As filed via EDGAR with the Securities and Exchange Commission on
February 27, 1998
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. 50 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Post-Effective Amendment No. 89 |X|
-------------------------------
MUTUAL FUND GROUP
(Exact Name of Registrant as Specified in Charter)
One Chase Manhattan Plaza
New York, New York 10081
--------------------------------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 492-1600
George Martinez, Esq. Peter Eldridge, Esq. Gary S. Schpero, Esq.
BISYS Fund Services, Inc. Chase Manhattan Bank Simpson Thacher & Bartlett
3435 Stelzer Road 270 Park Avenue 425 Lexington Avenue
Columbus, Ohio 43219 New York, New York 10017 New York, New York 10017
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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 (________________)
paragraph (b) pursuant toparagraph (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.
------------------
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 for the fiscal year ended October 31, 1997 was
filed on January 22, 1998.
<PAGE>
MUTUAL FUND GROUP
Registration Statement on Form N-1A
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) Under the Securities Act of 1933
U.S. TREASURY INCOME FUND
BALANCED FUND
EQUITY INCOME FUND
GROWTH AND INCOME FUND
CAPITAL GROWTH FUND
LARGE CAP EQUITY FUND
BOND FUND
SHORT-TERM BOND FUND
INTERNATIONAL EQUITY FUND
SMALL CAP EQUITY FUND
U.S. GOVERNMENT SECURITIES FUND
AMERICAN VALUE FUND
SOUTHEAST ASIAN FUND
JAPAN FUND
EUROPEAN FUND
SMALL CAP OPPORTUNITIES FUND
SELECT GROWTH AND INCOME FUND
LATIN AMERICAN EQUITY FUND
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
Captions apply to all Prospectuses except where
indicated in parenthesis. Parenthesis indicate
captions for Institutional Shares Prospectuses
1 Front Cover Page *
2(a) Expense Summary *
(b) Not Applicable *
3(a) Financial Highlights *
(b) Not Applicable *
(c) Performance Information *
4(a)(b) Other Information *
Concerning the Fund;
Fund Objective; Investment
Policies
(c) Fund Objective; Investment *
Policies
(d) Not Applicable *
5(a) Management *
(b) Management *
(c)(d) Management; Other Information Concerning the Fund *
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(e) Other Information Concerning *
the Fund; Back Cover Page
(f) Other Information Concerning *
the Fund
(g) Not Applicable *
5A Not Applicable *
6(a) Other Information Concerning *
the Fund
(b) Not Applicable *
(c) Not Applicable *
(d) Not Applicable *
(e)(f) About Your Investment; How to Buy, Sell *
and Exchange Shares (How to Purchase, Redeem
and Exchange Shares); How Distributions Are
Made; Tax Information; Other Information
Concerning the Fund; Make the Most of Your
Vista Privileges.
(f) How Distributions are Made; *
Tax Information
(g) How Distributions are Made; Tax Matters
Tax Information
(h) About Your Investment; How to Buy, *
Sell and Exchange Shares (How to
Purchase, Redeem and Exchange Shares);
Other Information Concerning the Fund
7(a) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(b) How the Fund Values its Shares; *
How to Buy, Sell and Exchange
Shares (How to Purchase, Redeem
and Exchange Shares)
(c) Not Applicable *
(d) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem and
Exchange Shares)
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part A Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(e) Management; Other Information *
Concerning the Fund
(f) Other Information Concerning the *
Fund
8(a) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(b) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(c) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
(d) How to Buy, Sell and Exchange *
Shares (How to Purchase, Redeem
and Exchange Shares)
9 Not Applicable *
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
10 * Front Cover Page
11 * Front Cover Page
12 * Not Applicable
13(a)(b) Fund Objective; Investment Investment Policies
Policies and Restrictions
14(c) * Management of the Trust and
Funds or Portfolios
(b) * Not Applicable
(c) * Management of the Trust and
Funds or Portfolios
15(a) * Not Applicable
(b) * General Information
(c) * General Information
16(a) Management Management of the Trust and
Funds or Portfolios
(b) Management Management of the Trust and
Funds or Portfolios
(c) Other Information Concerning Management of the Trust and
the Fund Funds or Portfolios
(d) Management Management of the Trust and
Funds or Portfolios
(e) * Not Applicable
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(f) How to Buy, Sell and Exchange Shares Management of the Trust and
(How to Purchase, Redeem and Exchange Shares); Funds or Portfolios
Other Information Concerning the Fund
(g) * Not Applicable
(h) * Management of the Trust and
Funds or Portfolios;
Independent Accountants
(i) * Not Applicable
17 Investment Policies Investment Policies and Restrictions
18(a) Other Information Concerning the Fund; General Information
How to Buy, Sell and Exchange Shares
(How to Purchase, Redeem and Exchange
Shares)
(b) * Not Applicable
19(a) How to Buy, Sell and Exchange Shares Purchases, Redemptions and Exchanges
(How to Purchase, Redeem and Exchange
Shares)
(b) How the Fund Values its Shares; How to Determination of Net Asset Value
Buy, Sell and Exchange Shares (How to
Purchase, Redeem and Exchange Shares)
(c) * Purchases, Redemptions and Exchanges
20 How Distributions are Made; Tax Information Tax Matters
21(a) * Management of the Trust and Funds
or Portfolios
(b) * Management of the Trust and Funds
or Portfolios
(c) * Not Applicable
22 * Performance Information
23 * Not Applicable
</TABLE>
-v-
<PAGE>
EXPLANATORY NOTE
The Prospectus for Shares of Latin American Equity Fund is incorporated by
reference to Amendment No. 46 to the Registration Statement on Form N-1A of the
Registrant filed on December 1, 1997.
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
AMERICAN VALUE FUND
INVESTMENT STRATEGY: TOTAL RETURN
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 .................................................................. 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 Chase Vista Privileges ................................ 22
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.
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)* .............. 0.10%
12b-1 Fee (after estimated waiver)* ** ......................... 0.00%
Shareholder Servicing Fee (after estimated waiver)* ............ 0.10%
Other Expenses (after estimated waiver)* ....................... 1.12%
-----
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 5 Years 10 Years
-------- --------- --------- ---------
Shares ........................ $13 $42 $72 $159
* 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 1.12%,
respectively, and Total Fund Operating Expenses would be 2.32%. 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 American Value Fund, which was created to be the successor to the
Predecessor Fund. The table set forth below provides financial highlights for
one Share of the Predecessor Fund outstanding through May 3, 1996, and one
Share of the 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 year ended October 31, 1997 and the period December
1, 1995 through 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.
AMERICAN VALUE FUND
<TABLE>
<CAPTION>
December 1, 1995+
Year Ended through Year Ended
October 31, 1997 October 31, 1996 November 30, 1995*
-------------------- ----------------------- ----------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 13.49 $ 12.11 $ 10.00
-------- -------
Income from Investment Operations:
Net Investment Income ................. ...... 0.218 0.152 0.180
Net Gain on Securities
(both realized and unrealized) ...... ...... 2.602 1.694 2.000
-------- -------- -------
Total from Investment Operations ...... ...... 2.820 1.846 2.180
-------- -------- -------
Less Distributions:
Dividends from Net Investment
Income ....................................... 0.100 0.196 0.070
Distributions from Capital Gains ...... ...... 0.520 0.270 --
-------- -------- -------
Total Distributions ................... ...... 0.620 0.466 0.070
-------- -------- -------
Net Asset Value, End of Period ................. $ 15.69 $ 13.49 $ 12.11
======== ======== =======
Total Return ................................... 21.67% 15.76% 21.80%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $11,577 $ 9,609 $8,399
Ratio of Expenses to Average Net Assets# . 1.32% 1.37% 1.23%
Ratio of Net Investment Income to
Average Net Assets# ......................... 1.50% 1.38% 1.97%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets# ................................. 2.45% 2.52% 2.03%
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets .............. 0.37% 0.23% 1.17%
Portfolio Turnover Rate ........................ 37% 25% 11%
Average Commission Rate Paid per share ......... $0.0664 $0.0793 --
</TABLE>
* Fund commenced operations on February 3, 1995.
+ In 1996, the Fund changed its fiscal year end from November 30 to
October 31.
# Short periods have been annualized.
6
<PAGE>
FUND OBJECTIVE
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 assets in an investment company having substantially the same
investment objective and policies as the Fund.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when consistent
with the Fund's overall objective and policies. These practices, and certain
associated risks, are more fully described in the SAI. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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. Unsponsored
Depositary Receipts may not carry comparable voting rights to sponsored
Depositary Receipts, and a purchaser of unsponsored Depositary Receipts may not
receive as much information about the issuer of the underlying securities as
with a sponsored Depositary Receipt.
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
8
<PAGE>
("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.
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
9
<PAGE>
investment, in which case, unless such offers or proposals are replaced by
equivalent or increased offers or proposals which are consummated, the Fund may
sustain a loss.
WARRANTS. The Fund may invest up to 5% of the value of its total assets (at the
time of investment) in warrants or rights (other than those acquired in units
or attached to other securities) which entitle the holder to buy equity
securities at a specific price during or at the end of a specific period of
time. The Fund will not invest more than 2% of the value of its total assets in
warrants or rights which are not listed on the New York or American Stock
Exchanges.
OTHER INVESTMENT COMPANIES. 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-
10
<PAGE>
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
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
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decisions of the Fund, subject to the oversight of the Board of Trustees. Chase
is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank holding
company. Chase and its predecessors have over 100 years of money management
experience.
For its investment advisory services to the Fund, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal to
0.70% of the Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Van Deventer & Hoch ("VDH"), a registered investment adviser, is the Fund's
sub-investment adviser under a Sub-Investment Advisory Agreement between VDH
and Chase. 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.
REORGANIZATION OF FUND. Effective December 31, 1997, The Chase Manhattan
Corporation consummated the sale of its 50% interest in VD&H to Crestline
Capital Partners L.P. Subject to shareholder approval and the satisfaction of
certain other conditions, the Fund will be reorganized into a new mutual fund
portfolio managed by VD&H. It is anticipated that this reorganization will be
consummated in early 1998.
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 Chase 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
Chase 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,
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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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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
Chase 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 Chase 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
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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 Chase
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 Chase 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. There is a $10.00 charge for each wire transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase Vista Service Center at 1-800-34-
VISTA for complete instructions.
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SELLING SHARES THROUGH YOUR INVESTMENT REPRESENTATIVE. Your investment
representative must receive your request before the close of regular trading on
the New York Stock Exchange to receive that day's net asset value. Your
investment representative will be responsible for furnishing all necessary
documentation to the Chase 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 Chase Vista
funds at net asset value plus any applicable sales charge beginning 15 days
after purchase. Not all Chase Vista funds offer all classes of shares. The
prospectus of the other Chase 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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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
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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.
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
Chase 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 Chase 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 Chase Vista fund. If the Chase Vista Service Center does not receive
your election, the distribution will be reinvested in the Fund. Similarly, if
the Fund or the Chase 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.
All Fund distributions of net investment income (which term includes net
short-term capital gain) will be taxable as ordinary income. Any distributions
of net capital gain which are designated as "capital gain dividends" will be
taxable as long-term capital gain at the currently applicable 28% or 20% rate,
regardless of how long you have held the shares. The taxation of your
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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 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 Chase Vista 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
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain
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broker-dealers who employ registered representatives who have sold or may sell
significant amounts of shares of the Fund and/or other Chase Vista Funds during
a specified period of time. Such compensation does not represent an additional
expense to the Fund or its shareholders, since it will be paid by VFD out of
compensation retained by it from the Fund or other sources available to it.
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 one
or more of the following: assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of shares of the Fund held by investors for whom the
shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services.
Shareholder servicing agents may offer additional services to their customers,
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
Chase 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 Chase 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,
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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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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.
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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, 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
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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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase 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 Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] EXCHANGE PRIVILEGE--Exchange money between Chase 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 Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VAMV-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
BALANCED FUND
CLASS A AND B SHARES
---------------------------------
INVESTMENT STRATEGY: TOTAL RETURN
---------------------------------
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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.
- --------------------------------------------------------------------------------
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2
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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 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 .............................................. 24
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 ..................................................... 30
How performance is determined, stated and/or advertised
Make the Most of Your Chase Vista Privileges ................................ 31
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) ..................... 5.75% 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) .......... 0.50% 0.50%
12b-1 Fee*** .............................................. 0.25% 0.75%
Shareholder Servicing Fee (after estimated waiver,
where indicated) ....................................... 0.05%** 0.25%
Other Expenses ............................................ 0.45% 0.45%
---- ----
Total Fund Operating Expenses (after waivers of fees)** ... 1.25% 1.95%
==== ====
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+ ....................... $70 $95 $122 $200
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ .... $71 $94 $128 $209
Assuming no redemptions+++ .......... $20 $61 $105 $209
* 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 Shareholder Servicing Fee would be 0.25% for Class A shares, and Total
Fund Operating Expenses would be 1.45% for Class A shares.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A shares at
the beginning of the ninth year after purchase. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses or
returns; actual expenses and returns may be greater or less than shown.
