks discussed herein.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase,
12
<PAGE>
the value of the fixed income securities held by the Fund tends to decrease.
This effect will be more pronounced with respect to investments by the Fund
in mortgage-related securities, the value of which are more sensitive to
interest rate changes. There is no restriction on the maturity of the Fund's
portfolio or any individual portfolio security, and to the extent the Fund
invests in securities with longer maturities, the volatility of the Fund in
response to changes in interest rates can be expected to be greater than if
the Fund had invested in comparable securities with shorter maturities. The
performance of the Fund will also depend on the quality of its investments.
While U.S. Government securities generally are of high quality, government
securities that are not backed by the full faith and credit of the U.S.
Treasury may be affected by changes in the creditworthiness of the agency
that issued them. Guarantees of principal and interest on obligations that
may be purchased by the Fund are not guarantees of the market value of such
obligations, nor do they extend to the value of shares of the Fund. Other
fixed-income securities in which the Fund may invest, while of
investment-grade quality, may be of lesser credit quality than U.S.
Government securities.
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 0.30% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.15% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as
13
<PAGE>
portfolio managers for CAM. CAM is located at 1211 Avenue of the Americas,
New York, New York 10036.
PORTFOLIO MANAGERS. Susan Huang, a Vice President and the Director of Fixed
Income Management of Chase, and Michael Bennis, a Vice President of Chase,
have been responsible for the day-to-day management of the Fund's portfolio
since June and December of 1996, respectively. Ms. Huang is responsible for
developing the allocation and risk management strategy for U.S. fixed income
portfolios, and managing the institutional U.S. fixed income assets under
management. Prior to joining Chase in June of 1995, Ms. Huang was Director of
the Insurance Asset Management Group at Hyperion Capital Management Inc.
Prior to joining Hyperion, Ms. Huang was a senior portfolio manager with CS
First Boston. Prior to joining CS First Boston in 1992, Ms. Huang spent 14
years at The Equitable, where she worked in the pension consulting group and
the U.S. Fixed Income Management Group. Ms. Huang is also a manager of Vista
Balanced Fund, Vista Bond Fund, Vista Short-Term Bond Fund and Vista U.S.
Treasury Income Fund.
Prior to joining Chase in 1996, Mr. Bennis was a senior analyst/trader at
Union Bank of Switzerland Asset Management. Prior to joining Union Bank of
Switzerland, Mr. Bennis was a fixed income analyst at Donaldson, Lufkin &
Jenrette.
HOW TO PURCHASE, REDEEM
AND EXCHANGE SHARES
- -----------------------
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service
firms, such as broker-dealer firms and banks ("Dealers") who have entered
into a selected dealer agreement with the Fund's distributor on each business
day during which the New York Stock Exchange is open for trading ("Fund
Business Day"). Qualified investors are defined as institutions, trusts,
partnerships, corporations, qualified and other retirement plans and
fiduciary accounts opened by a bank, trust company or thrift institution
which exercises investment authority over such accounts. The Fund reserves
the right to reject any purchase order or cease offering shares for purchase
at any time.
Institutional Shares are purchased at their public offering price, which is
their next determined net asset value. Orders received by Dealers in proper
form prior to the New York Stock Exchange closing time are confirmed at that
day's net asset value, provided the order is received by the Vista Service
Center prior to its close of business. Dealers are responsible for forwarding
orders for the purchase of shares on a timely basis. Institutional Shares
will be maintained in book entry form and share certificates will not be
issued. Management reserves the right to refuse to sell shares of the Fund to
any institution.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
14
<PAGE>
MINIMUM INVESTMENTS
The Fund has established a minimum initial investment amount of $1,000,000
for the purchase of Institutional Shares. There is no minimum for subsequent
investments. Purchases of Institutional Shares offered by other non-money
market Vista funds may be aggregated with purchases of Institutional Shares
of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
HOW TO REDEEM SHARES
You may redeem all or any portion of the shares in your account at any time
at the net asset value next determined after a redemption request in proper
form is furnished by you to your Dealer and transmitted to and received by
the Vista Service Center. A wire redemption may be requested by telephone to
the Vista Service Center. For telephone redemptions, call the Vista Service
Center at 1-800-622-4273.
In making redemption requests, the names of the registered shareholders on
your account and your account number must be supplied, along with any
certificates that represent shares you want to sell. The price you will
receive is the next net asset value calculated after the Fund receives your
request in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before the close of regular
trading on the New York Stock Exchange.
DELIVERY OF PROCEEDS. The Fund generally sends you payment for your shares by
wire in federal funds on the business day after your request is received in
proper form. Under unusual circumstances, the Fund may suspend redemptions,
or postpone payment for more than seven days, as permitted by federal
securities law.
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,
15
<PAGE>
you may experience delays in contacting the Vista Service Center by
telephone. In this event, you may wish to submit a written redemption request
or contact your Dealer. The Telephone Redemption Privilege may be modified or
terminated without notice.
SELLING SHARES THROUGH YOUR DEALER. Your Dealer must receive your request
before the close of regular trading on the New York Stock Exchange to receive
that day's net asset value. Your Dealer will be responsible for furnishing
all necessary documentation to the Vista Service Center, and may charge you
for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000 due to redemptions. In the event of any such
redemption, you will receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Vista
funds at net asset value beginning 15 days after purchase. Not all Vista
funds offer Institutional Shares. The prospectus of the other Vista fund into
which shares are being exchanged should be read carefully prior to any
exchange and retained for future reference.
For federal income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss.
EXCHANGING BY PHONE. A Telephone Exchange Privilege is currently available.
Call the Vista Service Center for procedures for telephone transactions. Ask
your investment representative or the Vista Service Center for prospectuses
of other Vista funds. Shares of certain Vista funds are not available to
residents of all states.
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 terminate the exchange privilege,
limit the amount or number of exchanges or reject any exchange. In addition,
any shareholder who makes more than ten exchanges of shares involving the
Fund in a year or three in a calendar quarter will be charged a $5.00
administration fee for each such exchange. Shareholders would be notified of
any such action to the extent required by law. Consult the Vista Service
Center before requesting an exchange. The exchange privilege is subject to
change or termination. See the SAI to find out more about the exchange
privilege.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices
16
<PAGE>
determined as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time, however, options are priced at 4:15 p.m.,
Eastern time), on each Fund Business Day, by dividing the net assets of the
Fund attributable to that class by the total number of outstanding shares of
that class. Values of assets held by the Fund are determined on the basis of
their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at
least annually. Capital gains are distributed after deducting any available
capital loss carryover.
DISTRIBUTION PAYMENT OPTION. You can choose from three distribution options:
(1) reinvest all distributions in additional Fund shares; (2) receive
distributions from net investment income in cash or by Automated Clearing
House (ACH) to a pre-established bank account while reinvesting capital gains
distributions in additional shares; or (3) receive all distributions in cash
or by ACH. You can change your distribution option by notifying the Vista
Service Center in writing. If you do not select an option when you open your
account, all distributions will be reinvested. All distributions not paid in
cash or by ACH will be reinvested in shares of the same share class. You will
receive a statement confirming reinvestment of distributions in additional
Fund shares promptly following the quarter in which the reinvestment occurs.
If a check representing a Fund distribution is not cashed within a specified
period, the Vista Service Center will notify you that you have the option of
requesting another check or reinvesting the distribution in the Fund or in an
established account of 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.
17
<PAGE>
A portion of the ordinary income dividends paid by the Fund may qualify for
the 70% dividends-received deduction for corporate shareholders.
Distributions may also be subject to state and local taxes. However, the laws
of most states and localities exempt from some types of taxes distributions
such as those made by the Fund to the extent such distributions are
attributable to interest from obligations of the U.S. Government and certain
of its agencies and instrumentalities.
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
- -------------------
SHAREHOLDER SERVICING AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Institutional Shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Institutional Shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 from the Fund or other sources
18
<PAGE>
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
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
SUB-ADMINISTRATOR
AND DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub- administrator
and distributor. VFD is a subsidiary of The BISYS Group, Inc. and is
unaffiliated with Chase. For the sub-administrative services it performs, VFD
is entitled to receive a fee from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VFD has agreed to use a portion of
this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VFD
is located at 450 West 33rd Street, New York, New York 10001-2603.
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
19
<PAGE>
to the Fund may, from time to time, voluntarily waive all or a portion of any
fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes. Each share of a series or class represents an equal
proportionate interest in that series or class with each other share of that
series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no pre-emptive or conversion rights. Shares when issued are fully paid
and non-assessable, except as set forth below. Shareholders are entitled to
one vote for each whole share held, and each fractional share shall be
entitled to a proportionate fractional vote, except that Trust shares held in
the treasury of the Trust shall not be voted. Shares of each class of the
Fund generally vote together except when required under federal securities
laws to vote separately on matters that only affect a particular class, such
as the approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make
an initial investment of $1,000,000 or more. "Qualified investors" are
defined as institutions, trusts, partnerships, corporations, qualified and
other retirement plans and fiduciary accounts opened by a bank, trust company
or thrift institution which exercises investment authority over such
accounts. The Fund offers other classes of shares in addition to these
classes. The categories of investors that are eligible to purchase shares may
differ for each class of Fund shares. In addition, other classes of Fund
shares may be subject to differences in sales charge arrangements, ongoing
distribution and service fee levels, and levels of certain other expenses,
which will affect the relative performance of the different classes.
Investors may call 1-800-622-4273 to obtain additional information about
other classes of shares of the Fund that are offered. Any person entitled to
receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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.
20
<PAGE>
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 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 public offering price. Total return may also be presented for
other periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment
performance for any period when a fee waiver or expense limitation was in
effect will be greater than if the waiver or limitation had not been in
effect. The Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
21
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
22
<PAGE>
<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
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
[Vista Logo]
PROSPECTUS
VISTA(SM) U.S. TREASURY INCOME FUND
CLASS A AND B SHARES
Investment Strategy: Income
February 28, 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 February 28, 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>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights 6
How the Fund has performed
Fund Objective 8
Investment Policies 8
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management 12
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the Fund's
sub-adviser, and the individuals who manage the Fund
About Your Investment 13
Choosing a share class
How to Buy, Sell and Exchange Shares 14
How the Fund Values Its Shares 21
How Distributions Are Made; Tax Information 21
How the Fund distributes its earnings, and tax treatment related to those
earnings
Other Information Concerning the Fund 22
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 25
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 27
</TABLE>
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 expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
<TABLE>
<CAPTION>
<S> <C> <C>
Class A Class B
Shares Shares
------ -------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) 4.50% None
Maximum Deferred Sales Charge (as a percentage of the lower of
original purchase price
or redemption proceeds)* None 5.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver) ** 0.23% 0.23%
12b-1 Fee*** 0.25% 0.75%
Shareholder Servicing Fee (after estimated waiver, where indicated) 0.01%** 0.25%
Other Expenses 0.41% 0.41%
------ -------
Total Fund Operating Expenses (after waivers of fees) ** 0.90% 1.64%
====== =======
</TABLE>
<TABLE>
<CAPTION>
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
---- ------ ------ ---------
<S> <C> <C> <C> <C>
Class A Share+ $54 $72 $ 93 $151
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ $68 $85 $113 $175
Assuming no redemptions+++ $17 $52 $89 $175
</TABLE>
* The maximum deferred sales charge on Class B shares applies to redemptions
during the first year after purchase; the charge generally declines by 1%
annually thereafter (except in the fourth year), reaching zero after six
years. See "How to Buy, Sell and Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.30% for Class A and Class B shares,
the Shareholder Servicing Fee would be 0.25% for Class A shares, and Total
Fund Operating Expenses would be 1.21% and 1.71% for Class A and Class B
shares, respectively.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
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>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Class A share and one Class B share for each period shown. This information
is supplemented by financial statements and accompanying notes appearing in
the Fund's Annual Report to Shareholders for the fiscal year ended October
31, 1996, which is incorporated by reference into the SAI. The financial
statements and notes, as well as the financial information set forth in the
table below with respect to each of the five years in the period ended
October 31, 1996, have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is also included in the Annual Report to
Shareholders. Shareholders can obtain a copy of this Annual Report by
contacting the Fund or their Shareholder Servicing Agent.
VISTA U.S. TREASURY INCOME FUND*
<TABLE>
<CAPTION>
Class A
Year Ended October 31,
-----------------------------------
1996 1995 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.40 $ 10.60 $ 12.10 $ 11.68
------- ------- ------- -------
Income from Investment Operations
Net Investment Income 0.655 0.699 0.646 0.666
Net Gains or (Losses) in Securities
(both realized and unrealized) (0.268) 0.798 (1.297) 0.699
------ ----- ------- -----
Total from Investment Operations 0.387 1.497 (0.651) 1.365
----- ----- ------- -----
Less Distributions
Dividends from Net Investment Income 0.656 0.697 0.646 0.667
Distributions from Capital Gains -- -- 0.203 0.287
----- ----- ----- -----
Total Distributions 0.656 0.697 0.849 0.954
----- ----- ----- -----
Net Asset Value, End of Period $ 11.13 $ 11.40 $ 10.60 $ 12.10
======= ======= ======= =======
TOTAL RETURN (1) 3.56% 14.59% (5.58%) 12.35%
Ratios/Supplemental Data*:
Net Assets, End of Period (000 omitted) $111,482 $99,109 $99,524 $93,039
Ratio of Expenses to Average Net
Assets# 0.90% 0.87% 0.76% 0.75%
Ratio of Net Investment Income to
Average Net Assets# 5.89% 6.37% 5.74% 5.61%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# 1.29% 1.40% 1.28% 1.14%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# 5.50% 5.84% 5.22% 5.22%
Portfolio Turnover Rate 103% 164% 163% 296%
</TABLE>
6
<PAGE>
[restubbed table]
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ ------- --------------------------------
9/8/87** Year Year 11/4/93***
through Ended Ended through
1992 1991 1990 1989 1988 10/31/87 10/31/96 10/31/95 10/31/94
-------------------------------------------- -------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.53 $ 10.93 $ 11.21 $ 10.90 $ 10.69 $ 10.00 $ 11.37 $ 10.59 $ 11.98
------- ----- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income 0.786 0.883 0.882 0.885 0.842 0.052 0.571 0.621 0.592
Net Gains or (Losses) in Securities
(both realized and unrealized) 0.267 0.597 (0.284) 0.319 0.258 0.638 (0.265) 0.797 (1.187)
----- ----- ------- ----- ----- ----- ----- ------ -------
Total from Investment Operations 1.053 1.480 0.598 1.204 1.100 0.690 0.306 1.418 (0.595)
----- ----- ----- ----- ----- ----- ----- ------ -------
Less Distributions
Dividends from Net Investment Income 0.786 0.882 0.882 0.888 0.890 -- 0.566 0.638 0.592
Distributions from Capital Gains 0.111 ----- ----- 0.004 ----- -- -- 0.203
-----
Total Distributions 0.897 0.882 0.882 0.892 0.890 -- 0.566 0.638 0.795
----- ----- ----- ----- ------ ------- ------- ------
Net Asset Value, End of Period $ 11.68 $ 11.53 $10.93 $ 11.21 $ 10.90 $ 10.69 $ 11.11 $ 11.37 $ 10.59
======= ======= ====== ======= ======= ======= ======= ======= =======
TOTAL RETURN (1) 9.40% 14.07% 5.70% 11.64% 10.70% 46.64% 2.82% 13.80% (5.18%)
Ratios/Supplemental Data*:
Net Assets, End of Period (000 omitted) $59,391 $15,131 $6,359 $3,725 $1,742 $107 $10,764 $10,652 $5,184
Ratio of Expenses to Average Net
Assets# 0.38% 0.02% 0.08% 0.00% 0.00% 0.00% 1.64% 1.62% 1.50%
Ratio of Net Investment Income to
Average Net Assets# 6.52% 7.81% 8.08% 8.12% 8.11% 6.29% 5.12% 5.53% 5.28%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# 1.34% 2.89% 2.50% 2.50% 2.00% 2.00% 1.79% 1.89% 1.78%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# 5.56% 4.94% 5.66% 5.62% 6.11% 4.29% 4.97% 5.26% 5.00%
Portfolio Turnover Rate 514% 103% 15% 34% 3% 0% 103% 164% 163%
</TABLE>
[end restubbed table]
* Formerly known as Vista U.S. Government Income Fund.
** Commencement of operations.
*** Commencement of offering of class of shares.
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
7
<PAGE>
FUND OBJECTIVE
- --------------
Vista U.S. Treasury Income Fund seeks to provide shareholders with monthly
dividends and to protect the value of their investment. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal circumstances, the Fund will invest at least 65% of its assets
in direct obligations of the U.S. Treasury, obligations issued or guaranteed
by U.S. government agencies or instrumentalities if such obligations are
backed by the "full faith and credit" of the U.S. Treasury, and repurchase
obligations collateralized by the foregoing obligations.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
The Fund is classified as a "non- diversified" fund under federal securities
law.
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
objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who...
o Are seeking current income
o Are investing for mid- to long- term investment goals
o Own or plan to own other types of investments for diversification purposes
o Can assume bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate any
up and down price changes, are investing for very short-term goals or who are
in need of capital growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the
8
<PAGE>
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 during unfavorable market
conditions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including
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.
ZERO COUPON SECURITIES AND STRIPS. The Fund may invest in zero coupon U.S.
Government securities. Zero coupon securities are debt securities that do not
pay regular interest payments, and instead are sold at substantial discounts
from their value at maturity. The Fund may also invest in 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.
FLOATING AND VARIABLE RATE SECURITIES. The Fund may invest in floating rate
securities, whose interest rates adjust automatically whenever a specified
interest rate changes, and variable rate securities, whose interest rates are
periodically adjusted. Certain of these instruments permit the holder to
demand payment of principal and accrued interest upon a specified number of
days' notice from either the issuer or a third party. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates
9
<PAGE>
increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate the Fund to pay a "tender fee" to a third party.
Demand features provided by foreign banks involve certain risks associated
with foreign investments.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related U.S.
Government securities. Mortgage pass-through securities are securities
representing interests in "pools" of mortgages in which payments of both
interest and principal on the securities are made monthly, in effect "passing
through" monthly payments made by the individual borrowers on the residential
mortgage loans which underlie the securities. Early repayment of principal on
mortgage pass-through securities held by the Fund (due to prepayments of
principal on the underlying mortgage loans) may result in a lower rate of
return when the Fund reinvests such principal. In addition, as with callable
fixed-income securities generally, if the Fund purchased the securities at a
premium, sustained early repayment would limit the value of the premium. Like
other fixed-income securities, when interest rates rise the value of a
mortgage-related security generally will decline; however, when interest
rates decline, the value of mortgage-related securities with prepayment
features may not increase as much as other fixed-income, fixed-maturity
securities which have no prepayment on call features. Payment of principal
and interest on the mortgage pass-through securities (but not the market
value of the securities themselves) in which the Fund invests will be
guaranteed by the U.S. Government.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage- backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
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
related securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures
10
<PAGE>
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts and (iv) purchase and sell structured products, which
are instruments designed to restructure or reflect the characteristics of
certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of 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 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 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 its
shareholders. Among these restrictions, the Fund is prohibited from investing
more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of
Trustees). A complete description of this and other investment policies is
included in the SAI. Except for the Fund's investment objective and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental
11
<PAGE>
investment policy without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. This effect will be more pronounced with respect to
investments by the Fund in mortgage-related securities, the value of which
are more sensitive to interest rate changes. There is no restriction on the
maturity of the Fund's portfolio or any individual portfolio security, and to
the extent the Fund invests in securities with longer maturities, the
volatility of the Fund in response to changes in interest rates can be
expected to be greater than if the Fund had invested in comparable securities
with shorter maturities. Guarantees of principal and interest on obligations
that may be purchased by the Fund are not guarantees of the market value of
such obligations, nor do they extend to the value of shares of the Fund.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.30% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.15% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
12
<PAGE>
PORTFOLIO MANAGER. Timothy N. Neumann, a Senior Portfolio Manager at Chase,
and Susan Huang, a Vice President and the Director of U.S. Fixed Income
Management of Chase, have been responsible for the management of the Fund
since January 1997 and June 1996, respectively. Mr. Neumann joined Chase in
January 1997. Prior to joining Chase, Mr. Neumann was the portfolio manager
for the mortgage-backed securities accounts at Lehman Brothers Global Asset
Management for three years. Prior to joining Lehman, he spent five years
managing fixed income portfolios at Allstate Insurance.
Ms. Huang is responsible for developing the allocation and risk management
strategy for U.S. fixed income portfolios, and managing the institutional
U.S. fixed income assets under management. Prior to joining Chase in June of
1995, Ms. Huang was Director of the Insurance Asset Management Group at
Hyperion Capital Management Inc. Prior to joining Hyperion, Ms. Huang was a
senior portfolio manager with CS First Boston. Prior to joining CS First
Boston in 1992, Ms. Huang spent 14 years at The Equitable, where she worked
in the pension consulting group and the U.S. Fixed Income Management Group.
Ms. Huang is also a manager of Vista Bond Fund, Vista Short Term Bond Fund,
Vista U.S. Government Securities Fund and Vista Balanced Fund.
ABOUT YOUR INVESTMENT
- ---------------------
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" 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 a higher combined
12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on relative
net asset value, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This
discussion will include information about how shares acquired through
reinvestment of distributions are treated for conversion purposes. Class B
shares provide an investor the benefit of putting all of the investor's
dollars to work from the time the investment is made. Until conversion, Class
B shares will have a higher expense ratio and pay lower dividends than Class
A shares because of the higher combined 12b-1 and service fees. See "How to
Buy, Sell and Exchange Shares" and "Other Information Concerning the Fund."
13
<PAGE>
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 purchase 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 $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 in proper
form 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
14
<PAGE>
are in proper form only 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.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
---------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price Price invested offering price
- ------------------------------ ------- --------- ---------------
Under 100,000 4.50 4.71 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withold such payments with
respect to short-term investments.
Class B Shares
--------------
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be redeemed
without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described
below. For other shares, the
15
<PAGE>
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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker- dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of the Fund's Class A
shares if you are investing the
16
<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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
17
<PAGE>
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.
SIGNATURE GUARANTEES. If you sell shares having a net asset value of $100,000
or more, the signatures of registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or certain other financial
institutions. See the SAI for more information about where to obtain a
signature guarantee.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required.
The Fund may require additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
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
18
<PAGE>
registration and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures to
confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. For
information, consult the Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal
plan for Class A accounts. Call the Vista Service Center at 1-800-34-VISTA
for complete instructions.
SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading
on the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its
services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 due to redemptions 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
19
<PAGE>
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 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 reinstatement 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
20
<PAGE>
the redemption of the Class B shares.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at
least annually. Capital gains are distributed after deducting any available
capital loss carryover. Distributions paid by the Fund with respect to Class
A shares will generally be greater than those paid with respect to Class B
shares because expenses attributable to Class B shares will generally be
higher.
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 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 an
established account of 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
21
<PAGE>
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.
Distributions may also be subject to state and local taxes. However, the laws
of most states and localities exempt some types of taxes distributions such
as those made by the Fund to the extent such distributions are attributable
to interest from obligations of the U.S. Government and certain of its
agencies and instrumentalities.
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% annually of the average daily net assets attributable to
Class A and Class B shares of the Fund, respectively. Payments under the
distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to
the amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or 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
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<PAGE>
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 for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.
SHAREHOLDER SERVICING
AGENTS
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A or Class B shares of the Fund. These
services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A and Class B shares of the Fund held by
investors for whom the shareholder servicing agent maintains a servicing
relationship. Shareholder servicing agents may subcontract with other parties
for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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 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.
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<PAGE>
ADMINISTRATOR AND
SUB-ADMINISTRATOR
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub- administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
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.