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>
7
FINANCIAL HIGHLIGHTS
6
The table set forth below provides financial highlights 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, 1997, 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.
BALANCED FUND
<TABLE>
<CAPTION>
Class A
--------------------------------------------------
Year Ended 11/4/92*
--------------------------------------------------- through
10/31/97 10/31/96 10/31/95 10/31/94 10/31/93
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................ $ 13.83 $ 12.45 $ 11.09 $ 11.38 $ 10.00
------- ------- ------- -------
Income from Investment Operations:
Net Investment Income ................................... 0.392 0.353 0.382 0.356 0.410
Net Gains or (Losses) in Securities
(both realized and unrealized) ........................ 2.393 1.692 1.517 (0.187) 1.344
------- ------- ------- -------
Total from Investment Operations .......................... 2.785 2.045 1.899 0.169 1.754
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income .................... 0.395 0.345 0.408 0.359 0.375
Distributions from Capital Gains ........................ 0.810 0.320 0.131 0.100 --
------- ------- ------- -------
Total Distributions ..................................... 1.205 0.665 0.539 0.459 0.375
------- ------- ------- -------
Net Asset Value, End of Period .............................. $ 15.41 $ 13.83 $ 12.45 $ 11.09 $ 11.38
======= ======= ======= ======= =======
Total Return(1) ............................................. 21.48% 16.89% 17.70% 1.56% 17.74%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................... $92,941 $55,233 $33,733 $21,705 $15,471
Ratio of Expenses to Average Net Assets# .................. 1.25% 1.25% 1.06% 0.58% 2.04%
Ratio of Net Investment Income
to Average Net Assets# .................................. 2.91% 2.97% 3.48% 3.21% 2./26%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# ........... 1.52% 1.78% 2.20% 2.20% 2.06%
Ratio of Net Investment Income without
waivers and assumption of expenses
to Average Net Assets# .................................. 2.64% 2.44% 2.34% 1.59% 3.35%
Portfolio Turnover Rate ..................................... 136% 149% 68% 77% 136%
Average Commission Rate Paid per share ...................... $0.0551 $0.0598 -- -- --
<CAPTION>
Class B
-----------------------------------------------------
Year Ended 11/4/93**
-------------------------------------- through
10/31/97 10/31/96 10/31/95 10/31/94
---------- -------- -------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ....................................... $ 13.70 $ 12.36 $ 11.03 $ 11.22
------- -------
Income from Investment Operations:
Net Investment Income .................................................. 0.319 0.283 0.309 0.345
Net Gains or (Losses) in Securities (both realized and unrealized) ..... 2.326 1.656 (1.502) (0.117)
------- -------
Total from Investment Operations ......................................... 2.645 1.939 1.811 0.228
------- -------
Less Distributions:
Dividends from Net Investment Income ................................... 0.325 0.279 0.131 0.318
Distributions from Capital Gains ....................................... 0.810 0.320 0.350 0.100
------- -------
Total Distributions ...................................................... 1.135 0.599 0.481 0.418
------- -------
Net Asset Value, End of Period ............................................ $ 15.21 $ 13.70 $ 12.36 $ 11.03
======= ======= ======= =======
Total Return(1) ............................................................ 20.55% 16.10% 16.93% 2.17%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) .................................. $15,471 $ 9,737 $ 6,336 $ 3,543
Ratio of Expenses to Average Net Assets# ................................. 2.04% 2.00% 1.82% 1.50%
Ratio of Net Investment Income
to Average Net Assets# ................................................. 2.26% 2.21% 2.68% 2.46%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets# ..................................... 2.06% 2.29% 2.72% 2.69%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average Net Assets# ...................... 2.24% 1.92% 1.78% 1.24%
Portfolio Turnover Rate .................................................... 136% 149% 68% 77%
Average Commission Rate Paid per share ..................................... $0.0551 $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.
<PAGE>
FUND OBJECTIVE
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 at the time of purchase by the fund 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 appropriate 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
8
<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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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.
Unsponsored Depositary Receipts may not carry comparable voting rights to
sponsored Depositary Receipts, and a purchaser of unsponsored Depositary
Receipts may not receive as much information about the issuer of the underlying
securities as with a sponsored Depositary Receipt.
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
9
<PAGE>
also invest in securities denominated in the ECU, which is a "basket" consisting
of specified amounts of the currencies of certain member states of the European
Community. These securities are typically issued by European governments and
supranational organizations.
U.S. GOVERNMENT OBLIGATIONS. The Fund may invest in obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. 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 AND STANDY-BY 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. 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. A put transaction will
increase the cost of the underlying security and consequently reduce the
available yield. Each of these transactions involves 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
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 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 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.
As new types of
12
<PAGE>
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 contracts, there is a greater potential
13
<PAGE>
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 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 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
companies may have limited
14
<PAGE>
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 provides
discretionary investment advisory services to institutional clients. 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 Patrick Quilty, Jr., Vice Presidents and
Senior Portfolio Managers of Chase, have been responsible for the management of
the Fund's portfolio since its inception in 1993, and December 1996,
respectively. Mr. Adams joined Chase in 1987 and oversees the equity trading of
the Fund and is a manager of Growth and Income Portfolio and Large Cap Equity
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. Mr. Quilty is also a manager
of Bond Fund and 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
15
<PAGE>
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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
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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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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.
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 5.75 6.10 5.00
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
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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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GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank
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or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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
Chase Vista Funds with balances held in Chase bank accounts for purposes of
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<PAGE>
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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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 Chase
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 Chase 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. There is a $10.00 charge for each wire transaction. 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
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<PAGE>
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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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,
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<PAGE>
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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC--and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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
23
<PAGE>
Class A shares with no initial sales charge (in an amount not in excess of
their redemption proceeds) if the purchase occurs within 90 days of the
redemption of the Class B shares.
HOW THE FUND
VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once daily
based upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced
at 4:15 p.m., Eastern time), on each business day of the Fund, by dividing the
net assets of the Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Fund are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
The Fund distributes any net investment income at least quarterly and any net
realized capital gains at least annually. 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
Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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
24
<PAGE>
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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain, at the currently
applicable 28% or 20% rate, 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 Chase Vista 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 Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that
25
<PAGE>
meet specified targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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 one or more of the following: 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
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<PAGE>
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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
27
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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 and may determine not to offer certain classes of
shares. 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
28
<PAGE>
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 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
29
<PAGE>
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 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
<PAGE>
MAKE THE MOST OF YOUR CHASE VISTA PRIVILEGES
The following services are available to you as a Chase 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 Chase Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
o FREE EXCHANGE PRIVILEGE--Exchange money between Chase 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 Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
31
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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.
32
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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VBF-1-298X
<PAGE>
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
PROSPECTUS
BOND FUND
CLASS A AND B SHARES
INVESTMENT STRATEGY: INCOME
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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
<TABLE>
<S> <C>
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 .................................................................. 13
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 ....................................................... 14
Choosing a share class
How to Buy, Sell and Exchange Shares ........................................ 15
How the Fund Values Its Shares .............................................. 22
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 ..................................................... 28
How performance is determined, stated and/or advertised
Make the Most of Your Chase Vista Privileges ................................ 29
</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>
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)** ......... 0.00% 0.00%
12b-1 Fee** *** ............................................ 0.10% 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)** ................................ 0.75% 1.65%
======= =======
</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+ ...................... $52 $68 $ 85 $134
Class B Shares:
Assuming complete redemption at the
end of the period++ +++ ............ $68 $85 $113 $171
Assuming no redemptions +++ ......... $17 $52 $ 90 $171
</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 12b-1 Fee would be 0.25% for Class A 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."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides financial highlights 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,
1997, 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.
BOND FUND
<TABLE>
<CAPTION>
Class A Class B
------------------------- --------------------------
Year 5/6/96* Year 5/6/96*
Ended through Ended through
10/31/97 10/31/96 10/31/97 10/31/96
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............... $ 10.71 $ 10.39 $ 10.76 $ 10.39
---------- --------- ---------- ---------
Income from Investment Operations
Net Investment Income ........................... 0.629 0.288 0.578 0.233
Net Gains or (Losses) in Securities (both realized
and unrealized) ................................ 0.330 0.310 0.323 0.368
---------- --------- ---------- ---------
Total from Investment Operations ................. 0.959 0.598 0.901 0.601
---------- --------- ---------- ---------
Less Distributions
Dividends from Net Investment Income ............ 0.638 0.278 0.580 0.231
Distributions from Capital Gains ................. 0.210 -- 0.210 --
---------- --------- ---------- ---------
Total Distributions .............................. 0.848 0.278 0.790 0.231
Net Asset Value, End of Period ..................... $ 10.82 $ 10.71 $ 10.87 $ 10.76
========== ========= ========== =========
Total Return(1) .................................... 9.45% 5.95% 8.32% 6.12%
Ratios/Supplemental Data
Net Assets, End of Perod (000 omitted) ............ $ 26,402 $ 988 $ 1,447 $ 821
Ratio of Exepnses to Average Net Assets # ......... 0.92% 0.90% 1.64% 1.65%
Ratio of Net Investment Income to Average Net
Assets # ........................................ 6.11% 5.75% 5.26% 4.97%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets # ............. 1.61% 2.39% 2.07% 2.93%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average
Net Assets # .................................... 5.42% 4.26% 4.83% 3.69%
Portfolio Turnover Rate ............................ 823% 122% 823% 122%
</TABLE>
* 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
<PAGE>
FUND OBJECTIVE
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 rated in the
category A or higher by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Corporation ("S&P"), and unrated securities determined by the Fund's
advisers to be of comparable quality. The Fund may invest a substantial portion
of its total assets in debt obligations of foreign issuers, which may include
issuers located in developing countries, so long as all such foreign debt
obligations meet the quality requirements listed above.
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.
6
<PAGE>
WHO MAY WANT TO INVEST
This Fund may be most appropriate for investors who...
[bullet] Are seeking current income
[bullet] Are investing for mid- to long-term investment goals
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
FOREIGN SECURITIES
The Fund may invest a substantial portion of its assets in foreign
investment-grade fixed income securities. 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.
The securities markets of certain countries in which the Fund may invest are
smaller, less liquid and have more limited trading volume than those in the
United States. Such factors could cause the prices of foreign securities to be
erratic for reasons apart from factors that affect the quality of securities.
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.
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 and economic
stability. The small size of market 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.
Additionally, special tax considerations will apply to foreign securities, such
as the imposition of withholding taxes, and there may be an absence of
developed legal
7
<PAGE>
structure governing private investment and private property.
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 AND STAND BY 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.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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of these transactions involves 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.
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
8
<PAGE>
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 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
9
<PAGE>
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 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.
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<PAGE>
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 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
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<PAGE>
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.
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
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<PAGE>
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 provides
discretionary investment advisory services to institutional clients. 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 Vice President and Senior Portfolio Manager at Chase,
and Susan Huang, a Managing Director and the Head of U.S. Fixed Income
Management at 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 Balanced
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<PAGE>
Fund and U.S. Treasury Income Fund.
Ms. Huang is responsible for developing the asset allocation and risk
management strategies for fixed income portfolios. 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 was head of the
U.S. fixed income management group at Equitable Capital Management. Ms. Huang
is also a manager of Short-Term Bond Fund, U.S. Government Securities Fund and
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 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.
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<PAGE>
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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
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<PAGE>
of Class B shares, certificates for Class B shares will not be issued and all
Class B shares will be held in book entry form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives
the net asset value. The sales charge is allocated between your broker-dealer
and the Fund's distributor as shown in the following table, except when the
Fund's distributor, in its discretion, allocates the entire amount to your
broker-dealer.
<TABLE>
<CAPTION>
Sales charge as a
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 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.
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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in the Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank
17
<PAGE>
or its designee serves as trustee or custodian.
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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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
Chase Vista
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<PAGE>
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
Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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 Chase
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 Chase 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.
There is a $10.00 charge for each wire transaction. Unless an investor
indicates otherwise on the account application, the Fund will be authorized to
act upon redemption and transfer instructions received by
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<PAGE>
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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase Vista fund into which shares are being exchanged should be read carefully
and retained for future reference. If you exchange shares subject to a
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<PAGE>
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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC --and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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
21
<PAGE>
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 Chase
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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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
22
<PAGE>
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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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 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
23
<PAGE>
activities for the sale of Class A and Class B shares will be conducted
generally by the Chase Vista 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 Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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 one or more of the following: 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
24
<PAGE>
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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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. One Chase Manhattan
Plaza, 3rd Floor, New York, New York 10081.
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
25
<PAGE>
all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of
the Trust; insurance premiums; and expenses of calculating the net asset value
of, and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or
a portion of any fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of the Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of shares
in addition to these classes and may determine not to offer certain classes of
shares. 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
26
<PAGE>
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 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
27
<PAGE>
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
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.
28
<PAGE>
MAKE THE MOST OF YOUR CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans
for systematic investment or exchange and systematic withdrawal
or exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares with no initial sales
charge (in an amount not in excess of their redemption proceeds) if the
purchase occurs within 90 days of the redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
29
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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
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(This Page Intentionally Left Blank)
<PAGE>
CHASE 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
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
P.O. Box 419392
Kansas City, MO 64141-6392
VDF-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
BOND FUND
INSTITUTIONAL SHARES
INVESTMENT STRATEGY: INCOME
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 .......................................... 13
How to Purchase, Redeem and Exchange Shares ......... 14
How the Fund Values Its Shares ...................... 16
How Distributions Are Made; Tax Information ......... 16
Other Information Concerning the Fund ............... 18
Performance Information ............................. 22
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The 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 ................................................. 0.50%
----
Total Fund Operating Expenses (after waivers of fees)* ......... 0.50%
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 .......... $5 $16 $28 $63
*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 1.05%.
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 provides financial highlights for one Institutional
share with respect to each of the five fiscal periods commencing after October
31, 1992, and the related financial statements, have been audited by Price
Waterhouse LLP, 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,
1997, which is incorporated by reference into the SAI.
BOND FUND
<TABLE>
<CAPTION>
Year Ended
---------------------------
10/31/97 10/31/96
----------- ----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................................... $ 10.71 $ 10.91
--------- ---------
Income from Investment Operations:
Net Investment Income .................................................................. 0.680 0.665
Net gain or (Losses) in Securities (both realized and unrealized) ...................... 0.324 (0.148)
--------- ---------
Total from Investment Operations ....................................................... 1.004 0.517
--------- ---------
Less Distributions:
Dividends from Net Investment Income ................................................... 0.684 0.662
Distributions from Capital Gains ....................................................... 0.210 0.055
--------- ---------
Total Distributions: ................................................................... 0.894 0.717
--------- ---------
Net Asset Value, End of Period ........................................................... $ 10.82 $ 10.71
========= =========
Total Return ............................................................................. 9.93% 4.90%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................................................. $ 18,097 $ 17,777
Ratio of Expenses to Average Net Assets# ................................................ 0.50% 0.36%
Ratio of Net Investment Income to Average Net Assets# ................................... 6.42% 6.23%
Ratio of Expenses without waivers and assumption of expenses to Average Net Assets# ..... 1.17% 0.87%
Ratio of Net Investment Income without waivers and assumption of expenses to Average Net 5.75% 5.72%
Assets#
Portfolio Turnover Rate .................................................................. 823% 122%
<CAPTION>
Year Ended
-----------------------------------
10/31/95 10/31/94 10/31/93
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................................... $ 10.08 $ 11.30 $ 10.76
--------- --------- ---------
Income from Investment Operations:
Net Investment Income .................................................................. 0.687 0.667 0.622
Net gain or (Losses) in Securities (both realized and unrealized) ...................... 0.854 (1.140) 0.629
--------- --------- ---------
Total from Investment Operations ....................................................... 1.541 (0.473) 1.251
--------- --------- ---------
Less Distributions:
Dividends from Net Investment Income ................................................... 0.687 0.667 0.684
Distributions from Capital Gains ....................................................... 0.024 0.081 0.026
--------- --------- ---------
Total Distributions: ................................................................... 0.711 0.748 0.710
--------- --------- ---------
Net Asset Value, End of Period ........................................................... $ 10.91 $ 10.08 $ 11.30
========= ========= =========
Total Return ............................................................................. 15.83% (4.30%) 12.63%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................................................. $ 57,285 $ 52,439 $ 61,155
Ratio of Expenses to Average Net Assets# ................................................ 0.31% 0.31% 0.31%
Ratio of Net Investment Income to Average Net Assets# ................................... 6.56% 6.27% 6.15%
Ratio of Expenses without waivers and assumption of expenses to Average Net Assets# ..... 0.87% 0.92% 0.82%
Ratio of Net Investment Income without waivers and assumption of expenses to Average Net 6.00% 5.66% 5.64%
Assets#
Portfolio Turnover Rate .................................................................. 30% 17% 20%
<CAPTION>
7/1/92** Year 11/1/90*
through Ended through
10/31/92 6/30/92 6/30/91
--------- --------- ---------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................................... $ 10.70 $ 10.14 $ 10.00
--------- --------- ---------
Income from Investment Operations:
Net Investment Income .................................................................. 0.240 0.760 0.410
Net gain or (Losses) in Securities (both realized and unrealized) ...................... 0.110 0.570 0.080
--------- --------- ---------
Total from Investment Operations ....................................................... 0.350 1.330 0.490
--------- --------- ---------
Less Distributions:
Dividends from Net Investment Income ................................................... 0.240 0.760 0.350
Distributions from Capital Gains ....................................................... 0.050 0.010 --
--------- --------- ---------
Total Distributions: ................................................................... 0.290 0.770 0.350
--------- --------- ---------
Net Asset Value, End of Period ........................................................... $ 10.76 $ 10.70 $ 10.14
========= ========= =========
Total Return ............................................................................. 3.36% 13.67% 4.82%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................................................. $ 45,401 $ 41,321 $ 36,791
Ratio of Expenses to Average Net Assets# ................................................ 0.30% 0.30% 0.29%
Ratio of Net Investment Income to Average Net Assets# ................................... 6.74% 7.20% 7.30%
Ratio of Expenses without waivers and assumption of expenses to Average Net Assets# ..... 0.73% 1.03% 1.04%
Ratio of Net Investment Income without waivers and assumption of expenses to Average Net 6.31% 6.47% 6.55%
Assets#
Portfolio Turnover Rate .................................................................. 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
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 rated in the
category A or higher by Moody's Investors Service, Inc. ("Moody's") or Standard
& Poor's Corporation ("S&P"), and unrated securities determined by the Fund's
advisers to be of comparable quality. The Fund may invest a substantial portion
of its total assets in debt obligations of foreign issuers, which may include
developing-country issuers located in developing countries so long as all such
foreign debt obligations meet the quality requirements listed above.
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 appropriate for investors who...
[bullet] Are seeking current income
6
<PAGE>
[bullet] Are investing for mid- to long-term investment goals
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
FOREIGN SECURITIES. The Fund may invest a substantial portion of its assets in
foreign investment-grade fixed income securities. 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.
The securities markets of certain countries in which the Fund may invest are
smaller, less liquid and have more limited trading volume than those in the
United States. Such factors could cause the prices of foreign securities to be
erratic for reasons apart from factors that affect the quality of securities.
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.
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 and economic
stability. The small size of market 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.
Additionally, special tax considerations will apply to foreign securities, such
as the imposition of withholding taxes, and there may be an absence of
developed legal structure governing private investment and private property.
MONEY MARKET INSTRUMENTS.
The Fund may invest in cash or high-quality, short-term money
7
<PAGE>
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 AND STAND-BY 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. 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. A put transaction will
increase the cost of the underlying security and consequently reduce the
available yield. Each of these transactions involves 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.
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
8
<PAGE>
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 securitiess 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 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
9
<PAGE>
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 col`lateralized 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.
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
10
<PAGE>
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 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
11
<PAGE>
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-
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
12
<PAGE>
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 provides
discretionary investment advisory services to institutional clients. 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 Vice President and Senior Portfolio
Manager at Chase, and Susan Huang, a Managing Director and the Head of U.S.
Fixed Income Management at 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
Balanced Fund and U.S. Treasury Income Fund.
Ms. Huang is responsible for developing the asset allocation and risk
management strategies for fixed income portfolios. Prior to joining
13
<PAGE>
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 was head
of the U.S. fixed income management group at Equitable Capital Management. Ms.
Huang is also a manager of Short-Term Bond Fund, U.S. Government Securities
Fund and 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 Chase 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 Chase 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 Chase
Vista Service Center. A wire redemption may be requested by telephone to the
Chase Vista Service Center. For telephone redemptions, call the Chase Vista
Service Center at 1-800-622-4273.
14
<PAGE>
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 Chase 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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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
15
<PAGE>
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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase 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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Chase 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 Chase Vista Service Center before
requesting an exchange. The exchange privilege is subject to change or
termination. See the SAI to find out more about the exchange privilege.
HOW THE FUND
VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once daily
based upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced
at 4:15 p.m., Eastern time), on each Fund Business Day, by dividing the net
assets of the Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Fund are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment income at
least monthly. The Fund distributes any net realized capital gains at least
annually. Capital gains are distributed after deducting any available capital
loss carryover.
16
<PAGE>
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 Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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
17
<PAGE>
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 one or more of the following: 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 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
18
<PAGE>
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
19
<PAGE>
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 and may
determine not to offer certain classes of shares. 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 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
20
<PAGE>
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.
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.
21
<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 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.
22
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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.
23
<PAGE>
CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
INDF-1-298X
<PAGE>
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
PROSPECTUS
CAPITAL GROWTH FUND
CLASS A, B AND C SHARES
INVESTMENT STRATEGY: CAPITAL GROWTH
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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
27.
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>
<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 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 .................................................... 22
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 ............................................. 24
Distribution plans, shareholder servicing agents, administration, custodian,
expenses, organization and master/feeder Fund structure
Performance Information ........................................................... 28
How performance is determined, stated and/or advertised
Make the Most of Your Chase 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 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 Class C
Shares Shares Shares
----- ----- -----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .................... 5.75% None None
Maximum Deferred Sales Charge
(as a percentage of the lower of original purchase price
or redemption proceeds)* ............................... None 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee .................................. 0.40% 0.40% 0.40%
12b-1 Fee** .............................................. 0.25% 0.75% 0.75%+
Shareholder Servicing Fee ................................ 0.25% 0.25% 0.25%+
Other Expenses ........................................... 0.38% 0.38% 0.38%
----- ----- -----
Total Fund Operating Expenses ............................ 1.28% 1.78% 1.78%
===== ===== =====
</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++ .......................... $70 $96 $124 $203
Class B Shares:
Assuming complete redemption at the end of
the period+++ ++++ ..................... $70 $89 $120 $196
Assuming no redemptions ++++ ............. $18 $56 $ 96 $196
Class C Shares:
Assuming complete redemption at the end of
the period+++ .......................... $28 $56 $ 96 $209
Assuming no redemptions .................. $18 $56 $ 96 $209
</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. The maximum deferred sales charge on Class C shares applies to
redemptions during the first year after purchase; the charge is 1% during
the first year and zero thereafter. 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.
+ Beginning with the 13th month following the purchase of Class C shares by
their customers, broker-dealers receive payments at an annual rate of
1.00% of the average daily net asset value of the Class C shares invested
in the Fund by their customers, consisting of a 12b-1 distribution fee at
an annual rate of 0.75% of such assets and a service fee at an annual rate
of 0.25% of such assets.
++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 financial highlights 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, 1997, which is incorporated by reference into
the SAI. Shareholders can obtain a copy of this Annual Report
by contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below for each of the five periods ended October 31, 1997, have been
audited by Price Waterhouse LLP, independent accountants, whose report thereon
is also included in the Annual Report to Shareholders.