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
24
<PAGE>
share held, and each fractional share shall be entitled to a proportionate
fractional vote, except that Trust shares held in the treasury of the Trust
shall not be voted. Shares of each class of the Fund generally vote together
except when required under federal securities laws to vote separately on
matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to Class
A and Class B shares of the Fund. The Fund may offer other classes of shares
in addition to these classes. The categories of investors that are eligible
to purchase shares and minimum investment requirements may differ for each
class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which would affect
the relative performance of the different classes. Investors may call
1-800-34-VISTA to obtain additional information about other classes of shares
of the Fund that are offered. Any person entitled to receive compensation for
selling or servicing shares of the Fund may receive different levels of
compensation with respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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 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
25
<PAGE>
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.
26
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund shareholder.
o 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.
o 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.
o SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account
to another on a regular, prearranged basis. There is no additional charge
for this service.
o 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.
o 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.
27
<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 Equity Fund
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 FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free 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 Money Market 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.
28
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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
VUST-1-297x
<PAGE>
[Logo]
PROSPECTUS VISTA(SM)
U.S. TREASURY INCOME FUND
CLASS A
INVESTMENT STRATEGY: INCOME
February 28, 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 February 28, 1997 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call the Chase Global Funds Services Company at 1-800-344-3092.
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
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights 4
How the Fund has performed
Fund Objective 6
Investment Policies 6
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management 10
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the Fund's
sub-adviser, and the individuals who manage the Fund
About Your Investment 11
How to Buy, Sell and Exchange Shares 11
How the Fund Values its Shares 18
How Distributions are Made; Tax Information 18
How the Fund distributes its earnings, and tax treatment related to those earnings
Other Information Concerning the Fund 19
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 22
How performance is determined, stated and/or advertised
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
<TABLE>
<CAPTION>
<S> <C>
Class A
Shares
-------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) 4.50%
Maximum Deferred Sales Charge (as a percentage of the lower of original purchase
price or redemption proceeds) None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver) * 0.23%
12b-1 Fee** 0.25%
Shareholder Servicing Fee (after estimated waiver)* 0.01%
Other Expenses 0.41%
-------
Total Fund Operating Expenses (after waivers of fees) * 0.90%
=======
</TABLE>
<TABLE>
<CAPTION>
EXAMPLES
Your investment of $1,000 would
incur the following expenses, 3 5
assuming 5% annual return: 1 Year Years Years 10 Years
----- ------ ------ ---------
<S> <C> <C> <C> <C>
Class A Share+ $54 $72 $93 $151
</TABLE>
* Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.30%, the Shareholder Servicing Fee
would be 0.25%, and Total Fund Operating Expenses would be 1.21%.
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
shareholders of the Fund, may pay more than the economic equivalent of the
maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses
or returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing
Agents may credit to the accounts of their customers from whom they are
already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect
to those accounts. See "Other Information Concerning the Fund."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Class A share for each period shown. This information is supplemented by
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the fiscal year ended October 31, 1996, which is
incorporated by reference into the SAI. The financial statements and notes,
as well as the financial information set forth in the table below with
respect to each of the five years in the period ended October 31, 1996, have
been audited by Price Waterhouse LLP, independent accountants, located at
1177 Avenue of the Americas, New York, NY 10036 whose report thereon is also
included in the Annual Report to Shareholders. Shareholders can obtain a copy
of this Annual Report by contacting the Fund or their Shareholder Servicing
Agent.
Vista U.S. Treasury Income Fund*
================================================================================
<TABLE>
<CAPTION>
Class A Year
Ended October 31,
------------------------------------
1996 1995 1994 1993
----- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.40 $ 10.60 $ 12.10 $ 11.68
------- ------- ------- -------
Income from Investment Operations
Net Investment Income 0.655 0.699 0.646 0.666
Net Gains or (Losses) in
Securities (both realized
and unrealized) (0.268) 0.798 (1.297) 0.699
----- ----- ----- -----
Total from Investment Operations 0.387 1.497 (0.651) 1.365
----- ----- ----- -----
Less Distributions
Dividends from Net
Investment Income 0.656 0.697 0.646 0.667
Distributions from Capital
Gains -- -- 0.203 0.287
----- ---- ----- -----
Total Distributions 0.656 0.697 0.849 0.954
----- ----- ----- -----
Net Asset Value, End of Period $ 11.13 $ 11.40 $ 10.60 $ 12.10
======= ======= ======= =======
Total Return (1) 3.56% 14.59% (5.58%) 12.35%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) $111,482 $99,109 $99,524 $93,039
Ratio of Expenses to Average Net
Assets# 0.90% 0.87% 0.76% 0.75%
Ratio of Net Investment Income to
Average Net Assets# 5.89% 6.37% 5.74% 5.61%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# 1.29% 1.40% 1.28% 1.14%
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets# 5.50% 5.84% 5.22% 5.22%
Portfolio Turnover Rate 103% 164% 163% 296%
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
Class A Year
Ended October 31,
--------------------------------------------------------
9/8/87**
through
1992 1991 1990 1989 1988 10/31/87
---- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.53 $ 10.93 $ 11.21 $ 10.90 $ 10.69 $ 10.00
------- ------- ------- ------- ------- -------
Income from Investment Operations
Net Investment Income 0.786 0.883 0.882 0.885 0.842 0.052
Net Gains or (Losses) in
Securities (both realized
and unrealized) 0.267 0.597 (0.284) 0.319 0.258 0.638
----- ----- ----- ----- ----- -----
Total from Investment Operations 1.053 1.480 0.598 1.204 1.100 0.690
----- ----- ----- ----- ----- -----
Less Distributions
Dividends from Net
Investment Income 0.786 0.882 0.882 0.888 0.890 --
Distributions from Capital
Gains 0.111 -- -- 0.004 -- --
----- ----- ----- ----- ----- -------
Total Distributions 0.897 0.882 0.882 0.892 0.890 --
----- ----- ----- ----- ----- -------
Net Asset Value, End of Period $ 11.68 $ 11.53 $ 10.93 $ 11.21 $ 10.90 $ 10.68
======= ======= ======= ======= ======= =======
Total Return (1) 9.40% 14.07% 5.70% 11.64% 10.70% 46.64%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) $59,391 $15,131 $6,359 $3,725 $1,742 $107
Ratio of Expenses to Average Net
Assets# 0.38% 0.02% 0.08% -- -- --
Ratio of Net Investment Income to
Average Net Assets# 6.52% 7.81% 8.08% 8.12% 8.11% 6.29%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# 1.34% 2.89% 2.50% 2.50% 2.00% 2.00%
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets# 5.56% 4.94% 5.66% 5.62% 6.11% 4.29%
Portfolio Turnover Rate 514% 103% 15% 34% 3% 0%
</TABLE>
* Formerly known as Vista U.S. Government Income Fund.
** Commencement of operations.
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVE
- --------------
Vista U.S. Treasury Income Fund seeks to provide shareholders with monthly
dividends and to protect the value of their investment. The Fund is not
intended to be a complete investment program, and there is no assurance it
will achieve its objective.
INVESTMENT POLICIES
- -------------------
INVESTMENT APPROACH
Under normal circumstances, the Fund will invest at least 65% of its assets
in direct obligations of the U.S. Treasury, obligations issued or guaranteed
by U.S. government agencies or instrumentalities if such obligations are
backed by the "full faith and credit" of the U.S. Treasury, and repurchase
obligations collateralized by the foregoing obligations.
There is no restriction on the maturity of the Fund's portfolio or any
individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations
of future changes in interest rates.
The Fund is classified as a "non- diversified" fund under federal securities
law.
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
objective and policies.
WHO MAY WANT TO INVEST
This Fund may be most suitable for investors who . . .
o Are seeking current income
o Are investing for mid- to long- term investment goals
o Own or plan to own other types of investments for diversification purposes
o Can assume bond market (i.e., interest rate) risk
This Fund may NOT be appropriate for investors who are unable to tolerate
frequent up and down price changes, are investing for very short-term goals
or who are in need of capital growth potential.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has the ability to lend portfolio securities in
an amount equal to not more than 30% of its total assets to generate
additional income. These transactions must be fully collateralized at all
times. The Fund may purchase securities for delivery at a future date, which
may increase its overall investment exposure and involves a risk of loss if
the value of the securities declines prior to the settlement date. These
transactions involve some risk to the Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS. The Fund may borrow money from
6
<PAGE>
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. This Fund may use this practice to generate cash for
shareholder redemptions without selling securities during unfavorable market
conditions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets
on a daily basis in an amount at least equal to the repurchase price
(including accrued interest). The Fund would be required to pay interest on
amounts obtained through reverse repurchase agreements, which are considered
borrowings under federal securities laws.
STAND-BY COMMITMENTS. The Fund may enter into put transactions, including
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.
ZERO COUPON SECURITIES AND STRIPS. The Fund may invest in zero coupon U.S.
Government securities. Zero coupon securities are debt securities that do not
pay regular interest payments, and instead are sold at substantial discounts
from their value at maturity. The Fund may also invest in 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.
FLOATING AND VARIABLE RATE SECURITIES. The Fund may invest in floating rate
securities, whose interest rates adjust automatically whenever a specified
interest rate changes, and variable rate securities, whose interest rates are
periodically adjusted. Certain of these instruments permit the holder to
demand payment of principal and accrued interest upon a specified number of
days' notice from either the issuer or a third party. As a result of the
floating or variable rate nature of these investments, the Fund's yield may
decline and it may forego the opportunity for capital appreciation during
periods when interest rates decline; however, during periods when interest
rates increase, the Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate the Fund to pay a "tender fee" to a third party.
Demand features provided by foreign banks involve certain risks associated
with foreign investments.
7
<PAGE>
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related U.S.
Government securities. Mortgage pass-through securities are securities
representing interests in "pools" of mortgages in which payments of both
interest and principal on the securities are made monthly, in effect "passing
through" monthly payments made by the individual borrowers on the residential
mortgage loans which underlie the securities. Early repayment of principal on
mortgage pass-through securities held by the Fund (due to prepayments of
principal on the underlying mortgage loans) may result in a lower rate of
return when the Fund reinvests such principal. In addition, as with callable
fixed- income securities generally, if the Fund purchased the securities at a
premium, sustained early repayment would limit the value of the premium. Like
other fixed- income securities, when interest rates rise the value of a
mortgage- related security generally will decline; however, when interest
rates decline, the value of mortgage- related securities with prepayment
features may not increase as much as other fixed-income, fixed-maturity
securities which have no prepayment or call features. Payment of principal
and interest on the mortgage pass-through securities (but not the market
value of the securities themselves) in which the Fund invests will be
guaranteed by the U.S. Government.
The Fund may also invest in investment grade Collateralized Mortgage
Obligations ("CMOs"), which are hybrid instruments with characteristics of
both mortgage- backed bonds and mortgage pass- through securities. Similar to
a bond, interest and prepaid principal on a CMO are paid, in most cases,
monthly. CMOs may be collateralized by whole residential or commercial
mortgage loans but are more typically collateralized by portfolios of
mortgage pass-through securities guaranteed by the U.S. Government or its
agencies or instrumentalities. CMOs are structured into multiple classes,
with each class having a different expected average life and/or stated
maturity. Monthly payments of principal, including prepayments, are allocated
to different classes in accordance with the terms of the instruments, and
changes in prepayment rates or assumptions may significantly affect the
expected average life and value of a particular class.
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
related securities indexes (including using options in combination with
securities, other options or derivative instruments); (ii) enter into swaps,
futures contracts and options on futures contracts; (iii) employ forward
currency and interest rate contracts and (iv) purchase and sell structured
products, which are instruments designed to restructure or reflect the
characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and
related instruments and no
8
<PAGE>
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 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 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 its
shareholders. Among these restrictions, the Fund is prohibited from investing
more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of
Trustees). A complete description of this and other investment policies is
included in the SAI. Except for the Fund's investment objective and
investment policies designated as fundamental in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
The Fund does not constitute a balanced or complete investment program, and
the net asset value of its shares will fluctuate based on the value of the
securities in the Fund's portfolio.
The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to
9
<PAGE>
decrease. This effect will be more pronounced with respect to investments by
the Fund in mortgage-related securities, the value of which are more
sensitive to interest rate changes. There is no restriction on the maturity
of the Fund's portfolio or any individual portfolio security, and to the
extent the Fund invests in securities with longer maturities, the volatility
of the Fund in response to changes in interest rates can be expected to be
greater than if the Fund had invested in comparable securities with shorter
maturities. Guarantees of principal and interest on obligations that may be
purchased by the Fund are not guarantees of the market value of such
obligations, nor do they extend to the value of shares of the Fund.
For a discussion of certain other risks associated with the Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
- ----------
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase") 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 0.30% of the Fund's average daily net assets. Chase is located at
270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
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 0.15% of the Fund's average daily
net assets. CAM was recently formed for the purpose of providing
discretionary investment advisory services to institutional clients and to
consolidate Chase's investment management function. The same individuals who
serve as portfolio managers for Chase also serve as portfolio managers for
CAM. CAM is located at 1211 Avenue of the Americas, New York, New York 10036.
PORTFOLIO MANAGER. Timothy N. Neumann, a Senior Portfolio Manager at Chase,
and Susan Huang, a Vice President and the Director of U.S. Fixed Income
Management of Chase, have been responsible for the management of the Fund
since its inception and since January 1997, respectively. Mr. Neumann joined
Chase in January 1997. Prior to joining Chase, Mr. Neumann was the portfolio
manager for the mortgage- backed securities accounts at Lehman Brothers
Global Asset Management for three years. Prior to joining Lehman, he spent
five years managing fixed income portfolios at Allstate Insurance.
10
<PAGE>
Ms. Huang is responsible for developing the allocation and risk management
strategy for U.S. fixed income portfolios, and managing the institutional
U.S. fixed income assets under management. Prior to joining Chase in June of
1995, Ms. Huang was Director of the Insurance Asset Management Group at
Hyperion Capital Management Inc. Prior to joining Hyperion, Ms. Huang was a
senior portfolio manager with CS First Boston. Prior to joining CS First
Boston in 1992, Ms. Huang spent 14 years at The Equitable, where she worked
in the pension consulting group and the U.S. Fixed Income Management Group.
Ms. Huang is also a manager of Vista Bond Fund, Vista Short Term Bond Fund,
Vista U.S. Government Securities Fund and Vista Balanced Fund.
ABOUT YOUR INVESTMENT
- ---------------------
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. See "How to Buy, Sell and Exchange Shares"
and "Other Information Concerning the Fund."
HOW TO BUY, SELL AND
EXCHANGE SHARES
- --------------------
PURCHASE OF SHARES
The minimum initial investment by a shareholder is $2,500, including IRA's
and Keogh's. There is no minimum for additional investments. The Fund
reserves the right, in its sole discretion, to reject any purchase order or
cease offering shares for purchase at any time. No share certificates will be
issued unless requested in writing. Subscriptions for shares are subject to
acceptance by the Fund and are not binding until accepted.
Purchase by Mail: Shares of the Fund may be purchased by sending a completed
Application (included with this Prospectus or obtainable from the Fund) to
"Gintel Group", c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798, accompanied by a check payable to Gintel Group in payment for the
shares. Applications sent to the Fund will be forwarded to Chase Global Funds
Services Company and will not be effective until received by Chase Global Funds
Services Company. Special forms are required for IRA and Keogh subscriptions and
may be obtained by contacting the Fund. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which may
take 15 calendar days or longer. In addition, the redemption or shares purchased
through ACH will not be allowed until clearance of the payment, which may take 7
business days or longer. In the event a check used to pay for shares is not
honored by a bank, the purchase order will be cancelled and the shareholder will
be liable for any losses or expenses incurred by the Fund.
Purchase by Exchange: Shares of the Fund may be exchanged for shares of any
other fund within the Gintel Group, to the extent such shares are offered for
sale in the investor's state of residence. Before any exchange, an investor
must obtain and should carefully review a copy of the current prospectus of
the fund into which he or she wishes to exchange and should retain such copy
for future reference. When
11
<PAGE>
opening an account by exchange, the new account must be established with the
same name(s), address, and tax identification number as the other account and
must meet that fund's minimum initial investment and other eligibility
requirements. For federal income tax purposes, an exchange is treated as a
sale of shares and generally results in a capital gain or loss. If an
investor wishes to use the exchange feature, he or she should consult his or
her investment representative or Chase Global Funds Services Company to
determine if the feature is available and whether any other conditions are
imposed on its use. The discussion of the exchange feature in this Prospectus
supersedes the discussion of the exchange privileges in the SAI for investors
purchasing shares through the Gintel Group. Purchase by exchange may be
executed by either mail or telephone but in every instance must comply with
the purchase and redemption procedures set forth in the Prospectus. Neither
Chase Global Funds Services Company nor the Fund will be liable for acting
upon such instructions, regardless of the authority or absence thereof of the
person giving the instructions, or for any loss, expense, or cost arising out
of any exchange by telephone, whether or not properly authorized and
directed. An investor will bear the risk of loss. The staff of the Securities
and Exchange Commission is currently examining whether such responsibilities
may be disclaimed. The accuracy of telephone transactions should be verified
immediately upon the receipt of confirmation statement.
Purchase by Wire: Investors may purchase shares by wire by first telephoning
Chase Global Funds Services Company at 1-800-344- 3092 for instructions and
wire control number and subsequently wiring Federal funds and registration
instructions to:
The Chase Manhattan Bank
New York, NY 10003
ABA# 0210-0002-1
F/B/O The Gintel Group
Acct. #910-2-732980
Ref: U.S. Treasury Income Fund
Account Number ______________________
Account Name: ______________________
Purchase By Automatic Investment: Investors may purchase shares on a regular
basis, (the first, the fifteenth, or the first and fifteenth of each month),
by automatically transferring a specified dollar amount ($100 minimum) from
their regular checking or NOW account to their specified Gintel Group
Account. Special forms are required for this automatic investment plan and
may be obtained by contacting the Fund. Existing shareholders may begin the
Plan at any time by sending a signed letter with signature guarantee and a
deposit slip or voided check.
ADDITIONAL INVESTMENTS
An investor may add to his or her account by purchasing additional shares of
the same class of the Fund's shares by mailing a check to the Gintel Group
(payable to "Gintel Group") at its address set forth above under "Purchases
by Mail" or by wiring funds to the Fund's custodian using the procedures set
forth above under "Purchases by Wire." It is important that the account
number, account name and the Fund and class of shares to be purchased are
specified on the check or wire to ensure proper crediting to the investor's
account.
12
<PAGE>
PROCESSING OF PURCHASE ORDERS
Shares are sold at the public offering price based on the net asset value
next determined after the Fund's distributor receives an order in proper
form. In most cases, in order for an investor to receive that day's public
offering price, Chase Global Funds Services Company must generally receive
the purchase order in proper form prior to the close of regular trading on
the New York Stock Exchange. If an investor buys shares through his or her
investment representative, the representative must have received the order
before the close of regular trading on the New York Stock Exchange in order
to receive that day's public offering price. Orders are in proper form only
after funds are converted to Federal Funds. Orders paid by check and received
before 2:00 p.m. will generally be available for the purchase of shares the
following Fund Business Day.
Confirmed purchases will be done only at the discretion of the Investment
Advisor.
Purchase of shares of the Fund may also be made through registered securities
dealers who have entered into selected dealer agreements with the
Distributor. A dealer who agrees to process an order on behalf of an investor
may charge the investor a fee for this service.
The offering price of each Fund share is the net asset value per share next
computed after the subscriber's application is received by Chase Global Funds
Services Company. The net asset value per share is determined by dividing the
market value of the Fund's securities as of the close of trading plus any
cash or other assets (including dividends and accrued interest) less all
liabilities (including accrued expenses) by the number of the Fund's shares
outstanding. The Fund will determine net asset value of its shares on each
"Fund Business Day", which is any day the New York Stock Exchange is open for
business exclusive of national holidays.
All ordinary income dividends and capital gains distributions are
automatically reinvested at net asset value unless the Chase Global Funds
Services Company receives written notice from a shareholder at least 30 days
prior to the record date requesting that the distributions and dividends be
distributed to the investor in cash.
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
percentage of:
---------------------- Amount of sales charge reallowed
Amount of transaction at Offering Net amount to dealers as a percentage of
offering price Price invested offering price
- ------------------------------ ------- --------- --------------------------------
<S> <C> <C> <C>
Under 100,000 4.50 4.71 4.00
100,000 but under 250,000 3.75 3.90 3.25
250,000 but under 500,000 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
</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 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withold such payments with
respect to short-term investments.
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or Chase Global Funds Services Company 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 determining 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 current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker- dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Vista fund shares), financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants
are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of 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
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<PAGE>
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.
Investors may incur a fee if they effect transactions through a broker or
agent.
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.
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.
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 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.
REDEMPTION OF SHARES
Upon receipt by Chase Global Funds Services Company of a request in proper
form, the Fund will redeem shares at its next determined net asset value.
There is no assurance that the net asset value received upon redemption will
be greater than that paid by a shareholder upon purchase. The Fund will
forward redemption payments only on shares for which it has collected
payment.
Redemption by Mail: Shares may be redeemed by sending a written redemption
request to Gintel Group, c/o Chase Global Funds Services Company, P.O. Box
2798, Boston, MA 02208-2798. Any written request sent to the Fund will be
forwarded to Chase Global
15
<PAGE>
Funds Services Company and the effective date of the redemption request will
be when the request is received in proper form by Chase Global Funds Services
Company. The redemption value of each Fund share is the net asset value per
share next computed after the redemption request is received in proper form.
In order to receive that day's net asset value, Chase Global Funds Services
Company must receive an investor's request before the close of regular
trading on the New York Stock Exchange. Where share certificates have been
issued, a shareholder must endorse the certificates and include them in the
redemption request. "Proper form" means that the request for redemption must
include the following:
1. A letter of instruction specifying the Fund name, the account number, and
the number of shares or the dollar amount to be redeemed and signed by all
registered owners exactly as their names appear on the account.
2. Signatures must be guaranteed by an eligible guarantor institution as
described in Rule 17Ad-15 under the Securities and Exchange Act of 1934. Such
institutions include banks, brokers, securities dealers, credit unions,
securities exchanges, clearing agencies and savings associations. On and after
August 24, 1992, the eligible guarantor institution must be a participant in a
recognized signature guarantee program such as the STAMP program of the
Securities Transfer Association. Until August 24, 1992, eligible guarantor
institutions previously approved by Chase Global Funds Services Company
(commercial banks and members of domestic stock exchanges) will continue to be
approved. Eligible guarantor institutions not previously approved by Chase
Global Funds Services Company and not yet members of a recognized signature
guarantee program, must make application to that company. For complete
information or a copy of Chase Global Funds Services Company's signature
guarantee Standards, Procedures and Guidelines, please contact the Transfer
Agent at (800) 344-3092. A notary public is not an acceptable guarantor.
3. Other supporting legal documents, if required, in the
case of estates, trusts, guardianships, corporations, pension and profit
sharing plans and other organizations. Shareholders
should contact Chase Global
Funds Services Company,
(800) 344-3092, to obtain further information on the specific documentation
required.
Payment will be made for redeemed shares as soon as practicable, but
generally no later than five business days after proper receipt of redemption
notification. Payment will be made by check, unless a shareholder arranges
for the proceeds of redemption requests to be sent by Federal fund wire to a
designated bank account, in which case a wire charge (currently $8.00 per
wire) will be deducted
from the account. Shareholders should contact Chase Global Funds Services
Company, (800) 344- 3092, to obtain further information on this service and
the related charges.