CAPITAL GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
Year ended October 31,
-----------------------------------------------------
1997 1996 1995 1994
---------- -------- ---------- -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 41.60 $ 35.65 $ 32.17 $ 32.01
----------- -------- ---------- -----------
Income from Investment Operations:
Net Investment Income (Loss) ................. ( 0.022)@ 0.147 0.189 0.099@
Net Gains or (Losses) in Securities
(both realized and unrealized) .............. 10.130 7.270 4.160 0.719
----------- --------- ---------- -----------
Total from Investment Operations ............. 10.108 7.417 4.349 0.818
----------- --------- ---------- -----------
Less Distributions:
Dividends from Net Investment Income ......... 0.144 0.117 0.189 0.027
Distributions from Capital Gains ............. 4.800 1.355 0.676 0.631
----------- --------- ---------- -----------
Total Distributions. ......................... 4.944 1.472 0.865 0.658
----------- --------- ---------- -----------
Net Asset Value, End of Period ................. $ 46.76 $ 41.60 $ 35.65 $ 32.17
=========== ========= ========== ===========
Total Return(1) ................................ 26.47% 21.48% 13.89% 2.62%
Ratios/Supplemental Data(2):
Net Assets, End of Period (000 omitted) ....... $ 839,354 $767,998 $ 747,575 $ 549,411
Ratio of Expenses to Average Net Assets # ..... 1.31% 1.37% 1.51% 1.49%
Ratio of Net Investment Income to Average
Net Assets # ................................. (0.05%) 0.39% 0.54% 0.33%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets # ..................................... 1.31% 1.37% 1.53% 1.50%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ......................... (0.05%) 0.39% 0.52% 0.32%
Portfolio Turnover Rate ........................ -- -- -- --
<CAPTION>
Class A
Year ended October 31,
-------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988
----------- --------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 25.12 $ 22.02 $ 12.33 $ 16.23 $ 11.56 $ 10.00
---------- ---------- -------- --------- -------- --------
Income from Investment Operations:
Net Investment Income (Loss) ................. 0.064 0.078 (0.011) 0.436 0.500 0.117
Net Gains or (Losses) in Securities
(both realized and unrealized) .............. 7.173 3.044 9.805 (3.141) 5.164 1.498
---------- ---------- --------- ---------- -------- ---------
Total from Investment Operations ............. 7.237 3.122 9.794 (2.705) 5.664 1.615
---------- ---------- --------- ---------- -------- ---------
Less Distributions:
Dividends from Net Investment Income ......... 0.093 0.017 0.109 0.592 0.320 0.055
Distributions from Capital Gains ............. 0.257 -- -- 0.598 0.675 --
---------- ---------- --------- ---------- -------- ---------
Total Distributions. ......................... 0.350 0.017 0.109 1.190 0.995 0.055
---------- ---------- --------- ---------- -------- ---------
Net Asset Value, End of Period ................. $ 32.01 $ 25.12 $ 22.02 $ 12.33 $ 16.23 $ 11.56
========== ========== ========= ========== ======== =========
Total Return(1) ................................ 29.06% 14.16% 79.96% (18.11%) 52.12% 16.15%
Ratios/Supplemental Data(2):
Net Assets, End of Period (000 omitted) ....... $ 225,235 $39,836 $ 9,334 $ 4,749 $ 4,652 $ 561
Ratio of Expenses to Average Net Assets # ..... 1.49% 1.40% 1.27% 1.04% 0.00% 0.00%
Ratio of Net Investment Income to Average
Net Assets # ................................. 0.12% 0.32% (0.09%) 2.82% 3.87% 1.55%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets # ..................................... 1.49% 1.77% 3.44% 2.50% 2.50% 2.00%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ......................... 0.12% (0.05%) (2.26%) 1.36% 1.37% (0.45%)
Portfolio Turnover Rate ........................ 43% 67% 83% 139% 189% 229%
<CAPTION>
Class B
-----------------------------------------------------
Year Year Year 11/4/93*
Ended Ended Ende d through
10/31/97 10/31/96 10/31/95 10/31/94
---------- -------- -------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 41.21 $ 35.39 $ 32.03 $ 31.38
---------- --------- ---------- ----------
Income from Investment Operations:
Net Investment Income (Loss) ................. (0.236)@ (0.076) 0.044 0.011@
Net Gains or (Losses) in Securities
(both realized and unrealized) .............. 10.010 7.246 4.100 1.296
---------- --------- ---------- -----------
Total from Investment Operations ............. 9.774 7.170 4.144 1.307
---------- --------- ---------- -----------
Less Distributions:
Dividends from Net Investment Income ......... 0.078 -- 0.111 0.026
Distributions from Capital Gains ............. 4.800 1.355 0.676 0.631
---------- --------- ---------- -----------
Total Distributions. ......................... 4.878 1.355 0.787 0.657
---------- --------- ---------- -----------
Net Asset Value, End of Period ................. $ 46.11 $ 41.21 $ 35.39 $ 32.03
========== ========= ========== ===========
Total Return(1) ................................ 25.85% 20.88% 13.34% 4.19%
Ratios/Supplemental Data(2):
Net Assets, End of Period (000 omitted) ....... $421,645 $333,703 $ 260,376 $ 124,223
Ratio of Expenses to Average Net Assets # ..... 1.81% 1.87% 2.01% 2.00%
Ratio of Net Investment Income to Average
Net Assets # ................................. (0.56%) (0.21%) 0.02% (0.09%)
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets # ..................................... 1.81% 1.87% 2.02% 2.02%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ......................... (0.56%)% (0.21%) 0.01% (0.11%)
Portfolio Turnover Rate ........................ -- -- -- --
</TABLE>
* 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.
6 & 7
<PAGE>
FUND OBJECTIVE
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 at the time of purchase by the Fund. 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 appropriate for investors who . . .
[bullet] Are seeking long-term growth of capital
[bullet] Are investing for goals several years away
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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.
Except as otherwise indicated below, the Portfolio is not subject to any
percentage limits with respect to the practices described below.
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. Unsponsored Depositary Receipts may not carry
comparable voting rights to sponsored Depositary Receipts, and a purchaser of
unsponsored Depositary Receipts may not receive as much information about the
issuer of the underlying securities as with a sponsored Depositary Receipt.
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.
9
<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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.
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
10
<PAGE>
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 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.
11
<PAGE>
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 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.
12
<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-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 provides discretionary investment advisory services to
institutional clients. 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 Small Cap Equity Fund and Growth and
Income Portfolio. Mr. Gleason is also responsible for managing 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 and Class C 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 an annually declining 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
13
<PAGE>
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."
CLASS C SHARES. Class C shares are sold without an initial sales charge, which
provides the investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. If redeemed within one year after
purchase, Class C shares are subject to a CDSC equal to 1% of the lesser of
their original cost or the net asset value at the time of the redemption. If
you hold your shares for one year or more, you will receive the entire net
asset value of your shares upon redemption at the then-current share price.
Class C shares, like Class B shares, have higher combined 12b-1 and service
fees than Class A shares and, as a consequence, pay correspondingly lower
dividends and may have a lower net asset value than Class A shares. Unlike
Class B shares, Class C shares do not convert into any other class of shares of
the Fund. 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 and anticipate
holding your shares for a number of years, you might consider Class B shares.
If you prefer not to pay an initial sales charge and you are uncertain as to
the intended length of your investment, you might consider Class C shares. In
almost all cases, if you are a long-term investor 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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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,
14
<PAGE>
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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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 or Class C 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.
15
<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.
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 5.75 6.10 5.00
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
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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.
16
<PAGE>
Class C Shares
Class C shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within one year after purchase. 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.
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 1.00% of the offering price on sales of Class C 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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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
17
<PAGE>
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 Chase Vista
fund shares), financial institution trust departments investing an aggregate of
$1 million or more in the Chase Vista Funds and clients of certain
administrators of tax-qualified plans when proceeds from repayments of loans to
participants are invested (or reinvested) in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase
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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 or Class C 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 or Class C shares subject to a systematic
withdrawal plan may also be redeemed each year without a CDSC, provided that
the Class B or Class C 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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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
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may require additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner. Contact the Chase
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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 and Class C 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 Chase 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
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representative will be responsible for furnishing all necessary documentation
to the Chase 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 or Class C 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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 or Class C shares into
any of the Chase Vista money market funds (other than Prime Money Market Fund's
Class B and Class C shares, respectively) will be treated as a redemption--and
therefore subject to the conditions of the CDSC--and a subsequent purchase.
Class B or Class C shares of any Chase Vista non-money market fund may be
exchanged into the Class B or Class C shares of the Prime Money Market Fund,
respectively, 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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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
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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 Chase 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 and
Class C 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 or Class C 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 capital gain 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 and Class C shares because expenses attributable to Class B
and Class C 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
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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 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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.
All Fund distributions of net investment income (which term includes net
short-term capital gain) will be taxable as ordinary income. Any distributions
of net capital gain which are designated as "capital gain dividends" will be
taxable as long-term capital gain at the currently applicable 28% or 20% rate,
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).
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OTHER INFORMATION CONCERNING THE FUND
DISTRIBUTION PLANS
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A, Class B and Class C
shares, which provide for the payment of distribution fees at annual rates of
up to 0.25%, 0.75% and 0.75% of the average daily net assets attributable to
Class A, Class B and Class C 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, Class B and Class C 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 the Class A or
Class B shares, or up to 0.75% of the average daily net asset value of Class C
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, Class B and Class C shares will be conducted generally by
the Chase Vista Funds, and activities intended to promote the Fund's Class A,
Class B or Class C shares may also benefit the Fund's other shares and other
Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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, Class B
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or Class C shares of the Fund. These services include one or more of the
following: 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, Class B and Class C 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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
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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
One Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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 approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A, Class B and Class C shares of the Fund. The Fund may offer other
classes of shares in addition to these classes and may
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determine not to offer certain classes of shares. 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 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
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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 Chase 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 and Class C 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
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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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B and Class C accounts) monthly, quarterly or
seminannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. Investors
may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B and Class C 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 or Class C shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
P.O. Box 419392
Kansas City, MO 64141-6392
VCG-1-298X
<PAGE>
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
CAPITAL GROWTH FUND
INSTITUTIONAL SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase Vista Service Center at 1-800-622-4273. The SAI has
been filed with the Securities and Exchange Commission and is incorporated into
this Prospectus by reference. 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
17.
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 ..................................................... 18
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
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. 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
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FINANCIAL HIGHLIGHTS
The table set forth below provides financial highlights 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,
1997, 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,
independent accountants, whose report thereon is also included in the Annual
Report to Shareholders.
CAPITAL GROWTH FUND
Year 1/25/96*
Ended through
10/31/97 10/31/96
------- --------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........... $ 41.65 $ 35.26
------- -------
Income From Investment Operations:
Net Investment Income ........................ 0.133@ 0.172
10.164 6.336
------- -------
Total from Investment Operations ............. 10.297 6.508
------- -------
Less Distributions:
Dividends from Net Investment Income .......... 0.248 0.122
Distributions from Capital Gains .............. 4.800 --
------- -------
Total Distributions ........................... 5.048 0.122
------- -------
Net Asset Value, End of Period ................. $ 46.90 $ 41.65
======= =======
Total Return ................................... 26.98% 18.13%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ....... $52,250 $31,556
Ratio of Expenses to Average Net Assets# ...... 0.91% 1.25%
Ratio of Net Investment Income
to Average Net Assets# ...................... 0.31% 0.81%
Ratio of Expenses without waivers
and assumption of expenses
to Average Net Assets# ...................... 0.92% 1.25%
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets# ............. 0.31% 0.81%
# Annualized.
* Commencement of offering shares.
@ Calculated based upon average net assets.
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FUND OBJECTIVE
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 at the time of purchase by the Fund. Current income, if any, is a
consideration incidental to the Portfolio's objective of long-term capital
growth. The Portfolio's advisers intend to utilize both quantitative and
fundamental research to identify undervalued stocks with a catalyst for
positive change.
The Portfolio is classified as a "non-diversified" fund under federal
securities law. The Portfolio's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Portfolio were
diversified.
The Portfolio may invest any portion of its assets not invested in common
stocks in high quality money market instruments and repurchase agreements, as
described below. For temporary defensive purposes, the Portfolio may invest
without limitation in these instruments. 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
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 appropriate 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 market risk
This Fund may NOT be appropriate for investors who are unable to tolerate
frequent up and
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down price changes, are investing for short-term goals or who are in need of
current income.
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.
Except as otherwise indicated below, the Portfolio is not subject to any
percentage limits with respect to the practices described below.
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. Unsponsored Depositary Receipts may not carry
comparable voting rights to sponsored Depositary Receipts, and a purchaser of
unsponsored Depositary Receipts may not receive as much information about the
issuer of the underlying securities as with a sponsored Depositary Receipt.
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
6
<PAGE>
may involve certain risks associated with foreign investment.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. 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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of these transactions involves 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. The Fund may use this practice to generate cash for shareholder
redemptions without selling securities in a down market. 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.
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
7
<PAGE>
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 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 Fund. There can be no assurance that
a liquid market will exist at a time when the Portfolio seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward
contracts, there is a greater potential that a counterparty or broker may
default. In the event of a default, the Portfolio may experience a loss. For
additional information concerning derivatives, related instruments and the
associated risks, see the SAI.
8
<PAGE>
PORTFOLIO TURNOVER. The frequency of the Portfolio's 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.
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.
9
<PAGE>
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 provides discretionary investment advisory services to
institutional clients. 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 of Domestic Equity Management at Chase, is responsible for asset
allocation and investment strategy for Chase's domestic equity portfolios. Mr.
Klassen joined in 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
Capital Growth Portfolio, Mr. Klassen is a manager of Small Cap Equity Fund and
Growth and Income Portfolio.
Mr. Klassen and Tony Gleason, a Vice President of Chase, have been responsible
for the day-to-day management of the Portfolio since September 1995. Mr.
Gleason is also responsible for managing 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 Chase Vista
Service Center prior to its close of business. Dealers are responsible for
forwarding orders for the purchase of shares on a
10
<PAGE>
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 Chase 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 Chase
Vista Service Center. A wire redemption may be requested by telephone to the
Chase Vista Service Center. For telephone redemptions, call the Chase 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 Chase 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 Chase 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. There is a $10.00 charge for each wire transaction. 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 Chase Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to
11
<PAGE>
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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase Vista Service Center, and may charge you
for its services.
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $1,000,000. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption.
HOW TO EXCHANGE YOUR SHARES
You can exchange your shares for Institutional Shares of certain other Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase 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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Chase 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
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<PAGE>
required by law. Consult the Chase 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 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 Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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
13
<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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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 one or more of the following: 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
14
<PAGE>
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 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
15
<PAGE>
administrative fees; the compensation of the Trustees; registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of
the Trust; insurance premiums; and expenses of calculating the net asset value
of, and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are allocated to specific classes of the Fund. In addition,
the Fund may allocate transfer agency and certain other expenses by class.
Service providers to the Fund may, from time to time, voluntarily waive all or
a portion of any fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no pre-emptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of the Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make an
initial investment of $1,000,000 or more. "Qualified investors" are defined as
institutions, trusts, partnerships, corporations, qualified and other
retirement plans and fiduciary accounts opened by a bank, trust company or
thrift institution which exercises investment authority over such accounts. The
Fund offers other classes of shares in addition to these classes and may
determine not to offer certain classes of shares. 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
16
<PAGE>
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 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
17
<PAGE>
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 Chase 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.
18
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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.
19
<PAGE>
CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
INCG-1-298CX
<PAGE>
[CHASE VISTA LOGO]
PROSPECTUS
EQUITY INCOME FUND
CLASS A, B AND C SHARES
INVESTMENT STRATEGY: INCOME. CAPITAL
APPRECIATION IS A SECONDARY
CONSIDERATION.
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 .................................................................. 13
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 ....................................................... 14
Choosing a share class
How to Buy, Sell and Exchange Shares ........................................ 15
How the Fund Values Its Shares .............................................. 22
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 ....................................... 24
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 Chase 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 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 Class C
Shares Shares Shares
------- ---- -----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ........................ 5.75% None None
Maximum Deferred Sales Charge
(as a percentage of the lower of original purchase price
or redemption proceeds)* .................................. None 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver) ............. 0.40% 0.40% 0.40%
12b-1 Fee** .................................................. 0.25% 0.75% 0.75%+
Shareholder Servicing Fee
(after estimated waiver, where indicated) .................. 0.25%** 0.25% 0.25%+
Other Expenses ............................................... 0.60% 0.60% 0.60%
------- ---- -----
Total Fund Operating Expenses (after waivers of fees) ........ 1.50% 2.00% 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++ ..................... $72 $102 $135 $226
Class B Shares:
Assuming complete redemption at the
end of the period+++, ++++ ......... $72 $ 96 $131 $220
Assuming no redemptions++++ ......... $20 $ 63 $108 $220
Class C Shares:
Assuming complete redemption at the
end of the period+++ ............... $31 $ 63 $108 $233
Assuming no redemptions ............. $20 $ 63 $108 $233
</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. The maximum deferred sales charge on
Class C shares applies to redemptions during the first year after
purchase; the charge is 1% during the first year and zero thereafter.
See "How to Buy, Sell and Exchange Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class
A, Class B and Class C 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.
+ Beginning with the 13th month following the purchase of Class C
shares by their customers, broker-dealers receive payments at an annual
rate of 1.00% of the average daily net asset value of the Class C shares
invested in the Fund by their customers, consisting of a 12b-1
distribution fee at an annual rate of 0.75% of such assets and a service
fee at an annual rate of 0.25% of such assets.
++ 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 financial highlights 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, 1997, 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.
EQUITY INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------
Year Ended
-------------------------------------
10/31/97 10/31/96 10/31/95
---------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period .......... $ 15.98 $ 13.39 $ 12.12
---------- --------- ----------
Income from Investment Operations:
Net Investment Income ....................... 0.260 0.348 0.347
Net Gains or (Losses) in Securities
(both realized and unrealized) .............. 4.709 3.434 1.698
---------- --------- ----------
Total from Investment Operations ........... 4.969 3.782 2.045
---------- --------- ----------
Less Distributions:
Dividends from Net Investment Income ........ 0.228 0.329 0.366
Distributions from Capital Gains ............ 1.490 0.863 0.410
---------- --------- ----------
Total distributions ......................... 1.718 1.192 0.776
---------- --------- ----------
Net Asset Value, End of Period ................ $ 19.23 $ 15.98 $ 13.39
========== ========= ==========
Total Return(1) ............................... 33.66% 29.79% 17.97%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ...... $47,373 $17,493 $ 11,737
Ratio of Expenses to Average Net Assets# ..... 1.50% 1.50% 1.50%
Ratio of Net Investment Income to
Average Net Assets# .......................... 1.65% 2.41% 2.81%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# ...................................... 1.70% 2.32% 2.19%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# .......................... 1.45% 1.59% 2.12%
Portfolio Turnover Rate ....................... 75% 114% 91%
Average Commission Rate Paid per share ........ $0.0599 $0.0587 --
<CAPTION>
Class B
-------------------------
07/15/93* 5/7/96**
through Year Ended through
10/31/94 10/31/93 10/31/97 10/31/96
-------- --------- --------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period .......... $ 13.84 $ 13.14 $ 15.92 $ 14.56
--------- ----------- --------- --------
Income from Investment Operations:
Net Investment Income ....................... 0.290 0.078 0.220 0.134
Net Gains or (Losses) in Securities
(both realized and unrealized) .............. ( 0.477) 0.700 4.615 1.376
---------- ----------- --------- --------
Total from Investment Operations ........... ( 0.187) 0.778 4.835 1.510
---------- ----------- --------- --------
Less Distributions:
Dividends from Net Investment Income ........ 0.258 0.078 0.175 0.151
Distributions from Capital Gains ............ 1.275 -- 1.490 --
---------- ----------- --------- --------
Total distributions ......................... 1.533 0.078 1.665 0.151
---------- ----------- --------- --------
Net Asset Value, End of Period ................ $ 12.12 $ 13.84 $ 19.09 $ 15.92
========== =========== ========= ========
Total Return(1) ............................... ( 1.35%) 5.91% 32.87% 10.43%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ...... $ 11,409 $ 15,321 $14,799 $ 560
Ratio of Expenses to Average Net Assets# ..... 1.50% 1.50% 2.11% 2.25%
Ratio of Net Investment Income to
Average Net Assets# .......................... 2.31% 1.72% 1.06% 1.75%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# ...................................... 2.02% 2.40% 2.13% 2.75%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# .......................... 1.79% 0.82% 1.05% 1.25%
Portfolio Turnover Rate ....................... 75% 54% 75% 114%
Average Commission Rate Paid per share ........ -- -- $0.0599 $0.0587
</TABLE>
* 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.
6 & 7
<PAGE>
FUND OBJECTIVE
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 appropriate for investors who . . .
[bullet] Are seeking current income while maintaining an opportunity to benefit
from growth in the equity market
[bullet] Are investing for goals at least 3-5 years away
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] Can assume stock market risk
This Fund may NOT be appropriate for investors who are unable to tolerate 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
8
<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.
Unsponsored Depositary Receipts may not carry comparable voting rights to
sponsored Depositary Receipts, and a purchaser of unsponsored Depositary
Receipts may not receive as much information about the issuer of the underlying
securities as with a sponsored Depositary Receipt.
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,
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<PAGE>
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 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 AND STAND-BY 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. 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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of these transactions involves 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
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<PAGE>
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
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 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. There
can be no guarantee that there will be a correlation between price movements in
a hedging instrument and in the portfolio
11
<PAGE>
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 general risks
and considerations associated with equity investing, as well as the risks
discussed herein.
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<PAGE>
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 provides
discretionary investment advisory services to institutional clients. 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 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. Bill Ellsworth, Senior Research
Analyst and Associate Portfolio Manager at Chase, participates in the
management of the Fund. Mr. Ellsworth has been employed by Chase since 1992.
13
<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 and Class C 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 an annually declining 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."
CLASS C SHARES. Class C shares are sold without an initial sales charge, which
provides the investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. If redeemed within one year after
purchase, Class C shares are subject to a CDSC equal to 1% of the lesser of
their original cost or the net asset value at the time of the redemption. If
you hold your shares for one year or more, you will receive the entire net
asset value of your shares upon redemption at the then-current share price.
Class C shares, like Class B shares, have higher combined 12b-1 and service
fees than Class A shares and, as a consequence, pay correspondingly lower
dividends and may have a lower net asset value than Class A shares. Unlike
Class B shares, Class C shares do not convert into any other class of shares of
the Fund. 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 and anticipate
holding your shares for a number of years, you might consider Class B shares.
If you prefer not to pay an initial sales charge and you are uncertain as to
the intended length of your investment, you might consider Class C shares. In
almost all cases, if you are a long-term investor
14
<PAGE>
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 Chase 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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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
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<PAGE>
after the purchase date. To eliminate the need for safekeeping, the Fund will
not issue certificates for your Class A or Class C shares unless you request
them. Due to the conversion feature of Class B shares, certificates for Class B
shares will not be issued and all Class B shares will be held in book entry
form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives
the net asset value. The sales charge is allocated between your broker-dealer
and the Fund's distributor as shown in the following table, except when the
Fund's distributor, in its discretion, allocates the entire amount to your
broker-dealer.
<TABLE>
<CAPTION>
Sales charge as a
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
- ----------------------------- -------- ---------- --------------------------
<S> <C> <C> <C>
Under 100,000 5.75 6.10 5.00
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>
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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
16
<PAGE>
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.
Class C Shares
Class C shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within one year after purchase. 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.
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 1.00% of the offering price on sales of Class C 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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase Vista mutual funds to buy your shares, and on which
you paid a front-end or contingent deferred sales charge.
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<PAGE>
Some participant-directed employee benefit plans participate in a "multi-fund"
program which offers both Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. 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 Chase Vista 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.
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<PAGE>
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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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 or Class C 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 or Class C shares subject to a systematic
withdrawal plan may also be redeemed each year without a CDSC, provided that
the Class B or Class C 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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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
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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 Chase
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 Chase
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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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
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modified or terminated without notice.
SYSTEMATIC WITHDRAWAL. You can make regular withdrawals of $50 or more ($100 or
more for Class B and Class C 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 Chase 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 Chase 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 or Class C 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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 or Class C shares into
any of the Chase Vista money market funds (other than Prime Money Market Fund's
Class B and Class C shares, respectively) will be treated as a redemption--and
therefore subject to the conditions of the CDSC--and a subsequent purchase.
Class B or Class C shares of any Chase Vista non-money market fund may be
exchanged into the Class B or Class C shares of the Prime Money Market Fund,
respectively, in order to continue the
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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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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 and
Class C 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 or Class C 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
capital gain 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 and Class C shares because expenses attributable to Class B
and Class C 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
Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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.
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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, Class B and Class C
shares, which provide for the payment of distribution fees at annual rates of
up to 0.25%, 0.75% and 0.75% of the average daily net assets attributable to
Class A, Class B and Class C 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, Class B and Class C 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
and 0.75% of the average daily net asset value of Class C 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,
Class B and Class C shares will be conducted generally by the Chase Vista
Funds, and activities intended to promote the Fund's Class A, Class B or Class
C shares may also benefit the Fund's other shares and other Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in
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the sale of shares of the Fund. In some instances, such compensation may be
offered only to certain broker-dealers who employ registered representatives
who have sold or may sell significant amounts of shares of the Fund and/or
other Chase Vista Funds during a specified period of time. Such compensation
does not represent an additional expense to the Fund or its shareholders, since
it will be paid by VFD out of compensation retained by it from the Fund or
other sources available to it.
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, Class B or Class C shares of the Fund.
These services include one or more of the following: 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, Class B or Class
C 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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Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
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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,
Class B and Class C shares of the Fund. The Fund may offer other classes of
shares in addition to these classes and may determine not to offer certain
classes of shares. 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.
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
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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.
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.
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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 and Class C 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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B and Class C accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans
for systematic investment or exchange and systematic withdrawal
or exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B and Class C 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 or Class C shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
P.O. Box 419392
Kansas City, MO 64141-6392
VEQ-1-298X
<PAGE>
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
PROSPECTUS
GROWTH AND INCOME FUND
CLASS A, B AND C SHARES
INVESTMENT STRATEGY:
GROWTH AND INCOME
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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
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
<TABLE>
<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 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 ........................................ 15
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 ....................................... 24
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 Chase 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 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 Class C
Shares Shares Shares
-------- ------- --------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ............. 5.75% None None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)* ......... None 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee ........................... 0.40% 0.40% 0.40%
12b-1 Fee ** ...................................... 0.25% 0.75% 0.75%+
Shareholder Servicing Fee ......................... 0.25% 0.25% 0.25%+
Other Expenses .................................... 0.36% 0.36% 0.36%
---- ---- -----
Total Fund Operating Expenses ..................... 1.26% 1.76% 1.76%
==== ==== =====
</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++ ............................. $70 $95 $123 $201
Class B Shares:
Assuming complete redemption at the
end of the period+++ ++++ .................. $70 $88 $119 $194
Assuming no redemptions++++ ................. $18 $55 $ 95 $194
Class C Shares:
Assuming complete redemption at the
end of the period+++ ....................... $28 $55 $ 95 $207
Assuming no redemptions ..................... $18 $55 $ 95 $207
</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. The maximum deferred sales charge on
Class C shares applies to redemptions during the first year after
purchase; the charge is 1% during the first year and zero thereafter.
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.
+ Beginning with the 13th month following the purchase of Class C
shares by their customers, broker-dealers receive payments at an annual
rate of 1.00% of the average daily net asset value of the Class C shares
invested in the Fund by their customers, consisting of a 12b-1
distribution fee at an annual rate of 0.75% of such assets and a service
fee at an annual rate of 0.25% of such assets.
++ 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 financial highlights 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, 1997, which is incorporated by reference into the SAI. Shareholders
can obtain a copy of this annual report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below for each of the five periods
ended October 31, 1997, has been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is also included in the Annual Report to
Shareholders.
GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
Year ended October 31,
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996 1995 1994
------------ ---------- ---------- ----------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .... $ 39.21 $ 34.96 $ 30.26 $ 30.99
------------ ---------- ---------- ----------
Income from Investment Operations:
Net Investment Income ................. 0.347@ 0.599 0.614 0.466
Net Gains or (Losses) in Securities
(both realized and unrealized) ....... 10.180 5.960 4.710 ( 0.429)
------------ ---------- ---------- ----------
Total from Investment
Operations ........................... 10.527 6.559 5.324 0.037
------------ ---------- ---------- ----------
Less Distributions:
Dividends from Net Investment
Income ............................... 0.379 0.549 0.621 0.422
Distributions from Capital Gains 3.150 1.762 -- 0.345
------------ ---------- ---------- ----------
Total Distributions .................. 3.529 2.311 0.621 0.767
------------ ---------- ---------- ----------
Net Asset Value, End of Period .......... $ 46.21 $ 39.21 $ 34.96 $ 30.26
============ ========== ========== ==========
Total Return(1) ......................... 28.84% 19.60% 17.79% 0.15%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) ......................... $1,496,738 $1,590,893 $1,521,489 $1,413,899
Ratio of Expenses to Average
Net Assets# ........................... 1.27% 1.32% 1.43% 1.40%
Ratio of Net Investment
Income to Average Net Assets# ......... 0.82% 1.46% 1.93% 1.60%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ................... 1.27% 1.32% 1.45% 1.40%
Ratio of Net Investment Income
without waivers and
assumption of expenses to
Average Net Assets # .................. 0.82% 1.46% 1.91% 1.60%
Portfolio Turnover Rate ................. -- -- -- --
<CAPTION>
Class B
----------
Year
Ended
1993 1992 1991 1990 1989 1988 10/31/97
-------- -------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .... $ 26.60 $ 25.49 $ 16.49 $ 18.12 $ 14.08 $ 10.00 $ 39.02
-------- -------- ------- -------- -------- -------- ----------
Income from Investment Operations:
Net Investment Income ................. 0.341 0.313 0.388 0.707 0.633 0.225 0.132@
Net Gains or (Losses) in Securities
(both realized and unrealized) ....... 5.007 2.702 9.521 ( 0.573) 5.033 4.050 10.130
-------- -------- ------- -------- -------- -------- ----------
Total from Investment
Operations ........................... 5.348 3.015 9.909 0.134 5.666 4.275 10.262
-------- -------- ------- -------- -------- -------- ----------
Less Distributions:
Dividends from Net Investment
Income ............................... 0.338 0.313 0.339 0.698 0.611 0.195 0.173
Distributions from Capital Gains 0.620 1.587 0.574 1.063 1.015 -- 3.150
-------- -------- ------- -------- -------- -------- ----------
Total Distributions .................. 0.958 1.900 0.913 1.761 1.626 0.195 3.323
-------- -------- ------- -------- -------- -------- ----------
Net Asset Value, End of Period .......... $ 30.99 $ 26.60 $ 25.49 $ 16.49 $ 18.12 $ 14.08 $ 45.96
======== ======== ======= ======== ======== ======== ==========
Total Return(1) ......................... 20.47% 12.34% 62.60% 0.05% 44.40% 42.87% 28.20%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) ......................... $949,465 $149,506 $43,261 $ 17,994 $ 8,097 $ 1,197 $ 489,100
Ratio of Expenses to Average
Net Assets# ........................... 1.39% 1.43% 1.25% 1.09% 0.00% 0.00% 1.77%
Ratio of Net Investment
Income to Average Net Assets# ......... 1.07% 1.19% 1.24% 3.65% 4.56% 2.64% 0.31%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ................... 1.39% 1.46% 1.76% 2.06% 2.50% 2.00% 1.77%
Ratio of Net Investment Income
without waivers and
assumption of expenses to
Average Net Assets # .................. 1.07% 1.16% 0.73% 2.68% 2.06% 0.64% 0.31%
Portfolio Turnover Rate ................. 41% 56% 103% 160% 319% 109% --
<CAPTION>
Class B
----------------------------------
Year Year 11/4/93*
Ended Ended through
10/31/96 10/31/95 10/31/94
-------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .... $ 34.81 $ 30.12 $ 30.39
--------- --------- ---------
Income from Investment Operations:
Net Investment Income ................. 0.366 0.463 0.336
Net Gains or (Losses) in Securities
(both realized and unrealized) ....... 5.984 4.700 0.109
--------- --------- ---------
Total from Investment
Operations ........................... 6.350 5.163 0.445
--------- --------- ---------
Less Distributions:
Dividends from Net Investment
Income ............................... 0.379 0.470 0.370
Distributions from Capital Gains 1.762 -- 0.345
--------- --------- ---------
Total Distributions .................. 2.141 0.470 0.715
--------- --------- ---------
Net Asset Value, End of Period .......... $ 39.02 $ 34.81 $ 30.12
========= ========= =========
Total Return(1) ......................... 19.02% 17.21% 1.55%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) ......................... $ 370,496 $ 273,685 $ 160,375
Ratio of Expenses to Average
Net Assets# ........................... 1.81% 1.93% 1.89%
Ratio of Net Investment
Income to Average Net Assets# ......... 0.95% 1.38% 1.21%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ................... 1.81% 1.94% 1.89%
Ratio of Net Investment Income
without waivers and
assumption of expenses to
Average Net Assets # .................. 0.95% 1.37% 1.21%
Portfolio Turnover Rate ................. -- -- --
</TABLE>
*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.
@ Calculated based upon average shares outstanding.
6 & 7
<PAGE>
FUND OBJECTIVES
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 U.S. Government obligations and 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 appropriate for investors who...
[bullet] Are seeking long-term growth potential with dividend income
[bullet] Are investing for goals at least 3-5 years away
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] Can assume stock market risk
This Fund may NOT be appropriate for investors who are unable to tolerate 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.
Except as otherwise indicated below, the Portfolio is not subject to any
percentage limits with respect to the practices described below.
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. Unsponsored Depositary Receipts may not carry
comparable voting rights to sponsored Depositary Receipts, and a purchaser of
unsponsored Depositary Receipts may not receive as much information about the
issuer of the underlying securities as with a sponsored Depositary Receipt.
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
9
<PAGE>
member states of the European Community. These securities are typically issued
by European governments and supranational organizations.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets
in convertible securities, which are securities generally offering fixed
interest or dividend yields which may be converted either at a stated price or
stated rate for common or preferred stock. Although to a lesser extent than
with fixed-income securities generally, the market value of convertible
securities tends to decline as interest rates increase, and increase as
interest rates decline. Because of the conversion feature, the market value of
convertible securities also tends to vary with fluctuations in the market value
of the underlying common or preferred stock.
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 AND STAND-BY
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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.
10
<PAGE>
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.
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.
REAL ESTATE INVESTMENT TRUSTS. The Portfolio'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
trusts") 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 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 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.
11
<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 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
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.
12
<PAGE>
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.
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 provides discretionary investment advisory services to
institutional clients. 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 Diane Sobin, Senior Portfolio Managers at
Chase, are responsible for the day-to-day management of the Portfolio. Mr.
Adams joined Chase in 1987 and has been a manager of the Portfolio since March
1995. Mr. Adams is also a manager of Balanced Fund and 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. Ms. Sobin
joined Chase in 1997 and has been a manager of the Portfolio since
13
<PAGE>
July 1997. Prior to joining Chase, Ms. Sobin was a senior portfolio manager at
Oppenheimer Funds Inc., where she managed mutual funds. Prior to 1995, Ms.
Sobin was a senior portfolio manager at Dean Witter Discover, where she managed
several mutual funds and other accounts.
Dave Klassen, Director, U.S. Funds Management and Equity Research at Chase, is
responsible for asset allocation and investment stategy for Chase's domestic
equity portfolios. Mr. Klassen joined Chase in 1992 and is a manager of Small
Cap Equity Fund and Capital Growth Portfolio. Prior to joining Chase in 1992,
Mr. Klassen was a vice president and portfolio manager at Dean Witter Reynolds,
responsible for managing several mutual funds and other accounts.
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 and Class C 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 an annually declining 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."
CLASS C SHARES. Class C shares are sold without an initial sales charge, which
provides the investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. If redeemed within one year after
purchase, Class C shares are subject to a CDSC equal to 1% of the lesser of
their original cost or the net asset value at the time of the redemption. If
you hold your shares for one year or more, you will receive the entire net
asset value of your shares upon redemption at the then-current share price.
Class C shares, like Class B shares, have higher combined 12b-1 and service
fees than Class A shares and, as a consequence, pay correspondingly lower
dividends and may have a lower net asset value than Class A shares. Unlike
Class B shares, Class C shares do not convert into any
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<PAGE>
other class of shares of the Fund. 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 and anticipate holding
your shares for a number of years, you might consider Class A shares. If you
prefer not to pay an initial sales charge you might consider Class B shares. If
you prefer not to pay an initial sales charge and you are uncertain as to the
intended length of your investment, you might consider Class C shares. In
almost all cases, if you are a long term investor 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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form.
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<PAGE>
In most cases, in order to receive that day's public offering price, the Chase
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.
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 or Class C shares unless you request them.
Due to the conversion feature of Class B shares, certificates for Class B
shares will not be issued and all Class B shares will be held in book entry
form.
Class A Shares
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives
the net asset value. The sales charge is allocated between your broker-dealer
and the Fund's distributor as shown in the following table, except when the
Fund's distributor, in its discretion, allocates the entire amount to your
broker-dealer.
<TABLE>
<CAPTION>
Amount of
reallowed to
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
- ------------------------------------- ------- --------- ------------------
<S> <C> <C> <C>
Under 100,000 ....................... 5.75 6.10 5.00
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>
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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.
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<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.
Class C Shares
Class C shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within one year after purchase. 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.
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 1.00% of the offering price on sales of Class C 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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank
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<PAGE>
or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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 or Class C 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 or Class C shares subject to a systematic
withdrawal plan may also be redeemed each year without a CDSC, provided that
the Class B or Class C 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
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<PAGE>
investments in the Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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 Chase
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 Chase 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.
There is a $10.00 charge for each wire transaction. Unless an investor
indicates
20
<PAGE>
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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 and
Class C 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 Chase 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 Chase 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 or Class C 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase Vista
21
<PAGE>
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 or Class C shares into
any of the Chase Vista money market funds (other than the Prime Money Market
Fund's Class B and Class C shares, respectively) will be treated as a
redemption--and therefore subject to the conditions of the CDSC --and a
subsequent purchase. Class B or Class C shares of any Chase Vista non-money
market fund may be exchanged into the Class B or Class C shares of the Prime
Money Market Fund, respectively, 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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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
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<PAGE>
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 and Class C 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 or Class C 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 quarterly and any net
capital gain 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 and Class C shares because expenses attributable to Class B
and Class C 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
Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase Vista
Service
23
<PAGE>
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.
All Fund distributions of net investment income (which term includes net
short-term capital gain) will be taxable as ordinary income. Any distributions
of net capital gain which are designated as "capital gain dividends" will be
taxable as long-term capital gain, at the currently applicable 28% or 20% rate,
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, Class B and Class C
shares, which provide for the payment of distribution fees at annual rates of up
to 0.25%, 0.75% and 0.75% of the average daily net assets attributable to Class
A, Class B and Class C 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, Class B and Class C 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 the Class A or Class
B shares or 0.75% of the net asset value of the Class C
24
<PAGE>
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, Class B and Class C shares will be conducted generally by
the Chase Vista Funds, and activities intended to promote the Fund's Class A,
Class B or Class C shares may also benefit the Fund's other shares and other
Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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, Class B and Class C shares of the Fund.
These services include one or more of the following: 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, Class B and
Class C 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
25
<PAGE>
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.
Chase and its affiliates and the Chase Vista Family of Funds, affiliates,
agents, and subagents may exchange among themselves and others certain
information about shareholders and their accounts, including information used
to offer investment products and insurance products to them, unless otherwise
contractually prohibited.
ADMINISTRATOR AND
SUB-ADMINISTRATOR
Chase acts as the administrator for the Fund and the Portfolio and is entitled
to receive from each of the Fund and the Portfolio a fee computed daily and
paid monthly at an annual rate equal to 0.05% of their respective average daily
net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay
for certain expenses incurred in connection with organizing new series of the
Trust and certain other ongoing expenses of the Trust. VFD is located at One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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;
26
<PAGE>
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 approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A, Class B and Class C shares of the Fund. The Fund may offer other
classes of shares in addition to these classes and may determine not to offer
certain classes of shares. 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.
27
<PAGE>
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 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
28
<PAGE>
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 Chase 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 and Class C 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.
29
<PAGE>
MAKE THE MOST OF YOUR CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B and Class C accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. Investors
may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B and Class C 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 or Class C shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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>
CHASE 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
[CHASE VISTA LOGO]
CHASE VISTA FUNDS
P.O. Box 419392
Kansas City, MO 64141-6392
VGI-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
INVESTMENT STRATEGY:
GROWTH AND INCOME
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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
19.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Investments in the Fund are 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 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 ............... 16
Performance Information ............................. 20
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 .......................... 0.20%
-----
Total Fund Operating Expenses ........... 0.85%
=====
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 $27 $47 $105
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 financial highlights 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,
1997, 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.