Redemption by Telephone: Shareholders who authorize telephone redemptions in
the Application may redeem shares by telephone instructions to Chase Global
Funds Services Company
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<PAGE>
which will wire or mail the proceeds of redemptions to the bank and bank
account number specified in the Application or mail the proceeds to the
address of record, except that telephone redemptions of less than $1000 will
be mailed. Redemptions of $1000 or more will be charged a wire fee (currently
$8.00 per wire) which will be deducted from the account. Any change in the
bank account specified in the Application must be made in writing with a
signature guarantee as described above for redemptions by mail. If an
investor selects a telephone redemption privilege, the investor authorizes
Chase Global Funds Services Company to act on telephone instructions from any
person representing himself or herself to be the investor or the investor's
investment representative and reasonably believed by Chase Global Funds
Services Company to be genuine. The Fund will require Chase Global Funds
Services Company to employ reasonable procedures, such as requiring a form of
personal identification, to confirm that the instructions are genuine and, if
it does not follow such procedures, the Fund may be liable for losses due to
unauthorized or fraudulent requests. An investor agrees, however, that to the
extent permitted by applicable law, neither the Fund nor its agents nor Chase
Global Funds Services Company 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 Chase Global Funds Services
Company at 800-344-3092. The telephone redemption privilege may be modified
or terminated without notice.
Automatic Redemptions: A shareholder who owns shares of the Fund with a value
of $10,000 or more may establish a Systematic Withdrawal Plan. The
Shareholder may request a declining balance withdrawal, a fixed dollar
withdrawal, a fixed share withdrawal, or a fixed percentage withdrawal (based
on the current value of the account) on a monthly, quarterly, semiannual or
annual basis. When a shareholder reaches age 59-1/2 and begins to receive
distributions from an IRA or other retirement plan invested in the Fund, the
shareholder can arrange to have a regular monthly or quarterly redemptions
made under Systematic Withdrawal Plan. In this case it is not necessary for
the account value to be $10,000 or more. Further Information on establishing
a Systematic Withdrawal Plan may be obtained by calling the Fund.
PROCESSING OF REDEMPTION
ORDERS
The Fund generally sends payment for an investor's shares on the business day
after the investor's request is received in proper form, assuming that the
Fund has collected payment of the purchase price of such investor's shares.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven business days, as permitted by federal securities
laws.
Sales of shares of the Fund may also be made through registered securities
dealers who have entered into selected dealer agreements with the
Distributor. A dealer who agrees to process an order on behalf of an investor
may charge the investor a fee for this service.
With the exception of IRA or Keogh accounts, the Fund reserves
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<PAGE>
the right to close an investor's account if the account has dropped below
$500 in value for a period of three months or longer other than as a result
of a decline in the net asset value per share or if an investor purchases
through an automatic investment plan and fails to meet the Fund's investment
minimum within a twelve-month period. Shareholders are notified at least 60
days prior to any proposed redemption and invited to add to their account if
they wish to continue as a shareholder of the Fund; however the Fund does not
presently contemplate making such redemptions.
Confirmed redemptions will be done only at the discretion of the Investment
Advisor.
HOW THE FUND
VALUES ITS SHARES
- -----------------
The net asset value of each class of the Fund's shares is determined once
daily based upon prices determined as of the close of regular trading on the
New York Stock Exchange (normally 4:00 p.m., Eastern time, however, options
are priced at 4:15 p.m., Eastern time), on each business day of the Fund, by
dividing the net assets of the Fund attributable to that class by the total
number of outstanding shares of that class. Values of assets held by the Fund
are determined on the basis of their market or other fair value, as described
in the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
- ---------------------
The Fund declares dividends daily and distributes any net investment income
at least monthly. The Fund distributes any net realized capital gains at
least annually. Capital gains are distributed after deducting any available
capital loss carryover.
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 Chase Global Funds Services Company 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
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, Chase Global Funds Services Company will notify you that you have the
option of requesting another check or reinvesting the distribution in the
Fund. If Chase Global Funds Services Company does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if the Fund or
Chase Global Funds Services Company 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
18
<PAGE>
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.
Distributions may also be subject to state and local taxes. However, the laws
of most states and localities exempt some types of taxes distributions such
as those made by the Fund to the extent such distributions are attributable
to interest from obligations of the U.S. Government and certain of its
agencies and instrumentalities.
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 PLAN
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A shares which provide
for the payment of distribution fees at annual rates of up to 0.25% annually
of the average daily net assets attributable to Class A shares of the Fund,
respectively. Payments under the distribution plans shall be used to
compensate or reimburse the Fund's distributor and broker-dealers for
services provided and expenses incurred in connection with the sale of Class
A shares, and are not tied to the amount of actual expenses incurred.
Payments may be used to compensate broker-dealers with trail or maintenance
commissions at an annual rate of up to 0.25% of the average daily net asset
value of Class A shares 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 shares will be conducted
generally by the Vista Family of Funds, and activities intended to promote
the Fund's Class
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<PAGE>
A shares may also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater or entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers who beneficially own Class A shares of the Fund. These services
include assisting with purchase and redemption transactions, maintaining
shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class A shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, 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. 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.
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may
21
<PAGE>
be up to 0.10% annually of the average net assets of the Fund attributable to
shares of the Fund held by customers of such selected dealers. Such
compensation does not represent an additional expense to the Fund or its
shareholders, since it will be paid by Chase.
ADMINISTRATOR AND
SUB-ADMINISTRATOR
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VFD provides certain sub- administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a
fee for these services from the Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VFD has agreed to use a portion of this fee
to pay for certain expenses incurred in connection with organizing new series
of the Trust and certain other ongoing expenses of the Trust. VFD is located
at 450 West 33rd Street, New York, New York 10001-2603.
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.
TRANSFER AGENT AND DIVIDEND
PAYING AGENT
DST Systems, Inc. located at 210 W. 10th Street, Kansas City, MO 64105 serves
as the Fund's transfer agent and dividend paying agent.
EXPENSES
The Fund pays the expenses incurred in its operations, including its pro rata
share of expenses of the Trust. These expenses include investment advisory
and administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent
accountants, of legal counsel and of any transfer agent, registrar or
dividend disbursing agent of the Trust; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, shares of the
Fund. Shareholder servicing and distribution fees are allocated to specific
classes of the Fund. In addition, the Fund may allocate transfer agency and
certain other expenses by class. Service providers to the Fund may, from time
to time, voluntarily waive all or a portion of any fees to which they are
entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management
investment company organized as a Massachusetts business trust in 1987 (the
"Trust"). The Trust has reserved the right to create and issue additional
series and classes.
22
<PAGE>
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The
shares of each series or class participate equally in the earnings, dividends
and assets of the particular series or class. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable,
except as set forth below. Shareholders are entitled to one vote for each
whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury
of the Trust shall not be voted. Shares of each class of the Fund generally
vote together except when required under federal securities laws to vote
separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates to Class
A shares of the Fund. The Fund may offer other classes of shares in addition
to these classes. The categories of investors that are eligible to purchase
shares and minimum investment requirements may differ for each class of Fund
shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service
fee levels, and levels of certain other expenses, which would affect the
relative performance of the different classes. Investors may call
1-800-344-3092 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 calculated by dividing the annualized net investment income
calculated pursuant to federal rules per share during a recent 30-day period
by the maximum public offering price per share of such class on the last day
of that period.
"Total return" for the one-, five- and ten-year periods (or since inception,
if shorter) through the most recent calendar quarter represents the average
annual compounded rate of
23
<PAGE>
return on an investment of $1,000 in the Fund invested at the maximum public
offering price. Total return may also be presented for other periods 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>
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
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
February 28, 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) NEW GROWTH OPPORTUNITIES FUND
VISTA(SM) SHORT-TERM BOND FUND
VISTA(SM) SMALL CAP EQUITY FUND
VISTA(SM) U.S. GOVERNMENT SECURITIES FUND
VISTA(SM) U.S. TREASURY INCOME FUND
101 Park Avenue, New York, New York 10178
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering
shares of Vista U.S. Government Securities Fund, Vista U.S. Treasury Income
Fund, Vista Bond Fund and Vista Short-Term Bond Fund (collectively the
"Income Funds"), and Vista American Value Fund, Vista Balanced Fund, Vista
New Growth Opportunities Fund, Vista Equity Income Fund, Vista Growth and
Income Fund, Vista Capital Growth Fund, Vista Large Cap Equity Fund and Vista
Small Cap Equity Fund (collectively the "Equity Funds"). Any references to a
"Prospectus" in this Statement of Additional Information is a reference to
one or more of the foregoing Prospectuses, as the context requires. Copies of
each Prospectus may be obtained by an investor without charge by contacting
Vista Fund Distributors, Inc.("VFD"), the Funds' distributor (the
"Distributor"), at the above-listed address.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
For more information about your account, simply call or write the Vista
Service Center at:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
MFG-SAI
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
The Funds ................................................................ 3
Investment Policies and Restrictions ..................................... 3
Performance Information .................................................. 21
Determination of Net Asset Value ......................................... 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
<PAGE>
THE FUNDS
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists
of 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. The Vista New Growth
Opportunities Fund has been organized with a master fund/ feeder fund
structure. 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 and the
New Growth Opportunities Fund invests in the New Growth Opportunities
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, New
Growth Opportunities Fund, and Capital Growth Fund, which do not have their
own advisers) and the three 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
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(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.
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Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may
be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit
losses arising from possible financial difficulties of borrowers might affect
a bank's ability to meet its obligations. Bank obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Investors
should also be aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.
Depositary Receipts. A Fund or Portfolio will limit its investment in
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-
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ing periodically fluctuating rates of interest under a letter agreement
between a commercial paper issuer and an institutional lender pursuant to
which the lender may determine to invest varying amounts.
Repurchase Agreements. A Fund or Portfolio will enter into repurchase
agreements only with member banks of the Federal Reserve System and
securities dealers believed creditworthy, and only if fully collateralized by
securities in which such Fund or Portfolio is permitted to invest. Under the
terms of a typical repurchase agreement, a Fund or Portfolio would acquire an
underlying instrument for a relatively short period (usually not more than
one week) subject to an obligation of the seller to repurchase the instrument
and the Fund or Portfolio to resell the instrument at a fixed price and time,
thereby determining the yield during the Fund's or Portfolio's holding
period. This procedure results in a fixed rate of return insulated from
market fluctuations during such period. A repurchase agreement is subject to
the risk that the seller may fail to repurchase the security. Repurchase
agreements are considered under the 1940 Act to be loans collateralized by
the underlying securities. All repurchase agreements entered into by a Fund
or Portfolio will be fully collateralized at all times during the period of
the agreement in that the value of the underlying security will be at least
equal to 102% of the amount of the loan, including the accrued interest
thereon, and the Fund or Portfolio or its custodian or sub-custodian will
have possession of the collateral, which the Board of Trustees believes will
give it a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a
collateralized loan has not been conclusively established. This might become
an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by the Fund or Portfolio, but would only constitute
collateral for the seller's obligation to pay the repurchase price.
Therefore, a Fund or Portfolio may suffer time delays and incur costs in
connection with the disposition of the collateral. The Board of Trustees
believes that the collateral underlying repurchase agreements may be more
susceptible to claims of the seller's creditors than would be the case with
securities owned by a Fund or Portfolio. Repurchase agreements maturing in
more than seven days are treated as illiquid for purposes of the Funds' and
Portfolios' restrictions on purchases of illiquid securities. Repurchase
agreements are also subject to the risks described below with respect to
stand-by commitments.
Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will
normally be purchased. When a commitment to purchase a security on a forward
commitment basis is made, procedures are established consistent with the
General Statement of Policy of the Securities and Exchange Commission
concerning such purchases. Since that policy currently recommends that an
amount of the respective Fund's or Portfolio's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the
commitment, a separate account of such Fund or Portfolio consisting of cash
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
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<PAGE>
or Portfolio's payment obligations). The sale of securities to meet such
obligations may result in the realization of capital gains or losses.
To the extent a Fund or Portfolio engages in forward commitment
transactions, it will do so for the purpose of acquiring securities
consistent with its investment objective and policies and not for the purpose
of investment leverage, and settlement of such transactions will be within 90
days from the trade date.
Floating and Variable Rate Securities; Participation Certificates. The
securities in which certain Funds and Portfolios may be invested include
participation certificates issued by a bank, insurance company or other
financial institution in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate
gives a Fund or Portfolio an undivided interest in the security in the
proportion that the Fund's or Portfolio's participation interest bears to the
total principal amount of the security and generally provides the demand
feature described below. Each Participation Certificate is backed by an
irrevocable letter of credit or guaranty of a bank (which may be the bank
issuing the Participation Certificate, a bank issuing a confirming letter of
credit to that of the issuing bank, or a bank serving as agent of the issuing
bank with respect to the possible repurchase of the Participation
Certificate) or insurance policy of an insurance company that the Board of
Trustees of the Trust has determined meets the prescribed quality standards
for a particular Fund or Portfolio.
A Fund or Portfolio may have the right to sell the Participation
Certificate back to the institution and draw on the letter of credit or
insurance on demand after the prescribed notice period, for all or any part
of the full principal amount of the Fund's or Portfolio's participation
interest in the security, plus accrued interest. The institutions issuing the
Participation Certificates would retain a service and letter of credit fee
and a fee for providing the demand feature, in an amount equal to the excess
of the interest paid on the instruments over the negotiated yield at which
the Participation Certificates were purchased by a Fund or Portfolio. The
total fees would generally range from 5% to 15% of the applicable prime rate
or other short-term rate index. With respect to insurance, a Fund or
Portfolio will attempt to have the issuer of the participation certificate
bear the cost of any such insurance, although the Funds and Portfolios retain
the option to purchase insurance if deemed appropriate. Obligations that have
a demand feature permitting a Fund or Portfolio to tender the obligation to a
foreign bank may involve certain risks associated with foreign investment. A
Fund's or Portfolio's ability to receive payment in such circumstances under
the demand feature from such foreign banks may involve certain risks such as
future political and economic developments, the possible establishments of
laws or restrictions that might adversely affect the payment of the bank's
obligations under the demand feature and the difficulty of obtaining or
enforcing a judgment against the bank.
The advisers have been instructed by the Board of Trustees to monitor on
an ongoing basis the pricing, quality and liquidity of the floating and
variable rate securities held by the Funds and Portfolios, including
Participation Certificates, on the basis of published financial information
and reports of the rating agencies and other bank analytical services to
which the Funds and Portfolios may subscribe. Although these instruments may
be sold by a Fund or Portfolio, it is intended that they be held until
maturity.
Past periods of high inflation, together with the fiscal measures adopted
to attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the
underlying floating or variable rate securities may change with changes in
interest rates generally, the floating or variable rate nature of the
underlying floating or variable rate securities should minimize changes in
value of the instruments. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation and the risk of potential
capital depreciation is less than would be the case with a portfolio of fixed
rate securities. A Fund's or Portfolio's portfolio may contain floating or
variable rate securities on which stated minimum or maximum rates, or maximum
rates set by state law, limit the degree to which interest on such floating
or variable rate securities may fluctuate; to the extent it does, increases
or decreases in value may be somewhat greater than would be the case without
such limits. Because the adjustment of interest rates on the floating or
variable rate securities is made in relation to movements of the applicable
banks' "prime rates" or other short-term rate adjustment indices, the
floating or variable rate securities are not comparable to long-
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term fixed rate securities. Accordingly, interest rates on the floating or
variable rate securities may be higher or lower than current market rates for
fixed rate obligations of comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of (i)
the notice period required before a Fund or Portfolio is entitled to receive
payment of the principal amount of the security upon demand or (ii) the
period remaining until the security's next interest rate adjustment.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund or Portfolio with an agreement to
repurchase the securities at an agreed upon price and date. The repurchase
price is generally equal to the original sales price plus interest. Reverse
repurchase agreements are usually for seven days or less and cannot be repaid
prior to their expiration dates. Reverse repurchase agreements involve the
risk that the market value of the portfolio securities transferred may
decline below the price at which the Fund or Portfolio is obliged to purchase
the securities.
Zero Coupon, Payment-in-Kind and Stripped Obligations. The principal and
interest components of United States Treasury bonds with remaining maturities
of longer than ten years are eligible to be traded independently under the
Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that
of United States Treasury bills with comparable maturities.
Zero coupon obligations are sold at a substantial discount from their
value at maturity and, when held to maturity, their entire return, which
consists of the amortization of discount, comes from the difference between
their purchase price and maturity value. Because interest on a zero coupon
obligation is not distributed on a current basis, the obligation tends to be
subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying securities with similar maturities.
The value of zero coupon obligations appreciates more than such ordinary
interest-paying securities during periods of declining interest rates and
depreciates more than such ordinary interest-paying securities during periods
of rising interest rates. Under the stripped bond rules of the Internal
Revenue Code of 1986, as amended, investments by a Fund or Portfolio in zero
coupon obligations will result in the accrual of interest income on such
investments in advance of the receipt of the cash corresponding to such
income.
Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the
coupon payments and principal payment that will be generated by this security
separately. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities, Treasury Investment Growth Receipts and generic Treasury
Receipts, are examples of stripped U.S. Treasury securities separated into
their component parts through such custodial arrangements.
Payment-in-kind ("PIK") bonds are debt obligations which provide that the
issuer thereof may, at its option, pay interest on such bonds in cash or in
the form of additional debt obligations. Such investments benefit the issuer
by mitigating its need for cash to meet debt service, but also require a
higher rate of return to attract investors who are willing to defer receipt
of such cash. Such investments experience greater volatility in market value
due to changes in interest rates than debt obligations which provide for
regular payments of interest. A Fund or Portfolio will accrue income on such
investments for tax and accounting purposes, as required, which is
distributable to shareholders and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy the Fund's or Portfolio's distribution obligations.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund and Portfolio may elect to treat as liquid, in
accordance with procedures established by the Board of Trustees, certain
investments in restricted securities for which there may be a secondary
market of qualified institutional buyers as contemplated by Rule 144A under
the Securities Act of 1933, as amended (the "Securities Act") and commercial
obligations issued in reliance on the so-called "private placement" exemption
from regis-
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tration afforded by Section 4(2) of the Securities Act ("Section 4(2)
paper"). Rule 144A provides an exemption from the registration requirements
of the Securities Act for the resale of certain restricted securities to
qualified institutional buyers. Section 4(2) paper is restricted as to
disposition under the federal securities laws, and generally is sold to
institutional investors such as a Fund or Portfolio who agree that they are
purchasing the paper for investment and not with a view to public
distribution. Any resale of Section 4(2) paper by the purchaser must be in an
exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid
market for Rule 144A securities or Section 4(2) paper will develop or be
maintained. The Trustees have adopted policies and procedures for the purpose
of determining whether securities that are eligible for resale under Rule
144A and Section 4(2) paper are liquid or illiquid for purposes of the
limitation on investment in illiquid securities. Pursuant to those policies
and procedures, the Trustees have delegated to the advisers the determination
as to whether a particular instrument is liquid or illiquid, requiring that
consideration be given to, among other things, the frequency of trades and
quotes for the security, the number of dealers willing to sell the security
and the number of potential purchasers, dealer undertakings to make a market
in the security, the nature of the security and the time needed to dispose of
the security. The Trustees will periodically review the Funds' and
Portfolios' purchases and sales of Rule 144A securities and Section 4(2)
paper.
Stand-By Commitments. In a put transaction, a Fund or Portfolio acquires
the right to sell a security at an agreed upon price within a specified
period prior to its maturity date, and a stand-by commitment entitles a Fund
or Portfolio to same-day settlement and to receive an exercise price equal to
the amortized cost of the underlying security plus accrued interest, if any,
at the time of exercise. Stand-by commitments are subject to certain risks,
which include the inability of the issuer of the commitment to pay for the
securities at the time the commitment is exercised, the fact that the
commitment is not marketable by a Fund or Portfolio, and that the maturity of
the underlying security will generally be different from that of the
commitment.
Securities Loans. To the extent specified in its Prospectus, each Fund and
Portfolio is permitted to lend its securities to broker-dealers and other
institutional investors in order to generate additional income. Such loans of
portfolio securities may not exceed 30% of the value of a Fund's or
Portfolio's total assets. In connection with such loans, a Fund or Portfolio
will receive collateral consisting of cash, cash equivalents, U.S. Government
securities or irrevocable letters of credit issued by financial institutions.
Such collateral will be maintained at all times in an amount equal to at
least 102% of the current market value plus accrued interest of the
securities loaned. A Fund or Portfolio can increase its income through the
investment of such collateral. A Fund or Portfolio continues to be entitled
to the interest payable or any dividend-equivalent payments received on a
loaned security and, in addition, to receive interest on the amount of the
loan. However, the receipt of any dividend-equivalent payments by a Fund or
Portfolio on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. A Fund or Portfolio might experience risk of loss if the
institutions with which it has engaged in portfolio loan transactions breach
their agreements with such Fund or Portfolio. The risks in lending portfolio
securities, as with other extensions of secured credit, consist of possible
delays in receiving additional collateral or in the recovery of the
securities or possible loss of rights in the collateral should the borrower
experience financial difficulty. Loans will be made only to firms deemed by
the advisers to be of good standing and will not be made unless, in the
judgment of the advisers, the consideration to be earned from such loans
justifies the risk.
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, New Growth Opportunities Fund
and the Capital Growth Fund, it is a fundamental policy of each Fund that
when the Fund holds no portfolio securities except interests
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in the Portfolio in which it invests, the Fund's investment objective and
policies shall be identical to the Portfolio's investment objective and
policies, except for the following: a Fund (1) may invest more than 10% of
its net assets in the securities of a registered investment company, (2) may
hold more than 10% of the voting securities of a registered investment
company, and (3) will concentrate its investments in the investment company.
It is a fundamental investment policy of each such Fund that when the Fund
holds only portfolio securities other than interests in the Portfolio, the
Fund's investment objective and policies shall be identical to the investment
objective and policies of the Portfolio at the time the assets of the Fund
were withdrawn from the Portfolio.
Each Fund and Portfolio may not:
(1) borrow money, except that each Fund and Portfolio may borrow money
for temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33-1/3% of the value of its total
assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings.
Any borrowings representing more than 5% of a Fund's or Portfolio's total
assets must be repaid before the Fund or Portfolio may make additional
investments;
(2) make loans, except that each Fund and Portfolio may: (i) purchase
and hold debt instruments (including without limitation, bonds, notes,
debentures or other obligations and certificates of deposit, bankers'
acceptances and fixed time deposits) in accordance with its investment
objectives 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, New Growth 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, New Growth 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
18
<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
19
<PAGE>
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 year ending October 31, 1997, the annual rate of portfolio
turnover for the New Growth Opportunities Portfolio 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
20
<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
21
<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
22
<PAGE>
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:
<TABLE>
<CAPTION>
Since Date of Date of
One Five Fund Fund Class
Fund Year Years Inception Inception Introduction
- ------------------------- ----- ------ --------- --------- ------------
<S> <C> <C> <C> <C> <C>
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>
Since Date of Date of
One Five Fund Fund Class
Fund Year Years Inception Inception Introduction
- ------------------------- ----- ------ --------- --------- ------------
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
27
<PAGE>
Value of Value of
Initial Capital Value of Fund
$10,000 Gains Reinvested Inception
Investment Distributions Dividends Total Value Date
----------- -------------- --------------- ------------ -----------
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:
<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>
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>
Value of Value of
Initial Capital Value of
Period Ended $10,000 Gains Reinvested
October 31, 1996 Investment Distributions Dividends Total Value
- ---------------- ---------- ------------- ----------- -----------
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
32
<PAGE>
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
33
<PAGE>
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
34
<PAGE>
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-
35
<PAGE>
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. .9However,
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.
36
<PAGE>
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.
37
<PAGE>
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 exemptins 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-
38
<PAGE>
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, International Equity
Portfolio and New Growth Opportunities 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. Effective August 21, 1995, each Trustee of the Vista Funds
receives a quarterly retainer of $12,000 and an additional per meeting fee of
$1,500. Members of committees receive a meeting fee only if the committee
meeting is held on a day other than a day on which a regularly scheduled
meeting is held. Prior to August 21, 1995, the quarterly retainer was $9,000
and the per-meeting fee was $1,000. The Chairman of the Trustees and the
Chairman of the Investment Committee each receive a 50% increment over
regular Trustee total compensation for serving in such capacities for all the
investment companies advised by the adviser.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 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
40
<PAGE>
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
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>
<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>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Accrued from
as Fund Expenses "Fund Complex" (1)
----------------- ------------------
<S> <C> <C>
Fergus Reid, III, Trustee $7,511 $90,000
Richard E. Ten Haken, Trustee 4,222 58,500
William J. Armstrong, Trustee 4,735 58,500
John R.H. Blum, Trustee 5,445 60,000
Joseph J. Harkins, Trustee 6,139 60,000
H. Richard Vartabedian, Trustee 5,525 90,000
Stuart W. Cragin, Jr., Trustee 3,977 60,000
Irving L. Thode, Trustee 4,728 60,000
W. Perry Neff, Trustee -- 43,500
Ronald R. Eppley, Jr., Trustee -- 43,500
W.D. MacCallan, Trustee -- 42,000
</TABLE>
- ------------
(1) 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.
41
<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 10% of
the highest annual compensation received from the Covered Funds multiplied by
the number of such Trustee's years of service (not in excess of 10 years)
completed with respect to any of the Covered Funds. Such benefit is payable
to each eligible Trustee in monthly installments for the life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years
of service classifications. 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, 7, 8 and 7, respectively.
Highest Annual Compensation Paid by All Vista Funds
-----------------------------------------------------------
$40,000 $45,000 $50,000 $55,000 $60,000
Years of
Service Estimated Annual Benefits upon Retirement
- ------------ ---------------------------------------------------------
10 $40,000 $45,000 $50,000 $55,000 $60,000
9 36,000 40,500 45,000 49,500 54,000
8 32,000 36,000 40,000 44,000 48,000
7 28,000 31,500 35,000 38,500 42,000
6 24,000 27,000 30,000 33,000 36,000
5 20,000 22,500 25,000 27,500 30,000
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 have 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 $62,500, 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 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
42
<PAGE>
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their
duties.
As of January 31, 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-Adviser
Chase acts as investment adviser to the Funds or Portfolios pursuant to an
Investment Advisory Agreement, dated as of May 6, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase is responsible for investment decisions for the Funds or Portfolios.
Pursuant to the terms of the Advisory Agreement, Chase provides the Funds or
Portfolios with such investment advice and supervision as it deems necessary
for the proper supervision of the Funds' or Portfolios' investments. The
advisers continuously provide investment programs and determine from time to
time what securities shall be purchased, sold or exchanged and what portion
of the Funds' or Portfolios' assets shall be held uninvested. The advisers to
the Funds or Portfolios furnish, at their own expense, all services,
facilities and personnel necessary in connection with managing the
investments and effecting portfolio transactions for the Funds or Portfolios.
The Advisory Agreement for the Funds or Portfolios will continue in effect
from year to year only if such continuance is specifically approved at least
annually by the Board of Trustees or by vote of a majority of a Fund's or
Portfolio's outstanding voting securities and by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any
such party, at a meeting called for the purpose of voting on such Advisory
Agreement.
Under the Advisory Agreement, the adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Funds
and Portfolios with greater opportunities and flexibility in accessing
investment expertise.
Pursuant to the terms of the Advisory Agreement and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without
penalty by the Trust on behalf of the Funds on not more than 60 days', nor
less than 30 days', written notice when authorized either by a majority vote
of a Fund's shareholders or by a vote of a majority of the Board of Trustees
of the Trust, or by the adviser or sub-adviser on not more than 60 days', nor
less than 30 days', written notice, and will automatically terminate in the
event of its "assignment" (as defined in the 1940 Act). The advisory
agreements provide that the adviser or sub-adviser under such agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for wilful
misfeasance, bad faith or gross negligence in the performance of its duties,
or by reason of reckless disregard of its obligations and duties thereunder.
With respect to the Equity Funds or Equity Portfolios, the equity research
team of the adviser looks for two key variables when analyzing stocks for
potential investment by equity portfolios: value and momentum. To uncover
these qualities, the team uses a combination of quantitative analysis,
fundamental research and computer technology to help identify undervalued
stocks.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense
limitation applicable to the Funds imposed by the securities laws or
regulations thereunder of any state in which the shares of the Funds are
qualified for sale, as such limitations may be raised or lowered from time to
time, the adviser shall reduce its advisory fee (which fee is described
below) to the extent of its share of such excess expenses. The amount of any
such reduction to be borne by the adviser shall be deducted from the monthly
advisory
43
<PAGE>
fee otherwise payable with respect to the Funds during such fiscal year; and
if such amounts should exceed the monthly fee, the adviser shall pay to a
Fund its share of such excess expenses no later than the last day of the
first month of the next succeeding fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement
provides that Chase may render services through its own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser of the Fund and are under the common control of Chase as
long as all such persons are functioning as part of an organized group of
persons, managed by authorized officers of Chase.
Chase, on behalf of the Funds or Portfolios (except the American Value
Fund), has entered into an investment sub-advisory agreement dated as of May
6, 1996 with Chase Asset Management, Inc. ("CAM"). With respect to the
American Value Fund, Chase has entered into an investment sub-advisory
agreement with Van Deventer & Hoch ("VDH") dated as of May 6, 1996. With
respect to the day-to-day management of the Funds or Portfolios, under the
sub-advisory agreements, the sub-advisers make decisions concerning, and
place all orders for, purchases and sales of securities and helps maintain
the records relating to such purchases and sales. The sub-advisers may, in
their discretion, provide such services through their own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser to the Company under applicable laws and are under the
common control of Chase; provided that (i) all persons, when providing
services under the sub-advisory agreement, are functioning as part of an
organized group of persons, and (ii) such organized group of persons is
managed at all times by authorized officers of the sub-advisers. This
arrangement will not result in the payment of additional fees by the Funds.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range
of banking and investment services to customers throughout the United States
and around the world. 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:
44
<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
45
<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, Capital
Growth Fund and New Growth Opportunities 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.
46
<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
47
<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
48
<PAGE>
Printing, Postage Sales Advertising &
Fund and Handling Compensation Administrative Filings
- ---- ----------------- ------------ ----------------------
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:
49
<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.
50
<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)
51
<PAGE>
Fiscal Year-Ended October 31,
------------------------------------------------------------------------------------------
1994 1995 1996
Fund payable waived payable waived payable waived
- ----
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.
52
<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
53
<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.
54
<PAGE>
Principal Holders
As of January 31, 1997, the following persons owned of record 5% or more
of the outstanding shares of the following classes of the following Funds:
<TABLE>
<CAPTION>
<S> <C>
VISTA AMERICAN VALUE FUND
CHEMICAL BANK NY 48.06%
INVESTMENT SERVICES DEPT
270 PARK AVENUE 31ST FLR
NEW YORK, NY 10017-2014
CHEMICAL BANK 6.89%
CUSTODIAN FOR THE IRA OF
DONALD F GRANNIS
100 NO SAN RAFAEL AVENUE
PASADENA CA 91105
VISTA BALANCED FUND--A SHARES
TESTA AND CO 16.65%
C/O CHASE MANHATTAN BANK
ATTN MUTUAL FDS/ T-C
PO BOX 1412
ROCHESTER NY 14603-1412
CHASE MANHATTAN BANK N/A 14.95%
GLOBAL SEC SERVICES OMNIBUS
ATTN ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN NY 11245
THE INSTITUTE OF ELECTRICAL AND 11.15%
ELECTRONICS ENGINEERS INC
445 HOES LANE
PO BOX 1331
PISCATAWAY NJ 08855-1331
TRULIN & CO 8.93%
C/O CHASE MANHATTAN BANK
ATTN MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
VISTA BOND FUND--A SHARES
PBG EB 40.82%
1211 6TH AVENUE
NEW YORK NY 10036-8701
55
<PAGE>
PBG EB 25.91%
1211 6TH AVENUE
NEW YORK NY 10036-8701
PERLE BURNET & CO 9.55%
KENNETH BURNETT JT TEN
6101 SHERIDAN RD E-35D
CHICAGO IL 60660-2801
IFTC CUST IRA A/C 6.92%
DENNIS A CHENOVICK
905 HIGHLAND ST
HELENA MT 59601-5119
VISTA BOND FUND--B SHARES
MARILYN M WHITE TTEE 22.58%
U/A DTD AUG 30 84
MARILYN M WHITE SURVIVORS TRUST
6211 PROSPECT RD
SAN JOSE CA 95129-4740
NFSC FEBO # AMG-584428 21.15%
NFSC/FMTC IRA
FBO PHYLLIS F FREED
773 VILLA PORTFINO CIRCLE
DEERFIELD BEACH FL 33442-8061
PHYLLIS REUDY TTEE 10.80%
U/A DTD JUN 30 84
MATHILDE R RUEDY TRUST
195 CYPRESS PL
SAUSALITO CA 94965-1566
NFSC FEBO # AMG-583553 10.71%
MYRTLE H. FLETCHER TRUST
STEVEN B GREENFIELD JR TTE
3200 NORTH MILITARY TRAIL
SUITE 201
BOCA RATON FL 33431-6311
IFTC CUST IRA A/C 5.56%
SEYMOUR SPIEGEL
6 WISTERIA PL
SYOSSET NY 11791-2824
56
<PAGE>
VISTA BOND FUND--INSTITUTIONAL SHARES
TRULIN & CO 65.57%
C/O CHASE MANHATTAN BANK
ATTN MUTUAL FDS /T-C
PO BOX 1412 ROCHESTER NY
14603-1412
TESTA AND CO 11.30%
C/O CHASE MANHATTAN BANK NA
ATTN MUTUAL FUNDS/ T-C
P0 BOX 1412
ROCHESTER NY 14603-1412
CUDD & COMPANY 6.82%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FL
NEW YORK NY 10036-8701
TEXAS COMMERCE BANK NA 5.29%
AVESTA
MSC 101111F 342
ASSET TRADING UNIT
PO BOX 2558
HOUSTON TX 77252-2558
VISTA CAPITAL GROWTH FUND--A SHARES
CHARLES SCHWAB & CO INC 6.83%
REINVEST ACCOUNT
ATTN MUTUAL FUNDS
DEPT 101 MONTGOMERY STREET
SAN FRANCISCO CA 94104-4122
VISTA CAPITAL GROWTH FUND--INSTITUTIONAL SHARES
BANKERS TRUST OF THE SOUTHWEST 38.46%
AS TTEE FOR THE MAPCO INC & SUBSID
PROFIT SHARING & SAVINGS PLAN
ATTN DEBORAH L TURRI
648 GRASSMERE PARK DRIVE
NASHVILLE TN 37211-3658
TESTA AND CO 30.80%
C/O CHASE MANHATTAN BANK NA
ATTN MUTUAL FUNDS/ T-C
PO BOX 1412
ROCHESTER NY 14603-1412
57
<PAGE>
BANKERS TRUST TRUSTEE 20.68%
ALIANCE COAL CORP PSSP
ATTN ELIJAH
OUTEN 34 EXCHANGE PL
JERSEY CITY NJ 07302-3901
INTERNATIONAL WIRE 5.26%
RETIREMENT SAVINGS PLAN
770 BROADWAY FLR 10
NEW YORK NY 10003-9522
VISTA GROWTH AND INCOME FUND--INSTITUTIONAL SHARES
CHASE MANHATTAN BANK N/A 93.21%
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 30.44%
PO BOX 2558 16HCB09
HOUSTON TX 77252-2558
HAMILL AND COMPANY 8.19%
FBO BURRUS & MATTHEWS
PO BOX 2558 16 HCB09
HOUSTON TX 77252
A MARY GILBERT 6.08%
C/O STARR & CO
350 PARK AVENUE
NEW YORK NY 10022-6022
VISTA LARGE CAP EQUITY FUND--B SHARES
NFSC FEBO 3 CL5-385808 17.19%
ALBERT HORNBLASS
BERNICE M HORNBLASS
156 MAPLE ST
ENGLEWOOD NJ 07631-3630
PETER M GOLD 13.87%
250 E 54TH ST APT 34D
NEW YORK NY 10022-4816
58
<PAGE>
KYLE S KIESAU & HUGH W BARROW 10.39%
& DEAN E DAVIS TTEES
UA 1-1-78 KIESAU BARROW
& DAVIS PA 401K P/S/P
118 DILLON DRIVE
SPARTANBURG SC 29307-1018
WHEAT FIRST CUST A/C 8060-3246 8.55%
FBO GREGORY VOLOK
U/A DTD FEB 23 96
IRA A/C #8060-3246
172 LAURIE LN
PHILADELPHIA PA 19115-2707
NFSC FEBO # OJR-229342 7.27%
SOUTH ORANGE COUNTY SURGICAL M
KENNETH DECK TTEE
32052 COOK LANE
SAN JUAN CAPISTRANO CA 92675-3947
VISTA LARGE CAP EQUITY FUND--INSTITUTIONAL SHARES
TRULIN & CO 26.76%
C/O CHASE MANHATTAN BANK
ATTN MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
TESTA AND CO 7.01%
C/O CHASE MANHATTAN BANK NA
ATTN MUTUAL FUNDS/ T-C
PO BOX 1412
ROCHESTER NY 14603-1412
CHEMICAL BANK 5.70%
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 46.63%
HEALTH BENEFIT TRUST
C/O RICHARD PECK D113
1295 STATE STREET
SPRINGFIELD MA 01111-0001
59
<PAGE>
VOLUNTARY HOSPITAL OF 16.05%
AMERICA SOUTHWEST INC
14901 QUORUM DR STE 300
DALLAS TX 75240-6731
CHEMICAL BANK 7.90%
PERSONAL CUSTODY
270 PARK AVENUE
NEW YORK NY 10017-2014
VISTA SHORT-TERM BOND FUND--INSTITUTIONAL SHARES
TRULIN & CO 60.34%
C/O CHASE MANHATTAN BANK
ATTN MUTUAL FDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
TESTA AND CO 12.00%
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 12.78%
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 99.56%
GLOBAL SEC SERVICES OMNIBUS
CMB THRIFT INCENTIVE PLAN
ATTN ALEX KWONG
3 CHASE METRO TECH CENTER FLR 7
BROOKLYN NY 11245-0001
VISTA US GOVERNMENT SECURITIES FUND--A SHARES
HAMILL & COMPANY 28.26%
PO BOX 2558 16HCB09
HOUSTON TX 77252-2558
60
<PAGE>
CHEMICAL BANK 10.06%
CUSTODIAN FOR THE IRA OF
ROSE FAGGAN
7 E 14TH ST APT 19-T
NEW YORK NY 10003-3127
CHEMICAL BANK 9.50%
CUSTODIAN FOR IRA OF
EDWARD MCCABE
226 WEST BROADWAY
NEW YORK NY 10013-2408
CHEMICAL BANK 9.28%
CUSTODIAN FOR 401 K FBO
STRUCTURE TONE INC
ATTN MARGARET LONG
4 NY PLAZA 12TH FLR
NEW YORK NY 10004
J JOHN MANN 6.35%
21 CLAREMONT AVENUE
NEW YORK NY 10027-6802
CHEMICAL BANK 6.32%
CUSTODIAN FOR 401 K FBO
R W ZANT CO
ATTN MARGARET LONG
4 NEW YORK PLAZA
NEW YORK NY 10004-2413
VISTA U.S. GOVERNMENT SECURITIES
FUND--INSTITUTIONAL SHARES
CHEMICAL BANK 6.33%
FBA JERICHO RBS PLASTICS
200 JERICHO QUAD 2ND NE FL
PO BOX 2000
JERICHO NY 11753
CHEMICAL BANK 6.30%
FBA JERICHO ROCKAWAY
200 JERICHO QUADE 2ND NE FLR
PO BOX 2000
JERICHO NY 11753
CHEMICAL BANK 5.11%
FBA JERICHO
NORTH GENERAL HOSPITAL
200 JERICHO QUAD 2ND NE FL
PO BOX 2000
JERICHO NY 11753
61
<PAGE>
VISTA U.S. TREASURY INCOME FUND--A SHARES
TRULIN & CO 24.96%
C/O CHASE MANHATTAN BANK
ATTN MUTUAL FUNDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
CARRIERS ILA CFS TRUST FUND 14.57%
C/O CCC INC
ONE EVERTRUST PLAZA
JERSEY CITY NJ 07302-3051
CARRIER ILA CONTAINER ROYALTY FUND 9.71%
ONE EVERTRUST PLAZA
JERSEY CITY NJ 07302-3051
TESTA AND CO 7.11%
C/O CHASE MANHATTAN BANK NA
ATTN MUTUAL FUNDS/ T-C
PO BOX 1412
ROCHESTER NY 14603-1412
</TABLE>
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.
62
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Specimen Computations of Offering Prices Per Share
U.S. Treasury Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 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
63
<PAGE>
Capital Growth Fund (specimen computations)
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
64
<PAGE>
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
65
<PAGE>
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>
66
<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>
STATEMENT OF
ADDITIONAL INFORMATION
FEBRUARY 28, 1997
VISTA(SM) EUROPEAN FUND
VISTA(SM) INTERNATIONAL EQUITY FUND
VISTA(SM) JAPAN FUND
VISTA(SM) SOUTHEAST ASIAN FUND
101 Park Avenue, New York, New York 10178
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the Prospectuses offering shares
of Vista International Equity Fund, Vista European Fund, Vista Japan Fund and
Vista Southeast Asian Fund. Any references to a "Prospectus" in this Statement
of Additional Information is a reference to one or more of the foregoing
Prospectuses, as the context requires. Copies of each Prospectus may be obtained
by an investor without charge by contacting Vista Fund Distributors, Inc.
("VFD"), the Funds' distributor (the "Distributor"), at the above-listed
address.
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
For more information about your account, simply call or write the Vista Service
Center at:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 6414
INTL-SAI
<PAGE>
<TABLE>
<CAPTION>
Table of Contents Page
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<S> <C>
The Funds .............................................................................. 3
Investment Policies and Restrictions ................................................... 3
Performance Information ................................................................ 19
Determination of Net Asset Value ....................................................... 24
Purchases, Redemptions and Exchanges ................................................... 24
Tax Matters ............................................................................ 27
Management ............................................................................. 34
Independent Accountants ................................................................ 45
Certain Regulatory Matters ............................................................. 45
General Information .................................................................... 46
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
</TABLE>
2
<PAGE>
THE FUNDS
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists of
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 Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The International Equity Fund 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 such Fund. The International Equity Fund invests in the International Equity
Portfolio (the "Portfolio"). The Portfolio is a New York trust with its
principal office in New York. Certain qualified investors, in addition to the
Fund, may invest in the Portfolio. For purposes of this Statement of Additional
Information, any information or references to the Portfolio refer to the
operations and activities after implementation of the master fund/feeder fund
structure.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. In the case of the Portfolio, a
separate Board of Trustees, with the same members as the Board of Trustees of
the Trust, provides broad supervision. The Chase Manhattan Bank ("Chase") is the
investment adviser for the Funds (other than the Vista International Equity
Fund, which does not have its own adviser) and the Portfolio. Chase also serves
as the administrator of the Trust, including the Funds, and is the administrator
of the Portfolio. 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 Portfolio are not affiliated with the investment adviser or
sub-advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies of each Fund and
Portfolio. The following information supplements and should be read in
conjunction with the related sections of each Prospectus. For descriptions of
the securities ratings of Moody's Investors Service, Inc. ("Moody's"), Standard
& Poor's Corporation ("S&P") and Fitch Investors Service, Inc. ("Fitch"), see
Appendix B.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities of
one year or less), U.S. Treasury notes (maturities of one to ten years) and U.S.
Treasury bonds (generally maturities of greater than ten years); and (2)
obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow any
amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain obligations
of the U.S. Government agency or instrumentality or (d) the credit of the agency
or instrumentality. Agencies and instrumentalities of the U.S. Government
include but are not limited to: Federal Land Banks, Federal Financing Banks,
Banks for Cooperatives, Federal Intermediate Credit Banks, Farm Credit Banks,
Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, Student Loan Marketing Association, United States
Postal Service, Chrysler Corporate Loan Guarantee Board, Small Business
Administration, Tennessee Valley Authority and any other enterprise established
or sponsored by the U.S. Government. Certain U.S. Government Securities,
including U.S. Treasury bills, notes and bonds, Government National Mortgage
Association certificates and Federal Housing Administration debentures, are
supported by the full faith and credit of the United States. Other U.S.
Government Securities are issued or guaranteed by federal agencies or government
sponsored enterprises and are not supported by
3
<PAGE>
the full faith and credit of the United States. These securities include
obligations that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of Federal Home Loan Banks, and obligations
that are supported by the creditworthiness of the particular instrumentality,
such as obligations of the Federal National Mortgage Association or Federal Home
Loan Mortgage Corporation. For a description of certain obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small Business
Administration, Federal Aviation Administration, Department of Defense, Bureau
of Indian Affairs and Private Export Funding Corporation, which often provide
higher yields that are available from the more common types of government-backed
instruments. However, such specialized instruments may only be available from a
few sources in limited amounts, or only in very large denominations; they may
also require specialized capability in portfolio servicing and in legal matters
related to government guarantees. While they may frequently offer attractive
yields, the limited-activity markets of many of these securities means that, if
a Fund or Portfolio were required to liquidate any of them, it might not be able
to do so advantageously; accordingly, each Fund and Portfolio investing in such
securities normally to hold such securities to maturity or pursuant to
repurchase agreements, and would treat such securities (including repurchase
agreements maturing in more than seven days) as illiquid for purposes of its
limitation on investment in illiquid securities.
Bank Obligations. Investments in bank obligations are limited to those of
U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are insured
by either the Bank Insurance Fund or the Savings Association Insurance Fund of
the Federal Deposit Insurance Corporation, and foreign banks (including their
U.S. branches) having total assets in excess of $10 billion (or the equivalent
in other currencies), and such other U.S. and foreign commercial banks which are
judged by the advisers to meet comparable credit standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit is
a short-term negotiable certificate issued by a commercial bank against funds
deposited in the bank and is either interest-bearing or purchased on a discount
basis. A bankers' acceptance is a short-term draft drawn on a commercial bank by
a borrower, usually in connection with an international commercial transaction.
The borrower is liable for payment as is the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Fixed time
deposits are obligations of branches of United States banks or foreign banks
which are payable at a stated maturity date and bear a fixed rate of interest.
Although fixed time deposits do not have a market, there are no contractual
restrictions on the right to transfer a beneficial interest in the deposit to a
third party. Fixed time deposits subject to withdrawal penalties and with
respect to which a Fund or Portfolio cannot realize the proceeds thereon within
seven days are deemed "illiquid" for the purposes of its restriction on
investments in illiquid securities. Deposit notes are notes issued by commercial
banks which generally bear fixed rates of interest and typically have original
maturities ranging from eighteen months to five years.
Banks are subject to extensive governmental regulations that may limit both
the amounts and types of loans and other financial commitments that may be made
and the interest rates and fees that may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operations of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations. Bank obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligations or
by government regulation. Investors should also be aware that securities of
foreign banks and foreign branches of United States banks may involve foreign
investment risks in addition to those relating to domestic bank obligations.
4
<PAGE>
Depositary Receipts. A Fund or Portfolio will limit its investment in
Depository Receipts not sponsored by the issuer of the underlying security to no
more than 5% of the value of its net assets (at the time of investment). A
purchaser of an unsponsored Depositary Receipt may not have unlimited voting
rights and may not receive as much information about the issuer of the
underlying securities as with a sponsored Depositary Receipt.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unsecured promissory notes issued by corporations in order to
finance their current operations. A variable amount master demand note (which is
a type of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under a letter agreement between a
commercial paper issuer and an institutional lender pursuant to which the lender
may determine to invest varying amounts.