GROWTH AND INCOME FUND
<TABLE>
<S> <C> <C>
Year 1/25/96*
Ended through
10/31/97 10/31/96
--------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................... $ 39.26 $ 34.80
--------- ---------
Income From Investment Operations
Net Investment Income ........................................ 0.518@ 0.467
Net Gains or (Losses) in Securities (both realized and
unrealized) ................................................ 10.200 4.459
--------- ---------
Total from Investment Operations ............................. 10.718 4.926
--------- ---------
Less Distributions
Dividends from Net Investment Income ......................... 0.483 0.471
Distributions from Capital Gains ............................. 3.150 --
--------- ---------
Total Distributions ............................................ 3.633 0.471
--------- ---------
Net Asset Value, End of Period ................................. $ 46.35 $ 39.26
========= =========
Total Return ................................................... 29.37% 13.39%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ....................... $ 522,336 $ 27,974
Ratio of Expenses to Average Net Assets# ...................... 0.86% 1.24%
Ratio of Net Investment Income to Average Net Assets# ......... 1.21% 1.73%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# ............................. 0.86% 1.24%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# ............... 1.21% 1.73%
</TABLE>
* Commencement of offering of class of shares.
# Short periods have been annualized.
@ Calculated based upon average shares outstanding.
5
<PAGE>
FUND OBJECTIVES
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 U.S. Government obligations and 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 appropriate for investors who...
[bullet] Are seeking long-term growth potential with dividend income
[bullet] Are investing for goals at least 3-5 years away
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] Can assume stock market risk
This Fund may NOT be appropriate for investors who are unable to tolerate 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
6
<PAGE>
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.
Except as otherwise indicated below, the Portfolio is not subject to any
percentage limits with respect to the practices described below.
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. Unsponsored Depositary Receipts may not carry
comparable voting rights to sponsored Depositary Receipts, and a purchaser of
unsponsored Depositary Receipts may not receive as much information about the
issuer of the underlying securities as with a sponsored Depositary Receipt.
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
7
<PAGE>
typically issued by European governments and supranational organizations.
CONVERTIBLE SECURITIES. The Portfolio may invest up to 20% of its net assets in
convertible securities, which are securities generally offering fixed interest
or dividend yields which may be converted either at a stated price or stated
rate for common or preferred stock. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase, and increase as interest rates
decline. Because of the conversion feature, the market value of convertible
securities also tends to vary with fluctuations in the market value of the
underlying common or preferred stock.
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 organization, or, if unrated, determined
by the advisers to be of comparable quality.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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
8
<PAGE>
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.
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.
REAL ESTATE INVESTMENT TRUSTS. The Portfolio's equity securities may include
shares of real estate investment trusts ("REITs"). REITs are pooled investment
vehicles which invest primarily on 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 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 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
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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
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,
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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.
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 provides discretionary investment advisory services to
institutional clients. 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 Diane Sobin, Senior Portfolio Managers at
Chase, are responsible for the day-to-day management of the Portfolio. Mr.
Adams joined Chase in 1987 and has been a manager of the Portfolio since March
1995. Mr. Adams is also a manager of Balanced Fund and 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. Ms. Sobin
joined Chase in 1997 and has been a manager of the Portfolio since July 1997.
Prior to joining Chase, Ms. Sobin was a senior portfolio manager at Oppenheimer
Funds Inc., where she managed mutual funds. Prior to 1995, Ms. Sobin was
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a senior portfolio manager at Dean Witter Discover, where she managed several
mutual funds and other accounts.
Dave Klassen, Director, U.S. Funds Management and Equity Research at Chase, is
responsible for asset allocation and investment strategy for Chase's domestic
equity portfolios. Mr. Klasen joined Chase in 1992 and is a manager of Small
Cap Equity Fund and Capital Growth Portfolio. Prior to joining Chase in 1992,
Mr. Klassen was a vice president and portfolio manager at Dean Witter Reynolds,
responsible for managing several mutual funds and other accounts.
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 Chase 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 Chase 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 Chase
Vista Service Center. A wire redemption may be requested by
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telephone by calling the Chase 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 Chase 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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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.
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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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase 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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Chase 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 Chase 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.
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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 Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain, at the current
applicable 28% or 20% rate, 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
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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 one or more of the following: 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 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 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents,
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and subagents may exchange among themselves and others certain information
about shareholders and their accounts, including information used to offer
investment products and insurance products to them, unless otherwise
contractually prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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.
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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 and may
determine not to offer certain classes of shares. 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
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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 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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Investors in the Fund may obtain information about whether an investment in the
Portfolio may be available through other funds by calling the Chase 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.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS1
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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
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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
INGI-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
LARGE CAP EQUITY FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 .................................................... 25
How performance is determined, stated and/or advertised
Make the Most of Your Chase Vista Privileges ............................... 27
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) ................... 5.75% 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)** ............... 0.40% 0.40%
---- ----
Total Fund Operating Expenses (after waiver of fee)** ... 0.90% 1.40%
==== ====
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+ ..................... $66 $85 $104 $162
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ ... $66 $78 $100 $154
Assuming no redemptions+++ ......... $14 $44 $ 77 $154
* 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 .50% for
Class A and Class B shares and Total Fund Operating Expenses would be
1.40% and 1.90% 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 financial highlights 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,
1997, 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.
LARGE CAP EQUITY FUND
<TABLE>
<CAPTION>
Class A Class B
--------------------------- ------------------------------
Year 5/8/96* Year 5/7/96*
Ended through Ended through
10/31/97 10/31/96 10/31/97 10/31/96
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning of Period ............... $ 13.25 $ 12.06 $ 13.22 $ 12.06
---------- ---------- ---------- --------
Income from Investment Operations
Net Investment Income ........................... 0.108 0.050 0.067 0.050
Net Gains or (Losses) in Securities (both
realized and unrealized) ....................... 3.456 1.209 3.423 1.187
---------- ---------- ---------- --------
Total from Investment Operations ................ 3.564 1.259 3.490 1.237
---------- ---------- ---------- --------
Less Distributions:
Dividends from Net Investment Income .............. 0.094 0.069 0.061 0.077
Distributions from Capital Gains .................. 1.890 -- 1.890 --
---------- ---------- ---------- --------
Total Distributions ............................... 1.984 0.069 1.951 0.077
---------- ---------- ---------- --------
Net Asset Value, End of Period ..................... $ 14.83 $ 13.25 $ 14.76 $ 13.22
========== ========== ========== ========
Total Return(1) .................................... 30.69% 10.84% 30.15% 6.66%
Ratios/Supplemental Data
Net Assets, End of Perod (000 omitted) ............ $43,491 $ 8,349 $ 5,334 $ 305
Ratio of Expenses to Average Net Assets # ......... 1.13% 1.38% 1.59% 1.88%
Ratio of Net Investment Income to Average
Net Assets # .................................... 0.61% 0.84% 0.15% 0.14%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets # ........................................ 1.63% 1.87% 2.09% 2.38%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets # ............................ 0.11% 0.35% (0.35%) (0.36%)
Portfolio Turnover Rate ............................ 72% 89% 72% 89%
Average Commission Rate Paid per share ............. $0.0599 $ 0.0598 $0.0599 $ 0.0598
</TABLE>
* 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
Large Cap Equity Fund seeks long-term capital growth. The Fund is not intended
to be a complete investment program, and there is no assurance it will achieve
its objective.
INVESTMENT POLICIES
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its total
assets in equity securities and at least 65% of its total assets in equity
securities of established companies with market capitalizations in excess of $1
billion at the time of purchase by the Fund. 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 appropriate 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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.
Unsponsored Depositary Receipts may not carry comparable voting rights to
sponsored Depositary Receipts, and a purchaser of unsponsored Depositary
Receipts may not receive as much information about the issuer of the underlying
securities as with a sponsored Depositary Receipt.
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.
7
<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. 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. A put transaction will
increase the cost of the underlying security and consequently reduce the
available yield. Each of these transactions involves 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 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 provides discretionary investment advisory services to
institutional clients . 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, and Tracy
Hutt, a Portfolio Manager and Senior Analyst at Chase, are primarily
responsible for the management of the Fund. Mr. Adams joined Chase in 1987 and
is also a manager of Growth and Income Portfolio and Balanced Fund. In
addition, Mr. Adams has been responsible for overseeing the proprietary
computer model program used in the U.S. equity selection process. 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."
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
11
<PAGE>
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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
12
<PAGE>
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 5.75 6.10 5.00
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
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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.
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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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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
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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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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
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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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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 Chase
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
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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 Chase 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. There is a $10.00 charge for each wire transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
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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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC --and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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
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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 Chase 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 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
Chase 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.
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If a check representing a Fund distribution is not cashed within a specified
period, the Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain, at the currently
applicable 28% or 20% rate, 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
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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 Chase
Vista 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 Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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 one or more of the following: 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.
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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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
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its pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees;
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Fund's custodian for all services to the Fund, including safekeeping of
funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to government offices and
commissions; expenses of meetings of investors; fees and expenses of
independent accountants, of legal counsel and of any transfer agent, registrar
or dividend disbursing agent of the Trust; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, shares of the Fund.
Shareholder servicing and distribution fees are allocated to specific classes
of the Fund. In addition, the Fund may allocate transfer agency and certain
other expenses by class. Service providers to the Fund may, from time to time,
voluntarily waive all or a portion of any fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no preemptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of the Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Class A and Class B shares of the Fund. The Fund offers other classes of shares
in addition to these classes and may determine not to offer certain classes of
shares. 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
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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
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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 investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
25
<PAGE>
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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase 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 Chase Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
o FREE EXCHANGE PRIVILEGE--Exchange money between Chase 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 Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
27
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund ( closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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<PAGE>
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<PAGE>
CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VLC-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
LARGE CAP EQUITY FUND
INSTITUTIONAL SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 27, 1998
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 27, 1998 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Chase 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* ......................................................... 0.25%
----
Total Fund Operating Expenses (after waiver of fee)* .................... 0.50%
====
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 .......... $5 $16 $28 $63
* 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 and Other Expenses would be 0.40% and 0.35%,
respectively, and Total Fund Operating Expenses would be 1.00%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The example
should not be considered a representation of past or future expenses or returns;
actual expenses and returns may be greater or less than shown.
Charges 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 financial highlights for one Institutional Share
with respect to each of the five fiscal periods commencing after October 31,
1992, and the related financial statements, have been audited by Price
Waterhouse LLP, 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, 1997, which is
incorporated by reference into the SAI.
<TABLE>
<CAPTION>
LARGE CAP EQUITY FUND*
- ------------------------------------------------------------------------------------------------------------------------------------
Year Ended 7/1/92*** Year 11/30/90**
----------------------------------------------------- through ended through
10/31/97 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> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ... $ 13.27 $ 12.24 $ 13.16 $ 13.65 $ 12.56 $ 12.50 $ 11.43 $ 10.00
-------- ------- ------- ------- -------- -------- ------- -------
Income From Investment Operations:
Net Investment Income ................. 0.182 0.227 0.277 0.298 0.302 0.080 0.240 0.170
Net Gain in Securities
(both realized and unrealized) ....... 3.470 2.597 1.744 0.263 1.153 0.500 1.230 1.350
-------- ------- ------- ------- -------- -------- ------- -------
Total from Investment Operations ...... 3.652 2.824 2.021 0.561 1.455 0.580 1.470 1.520
-------- ------- ------- ------- -------- -------- ------- -------
Less Distributions:
Dividends from Net Investment Income .. 0.182 0.224 0.282 0.290 0.304 0.140 0.290 0.090
Distributions from Capital Gains ...... 1.890 1.570 2.659 0.761 0.062 0.380 0.110 --
-------- ------- ------- ------- -------- -------- ------- -------
Total Distributions: .................. 2.072 1.794 2.941 1.051 0.366 0.520 0.400 0.090
-------- ------- ------- ------- -------- -------- ------- -------
Net Asset Value, End of Period .......... $ 14.85 $ 13.27 $ 12.24 $ 13.16 $ 13.65 $ 12.56 $ 12.50 $ 11.43
======== ======= ======= ======= ======== ======== ======= =======
TOTAL RETURNS ........................... 31.50% 25.65% 20.41% 4.37% 11.73% 4.78% 12.99% 15.25%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) ......................... $107,008 $99,025 $55,417 $67,818 $120,635 $106,088 $92,261 $95,440
Ratio of Expenses to
Average Net Assets # ................... 0.50% 0.40% 0.31% 0.31% 0.31% 0.30% 0.30% 0.28%
Ratio of Net Investment Income to
Average Net Assets # .................. 1.32% 1.86% 2.41% 2.30% 2.30% 1.96% 2.29% 2.81%
Ratio of Expenses without waivers
and assumption of
expenses to Average Net Assets # ...... 1.00% 0.96% 0.90% 0.95% 0.88% 0.80% 1.02% 1.13%
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets # ...... 0.82% 1.30% 1.82% 1.66% 1.73% 1.46% 1.57% 1.96%
Portfolio turnover rate ................. 72% 89% 45% 53% 33% 5% 14% 19%
Average Commission Rate Paid
per share ............................. $0.05993 $0.0598 -- -- -- -- -- --
</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
Large Cap Equity Fund seeks long-term capital growth. The Fund is not intended
to be a complete investment program, and there is no assurance it will achieve
its objective.