ECU Obligations. The specific amounts of currencies comprising the ECU may
be adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies. The Trustees do not
believe that such adjustments will adversely affect holders of ECU-denominated
securities or the marketability of such securities.
Supranational Obligations. Supranational organizations include
organizations such as The World Bank, which was chartered to finance development
projects in developing member countries; the European Community, which is a
twelve-nation organization engaged in cooperative economic activities; the
European Coal and Steel Community, which is an economic union of various
European nations steel and coal industries; and the Asian Development Bank,
which is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations of the Asian and
Pacific regions.
Repurchase Agreements. A Fund or Portfolio will enter into repurchase
agreements only with member banks of the Federal Reserve System and securities
dealers believed creditworthy, and only if fully collateralized by securities in
which such Fund or Portfolio is permitted to invest. Under the terms of a
typical repurchase agreement, a Fund or Portfolio would acquire an underlying
instrument for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase the instrument and the Fund
or Portfolio to resell the instrument at a fixed price and time, thereby
determining the yield during the Fund's or Portfolio's holding period. This
procedure results in a fixed rate of return insulated from market fluctuations
during such period. A repurchase agreement is subject to the risk that the
seller may fail to repurchase the security. Repurchase agreements are considered
under the 1940 Act to be loans collateralized by the underlying securities. All
repurchase agreements entered into by a Fund or Portfolio will be fully
collateralized at all times during the period of the agreement in that the value
of the underlying security will be at least equal to 102% of the amount of the
loan, including the accrued interest thereon, and the Fund or Portfolio or its
custodian or sub-custodian will have possession of the collateral, which the
Board of Trustees believes will give it a valid, perfected security interest in
the collateral. Whether a repurchase agreement is the purchase and sale of a
security or a collateralized loan has not been conclusively established. This
might become an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities would not be
owned by the Fund or Portfolio, but would only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, a Fund or Portfolio
may suffer time delays and incur costs in connection with the disposition of the
collateral. The Board of Trustees believes that the collateral underlying
repurchase agreements may be more susceptible to claims of the seller's
creditors than would be the case with securities owned by a Fund or Portfolio.
Repurchase agreements maturing in more than seven days are treated as illiquid
for purposes of the Funds' and Portfolios' restrictions on purchases of illiquid
securities. Repurchase agreements are also subject to the risks described below
with respect to stand-by commitments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund or Portfolio with an agreement to repurchase
the securities at an agreed upon price and date. The repurchase price is
generally equal to the original sales price plus interest. Reverse repurchase
agree-
5
<PAGE>
ments are usually for seven days or less and cannot be repaid prior to their
expiration dates. Reverse repurchase agreements involve the risk that the market
value of the portfolio securities transferred may decline below the price at
which the Fund or Portfolio is obliged to purchase the securities.
Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will normally
be purchased. When a commitment to purchase a security on a forward commitment
basis is made, procedures are established consistent with the General Statement
of Policy of the Securities and Exchange Commission concerning such purchases.
Since that policy currently recommends that an amount of the respective Fund's
or Portfolio's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, a separate account of such Fund
or Portfolio consisting of cash 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 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.
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.
Warrants and Rights. Warrants basically are options to purchase equity
securities at a specified price for a specific period of time. Their prices do
not necessarily move parallel to the prices of the underlying securities. Rights
are similar to warrants but normally have a shorter duration and are distributed
directly by the issuer to shareholders. Rights and warrants have no voting
rights, receive no dividends and have no rights with respect to the assets of
the issuer.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund and the 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
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buyers as contemplated by Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act") and commercial obligations issued in reliance on the
so-called "private placement" exemption from registration afforded by Section
4(2) of the Securities Act. ("Section 4(2) paper") Rule 144A provides an
exemption from the registration requirements of the Securities Act for the
resale of certain restricted securities to qualified institutional buyers.
Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as a Fund or
Portfolio who agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale of Section 4(2) paper by the
purchaser must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid market
for Rule 144A securities or Section 4(2) paper will develop or be maintained.
The Trustees have adopted policies and procedures for the purpose of determining
whether securities that are eligible for resale under Rule 144A and Section 4(2)
paper are liquid or illiquid for purposes of the limitation on investment in
illiquid securities. Pursuant to those policies and procedures, the Trustees
have delegated to the advisers the determination as to whether a particular
instrument is liquid or illiquid, requiring that consideration be given to,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to sell and security and the number of potential
purchasers, dealer undertakings to make a market in the security, the nature of
the security and the time needed to dispose of the security. The Trustees will
periodically review the Funds' and Portfolio's purchases and sales of Rule 144A
securities and Section 4(2) paper.
Stand-By Commitments. In a put transaction, a Fund or Portfolio acquires
the right to sell a security at an agreed upon price within a specified period
prior to its maturity date, and a stand-by commitment entitles a Fund or
Portfolio to same-day settlement and to receive an exercise price equal to the
amortized cost of the underlying security plus accrued interest, if any, at the
time of exercise. Stand-by commitments are subject to certain risks, which
include the inability of the issuer of the commitment to pay for the securities
at the time the commitment is exercised, the fact that the commitment is not
marketable by a Fund or Portfolio, and that the maturity of the underlying
security will generally be different from that of the commitment.
Securities Loans. To the extent specified in its Prospectus, each Fund and
Portfolio is permitted to lend its securities to broker-dealers and other
institutional investors in order to generate additional income. Such loans of
portfolio securities may not exceed 30% of the value of a Fund's or Portfolio's
total assets. In connection with such loans, a Fund or Portfolio will receive
collateral consisting of cash, cash equivalents, U.S. Government securities or
irrevocable letters of credit issued by financial institutions. Such collateral
will be maintained at all times in an amount equal to at least 102% of the
current market value plus accrued interest of the securities loaned. A Fund or
Portfolio can increase its income through the investment of such collateral. A
Fund or Portfolio continues to be entitled to the interest payable or any
dividend-equivalent payments received on a loaned security and, in addition, to
receive interest on the amount of the loan. However, the receipt of any
dividend-equivalent payments by a Fund or Portfolio on a loaned security from
the borrower will not qualify for the dividends-received deduction. Such loans
will be terminable at any time upon specified notice. A Fund or Portfolio might
experience risk of loss if the institutions with which it has engaged in
portfolio loan transactions breach their agreements with such Fund or Portfolio.
The risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delays in receiving additional collateral or in the
recovery of the securities or possible loss of rights in the collateral should
the borrower experience financial difficulty. Loans will be made only to firms
deemed by the advisers to be of good standing and will not be made unless, in
the judgment of the advisers, the consideration to be earned from such loans
justifies the risk.
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Funds and the Portfolio
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
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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 and
the Portfolio may invest may be particularly sensitive to changes in prevailing
interest rates or other economic factors, and--like other investments of the
Funds and the Portfolio--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 forecasts such factors and has taken positions in derivative or
similar instruments contrary to prevailing market trends, the Funds and the
Portfolio could be exposed to the risk of a loss. The Funds and/or the Portfolio
may not employ any or all of the strategies described herein, and no assurance
can be given that any strategy used will succeed.
Set forth below is an explanation of the various derivatives strategies and
related instruments the Funds and the Portfolio 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
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that limit. In addition, certain instruments are relatively new and without a
significant trading history. As a result, there is no assurance that an active
secondary market will develop or continue to exist. Finally, over-the-counter
instruments typically do not have a liquid market. Lack of a liquid market for
any reason may prevent a Fund or Portfolio from liquidating an unfavorable
position. Activities of large traders in the futures and securities markets
involving arbitrage, "program trading," and other investment strategies may
cause price distortions in these markets. In certain instances, particularly
those involving over-the-counter transactions, forward contracts, foreign
exchanges or foreign boards of trade, there is a greater potential that a
counterparty or broker may default or be unable to perform on its commitments.
In the event of such a default, a Fund or Portfolio may experience a loss. In
transactions involving currencies, the value of the currency underlying an
instrument may fluctuate due to many factors, including economic conditions,
interest rates, governmental policies and market forces.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by a
Fund or Portfolio.
Options on Securities, Securities Indexes, Currencies and Debt Instruments.
A Fund or Portfolio may PURCHASE, SELL or EXERCISE call and put options on:
securities; securities indexes; currencies; or debt instruments.
Although in most cases these options will be exchange-traded, the Funds and
the Portfolio may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
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 a Fund or Portfolio intends to purchase
pending its ability to invest in such securities in an orderly manner. A Fund or
Portfolio may also use combinations of options to minimize costs, gain exposure
to markets or take advantage of price disparities or market movements. For
example, a Fund or Portfolio may sell put or call options it has previously
purchased or purchase put or call options it has previously sold. These
transactions may result in a net gain or loss depending on whether the amount
realized on the sale is more or less than the premium and other transaction
costs paid on the put or call option which is sold. A Fund or Portfolio may
write a call or put option in order to earn the related premium from such
transactions. Prior to exercise or expiration, an option may be closed out by an
offsetting purchase or sale of a similar option. The Funds will not write
uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund or Portfolio writing a covered call (i.e., where the underlying securities
are held by the Fund or Portfolio) has, in return for the premium on the option,
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price, but has retained the risk of loss should
the price of the underlying securities decline. The writer of an option has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver the underlying securities at the
exercise price.
If a put or call option purchased by a Fund or Portfolio is not sold when
it has remaining value, and if the market price of the underlying security, in
the case of a put, remains equal to or greater than the exercise price or, in
the case of a call, remains less than or equal to the exercise price, such Fund
or Portfolio will lose its entire investment in the option. Also, where a put or
call option on a particular security is purchased to hedge against price
movements in a related security, the price of the put or call option may move
more
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or less than the price of the related security. There can be no assurance that a
liquid market will exist when a Fund or Portfolio seeks to close out an option
position. Furthermore, if trading restrictions or suspensions are imposed on the
options markets, a Fund or Portfolio may be unable to close out a position.
Futures Contracts and Options on Futures Contracts. A Fund on Portfolio may
purchase or sell: interest-rate futures contracts; stock index futures
contracts; foreign currency futures contracts; futures contracts on specified
instruments or indices; and options on these futures contracts ("futures
options").
The futures contracts and futures options may be based on various
instruments or indices in which the Funds and the Portfolio may invest such as
foreign currencies, certificates of deposit, Eurodollar time deposits,
securities indices, economic indices (such as the Consumer Price Indices
compiled by the U.S. Department of Labor).
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 the Portfolio may
simultaneously enter into other transactions involving futures contracts or
futures options in order to minimize costs, gain exposure to markets, or take
advantage of price disparities or market movements. Such strategies may entail
additional risks in certain instances. The Funds and the Portfolio may engage in
cross-hedging by purchasing or selling futures or options on a security or
currency different from the security or currency position being hedged to take
advantage of relationships between the two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Funds and the
Portfolio will only enter into futures contracts or options or futures contracts
which are traded on a U.S. or foreign exchange or board of trade, or similar
entity, or quoted on an automated quotation system.
Forward Contracts. A Fund or Portfolio may use foreign currency and
interest-rate forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments in
different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. The Funds and the
Portfolio may invest in securities denominated in foreign currencies and may, in
addition to buying and selling foreign currency futures contracts and options on
foreign currencies and foreign currency futures, enter into forward foreign
currency exchange contracts to reduce the risks or otherwise take a position in
anticipation of changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be a fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
By entering into a forward foreign currency contract, a Fund or Portfolio "locks
in" the exchange rate between the currency it will deliver and the currency it
will receive for the duration of the contract. As a result, a Fund or Portfolio
reduces its exposure to changes in the value of the currency it will deliver and
increases its exposure to changes in the value of the currency it will exchange
into. The effect on the value of a Fund or Portfolio is similar to selling
securities denominated in one currency and purchasing securities denominated in
another. Transactions that use two foreign currencies are sometimes referred to
as "cross-hedges."
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A Fund or Portfolio may enter into these contracts for the purpose of
hedging against foreign exchange risk arising from investments or anticipated
investments in securities denominated in foreign currencies. A Fund or Portfolio
may also enter into these contracts for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
country to another.
A Fund or Portfolio may also use forward contracts to hedge against changes
in interest-rates, increase exposure to a market or otherwise take advantage of
such changes. An interest-rate forward contract involves the obligation to
purchase or sell a specific debt instrument at a fixed price at a future date.
Interest Rate and Currency Transactions. A Fund or Portfolio may employ
currency and interest rate management techniques, including transactions in
options (including yield curve options), futures, options on futures, forward
foreign currency exchange contracts, currency options and futures and currency
and interest rate swaps. The aggregate amount of a Fund's or Portfolio's net
currency exposure will not exceed the total net asset value of its portfolio.
However, to the extent that a Fund or Portfolio is fully invested while also
maintaining currency positions, it may be exposed to greater combined risk.
The Funds and the Portfolio will only enter into interest rate and currency
swaps on a net basis, i.e., the two payment streams are netted out, with the
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 the Portfolio 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
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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.
Structured Products. A Fund or Portfolio may invest in interests in
entities organized and operated solely for the purpose of restructuring the
investment characteristics of certain other investments. This type of
restructuring involves the deposit with or purchase by an entity, such as a
corporation or trust, or specified instruments (such as commercial bank loans)
and the issuance by that entity of one or more classes of securities
("structured products") backed by, or representing interests in, the underlying
instruments. The cash flow on the underlying instruments may be apportioned
among the newly issued structured products to create securities with different
investment characteristics such as varying maturities, payment priorities and
interest rate provisions, and the extent of the payments made with respect to
structured products is dependent on the extent of the cash flow on the
underlying instruments. A Fund or Portfolio may invest in structured products
which represent derived investment positions based on relationships among
different markets or asset classes.
A Fund or Portfolio may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by a
formula to the price of an underlying instrument. Inverse floaters have coupon
rates that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the Cost of
Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon rate
while any drop in the reference rate of an inverse floater causes an increase in
the coupon rate. A spread trade is an investment position relating to a
difference in the prices or interest rates of two securities where the value of
the investment position is determined by movements in the difference between the
prices or interest rates, as the case may be, of the respective securities. When
a Fund or Portfolio invests in notes linked to the price of an underlying
instrument, the price of the underlying security is determined by a multiple
(based on a formula) of the price of such underlying security. A structured
product may be considered to be leveraged to the extent its interest rate varies
by a magnitude that exceeds the magnitude of the change in the index rate of
interest. Because they are linked to their underlying markets or securities,
investments in structured products generally are subject to greater volatility
than an investment directly in the underlying market or security. Total return
on the structured product is derived by linking return to one or more
characteristics of the underlying instrument. Because certain structured
products of the type in which a Fund or Portfolio may invest may involve no
credit enhancement, the credit risk of those structured products generally would
be equivalent to that of the underlying instruments. A Fund or Portfolio may
invest in a class of structured products that is either subordinated or
unsubordinated to the right of payment of another class. Subordinated structured
products typically have higher yields and present greater risks than
unsubordinated structured products. Although a Fund's or Portfolio's purchase of
subordinated structured products would have similar economic effect to that of
borrowing against the underlying securities, the purchase will not be deemed to
be leverage for purposes of a Fund's or Portfolio's fundamental investment
limitation related to borrowing and leverage.
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Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, an investment in these
structured products may be limited by the restrictions contained in the 1940
Act. Structured products are typically sold in private placement transactions,
and there currently is no active trading market for structured products. As a
result, certain structured products in which a Fund or Portfolio invests may be
deemed illiquid and subject to its limitation on illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security. In
addition, because structured products are typically sold in private placement
transactions, there currently is no active trading market for structured
products.
Additional Restrictions on the Use of Futures and Option Contracts. None of
the Funds is a "commodity pool" (i.e., a pooled investment vehicle which trades
in commodity futures contracts and options thereon and the operator of which is
registered with the CFTC and futures contracts and futures options will be
purchased, sold or entered into only for bona fide hedging purposes, provided
that a Fund may enter into such transactions for purposes other than bona fide
hedging if, immediately thereafter, the sum of the amount 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 the Portfolio 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 the Portfolio are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of a Fund or total beneficial
interests of the Portfolio.
Whenever the Trust is requested to vote on a fundamental policy of the
Portfolio, the Trust will hold a meeting of shareholders of the International
Equity Fund and will cast its votes as instructed by the shareholders of such
Fund.
With respect to the International Equity Fund, it is a fundamental policy
that when the Fund holds no portfolio securities except interests in the
Portfolio, the Fund's investment objective and policies shall be identical to
the Portfolio's investment objective and policies, except for the following: the
Fund (1) may invest more than 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
the 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.
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Each Fund and Portfolio may not:
(1) borrow money, except that each Fund and the Portfolio may borrow
money for temporary or emergency purposes, or by engaging in reverse
repurchase transactions, in an amount not exceeding 33-1/3% of the value of
its total assets at the time when the loan is made and may pledge, mortgage
or hypothecate no more than 1/3 of its net assets to secure such
borrowings. Any borrowings representing more than 5% of total assets must
be repaid before the Fund or Portfolio may make additional investments;
(2) make loans, except that each Fund and the 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 in securities or other instruments backed
by real estate or securities of companies engaged in the real estate
business). Investments by a Fund or Portfolio in securities backed by
mortgages on real estate or in marketable securities of companies engaged
in such activities are not hereby precluded;
(6) issue any senior security (as defined in the 1940 Act), except
that (a) a Fund or Portfolio may engage in transactions that may result in
the issuance of senior securities to the extent permitted under applicable
regulations and interpretations of the 1940 Act or an exemptive order; (b)
a Fund or Portfolio may acquire other securities, the acquisition of which
may result in the issuance of a senior security, to the extent permitted
under applicable regulations or interpretations of the 1940 Act; and (c)
subject to the restrictions set forth above, a Fund or Portfolio may borrow
money as authorized by the 1940 Act. For purposes of this restriction,
collateral arrangements with respect to permissible options and futures
transactions, including deposits of initial and variation margin, are not
considered to be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as a
Fund or Portfolio may technically be deemed to be an underwriter under the
Securities Act of 1933 in selling a portfolio security.
In addition, as a matter of fundamental policy, each of the Southeast Asian
Fund, Japan Fund and European Fund may not:
(8) make or guarantee loans to any person or otherwise become liable
for or in connection with any obligation or indebtedness of any person
without the prior written consent of the Trustees, provided that for
purposes of this restriction the acquisition of bonds, debentures, or other
corporate debt
14
<PAGE>
securities and investments in government bonds, short-term commercial
paper, certificates of deposit and bankers' acceptances shall not be deemed
to be the making of a loan;
(9) invest in securities which are not traded or have not sought a
listing on a stock exchange, over-the-counter market or other organized
securities market that is open to the international public and on which
securities are regularly traded if, regarding all such securities, more
than 10% of its total net assets would be invested in such securities
immediately after and as a result of such transaction;
(10) deal in put options, write or purchase call options, including
warrants, unless such options or warrants are covered and are quoted on a
stock exchange or dealt in on a recognized market, and, at the date of the
relevant transaction: (i) call options written do not involve more than
25%, calculated at the exercise price, of the market value of the
securities within the Fund's portfolio excluding the value of any
outstanding call options purchased, and (ii) the cost of call options or
warrants purchased does not exceed, in terms of premium, 2% of the value of
the net assets of the Fund; or
(11) purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such issuer
to be held by the Fund.
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 the Portfolio is subject to the following
nonfundamental restrictions which may be changed without shareholder approval:
(1) The International Equity Fund and the Portfolio may not, with
respect to 50% of its assets, hold more than 10% of the outstanding voting
securities of an issuer.
(2) Each Fund and the 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 the Portfolio may not purchase or sell interests in
oil, gas or mineral leases.
(4) Each Fund and the Portfolio may not invest more than 15% of its
net assets in illiquid securities.
(5) Each Fund and the 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.
15
<PAGE>
(6) Except as specified above, each Fund and the Portfolio may invest
up to 5% of its total assets in the securities of any one investment
company, but may not own more than 3% of the securities of any one
investment company or invest more than 10% of its total assets in the
securities of other investment companies.
In addition, each of the Southeast Asian Fund, Japan Fund and European
Fund is subject to the following nonfundamental restrictions which may be
changed without shareholder approval:
(7) The value of a Fund's investments in holdings of options and
warrants (other than those held for hedging purposes) may not exceed 15% of
the total net asset value of the Fund.
(8) Each Fund may not make any investment in assets that involve
assumption of any liability that is unlimited, or acquire any investments
that are for the time being nil paid or partly paid, unless according to
the terms of the issue thereof any call to be made thereon could be met in
full out of cash by the Fund's portfolio.
(9) Each Fund may not sell, purchase or loan securities (excluding
shares in the Fund) or grant or receive a loan or loans to or from the
adviser, corporate and domicillary agent, or paying agent, the distributors
and the authorized agents or any of their directors, officers or employees
or any of their major shareholders (meaning a shareholder who holds, in his
own or other name (as well as a nominee's name), more than 10% of the total
issued and outstanding shares of stock of such company) acting as
principal, or for their own account, unless the transaction is made within
the other restrictions set forth above and either (i) at a price determined
by current publicly available quotations, or (ii) at competitive prices or
interest rates prevailing from time to time on internationally recognized
securities markets or internationally recognized money markets.
It is the Trust's position that proprietary strips, such as CATS and TIGRS,
are United States Government securities. However, the Trust has been advised
that the staff of the Securities and Exchange Commission's Division of
Investment Management does not consider these to be United States Government
securities, as defined under the Investment Company Act of 1940, as amended.
For purposes of the Funds' and Portfolio's investment restrictions, the
issuer of a tax-exempt security is deemed to be the entity (public or private)
ultimately responsible for the payment of the principal of and interest on the
security.
With respect to each of the Funds, as a matter of nonfundamental policy, to
the extent permitted under applicable law, the above restrictions do not apply
to the following investments ("OECD investments"): (i) any security issued by or
the payment of principal and interest on which is guaranteed by the government
of any member state of the Organization for Economic Cooperation and Development
("OECD country"); (ii) any fixed income security issued in any OECD country by
any public or local authority or nationalized industry or undertaking of any
OECD country or anywhere in the world by the International Bank for
Reconstruction and Development, European Investment Bank, Asian Development Bank
or any body which is, in the Trustees' opinion, of similar standing. However, no
investment may be made in any OECD investment of any one issue if that would
result in the value of a Fund's holding of that issue exceeding 30% of the net
asset value of the Fund and, if the Fund's portfolio consists only of OECD
investments, those OECD investments shall be of at least six different issues.
In order to permit the sale of its shares in certain states, a Fund or
Portfolio may make commitments more restrictive than the investment policies and
limitations described above and in its Prospectus. Should a Fund or Portfolio
determine that any such commitment is no longer in its best interests, it will
revoke the commitment by terminating sales of its shares in the state involved.
In order to comply with certain regulatory policies, as a matter of operating
policy, each Fund and the Portfolio will not: (i) invest more than 5% of its
assets in companies which,
16
<PAGE>
including predecessors, have a record of less than three years' continuous
operation, (ii) invest in warrants, valued at the lower of cost or market, in
excess of 5% of the value of its net assets, and no more than 2% of such value
may be warrants which are not listed on the New York or American Stock
Exchanges, or (iii) purchase or retain in its portfolio any securities issued by
an issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or Portfolio, or is an officer or director of
the adviser, if after the purchase of the securities of such issuer by the Fund
or Portfolio one or more of such persons owns beneficially more than 1/2 of 1%
of the shares or securities, or both, all taken at market value, of such issuer,
and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or both,
all taken at market value.
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time a transaction is
effected, later changes in percentage resulting from any cause other than
actions by a Fund or Portfolio will not be considered a violation. If the value
of a Fund's or Portfolio's holdings of illiquid securities at any time exceeds
the percentage limitation applicable at the time of acquisition due to
subsequent fluctuations in value or other reasons, the Board of Trustees will
consider what actions, if any, are appropriate to maintain adequate liquidity.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for a Fund or Portfolio
are made by a portfolio manager who is an employee of the adviser or sub-adviser
to such Fund or Portfolio and who is appointed and 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 Portfolios. The portfolio
managers may serve other clients of the advisers in a similar capacity.
The frequency of a Fund's or Portfolio's portfolio transactions--the
portfolio turnover rate--will vary from year to year depending upon market
conditions. Because a high turnover rate may increase a Fund's or Portfolio's
transaction costs and the possibility of taxable short-term gains, the advisers
will weigh the added costs of short-term investment against anticipated gains.
Each Fund or Portfolio will engage in portfolio trading if its advisers believe
a transaction, net of costs (including custodian charges), will help it achieve
its investment objective.
The portfolio turnover rate for the International Equity Portfolio for the
fiscal year ended October 31, 1994, was 84%. For the fiscal year ended October
31, 1995, the portfolio turnover rate was 137%. For the fiscal year ended
October 31, 1996, the portfolio turnover rate was 179%. The International Equity
Fund invests all of its investable assets in the Portfolio and does not invest
directly in a portfolio of assets, and therefore does not have reportable
turnover rates.
For the fiscal period ending October 31, 1996 the annual portfolio turnover
rates for the Southeast Asian Fund, Japan Fund and European Fund were 149%, 121%
and 186%.
Under the advisory agreement and the sub-advisory agreements, the adviser
and sub-advisers shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs or
proceeds being the most favorable to the Funds and Portfolios. In assessing the
best overall terms available for any transaction, the adviser and sub-advisers
consider all factors they deem relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to the adviser or
sub-advisers, and the reasonableness of the commissions, if any, both for the
specific transaction and on a continuing basis. The adviser and sub-advisers are
not required to obtain the lowest commission or the best net price for any Fund
or Portfolio on any particular transaction, and are not required to execute any
order in a fashion either preferential to any Fund or Portfolio relative to
other accounts they manage or otherwise materially adverse to such other
accounts.
17
<PAGE>
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the adviser or
sub- adviser to a Fund or Portfolio normally seeks to deal directly with the
primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's or Portfolio's portfolio
securities in so-called tender or exchange offers. Such soliciting dealer fees
are in effect recaptured for the Funds and Portfolio 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 Portfolio to pay a broker-dealer which provides brokerage
and research services to the adviser or sub-advisers, the Funds or Portfolio
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 Portfolio. The adviser and sub-advisers report to the Board of
Trustees regarding overall commissions paid by the Funds and Portfolio and their
reasonableness in relation to the benefits to the Funds and Portfolio. 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 Portfolio pay to the adviser will
not be reduced as a consequence of the adviser's or sub-advisers' receipt of
brokerage and research services. To the extent the Funds' or Portfolio's
portfolio transactions are used to obtain such services, the brokerage
commissions paid by the Funds or Portfolio 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 Portfolio. 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 Portfolio as well as one or more of the adviser's or
sub-adviser's, other clients. Investment decisions for the Funds and Portfolio
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
Portfolio 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 Portfolio are concerned. However, it is
18
<PAGE>
believed that the ability of the Funds and Portfolio to participate in volume
transactions will generally produce better executions for the Funds and
Portfolio.
The International Equity Portfolio and the Funds paid brokerage commissions
as detailed below:
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
10/31/94 10/31/95 10/31/96
-------- -------- --------
<S> <C> <C> <C>
International
Equity Portfolio $285,577 $383,649 $203,816
Vista European Fund -- -- $ 56,205
Vista Japan Fund -- -- $ 82,509
Vista Southeast Asian $153,351
Fund -- --
</TABLE>
No portfolio transactions are executed with the advisers or a Shareholder
Servicing Agent, or with any affiliate of the advisers or a Shareholder
Servicing Agent, acting either as principal or as broker.
PERFORMANCE INFORMATION
From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
past investment results, it should not be considered as an indication or
representation of the performance of any classes of a Fund in the future. From
time to time, the performance and yield of classes of a Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of a Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of a Fund or its classes. A Fund's performance may be compared with
indices such as the Lehman Brothers Government/Corporate Bond Index, the Lehman
Brothers Government Bond Index, the Lehman Government Bond 1-3 Year Index and
the Lehman Aggregate Bond Index; the S&P 500 Index, the Dow Jones Industrial
Average or any other commonly quoted index of common stock prices; and the
Russell 2000 Index and the NASDAQ Composite Index. Additionally, a Fund may,
with proper authorization, reprint articles written about such Fund and provide
them to prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in a
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return figures will assume
payment of the maximum initial sales load at the time of purchase. For Class B
shares, the average annual total rate of return figures will assume deduction of
the applicable contingent deferred sales charge imposed on a total redemption of
shares held for the period. One-, five-, and ten-year periods will be shown,
unless the class has been in existence for a shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values of the classes of
shares of a Fund will vary based on market conditions, the current market value
of the securities held by a Fund and changes in the Fund's expenses. The
advisers, Shareholder Servicing Agents, the Administrator, the Distributor and
other service providers may voluntarily
19
<PAGE>
waive a portion of their fees on a month-to-month basis. In addition, the
Distributor may assume a portion of a Fund's operating expenses on a
month-to-month basis. These actions would have the effect of increasing the net
income (and therefore the yield and total rate of return) of the classes of
shares of a Fund during the period such waivers are in effect. These factors and
possible differences in the methods used to calculate the yields and total rates
of return should be considered when comparing the yields or total rates of
return of the classes of shares of a Fund to yields and total rates of return
published for other investment companies and other investment vehicles
(including different classes of shares). The Trust is advised that certain
Shareholder Servicing Agents may credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding the Shareholder
Servicing Agent fees received, which will have the effect of increasing the net
return on the investment of customers of those Shareholder Servicing Agents.
Such customers may be able to obtain through their Shareholder Servicing Agents
quotations reflecting such increased return.
Each Fund presents performance information for each class thereof since the
commencement of operations of that Fund rather than the date such class was
introduced. Performance information for each class introduced after the
commencement of operations of the related 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 class is based upon
the performance history of a predecessor class, to reflect the ongoing expenses
currently borne by the particular class.
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. Any annualized total rate of return quotation
will be calculated by (x) adding 1 to the period total rate of return quotation
as calculated above, (y) raising such sum to a power which is equal to 365
divided by the number of days in such period, and (z) subtracting 1 from the
result.
Average Annual Total Returns*
(excluding sales charges)
The average annual total rates of return for the Vista International Equity
Fund, and the total return figures for the Vista European Fund, Vista Japan Fund
and the Vista Southeast Asian Fund, reflecting the initial investment and
assuming the reinvestment of all distributions (but excluding the effects of any
applicable sales charges), for the one year period ended October 31, 1996 and
for the period from commencement of business operations of each such Fund to
October 31, 1996, were as follows:
20
<PAGE>
<TABLE>
<CAPTION>
Since Date of Date of
One Fund Fund Class
Year Inception Inception Introduction
---- --------- --------- ------------
<S> <C> <C> <C> <C>
Vista European Fund 11/2/95
Class A Shares -- 20.78% 11/2/95
Class B Shares -- 20.35% 11/3/95
Vista Japan Fund 11/2/95
Class A Shares -- (5.80%) 11/2/95
Class B Shares -- (6.50%) 11/3/95
Vista Southeast Asian Fund 11/2/95
Class A Shares -- 19.70% 11/2/95
Class B Shares -- 18.78% 11/3/95
Vista International Equity
Fund 12/31/95
A Shares 3.53% 6.34% 12/31/92
B Shares** 3.03% 5.90% 11/15/93
</TABLE>
- ----------------
*The ongoing fees and expenses borne by Class B Shares are greater than those
borne by Class A Shares. As indicated above, the performance information for
each class introduced after the commencement of operations of the related 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.
**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.
Average Annual Total Returns*
(including sales charges)
With the current maximum respective sales charges of 4.75% for Class A
shares, and the currently applicable CDSC for Class B shares for each period
length, reflected, the total rates of return would be as follows:
<TABLE>
<CAPTION>
Since
One Fund
Year Inception
---- ---------
<S> <C> <C>
Vista European Fund
Class A Shares -- 15.04%
Class B Shares -- 15.35%
Vista Japan Fund
Class A Shares -- (10.27%)
Class B Shares -- (11.17%)
21
<PAGE>
Since
One Fund
Year Inception
---- ---------
Vista Southeast Asian Fund
Class A Shares -- 14.01%
Class B Shares -- 13.78%
Vista International Equity
Fund
A Shares (1.38)% 4.99%
B Shares (1.97)% 5.46%
</TABLE>
- ---------------
*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 historical yield, carried at least to the nearest hundredth of one
percent, based on a thirty calendar day period and shall be calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the maximum offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result by
2.
The yields of the Class A shares of the Vista International Equity Fund,
Vista European Fund, Vista Japan Fund, and the Vista Southeast Asian Fund for
the thirty-day period ended October 31, 1996 were 0.00%, 0.35%, 0.00% and 0.00%,
respectively. The yields of the Class B shares of those Funds were 0.00% for
each Fund.
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 the following Funds (excluding the effects of any
applicable sales charges) for the period from the commencement date of business
through October 31, 1996 for each Fund, with values reflecting an assumption
that capital gain distributions and income dividends, if any, have been invested
in additional shares of the same class. From time to time, the Funds may provide
these performance results in addition to the total rate of return quotations
required by the Securities and Exchange Commission. As discussed more fully in
the Prospectuses, neither these performance results, nor total rate of return
quotations, should be considered as representative of the performance of the
Funds in the future. These factors and the possible differences in the methods
used to calculate performance results and total rates of return should be
considered when comparing such performance results and total rate of return
quotations of the Funds with those published for other investment companies and
other investment vehicles.
22
<PAGE>
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of Fund
$10,000 Gains Reinvested Total Inception
Investment Distributions Dividends Value Date
---------- ------------- ---------- ----- ---------
<S> <C> <C> <C> <C> <C>
Vista International Equity
Fund 12/31/92
Class A $12,380 $205 $65 $12,650
Class B $12,240 $203 $10 $12,453
Vista European Fund 11/2/95
Class A $11,990 $ 0 $88 $12,078
Class B $11,966 $ 0 $69 $12,035
Vista Japan Fund 11/2/95
Class A $ 9,420 $ 0 $ 0 $ 9,420
Class B $ 9,350 $ 0 $ 0 $ 9,350
Vista Southeast Asian Fund 11/2/95
Class A $11,970 $ 0 $ 0 $11,970
Class B $11,878 $ 0 $ 0 $11,878
</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 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 peformance history of a predecessor class,
to reflect the ongoing expenses currently borne by the particular class.
Non-Standardized Performance Results*
(including sales charges)
With the current maximum respective sales charge of 4.75% for Class A
shares and the applicable CDSC for Class B shares reflected, the figures for the
same period would be as follows:
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of
$10,000 Gains Reinvested Total
Investment Distributions Dividends Value
---------- ------------- ---------- -----
<S> <C> <C> <C> <C>
Vista International Equity
Fund
Class A $11,792 $196 $61 $12,049
Class B $12,040 $203 $10 $12,253
Vista European Fund
Class A $11,420 $ 0 $84 $11,504
Class B $11,466 $ 0 $69 $11,535
Vista Japan Fund
Class A $ 8,973 $ 0 $ 0 $ 8,973
Class B $ 8,883 $ 0 $ 0 $ 8,883
Vista Southeast Asian Fund
Class A $11,401 $ 0 $ 0 $11,401
Class B $11,378 $ 0 $ 0 $11,378
</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 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 peformance history of a predecessor class,
to reflect the ongoing expenses currently borne by the particular class.
23
<PAGE>
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Since the Funds
and the Portfolio invest in securities primarily listed on foreign exchanges
which may trade on Saturdays or other customary United States national business
holidays on which the Funds and the Portfolio do not price, the Funds' and the
Portfolio's portfolios will trade and the net asset value of the Funds' shares
may be significantly affected on days on which the investor has no access to the
Fund.
Equity securities are valued at the last sale price on the exchange on
which they are primarily traded or on the NASDAQ National Market System, or at
the last quoted bid price for securities in which there were no sales during the
day or for other unlisted (over-the-counter) securities. Bonds and other fixed
income securities (other than short-term obligations, but including listed
issues) are valued on the basis of valuations furnished by a pricing service,
the use of which has been approved by the Board of Trustees. In making such
valuations, the pricing service utilizes both dealer-supplied valuations and
electronic data processing techniques that take into account appropriate factors
such as institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and other
market data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Short-term obligations which
mature in 60 days or less are valued at amortized cost, which constitutes fair
value as determined by the Board of Trustees. Futures and option contracts that
are traded on commodities or securities exchanges are normally valued at the
settlement price on the exchange on which they are traded. Portfolio securities
(other than short-term obligations) for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.
Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between coupon acquisition price and stated redemption price at maturity) and
premiums (generally, the excess of purchase price over stated redemption price
at maturity). Interest income on short-term obligations is determined on the
basis of interest and discount accrued less amortization of premium.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses are not
available until a completed and signed account application has been received by
the Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in Section 6 of the Account Application.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, a Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of such Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to such Fund in writing.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of readily marketable portfolio securities
(instead of cash). The securities so distributed would be valued at the same
amount as that
24
<PAGE>
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 Vista International Equity Fund, the Trust will redeem
Fund shares in kind only if it has received a redemption in kind from the
corresponding Portfolio and therefore shareholders of the Fund that receive
redemptions in kind will receive portfolio securities of such Portfolio and in
no case will they receive a security issued by the Portfolio. The Portfolio has
advised the Trust that the Portfolio will not redeem in kind except in
circumstances in which the corresponding Fund is permitted to redeem in kind or
unless requested by the corresponding Fund.
Each investor in a Portfolio, including the corresponding Fund, may add to
or reduce its investment in the Portfolio on each day that the New York Stock
Exchange is open for business. Once on each such day, based upon prices
determined as of the close of regular trading on the New York Stock Exchange
(normally 4:00 p.m., Eastern time, however, options are priced at 4:15 p.m.
Eastern time) the value of each investor's interest in a Portfolio will be
determined by multiplying the net asset value of the Portfolio by the percentage
representing that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or reductions which are to be effected on that day will
then be effected. The investor's percentage of the aggregate beneficial
interests in a Portfolio will then be recomputed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of such time on such day plus or minus, as the case may be,
the amount of net additions to or reductions in the investor's investment in the
Portfolio effected on such day and (ii) the denominator of which is the
aggregate net asset value of the Portfolio as of such time on such day plus or
minus, as the case may be, the amount of net additions to or reductions in the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of such time on the following day the
New York Stock Exchange is open for trading.
Investors in Class A shares may qualify for reduced initial sales charges
by signing a statement of intention (the "Statement"). This enables the investor
to aggregate purchases of Class A shares in the Fund with purchases of Class A
shares of any other Fund in the Trust (or if a Fund has only one class, shares
of such Fund), excluding shares of any Vista money market fund, during a
13-month period. The sales charge is based on the total amount to be invested in
Class A shares during the 13-month period. All Class A or other qualifying
shares of these Funds currently owned by the investor will be credited as
purchases (at their current offering prices on the date the Statement is signed)
toward completion of the Statement. A 90-day back-dating period can be used to
include earlier purchases at the investor's cost. The 13-month period would then
begin on the date of the first purchase during the 90-day period. No retroactive
adjustment will be made if purchases exceed the amount indicated in the
Statement. A shareholder must notify the Transfer Agent or Distributor whenever
a purchase is being made pursuant to a Statement.
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
25
<PAGE>
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 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 date, but such purchase may be delayed by either
fund for up to five business days if a fund determines that it would be
disadvantaged by an immediate transfer of the proceeds.
The contingent deferred sales charge for Class B shares will be waived for
certain exchanges and for redemptions in connection with a Fund's systematic
withdrawal plan, subject to the conditions described in the Prospectuses. In
addition, subject to confirmation of a shareholder's status, the contingent
deferred sales charge will be waived for: (i) a total or partial redemption made
within one year of the shareholder's death or initial qualification for Social
Security disability payments; (ii) a redemption in connection with a Minimum
Required Distribution form an IRA, Keogh or custodial account under section
403(b) of the Internal Revenue Code or a mandatory distribution from a qualified
plan; (iii) redemptions made from an IRA, Keogh or custodial account under
section 403(b) of the Internal Revenue Code through an established Systematic
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 pur-
26
<PAGE>
chase (the "CDSC Period"), together with the pro rata portion of all Class B
shares representing dividends and other distributions paid in additional Class B
shares attributable to the Class B shares then converting. The conversion of
Class B shares purchased on or after May 1, 1996, will be effected at the
relative net asset values per share of the two classes on the first business day
of the month following the eighth anniversary of the original purchase. The
conversion of Class B shares purchased prior to May 1, 1996, will be effected at
the relative net asset values per share of the two classes on the first business
day of the month following the seventh anniversary of the original purchase. If
any exchanges of Class B shares during the CDSC Period occurred, the holding
period for the shares exchanged will be counted toward the CDSC Period. At the
time of the conversion the net asset value per share of the Class A shares may
be higher or lower than the net asset value per share of the Class B shares; as
a result, depending on the relative net asset values per share, a shareholder
may receive fewer or more Class A shares than the number of Class B shares
converted.
A Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written requests for
additional account services made after a shareholder has submitted an initial
account application to the Fund, and in certain of the circumstances described
in the Prospectuses. A Fund may also refuse to accept or carry out any
transaction that does not satisfy any restrictions then in effect. A signature
guarantee may be obtained from a bank, trust company, broker-dealer or other
member of a national securities exchange. Please note that a notary public
cannot provide a signature guarantee.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the respective Prospectus. No attempt is made to present a detailed explanation
of the tax treatment of each Fund or its shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, a Fund is not subject to federal income tax on the
portion of its net investment income (i.e., 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 the International Equity Fund invests all of its assets in the Portfolio
which will be classified as a partnership for federal income tax purposes, the
International Equity Fund will be deemed to own a proportionate share of the
income of the Portfolio for purposes of determining whether the International
Equity Fund satisfies the Distribution Requirement and the other requirements
necessary to qualify as a regulated investment company (e.g., Income Requirement
(hereinafter defined), etc.).
In addition to satisfying the Distribution Requirement 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
27
<PAGE>
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 Gains Test. However, income that is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by a Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation and has not
already been included in income. In addition, under the rules of Code Section
988, gain or loss recognized on the disposition of a debt obligation denominated
in a foreign currency or an option with respect thereto (but only to the extent
attributable to changes in foreign currency exchange rates), and gain or loss
recognized on the disposition of a foreign currency forward contract, futures
contract, option or similar financial instrument, or of foreign currency itself,
except for regulated futures contracts or non-equity options subject to Code
Section 1256, will generally be treated as ordinary income or loss.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
a Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of Section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction; and (2) the
capitalized interest on acquisition indebtedness under Code Section 263 (g).
Built-in losses will be preserved where a Fund has a built-in loss with respect
to property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed to
a Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (1) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (2) the
asset is otherwise held by a Fund as part of a "straddle" (which term generally
excludes a situation where the asset is stock and the Fund grants a qualified
covered call option (which, among other things, must not be deep-in-the-money)
with respect thereto) or (3) the asset is stock and the Fund grants an
in-the-money qualified covered call option with respect thereto. However, for
purposes of the Short-Short Gain Test, the holding period of the asset disposed
of may be reduced only in the case of clause (1) above. In addition, a Fund may
be required to defer the recognition of a loss on the disposition of an asset
held as part of a straddle to the extent of any unrecognized gain on the
offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will
28
<PAGE>
commence on the date it is written and end on the date it lapses or the date a
closing transaction is entered into. Accordingly, a Fund may be limited in its
ability to write options which expire within three months and to enter into
closing transactions at a gain within three months of the writing of options.
Transactions that may be engaged in by a Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes and
futures contracts) will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year, even though a
taxpayer's obligations (or rights) under such contracts have not terminated (by
delivery, exercise, entering into a closing transaction or otherwise) as of to
such date. Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is taken into account for the taxable year
together with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. Any capital gain
or loss for the entire taxable year with respect to Section 1256 contracts
(including any capital gain or loss arising as a consequence of the year-end
deemed sale of such contracts) is generally treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss. A Fund, however, may elect
not to have this special tax treatment apply to Section 1256 contracts that are
part of a "mixed straddle" with other investments of the Fund that are not
Section 1256 contracts. The Internal Revenue Service (the "IRS") has held in
several private rulings that gains arising from Section 1256 contracts will 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.
A Fund may enter into notional principal contracts, including interest rate
swaps, caps, floors and collars. Under Treasury Regulations, in general, the net
income or deduction from a notional principal contract for a taxable year is
included in or deducted from gross income for that taxable year. The net income
or deduction from a notional principal contract for a taxable year equals the
total of all of the periodic payments (generally, payments that are payable or
receivable at fixed periodic intervals of one year or less during the entire
term of the contract) that are recognized from that contract for the taxable
year and all of the non-periodic payments (including premiums for caps, floors
and collars) that are recognized from that contract for the taxable year. No
portion of a payment by a party to a notional principal contract is recognized
prior to the first year to which any portion of a payment by the counterparty
relates. A periodic payment is recognized ratably over the period to which it
relates. In general, a non-periodic payment must be recognized over the term of
the notional principal contract in a manner that reflects the economic substance
of the contract. A non-periodic payment that relates to an interest rate swap,
cap, floor or collar shall be recognized over the term of the contract by
allocating it in accordance with the values of a series of cash-settled forward
or option contracts that reflect the specified index and notional principal
amount upon which the notional principal contract is based under an alternative
method contained in the proposed regulations.
A Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If a Fund invests in a PFIC, it may elect to treat
the PFIC as a qualifying electing fund (a "QEF") in which event the Fund will
each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether the
Fund receives distributions of any such ordinary earnings or net capital gain
from the PFIC. If a Fund does not (because it is unable to, chooses not to or
otherwise) elect to treat the PFIC as a QEF, then in general (1) any gain
recognized by the Fund upon sale or other disposition of its interest in the
PFIC or any excess distribution received by the Fund from the PFIC will be
allocated ratably over the Fund's holding period of its interest in the PFIC,
(2) the portion of such gain or excess distribution so allocated to the year in
which the gain is recognized or the excess distribution is received shall be
included in the Fund's gross income for such year as ordinary income (and the
distribution of such portion by the Fund to shareholders will be taxable as an
ordinary income dividend, but such portion will not be subject to tax at the
Fund level), (3) a Fund shall be liable for tax on the portions of such gain or
excess distribution so allocated to prior years in an amount
29
<PAGE>
equal to, for each such prior year, (i) the amount of gain or excess
distribution allocated to such prior year multiplied by the highest tax rate
(individual or corporate) in effect for such prior year plus (ii) interest on
the amount determined under clause (i) for the period from the due date for
filing a return for such prior year until the date for filing a return for the
year in which the gain is recognized or the excess distribution is received at
the rates and methods applicable to underpayments of tax for such period, and
(4) the distribution by a Fund to shareholders of the portions of such gain or
excess distribution so allocated to prior years (net of the tax payable by the
Fund thereon) will again be taxable to the shareholders as an ordinary income
dividend.
Under proposed Treasury Regulations issued in 1992 (but not yet effective),
a Fund could elect to recognize as gain the excess as of the last day of its
taxable year, of the fair market value of each share of PFIC stock over the
Fund's adjusted tax basis in that share ("mark-to-market gain"). Such
mark-to-market gain would be included by the Fund as ordinary income, such gain
would not be subject to the Short-Short Gain Test, and the Fund's holding period
with respect to such PFIC stock would commence on the first day of the next
taxable year. If the Fund made such election in the first taxable year it holds
PFIC stock, the Fund would include ordinary income from any mark-to-market gain,
if any, and would not incur the tax described in the previous paragraph.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain for any taxable year,
to elect (unless it has made a taxable year election for excise tax purposes as
discussed below) to treat all or any part of any net capital loss, any net
long-term capital loss or any net foreign currency loss incurred after October
31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security, not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument. For purposes of asset diversification
testing, obligations issued by or guaranteed by agencies and instrumentalities
of the U.S. Government such as the Federal Agricultural Mortgage Corporation,
the Farm Credit System Financial Assistance Corporation, a Federal Home Loan
Bank, the Federal Home Loan Mortgage Corporation, the Federal National Mortgage
Association, the Government National Mortgage Corporation, and the Student Loan
Marketing Association are treated as U.S. Government Securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
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
elec-
30
<PAGE>
tion of a regulated investment company having a taxable year ending November 30
or December 31, for its taxable year (a "taxable year election")). The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of its net investment
income for each taxable year. Such distributions will be taxable to shareholders
as ordinary income and treated as dividends for federal income tax purposes, but
they will not qualify for the 70% dividends-received deduction for corporate
shareholders of the Funds.
Dividends paid on Class A and Class B shares are calculated at the same
time. In general, dividends on Class B shares are expected to be lower than
those on Class A shares due to the higher distribution expenses borne by the
Class B shares. Dividends may also differ between classes as a result of
differences in other class specific expenses.
A Fund may either retain or distribute to shareholders its net capital gain
for each taxable year. The Funds currently intend 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 realized
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Investment income that may be received by a Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Funds to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of the Fund's total assets at the close of its
taxable year consists of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by such Fund. If a Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata
31
<PAGE>
share of the foreign taxes paid by the Fund, but would be treated as having paid
his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from a
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax advisor regarding the
potential application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent of
(and in reduction of) the shareholder's tax basis in his shares; any excess will
be treated as gain from the sale of his shares, as discussed below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized net capital gain, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Each Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of such Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in 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.
32
<PAGE>
If a shareholder (1) incurs a sales load in acquiring shares of a Fund, (2)
disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income dividends paid to
a foreign shareholder will be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate) upon the gross amount of the dividend. Furthermore, such
a foreign shareholder may be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate) on the gross income resulting from a Fund's election to
treat any foreign taxes paid by it as paid by its shareholders, but may not be
allowed a deduction against this gross income or a credit against this U.S.
withholding tax for the foreign shareholder's pro rata share of such foreign
taxes which it is treated as having paid. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of the Fund, capital gain dividends and amounts retained by the Fund
that are designated as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
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
33
<PAGE>
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 Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
34
<PAGE>
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.
35
<PAGE>
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer of
The Adams Express Co. and Petroleum & Resources Corp.; 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, International
Equity Portfolio and New Growth Opportunities 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. Effective August 21, 1995, each Trustee of the Vista Funds receives a
quarterly retainer of $12,000 and an additional per meeting fee of $1,500.
Members of committees receive a meeting fee only if the committee meeting is
held on a day other than a day on which a regularly scheduled meeting is held.
Prior to August 21, 1995, the quarterly retainer was $9,000 and the per-meeting
fee was $1,000. The Chairman of the Trustees and the Chairman of the Investment
Committee each receive a 50% increment over regular Trustee total compensation
for serving in such capacities for all the investment companies advised by the
adviser.
36
<PAGE>
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 Large
Equity and Capital 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
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>
<TABLE>
<CAPTION>
Short- U.S. Small Inter- U.S.
Term Treasury Cap national Government 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>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Accruse from
as Fund Expenses "Fund Complex"(1)
---------------- -----------------
<S> <C> <C>
Fergus Reid, III, Trustee $7,511 $90,000
Richard E. Ten Haken, Trustee 4,222 58,500
William J. Armstrong, Trustee 4,735 58,500
John R.H. Blum, Trustee 5,445 60,000
Joseph J. Harkins, Trustee 6,139 60,000
H. Richard Vartabedian,
Trustee 5,525 90,000
Stuart W. Cragin, Jr., 3,977 60,000
Irving L. Thode, Trustee 4,728 60,000
W. Perry Neff, Trustee -- 43,500
Ronald R. Eppley, Jr., Trustee -- 43,500
W.D. MacCallan, Trustee -- 42,000
</TABLE>
- ---------------
(1) 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.
37
<PAGE>
Vista Funds Retirement Plan for Eligible Trustees
Effective August 21, 1995, the Trustees also instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not an
employee of any of the 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 10% of the highest annual compensation received
from the Covered Funds multiplied by the number of such Trustee's years of
service (not in excess of 10 years) completed with respect to any of the Covered
Funds. Such benefit is payable to each eligible Trustee in monthly installments
for the life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years of
service classifications. 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, 7, 8
and 7, respectively.
<TABLE>
<CAPTION>
Highest Annual Compensation Paid by All Vista Funds
---------------------------------------------------
$40,000 $45,000 $50,000 $55,000 $60,000
Years of
Service Estimated Annual Benefits Upon Retirement
- --------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C>
10 $40,000 $45,000 $50,000 $55,000 $60,000
9 36,000 40,500 45,000 49,500 54,000
8 32,000 36,000 40,000 44,000 48,000
7 28,000 31,500 35,000 38,500 42,000
6 24,000 27,000 30,000 33,000 36,000
5 20,000 22,500 25,000 27,500 30,000
</TABLE>
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which
each Trustee (who is not an employee of any of the Funds, the advisers,
administrator or distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustee's fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination of
service). The deferred amounts are invested in shares of Vista funds selected by
the Trustee. The deferred amounts are paid out in a lump sum or over a period of
several years as elected by the Trustee at the time of deferral. If a deferring
Trustee dies prior to the distribution of amounts held in the deferral account,
the balance of the deferral account will be distributed to the Trustee's
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring Trustee's death.
Messrs. Ten Haken, Thode and Vartabedian have each executed a deferred
compensation agreement for the 1996 calendar year and as of October 31, 1996
they had contributed $17,400, $45,000 and $62,500, 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 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
38
<PAGE>
majority of disinterested Trustees or in a written opinion of independent
counsel, that such officers or Trustees have not engaged in willful misfeasance,
bad faith, gross negligence or reckless disregard of their duties.
As of January 31, 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-Adviser
Chase acts as investment adviser to the Funds or Portfolios pursuant to an
Investment Advisory Agreement, dated as of May 6, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase is responsible for investment decisions for the Funds or Portfolios.
Pursuant to the terms of the Advisory Agreement, Chase provides the Funds or
Portfolios with such investment advice and supervision as it deems necessary for
the proper supervision of the Funds' or Portfolios' investments. The advisers
continuously provide investment programs and determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the Funds'
or Portfolios' assets shall be held uninvested. The advisers to the Funds or
Portfolios furnish, at their own expense, all services, facilities and personnel
necessary in connection with managing the investments and effecting portfolio
transactions for the Funds or Portfolios. The Advisory Agreement for the Funds
or Portfolios will continue in effect from year to year only if such continuance
is specifically approved at least annually by the Board of Trustees or by vote
of a majority of a Fund's or Portfolio's outstanding voting securities and by a
majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on such Advisory Agreement.
Under the Advisory Agreement, the adviser may utilize the specialized
portfolio skills of all its various affiliates, thereby providing the Funds with
greater opportunities and flexibility in accessing investment expertise.
Pursuant to the terms of the Advisory Agreement and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without penalty
by the Trust on behalf of the Funds on not more than 60 days', nor less than 30
days', written notice when authorized either by a majority vote of a Fund's
shareholders or by a vote of a majority of the Board of Trustees of the Trust,
or by the adviser or sub-adviser on not more than 60 days', nor less than 30
days', written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The advisory agreements provide that
the adviser or sub-adviser under such agreement shall not be liable for any
error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of portfolio transactions
for the respective Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties thereunder.
With respect to the Funds or Portfolios investing in equity securities, the
equity research team of the adviser looks for two key variables when analyzing
stocks for potential investment by equity portfolios: value and momentum. To
uncover these qualities, the team uses a combination of quantitative analysis,
fundamental research and computer technology to help identify undervalued
stocks.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to the Funds imposed by the securities laws or regulations thereunder
of any state in which the shares of the Funds are qualified for sales, as such
limitations may be raised or lowered from time to time, the adviser
39
<PAGE>
shall reduce its advisory fee (which fee is described below) to the extent of
its share of such excess expenses. The amount of any such reduction to be borne
by the adviser shall be deducted from the monthly advisory fee otherwise payable
with respect to the Funds during such fiscal year; and if such amounts should
exceed the monthly fee, the adviser shall pay to a Fund its share of such excess
expenses no later than the last day of the first month of the next succeeding
fiscal year.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement provides
that Chase may render services through its own employees or the employees of one
or more affiliated companies that are qualified to act as an investment adviser
of the Fund and are under the common control of Chase as long as all such
persons are functioning as a part of an organized group of persons, managed by
authorized officers of Chase.
Chase, on behalf of the Southeast Asian Fund and the Japan 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 European Fund and
International Equity Portfolio, Chase has entered into an investment
sub-advisory agreement with Chase Asset Management (London) Limited ("CAM
London"). With respect to the day-to-day management of the Funds or Portfolio,
under the sub-advisory agreements, the sub-advisers make decisions concerning,
and place all orders for, purchases and sales of securities and help 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.
CAM London is an indirect wholly-owned subsidiary of the Adviser. CAM
London is registered with the Securities and Exchange Commission and is
regulated by the Investment Management Regulatory Organization (IMRO) 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 of CAM London also serve as portfolio managers for Chase.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from each Fund or
Portfolio an investment advisory fee computed daily and paid monthly based on a
rate equal to a percentage of such Fund's or Portfolio's average daily net
assets specified in the relevant Prospectuses. However, the adviser may
voluntarily agree to waive a portion of the fees payable to it on a
month-to-month basis. For its services under its sub-advisory agreement, each
sub-adviser 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.
40
<PAGE>
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 Portfolio, and voluntarily waived the amounts in parentheses following
such fees with respect to each such period:
<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>
International
Equity Portfolio* $462,855 ($202,144) $431,019 ($276,302) $330,983 ($330,983)
Vista European Fund -- -- $ 54,013 ($ 54,013)
Vista Japan Fund -- -- $ 47,488 ($ 47,488)
Vista Southeast Asian
Fund -- -- $ 77,971 ($ 77,971)
</TABLE>
- ---------------
* The International Equity Fund and does 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 the Fund in the respective Portfolio.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds and the administrator of
the 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 Portfolio's independent contractors and agents;
preparation for signature by an officer of the Trust and Portfolio of all
documents required to be filed for compliance by the Trust and Portfolio 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 Portfolio 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 Portfolio, the
determination of investment policy, or for any matter pertaining to the
distribution of Funds shares.
Under the Administration Agreements Chase is permitted to render
administrative services to others. The Administration Agreements will continue
in effect from year to year with respect to each Fund or Portfolio only if such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or Portfolio or by vote of a majority of such Fund's or Portfolio's
outstanding voting securities and, in either case, by a majority of the Trustees
who are not parties to the Administration Agreements or "interested persons" (as
defined in the 1940 Act) of any such party. The Administration Agreements are
terminable without penalty by the Trust on behalf of each Fund or by a Portfolio
on 60 days' written notice when authorized either by a majority vote of such
Fund's or Portfolio's shareholders or by vote of a majority of the Board of
Trustees, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust or Portfolios, or by Chase on 60 days'
written notice, and will automatically terminate in the event of their
"assignment" (as defined in the 1940 Act). The Administration Agreements also
provide that neither Chase or its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration of
the Funds or Portfolio, 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
41
<PAGE>
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 International Equity Fund, Chase receives
from each of the Fund and the Portfolio a fee computed daily and paid monthly at
an annual rate equal to 0.05% of their respective average daily net assets.
Chase may 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 administration fees and voluntarily waived the amount in parentheses
following such fees:
<TABLE>
<CAPTION>
11/1/93 11/1/94
through through 11/1/95 through
11/31/94 10/31/95 10/31/96
------------------ ------------------ ------------------
<S> <C> <C> <C>
Vista International Equity Fund $16,367 ($16,367) $18,799 ($18,799) $16,550 ($16,500)
Vista European Fund -- -- $ 5,401 5,401)
Vista Japan Fund -- -- $ 4,789 ($ 4,789)
Vista Southeast Asian Fund -- -- $ 7,797 ($ 7,797)
</TABLE>
Distribution Plans
The Trust has adopted separate plans of distribution pursuant to Rule 12b-1
under the 1940 Act (a "Distribution Plan") on behalf of certain classes or
shares of certain Funds as described in the Prospectuses, which provide that
such classes of such Funds shall pay for distribution services a distribution
fee (the "Distribution Fee"), including payments to the Distributor, at annual
rates not to exceed the amounts set forth in their respective Prospectuses. The
Distributor may use all or any portion of such Class A Distribution Fee to pay
for Fund expenses of printing prospectuses and reports used for sales purposes,
expenses of the preparation and printing of sales literature and other such
distribution-related expenses.
Class B shares pay a Distribution Fee of up to 0.75% of average daily net
assets. The Distributor currently expects to pay sales commissions to a dealer
at the time of sale of Class B shares of up to 4.00% of the purchase price of
the shares sold by such dealer. The Distributor will use its own funds (which
may be borrowed or otherwise financed) to pay such amounts. Because the
Distributor will receive a maximum Distribution Fee of 0.75% of average daily
net assets with respect to Class B shares, it will take the Distributor several
years to recoup the sales commissions paid to dealers and other sales expenses.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to exceed
0.25% annualized of the average net asset value of Class A shares, or 0.25%
annualized of the average net asset value of the Class B shares maintained in a
Fund by such broker-dealers' customers. Trail or maintenance commissions on
Class B shares will be paid to broker-dealers beginning the 13th month following
the purchase of such Class B shares. Since the distribution fees are not
directly tied to expenses, the amount of distribution fees paid by a Fund during
any year may be more or less than actual expenses incurred pursuant to the
Distribution Plans. For this reason, this type of distribution fee arrangement
is characterized by the staff of the Securities and Exchange Com-
42
<PAGE>
mission 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. The Distribution Plans require that the Trust shall provide to the Board
of Trustees, and the Board of Trustees shall review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Distribution Plans. The Distribution Plans further provides that the selection
and nomination of Qualified Trustees shall be committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. The
Distribution Plans may be terminated at any time by a vote of a majority of the
Qualified Trustees or, with respect to a particular Fund, by vote of a majority
of the outstanding voting Shares of the class of such Fund to which it applies
(as defined in the 1940 Act). The Distribution Plans may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of shareholders and may not be materially amended in any case without a
vote of the majority of both the Trustees and the Qualified Trustees. Each of
the Funds will preserve copies of any plan, agreement or report made pursuant to
a Distribution Plan for a period of not less than six years from the date of the
Distribution Plan, and for the first two years such copies will be preserved in
an easily accessible place.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Distributor
was paid or accrued distribution fees with respect to the following Funds and
voluntarily waived the amount in parentheses following such fees:
<TABLE>
<CAPTION>
11/1/93 11/1/94 11/1/95
through through through
10/31/94 10/31/95 10/31/96
-------- -------- --------
<S> <C> <C> <C>
A Shares-
International Equity Fund $73,552 $75,652 $63,418
Vista European Fund -- -- $13,367
Vista Japan Fund -- -- $11,515
Vista Southeast Asian
Fund -- -- $17,928
B Shares-
International Equity Fund $24,853 $55,080 $57,266
Vista European Fund -- -- $ 409
Vista Japan Fund -- -- $ 878
Vista Southeast Asian
Fund -- -- $ 4,693
</TABLE>
With respect to the share of the Class A shares of the Funds, the
Distribution Fee was allocated as follows:
43
<PAGE>
<TABLE>
<CAPTION>
Printing, Advertising &
Postage Sale Administrative
Fund and Handling Compensation Filings
- ---- ------------ ------------ --------------
<S> <C> <C> <C>
International Equity Fund $13,565 $38,888 $10,965
Vista European Fund $ 2,859 $ 8,197 $ 2,311
Vista Japan Fund $ 2,463 $ 7,061 $ 1,991
Vista Southeast Asian
Fund $ 3,835 $10,993 $ 3,100
</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 thereafter with respect to each Fund only if such continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of such Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Distribution Agreement is terminable without penalty by the Trust on behalf of
each Fund on 60 days' written notice when authorized either by a majority vote
of such Fund's shareholders or by vote of a majority of the Board of Trustees of
the Trust, including a majority of the Trustees who are not "interested persons"
(as defined in the 1940 Act) of the Trust, or by the Distributor on 60 days'
written notice, and will automatically terminate in the event of its
"assignment" (as defined in the 1940 Act). The Distribution Agreement also
provides that neither the Distributor nor its personnel shall be liable for any
act or omission in the course of, or connected with, rendering services under
the Distribution Agreement, except for wilful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations or duties.
In the event the operating expenses of any Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to that Fund imposed by the securities laws or regulations thereunder
of any state in which the shares of such Fund are qualified for sale, as such
limitations may be raised or lowered from time to time, the Distributor shall
reduce its sub-administration fee with respect to such Fund (which fee is
described below) to the extent of its share of such excess expenses. The amount
of any such reduction to be borne by the Distributor shall be deducted from the
monthly sub-administration fee otherwise payable with respect to such Fund
during such fiscal year; and if such amounts should exceed the monthly fee, the
Distributor shall pay to such Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives an
annual fee, payable monthly, of 0.05% of the net assets of each Fund. The
Distributor may voluntarily waive a portion of the fees payable to it under the
Distribution Agreement with respect to each Fund on a month-to-month basis. For
the fiscal years ended October 31, 1994, 1995 and 1996, the Distributor was paid
or accrued sub-administration fees with respect to the Funds and voluntarily
waived the amount in parentheses following such fees:
44
<PAGE>
<TABLE>
<CAPTION>
11/1/93 11/1/94 11/1/95
through through through
11/1/94 10/31/95 10/31/96
----------------- ----------------- ----------------
<S> <C> <C> <C>
Vista International Equity
Fund $16,367 ($16,367) $18,799 ($18,799) $16,500 ($2,804)
Vista European Fund -- -- $ 2,701 ($2,701)
Vista Japan Fund -- -- $ 2,374 ($2,374)
Vista Southeast Asian Fund $ 3,899 ($3,899)
-- --
</TABLE>
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 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
--------------- --------------- -----------------
payable waived payable waived payable waived
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Vista International Equity
Fund
Class A $7,355 -- $75,631 -- $63,469 --
Class B $8,284 -- $18,367 -- $19,089 --
Vista European Fund
Class A -- -- -- -- $ 0 --
Class B -- -- -- -- $ 136 --
Vista Southeast Asian Fund
Class A -- -- -- -- $ 0 --
Class B -- -- -- -- $ 273 --
Vista Japan Fund
Class A -- -- -- -- $ 0 --
Class B -- -- -- -- $ 1,564 --
</TABLE>
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.
45
<PAGE>
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight and
record keeping for the assets held in the portfolios of each Fund. Chase also
provides fund accounting services for the income, expenses and shares
outstanding for such Funds. Chase is located at 3 Metro- tech Center, Brooklyn,
NY 11245.
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.
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.
46
<PAGE>
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Group is an open-end, non-diversified management investment
company organized as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts in 1987. Because the Trust is "non-diversified",
more than 5% of the assets of certain Funds may be invested in the obligations
of any single issuer, which may make the value of the shares in such a Fund more
susceptible to certain risks than shares of a diversified mutual fund.
The Trust currently consists of 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 among all the series in a manner believed by management of the Trust
to be fair and equitable. Shares have no preemptive or conversion rights. Shares
when issued are fully paid and non-assessable, except as set forth below.
Shareholders are entitled to one vote for each share held. Shares of class
generally vote together except when required under federal securities laws to
vote separately on matters that only affect a particular class, such as the
approval of distribution plans for a particular class. With respect to shares
purchased through a Shareholder Servicing Agent and, in the event written proxy
instructions are not received by a Fund or its designated agent prior to a
shareholder meeting at which a proxy is to be voted and the shareholder does not
attend the meeting in person, the Shareholder Servicing Agent for such
shareholder will be authorized pursuant to an applicable agreement with the
shareholder to vote the shareholder's outstanding shares in the same proportion
as the votes cast by other Fund shareholders represented at the meeting in
person or by proxy.
Certain Funds offer both Class A and Class B shares. The classes of shares
have several different attributes relating to sales charges and expenses, as
described herein and in the Prospectuses. In addition to such differences,
expenses borne by each class of a Fund may differ slightly because of the
allocation of other class-specific expenses. For example, a higher transfer
agency fee may be imposed on Class B shares than on class A shares. The relative
impact of initial sales charges, contingent deferred sales charges, and ongoing
annual expenses will depend on the length of time a share is held.
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the judgment
of the Trustees, it is necessary or desirable to submit matters for a
shareholder vote. Shareholders have, under certain circumstances, the right to
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have, in certain circumstances, the right to remove one or more Trustees without
a meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of a majority of the outstanding
shares of each series affected by the amendment. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series or class, a Shareholder Servicing Agent may vote any shares as to which
such Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares of that series or class otherwise
represented at the meeting in person or by proxy as to which such Shareholder
Servicing Agent is the agent of record. Any shares so voted by a Shareholder
Servicing Agent will be deemed represented at the meeting for purposes of quorum
requirements. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any series
or class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition
47
<PAGE>
of all or substantially all of its assets to, another entity, if approved by the
vote of the holders of two thirds of its outstanding shares, except that if the
Board of Trustees recommends such merger, consolidation or sale or disposition
of assets, the approval by vote of the holders of a majority of the series' or
class' outstanding shares will be sufficient, or (ii) by the vote of the holders
of a majority of its outstanding shares, or (iii) by the Board of Trustees by
written notice to the series' or class' shareholders. Unless each series and
class is so terminated, the Trust will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to shares
that may be redeemed through expedited or automated procedures established by a
Shareholder Servicing Agent. No certificates are issued for Class B shares due
to their conversion feature. No certificates are issued for Institutional
Shares.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
The Board of Trustees has adopted a code of ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The code 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.
Principal Holders
As of January 31, 1997 the following persons owned of record 5% or more of
the outstanding shares of the following classes of the following Funds:
<TABLE>
<CAPTION>
<S> <C>
VISTA EUROPEAN FUND -- A SHARES 44.77%
CUDD & COMPANY
CUSTODY DIVISION
1211 6TH AVENUE
35TH FLOOR NEW YORK NY 10036-8701
CUDD & COMPANY 31.15%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK NY 10036-8701
48
<PAGE>
CUDD & COMPANY CUSTODY DIVISION 10.43%
1211 6TH AVENUE 35TH FLOOR
NEW YORK NY 10036-8701
VISTA EUROPEAN FUND -- B SHARES
MARY BILINGS-JAMESON 8.83%
32538 SW RIVIERA LN
WILSONVILLE OR 97070-7440
NFSC FEBO # C1A-001872 6.22%
LITSA AMALIA ROUSSOS
C/O MR T MASMINDES
227 MOORPARK KATHERINE ST
SANDOWN JOHANNESBURG 31846
SOUTH AFRICA REP
NFSC FEBO # CL5-536709 5.25%
PETER CONOVICH
130 WATER STREET
NEW YORK NY 10005-1637
VISTA INTERNATIONAL EQUITY FUND -- A SHARES
CUDD & COMPANY 10.86%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK NY 10036-8701
TESTA AND CO 5.75%
C/O CHASE MANHATTAN BANK NA
ATTN: MUTUAL FUNDS/T-C
PO BOX 1412
ROCHESTER NY 14603-1412
VISTA JAPAN FUND -- A SHARES
CUDD & COMPANY 47.85%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK NY 10036-8701
CUDD & COMPANY 25.97%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK NY 10036-8701
49
<PAGE>
CUDD & COMPANY 14.59%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK NY 10036-8701
VISTA JAPAN FUND -- B SHARES
VAOGUO JIA 12.69%
184 REMINGTON AVE APT B1-A12
SYRACUSE NY 13210-3626
IFTC CIST ORA AC 8.01%
JUDITH P CITRON
129 LOWELL ST APT 2
PEABODY MA 01960-4280
NFSC FEBO # C1A-040193 7.12%
LIANG SUN
360 CABRINI BLVD #2E
NEW YORK NY 10040-3638
NFSC FEBO # CL5-407399 7.11%
NFSC/FMTC IRA
FBO RICHARD R STEBBINS JR
20 WEST 86TH STREET
NEW YORK NY 10024-3604
NFSC FEBO # C1A-788880 6.04%
NFSC/FMTC IRA
FBO TSU YI JEN
1974 51ST STREET APT 3E
BROOKLYN NY 11204-1343
CHASE MANHATTAN BANK CUST 5.64%
FBO MICHAEL F GLENNIE
KEOGH PS
1298 COCOANUT ROAD
BOCA RATON FL 33432-7710
CHASE MANHATTAN BANK CUST 5.64%
FBO DIANNE F GLENNIE
KEOGH PS
1298 COCOANUT ROAD
BOCA RATON FL 33432-7710
NFSC FEBO # C1A-731609 5.52%
NFSC/FMTC IRA
FBO CHING T CHIU
133-23 41ST RD
FLUSHING NY 11355-3631
50
<PAGE>
NFSC FEBO # C1A-056928 5.06%
KUNG SHUM
630 1ST AVENUE APT 5S
NEW YORK NY 10016-3786
NFSC FEBO #C1A-040193 5.03%
JOANNA S CHENG
ROBERT Y CHENG
42-65 KISSENA BLVD APT 422
FLUSHING NY 11355-3202
VISTA SOUTHEAST ASIAN -- A SHARES
CUDD & COMPANY 33.90%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FL
NEW YORK NY 10036-8701
CUDD & COMPANY 22.82%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FL
NEW YORK NY 10036-8701
CUDD & COMPANY 7.25%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FL
NEW YORK NY 10036-8701
VISTA SOUTHEAST ASIAN -- B SHARES
CONCHITA TAN BLONSKI 5.34%
60 SLEEPY HOLLOW LN
ORCHARD PARK NY 14127-4618
</TABLE>
51
<PAGE>
Financial Statements
The 1996 Annual Report to Shareholders of each Fund, including the reports
of independent accountants, financial highlights and financial statements for
the fiscal year ended October 31, 1996 contained therein, are incorporated
herein by reference.
Specimen Computations of Offering Prices Per Share
The International Equity Fund (specimen computations)
A Shares:
<TABLE>
<CAPTION>
<S> <C>
Net Asset Value and Redemption Price per Share $12.38
of Beneficial Interest at October 31, 1996
Maximum Offering Price per Share ($12.38 divided by .9525 $13.00
(reduced on purchases of $100,000 or more)
B Shares:
Net Asset Value and Redemption Price per Share $12.24
of Beneficial Interest at October 31, 1996
The European Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share $11.99
of Beneficial Interest at October 31, 1996
Maximum Offering Price per Share ($11.99 divided by .9525) $12.59
(reduced on purchases of $100,000 or more)
B Shares:
Net Asset Value and Redemption Price per Share $11.93
of Beneficial Interest at October 31, 1996
52
<PAGE>
The Japan Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share $9.42
of Beneficial Interest at October 31, 1996
Maximum Offering Price per Share ($9.42 divided by .9525) $9.89
(reduced on purchases of $100,000 or more)
B Shares:
Net Asset Value and Redemption Price per Share $9.35
of Beneficial Interest at October 31, 1996
The Southeast Asian Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share $11.97
of Beneficial Interest at October 31, 1996
Maximum Offering Price per Share ($11.97 divided by .9525 $12.57
(reduced on purchases of $100,000 or more)
B Shares:
Net Asset Value and Redemption Price per Share $11.89
of Beneficial Interest at October 31, 1996
</TABLE>
53
<PAGE>
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES
OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing Administration
of the U.S. Government and are guaranteed by the U.S. Government.
FHA Insured Notes--are bonds issued by the Farmers Home Administration, the
U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which represent a partial
ownership interest in a pool of mortgage loans issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA and
the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or FHA-insured
mortgages underlying the Certificates. The average life of a GNMA Certificate is
likely to be substantially less than the original maturity of the mortgage pools
underlying the securities. Prepayments of principal by mortgagors and mortgage
foreclosures may result in the return of the greater part of principal invested
far in advance of the maturity of the mortgages in the pool. Foreclosures impose
no risk to principal investment because of the GNMA guarantee. As the prepayment
rate of individual mortgage pools will vary widely, it is not possible to
accurately predict the average life of a particular issue of GNMA Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates. Principal which is so prepaid will be reinvested although possibly
at a lower rate. In addition, prepayment of mortgages included in the mortgage
pool underlying a GNMA Certificate purchased at a premium could result in a loss
to a Fund. Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate. If agency
securities are purchased at a premium above principal, the premium is not
guaranteed by the issuing agency and a decline in the market value to par may
result in a loss of the premium, which may be particularly likely in the event
of a prepayment. When and if available, U.S. Government obligations may be
purchased at a discount from face value.
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.
GSA Participation Certificates--are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed by
the U.S. Government.
A-1
<PAGE>
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of Housing
and Urban Development of the U.S. Government, the payment of which is secured by
the U.S. Government.
Penn Central Transportation Certificates--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds--are bonds issued by
the Washington Metropolitan Area Transit Authority. 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 safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance and
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in
high degree.
Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's applies numerical modifiers "1", "2", and "3" to certain of its rating
classifications. The modifier "1" indicates that the security ranks in the
higher end of its generic rating category; the modifier "2" indicates a
mid-range ranking; and the modifier "3" indicates that the issue ranks in the
lower end of its generic rating category.
B-1
<PAGE>
Standard & Poor's Ratings Group Corporate Bond Ratings
AAA--This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to repay principal and pay
interest.
AA--Bonds rated "AA" also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and differs from "AAA" issues only in
small degree.
A--Bonds rated "A" have a strong capacity to repay principal and pay interest,
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Bonds rated "BBB" are regarded as having an adequate capacity to repay
principal and pay interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to repay principal and pay interest for
bonds in this category than for higher rated categories.
BB-B-CCC-CC-C--Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded, on
balance, as predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the
obligations. BB indicates the lowest degree of speculation and C the highest
degree of speculation. While such bonds will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI--Bonds rated "CI" are income bonds on which no interest is being paid.
D--Bonds rated "D" are in default. The "D" category is used when interest
payments or principal payments are not made on the date due even if the
applicable grace period has not expired unless S&P believes that such payments
will be made during such grace period. The "D" rating is also used upon the
filing of a bankruptcy petition if debt service payments are jeopardized.
The ratings set forth above may be modified by the addition of a plus or minus
to show relative standing within the major rating categories.
Moody's Investors Service's Commercial Paper Ratings
Prime-1--Issuers (or related supporting institutions) rated "Prime-1" have a
superior ability for repayment of senior short-term debt obligations. "Prime-1"
repayment ability will often be evidenced by many of the following
characteristics: leading market positions in well-established industries, high
rates of return on funds employed, conservative capitalization structures with
moderate reliance on debt and ample asset protection, broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and
well-established access to a range of financial markets and assured sources of
alternate liquidity.
Prime-2--Issuers (or related supporting institutions) rated "Prime-2" have a
strong ability for repayment of senior short-term debt obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternative liquidity is maintained.
Prime-3--Issuers (or related supporting institutions) rated "Prime-3" have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and the requirement for relatively high financial
leverage. Adequate alternate liquidity is maintained.
B-2
<PAGE>
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime rating
categories.
Standard & Poor's Ratings Group Commercial Paper Ratings
A S&P commercial paper rating is current assessment of the likelihood of timely
payment of debt having an original maturity of no more than 365 days. Ratings
are graded in several categories, ranging from "A-1" for the highest quality
obligations to "D" for the lowest. The four categories are as follows:
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus (+) sign designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B--Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
Fitch Bond Ratings
AAA--Bonds rated AAA by Fitch are considered to be investment grade and of
the highest credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds rated AA by Fitch are considered to be investment grade and of
very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated AAA.
Because bonds rated in the AAA and AA categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issues
is generally rated F-1+ by Fitch
A--Bonds rated A by Fitch are considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB--Bonds rated BBB by Fitch are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to have adverse consequences on
these bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for bonds
with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position of
a credit within a rating category. Plus and minus signs, however, are not used
in the AAA category.
Fitch Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on demand
or have original maturities of generally up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
B-3
<PAGE>
The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.
Fitch's short-term ratings are as follows:
F-1+--Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment.
F-1--Issues assigned this rating reflect an assurance of timely payment only
slightly less in degree than issues rated F-1+.
F-2--Issues assigned this rating have a satisfactory degree of assurance for
timely payment but the margin of safety is not as great as for issues assigned
F-1+ and F-1 ratings.
F-3--Issues assigned this rating have characteristics suggesting that the degree
of assurance for timely payment is adequate, although near-term adverse changes
could cause these securities to be rated below investment grade.
LOC--The symbol LOC indicates that the rating is based on a letter of credit
issued by a commercial bank.
Like higher rated bonds, bonds rated in the Baa or BBB categories are considered
to have adequate capacity to pay principal and interest. However, such bonds may
have speculative characteristics, and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds.
After purchase by a Fund, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by such Fund. Neither event will
require a sale of such security by a Fund. However, a Fund's investment manager
will consider such event in its determination of whether such Fund should
continue to hold the security. To the extent the ratings given by Moody's, S&P
or Fitch may change as a result of changes in such organizations or their rating
systems, a Fund will attempt to use comparable ratings as standards for
investments in accordance with the investment policies contained in this
Prospectus and in the Statement of Additional Information.
B-4
<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 herewith.
ITEM 25. Persons Controlled by or Under Common
Control with Registrant
Not applicable
C-2
<PAGE>
ITEM 26. Number of Holders of Securities
Number of Record Holders
Title of Series as of January 31, 1997
- --------------- -----------------------------
A B Institutional
Shares Shares Shares
------ ------ ------
VISTA(SM) U.S. Treasury Income Fund 2,273 708 n/a
VISTA(SM) U.S. Government Securities Fund 67 n/a 92
VISTA(SM) Balanced Fund 1,953 803 n/a
VISTA(SM) Short-Term Bond Fund 97 n/a 65
VISTA(SM) Bond Fund 58 55 67
VISTA(SM) Large Cap Equity Fund 289 45 200
VISTA(SM) American Value Fund 191 n/a n/a
VISTA(SM) Equity Income Fund 1,018 167 n/a
VISTA(SM) Small Cap Equity Fund 9,504 7,760 12
VISTA(SM) Growth and Income Fund 72,228 24,052 9
VISTA(SM) Capital Growth Fund 36,499 23,935 11
VISTA(SM) International Equity Fund 2,293 1,140 n/a
VISTA(SM) Global Fixed Income Fund 0 0 n/a
VISTA(SM) Southeast Asian Fund 416 215 n/a
VISTA(SM) European Fund 125 73 n/a
VISTA(SM) Japan Fund 95 34 n/a
VISTA(SM) 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 Emerging Growth 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 certified that it meets all the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and 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 27th day of February, 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 February 27, 1997
- -------------------------------
Fergus Reid, III
* Trustee February 27, 1997
- -------------------------------
William J. Armstrong
* Trustee February 27, 1997
- -------------------------------
John R.H. Blum
* Trustee February 27, 1997
- -------------------------------
Joseph J. Harkins
* Trustee February 27, 1997
- -------------------------------
Richard E. Ten Haken
* Trustee February 27, 1997
- -------------------------------
Stuart W. Cragin, Jr.
* Trustee February 27, 1997
- -------------------------------
Irv Thode
/s/ H. Richard Vartabedian President February 27, 1997
_______________________________ and Trustee
H. Richard Vartabedian
*
- ------------------------------- Trustee February 27, 1997
W. Perry Neff
*
- ------------------------------- Trustee February 27, 1997
Roland R. Eppley, Jr.
*
- ------------------------------- Trustee February 27, 1997
W.D. MacCallan
C-8
<PAGE>
/s/ Martin R. Dean Treasurer and February 27, 1997
_______________________________ Principal Financial
Martin R. Dean Officer
/s/ H. Richard Vartabedian Attorney in February 27, 1997
_______________________________ Fact
H. Richard Vartabedian
<PAGE>
SIGNATURES
Growth and Income Portfolio has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A of Mutual Fund Group 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 27th day of February, 1997.
GROWTH AND INCOME PORTFOLIO
By /s/ H. Richard Vartabedian
____________________________
H. Richard Vartabedian
Chairman and President
This Amendment to the Registration Statement on Form N-1A of Mutual Fund Group
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ H. Richard Vartabedian
_______________________________ President February 27, 1997
H. Richard Vartabedian and Trustee
*
_______________________________ Trustee February 27, 1997
William J. Armstrong
*
_______________________________ Trustee February 27, 1997
John R.H. Blum
*
_______________________________ Trustee February 27, 1997
Joseph J. Harkins
*
_______________________________ Trustee February 27, 1997
Richard E. Ten Haken
*
_______________________________ Trustee February 27, 1997
Stuart W. Cragin, Jr.
*
_______________________________ Trustee February 27, 1997
Irving L. Thode
*
_______________________________ Chairman and Trustee February 27, 1997
Fergus Reid, III
*
_______________________________ Trustee February 27, 1997
W. Perry Neff
*
_______________________________ Trustee February 27, 1997
Roland R. Eppley, Jr.
*
_______________________________ Trustee February 27, 1997
W.D. MacCallan
/s/ Martin Dean Treasurer and Principal February 27, 1997
_______________________________ Accounting Officer
Martin Dean
/s/ H. Richard Vartabedian Attorney in Fact February 27, 1997
_______________________________
H. Richard Vartabedian
<PAGE>
SIGNATURES
Capital Growth Portfolio has duly caused this Post-Effective Amendment to the
Registration Statement on Form N-1A of Mutual Fund Group 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 27th day of February, 1997.
CAPITAL GROWTH PORTFOLIO
By /s/ H. Richard Vartabedian
____________________________
H. Richard Vartabedian
Chairman and President
This Amendment to the Registration Statement on Form N-1A of Mutual Fund Group
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ H. Richard Vartabedian
_______________________________ President February 27, 1997
H. Richard Vartabedian and Trustee
*
_______________________________ Trustee February 27, 1997
William J. Armstrong
*
_______________________________ Trustee February 27, 1997
John R.H. Blum
*
_______________________________ Trustee February 27, 1997
Joseph J. Harkins
*
_______________________________ Trustee February 27, 1997
Richard E. Ten Haken
*
_______________________________ Trustee February 27, 1997
Stuart W. Cragin, Jr.
*
_______________________________ Trustee February 27, 1997
Irving L. Thode
*
_______________________________ Chairman and Trustee February 27, 1997
Fergus Reid, III
*
_______________________________ Trustee February 27, 1997
W. Perry Neff
*
_______________________________ Trustee February 27, 1997
Roland R. Eppley, Jr.
*
_______________________________ Trustee February 27, 1997
W.D. MacCallan
/s/ Martin Dean Treasurer and Principal February 27, 1997
_______________________________ Accounting Officer
Martin Dean
/s/ H. Richard Vartabedian Attorney in Fact February 27, 1997
_______________________________
H. Richard Vartabedian
<PAGE>
SIGNATURES
International Equity Portfolio has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A of Mutual Fund Group 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 27th day of February, 1997.
INTERNATIONAL EQUITY PORTFOLIO
By /s/ H. Richard Vartabedian
____________________________
H. Richard Vartabedian
Chairman and President
This Amendment to the Registration Statement on Form N-1A of Mutual Fund Group
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ H. Richard Vartabedian
_______________________________ President February 27, 1997
H. Richard Vartabedian and Trustee
*
_______________________________ Trustee February 27, 1997
William J. Armstrong
*
_______________________________ Trustee February 27, 1997
John R.H. Blum
*
_______________________________ Trustee February 27, 1997
Joseph J. Harkins
*
_______________________________ Trustee February 27, 1997
Richard E. Ten Haken
*
_______________________________ Trustee February 27, 1997
Stuart W. Cragin, Jr.
*
_______________________________ Trustee February 27, 1997
Irving L. Thode
*
_______________________________ Chairman and Trustee February 27, 1997
Fergus Reid, III
*
_______________________________ Trustee February 27, 1997
W. Perry Neff
*
_______________________________ Trustee February 27, 1997
Roland R. Eppley, Jr.
*
_______________________________ Trustee February 27, 1997
W.D. MacCallan
/s/ Martin Dean Treasurer and Principal February 27, 1997
_______________________________ Accounting Officer
Martin Dean
/s/ H. Richard Vartabedian Attorney in Fact February 27, 1997
_______________________________
H. Richard Vartabedian
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number
11 Consent of Price Waterhouse LLP
27 Financial Data Schedules
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendement No. 41 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated December 10, 1996, relating to the financial
statements and selected per share data and ratios for a share of beneficial
interest outstanding appearing in the October 31, 1996 Annual Reports to
Shareholders ("Annual Reports") of Vista Bond Fund, Vista Short-Term Bond Fund,
Vista Equity Income Fund, Vista Large Cap Equity Fund, Vista Small Cap Equity
Fund, Vista Balanced Fund, Vista U.S. Treasury Income Fund, Vista U.S.
Government Securities Fund, Vista American Value Fund, Vista Southeast Asian
Fund, Vista Japan Fund, Vista European Fund, Vista Growth & Income Fund, Vista
Capital Growth Fund and Vista International Equity Fund (separately managed
portfolios of Mutual Fund Group), and of our reports dated December 10, 1996,
relating to the financial statements of Capital Growth Portfolio, Growth &
Income Portfolio and International Equity Portfolio appearing in the Annual
Reports, which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading "Financial
Highlights" in the Prospectuses and under the heading "Independent Accountants"
in the Statements of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 27, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000814078
<NAME> VISTA INTERNATIONAL EQUITY FUND - CLASS B
<SERIES>
<NUMBER> 062
<NAME> VISTA INTERNATIONAL EQUITY FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 538,506
<ASSETS-OTHER> 27,850
<OTHER-ITEMS-ASSETS> 32,319,977
<TOTAL-ASSETS> 32,886,333
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 163,015
<TOTAL-LIABILITIES> 163,015
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30,895,963
<SHARES-COMMON-STOCK> 2,650,947
<SHARES-COMMON-PRIOR> 2,754,496
<ACCUMULATED-NII-CURRENT> (66,746)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,356,920
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 537,181
<NET-ASSETS> 32,723,318
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 408,986
<EXPENSES-NET> 433,783
<NET-INVESTMENT-INCOME> (24,797)
<REALIZED-GAINS-CURRENT> 3,616,790
<APPREC-INCREASE-CURRENT> (2,436,093)
<NET-CHANGE-FROM-OPS> 1,155,900
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 143,398
<DISTRIBUTIONS-OF-GAINS> 27
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,762,385
<NUMBER-OF-SHARES-REDEEMED> 1,876,124
<SHARES-REINVESTED> 10,190
<NET-CHANGE-IN-ASSETS> (323,152)
<ACCUMULATED-NII-PRIOR> 126,692
<ACCUMULATED-GAINS-PRIOR> (2,282,883)
<OVERDISTRIB-NII-PRIOR> 0
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<NAME> VISTA BOND FUND - CLASS A
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<NAME> VISTA BOND FUND - CLASS B
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<NAME> VISTA BOND FUND - INSTITUTIONAL CLASS
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<NAME> VISTA CAPITAL GROWHT FUND - CLASS A
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<NAME> VISTA CAPITAL GROWTH FUND - CLASS B
<S> <C>
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<NAME> VISTA CAPITAL GROWTH FUND - INSTITUTIONAL CLASS
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<NAME> VISTA EQUITY INCOME FUND - CLASS B
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<NAME> VISTA EQUITY INCOME FUND - CLASS B
<S> <C>
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<NAME> VISTA EQUITY INCOME FUND - CLASS A
<SERIES>
<NUMBER> 031
<NAME> VISTA EQUITY INCOME FUND - CLASS A
<S> <C>
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<NAME> VISTA EUROPEAN FUND - CLASS A
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<NAME> VISTA EUROPEAN FUND-CLASS B
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<NAME> VISTA GROWTH & INCOME FUND - CLASS A
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<NAME> VISTA GROWTH & INCOME FUND - CLASS B
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<NAME> VISTA GROWTH & INCOME FUND - INSTITUTIONAL CLASS
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<NAME> VISTA JAPAN FUND - CLASS A
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<NAME> VISTA JAPAN FUND - CLASS B
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<NAME> VISTA JAPAN FUND - CLASS B
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<TABLE> <S> <C>
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<CIK> 0000814078
<NAME> VISTA LARGE CAP EQUITY FUND - CLASS A
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<NAME> VISTA LARGE CAP EQUITY FUND - CLASS A
<S> <C>
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<NAME> VISTA LARGE CAP EQUITY FUND - CLASS B
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<NAME> VISTA LARGE CAP EQUITY FUND - INSTITUTIONAL CLASS
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<NAME> VISTA SOUTHEAST ASIAN FUND
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<NAME> VISTA SOUTHEAST ASIAN FUND-CLASS A
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<NAME> VISTA SHORT-TERM BOND FUND - CLASS A
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<NAME> VISTA SHORT-TERM BOND FUND - CLASS A
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<NAME> VISTA SHORT-TERM BOND FUND - INSTITUTIONAL CLASS
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<NAME> VISTA SMALL CAP EQUITY FUND - CLASS A
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<NAME> VISTA SMALL CAP EQUITY FUND - CLASS A
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<NAME> VISTA SMALL CAP EQUITY FUND - CLASS B
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<NAME> VISTA SMALL CAP EQUITY FUND - CLASS B
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<NAME> VISTA SMALL CAP EQUITY FUND - CLASS I
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<NAME> VISTA SMALL CAP EQUITY FUND - CLASS I
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<CIK> 0000814078
<NAME> VISTA U.S. GOVERNMENT SECURITIES FUND - CLASS A
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<NAME> VISTA U.S. GOVERNMENT SECURITIES FUND - CLASS A
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<CIK> 0000814078
<NAME> VISTA U.S. GOVERNMENT SECURITIES FUND - INSITITUIONAL CLASS
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<NAME> VISTA U.S. GOVERNMENT SECURITIES FUND - INSTITUTIONAL CLASS
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<CIK> 0000814078
<NAME> VISTA U.S. TREASURY INCOME FUND - CLASS A
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<NUMBER> 011
<NAME> VISTA U.S. TREASURY INCOME FUND - CLASS A
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<CIK> 0000814078
<NAME> VISTA U.S. TREAUSRY INCOME FUND - CLASS B
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<NAME> VISTA U.S. TREASURY INCOME FUND - CLASS B
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<TABLE> <S> <C>
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<CIK> 0000814078
<NAME> VISTA BALANCED FUND - CLASS A
<SERIES>
<NUMBER> 021
<NAME> VISTA BALANCED FUND - CLASS A
<S> <C>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<CIK> 0000810478
<NAME> VISTA BALANCED FUND - CLASS A
<SERIES>
<NUMBER> 021
<NAME> VISTA BALANCED FUND - CLASS A
<S> <C>
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<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000814078
<NAME> VISTA AMERICAN VALUE FUND
<SERIES>
<NUMBER> 171
<NAME> VISTA AMERICAN VALUE FUND
<S> <C>
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