INVESTMENT POLICIES
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its total
assets in equity securities and at least 65% of its total assets in equity
securities of established companies with market capitalizations in excess of $1
billion at the time of purchase by the Fund. 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 appropriate 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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.
Unsponsored Depositary Receipts may not carry comparable voting rights to
sponsored Depositary Receipts, and a purchaser of unsponsored Depositary
Receipts may not receive as much information about the issuer of the underlying
securities as with a sponsored Depositary Receipt.
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.
7
<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. 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. A put transaction will
increase the cost of the underlying security and consequently reduce the
available yield. Each of these transactions involves 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 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
8
<PAGE>
applicable regulatory limitations. Additional fees may be charged by other
investment companies.
STRIPS. The Fund may invest up to 20% of its total assets in stripped
obligations (i.e., separately traded principal and interest components of
securities) where the underlying obligations are backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward currency contracts; and (iv) purchase
and sell structured products, which are instruments designed to restructure or
reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Fund invests
may be particularly sensitive to changes in prevailing economic conditions and
market value. The ability of the Fund to successfully utilize these instruments
may depend in part upon the ability of its advisers to forecast these factors
correctly. Inaccurate forecasts could expose the Fund to a risk of loss. There
can be no guarantee that there will be a correlation between price movements in
a hedging instrument and in the portfolio assets being hedged. The Fund is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in losses that may exceed the original investment of the Fund. There can
be no assurance that a liquid market will exist at a time when the Fund seeks to
close out a derivatives position. Activities of large traders in the futures and
securities markets involving arbitrage, "program trading," and other investment
strategies may cause price distortions in derivatives markets. In certain
instances, particularly those involving over-the-counter transactions or forward
contracts, there is a greater potential that a counterparty or broker may
default. In the event of a default, the Fund may experience a loss. For
additional information concerning derivatives, related instruments and the
associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Fund's buy and sell
9
<PAGE>
transactions will vary from year to year. The Fund's investment policies may
lead to frequent changes in investments, particularly in periods of rapidly
changing market conditions. High portoflio turnover rates would generally result
in higher transaction costs, including brokerage commissions or dealer mark-ups,
and would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made; Tax
Information."
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
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 annual rate equal to 0.20% of the Fund's average daily net
assets. CAM provides discretionary investment advisory services to institutional
clients. 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, and Tracy
Hutt, a Portfolio Manager and Senior Analyst at Chase, are primarily
responsible for the management of the Fund. Mr. Adams joined Chase in 1987 and
is also a manager of Growth and Income Portfolio and Balanced Fund. In
addition, Mr. Adams has been responsible for overseeing the proprietary
computer model program used in the U.S. equity selection process. 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 Chase 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
11
<PAGE>
of Institutional Shares offered by other non-money market Chase 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 Chase
Vista Service Center. A wire redemption may be requested by telephone to the
Chase Vista Service Center. For telephone redemptions, call the Chase 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 Chase 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 Chase 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. There is a $10.00 charge for each wire transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase Vista Service Center by telephone. In
this event, you may wish to submit a written
12
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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 Chase 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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase 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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Chase 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 Chase 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.,
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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 Chase 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 Chase 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 Chase Vista fund without a sales charge. If the
Chase Vista Service Center does not receive your election, the distribution will
be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain, at the currently
applicable 28% or 20%, regardless of how long you have held the shares. The
taxation of your distribution is the same whether received in cash or
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<PAGE>
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 one or more of the following: 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
15
<PAGE>
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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One Chase
Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
16
<PAGE>
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 and may determine
not to offer certain classes of shares. 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
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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 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.
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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
1-800-622-4273. 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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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
INLC-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
SHORT-TERM BOND FUND
CLASS A SHARES
---------------------------
INVESTMENT STRATEGY: INCOME
---------------------------
February 27, 1998
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 27, 1998 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call the Chase 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 .................................................................. 12
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 ........................................ 13
How the Fund Values Its Shares .............................................. 18
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 Chase Vista Privileges ................................ 26
2
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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.
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* ............................................ 0.00%
Other Expenses (after estimated waiver)* .............................. 0.60%
----
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, Shareholder Servicing Fee, and Other
Expenses would be 0.25%, 0.25%, 0.25% and 0.75%, respectively, and Total Fund
Operating Expenses would be 1.50%.
** 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 financial highlights 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, 1997, 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.
SHORT-TERM BOND FUND
Class A
---------------------
Year 5/6/96*
Ended through
10/31/97 10/31/96
-------- --------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period .................. $10.10 $10.03
------ ------
Income From Investment Operations
Net Investment Income ............................... 0.580 0.262
Net Gains or (Losses) in Securities
(both realized and unrealized) .................... (0.001) 0.072
------ ------
Total from Investment Operations .................... 0.579 0.334
------ ------
Less dividends from net investment income ............. 0.579 0.264
------ ------
Net Asset Value, End of Period ........................ $10.10 $10.10
====== ======
Total Return (1) ...................................... 5.91% 3.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) .............. $9,847 $9,416
Ratio of Expenses to Average Net Assets# ............. 0.75% 0.75%
Ratio of Net Investment Income to
Average Net Assets# ................................ 5.76% 5.28%
Ratio of Expenses without waivers
and assumption of expenses
to Average Net Assets# ............................. 1.31% 1.45%
Ratio of Net Investment Income without
waivers and assumption of expenses
to Average Net Assets# ............................. 5.20% 4.58%
Portfolio Turnover Rate ............................... 471% 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.
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FUND OBJECTIVE
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. The Fund may invest a substantial portion of its total
assets in investment-grade fixed income securities of foreign issuers, which may
include developing-country issuers located in developing countries.
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 appropriate 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 bond market (i.e., interest rate) risk
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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.
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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
FOREIGN SECURITIES. The Fund may invest a substantial portion of its assets in
foreign investment-grade fixed income securities. 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.
The securities markets of certain countries in which the Fund may invest are
smaller, less liquid and have more limited trading volume than those in the
United States. Such factors could cause the prices of foreign securities to be
erratic for reasons apart from factors that affect the quality of securities.
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.
Investments in securities of issuers based in developing countries entail
certain additional risks, including greater risks of expropriation, taxation by
withholding Fund assets, nationalization, and less social and economic
stability. The small size of market 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.
Additionally, special tax considerations will apply to foreign securities, such
as the imposition of withholding taxes, and there may be an absence of developed
legal structure governing private investment and private property.
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.
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<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. 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. A put transaction will
increase the cost of the underlying security and consequently reduce the
available yield. Each of these transactions involves 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.
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
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<PAGE>
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 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.
8
<PAGE>
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.
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
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<PAGE>
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 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.
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<PAGE>
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.
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 total 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
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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 provides
discretionary investment advisory services to institutional clients. 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. Andrew Russell, a Vice President and Portfolio Manager at
Chase, and Susan Huang, a Managing Director and the Head of U.S. Fixed Income
Management at Chase, have been responsible for the day-to-day management of the
Fund's portfolio since June 1996. Since joining Chase in 1990, Mr. Russell has
held several positions within the U.S. fixed income area, including portfolio
analyst, taxable fixed-income trader and assistant trader. 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. Ms. Huang is
responsible for developing the asset allocation and risk management strategies
for fixed income portfolios. 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 was head of the U.S. fixed
income management group at Equitable Capital Management. Ms. Huang is also a
manager of Bond Fund, U.S. Government Securities Fund and U.S. Treasury Income
Fund.
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<PAGE>
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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
Chase 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 Chase 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 Chase Vista Service
Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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.
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<PAGE>
OFFERING PRICE
The public offering price of Class A shares is the net asset value plus a sales
charge that varies depending on the size of your purchase. The Fund receives the
net asset value. The sales charge is allocated between your broker-dealer and
the Fund's distributor as shown in the following table, except when the Fund's
distributor, in its discretion, allocates the entire amount to your
broker-dealer.
Sales charge as a
percentage of:
--------------------- Amount of sales
charge reallowed to
Amount of transaction at Offering Net amount dealers as a percentage
offering price($) price invested 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 Chase 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. For
purchases of the Fund's Class A shares made from January 1, 1998 through April
30, 1998, no initial sales charge will be assessed if you are opening or adding
to a Vista prototype IRA by transferring or rolling over $5,000 or more of
assets from a qualified plan, consisting of redemption proceeds from non-Chase
Vista mutual funds on which you paid a front-end or deferred sales load. In
connection with such purchases of Class A shares, the Fund's distributor will
pay broker-dealers a 1% commission. If you open or add to a Vista prototype IRA,
from January 1, 1998 through April 30, 1998, by investing $5,000 or more, the
annual IRA maintenance fee payable to the IRA sponsor will be waived for the
life of the account. In addition, sales charges are waived if you are using
redemption proceeds received within the prior ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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
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<PAGE>
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 Chase Vista fund shares),
financial institution trust departments investing an aggregate of $1 million or
more in the Chase Vista Funds and clients of certain administrators of
tax-qualified plans when proceeds from repayments of loans to participants are
invested (or reinvested) in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are investing
the proceeds of an IRA or other qualified plan for which The Chase Manhattan
Bank or its designee serves as trustee or custodian. 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 Chase Vista 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.
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 Chase Vista Service
Center.
Shareholders of record of any Chase Vista fund as of November 30, 1990 and
certain immediate family members may purchase the Fund's Class A shares with no
initial sales
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<PAGE>
charge for as long as they continue to own Class A shares of any Chase 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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase 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,
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<PAGE>
partnership, agent or fiduciary, or a surviving joint owner. Contact the Chase
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 Chase 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. There is a $10.00 charge for each wire transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase Vista Service Center, and may charge you for its
services.
17
<PAGE>
INVOLUNTARY REDEMPTION OF ACCOUNTS. The Fund may involuntarily redeem your
shares if at such time the aggregate net asset value of the shares in your
account is less than $500 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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer all classes of shares. The prospectus of the other Chase 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 Chase 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 Chase Vista Service Center for prospectuses of other Chase
Vista funds. Shares of certain Chase 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 Chase 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.
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
18
<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 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
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 Chase 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 Chase Vista fund without a sales charge. If the
Chase Vista Service Center does not receive your election, the distribution will
be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain, at the currently
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<PAGE>
applicable 28% or 20% rate, 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 Chase Vista Funds, and activities intended to
promote the Fund's Class A shares may also benefit the Fund's other shares and
other Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it, pay
additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in
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<PAGE>
the sale of shares of the Fund. In some instances, such compensation may be
offered only to certain broker-dealers who employ registered representatives who
have sold or may sell significant amounts of shares of the Fund and/or other
Chase Vista Funds during a specified period of time. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it will
be paid by VFD out of compensation retained by it from the Fund or other sources
available to it.
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 one or more of the following: 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among
21
<PAGE>
themselves and others certain information about shareholders and their accounts,
including information used to offer investment products and insurance products
to them, unless otherwise contractually prohibited.
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 One Chase
Manhattan Plaza, 3rd Floor, New York, New York 10081.
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,
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<PAGE>
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 and may determine not to offer certain classes of shares. 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
23
<PAGE>
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.
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
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<PAGE>
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 composition of the Fund's
portfolio, the Fund's operating expenses and which class of shares you purchase.
Investment performance also often reflects the risks associated with the Fund's
investment objectives and policies. These factors should be considered when
comparing the Fund's investment results to those of other mutual funds and other
investment vehicles. Quotation of investment performance for any period when a
fee waiver or expense limitation was in effect will be greater than if the
waiver or limitation had not been in effect. The Fund's performance may be
compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR CHASE VISTA PRIVILEGES
The following services are available to you as a Chase 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 Chase Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
o FREE EXCHANGE PRIVILEGE--Exchange money between Chase 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 Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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>
CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VST-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
SHORT-TERM BOND FUND
INSTITUTIONAL SHARES
INVESTMENT STRATEGY: INCOME
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 ..................................................... 13
How to Purchase, Redeem and Exchange Shares .................... 14
How the Fund Values Its Shares ................................. 16
How Distributions Are Made; Tax Information .................... 16
Other Information Concerning the Fund .......................... 18
Unique Characteristics of Master/Feeder Fund Structure ......... 20
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 (after estimated waiver)* ....................... 0.42%
------
Total Fund Operating Expenses (after waivers of fees)* ......... 0.42%
======
<TABLE>
<CAPTION>
EXAMPLE
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>
Institutional Shares ......................... $4 $13 $24 $53
</TABLE>
*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 0.57%, respectively, and Total
Fund Operating Expenses would be 1.07%.
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 financial highlights for one Institutional Share
with respect to each of the five fiscal periods commencing after October 31,
1992, and the related financial statements, have been audited by Price
Waterhouse LLP, 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, 1997, which is
incorporated by reference into the SAI.
SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
Year Ended
-----------------------
10/31/97 10/31/96
----------- -----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................................... $ 10.12 $ 10.08
-------
Income from Investment Operations:
Net Investment Income .................................................................. 0.616 0.561
Net Gains or (Losses) in securities (both realized and unrealized) ..................... ( 0.005) 0.035
-------
Total from Investment Operations: ...................................................... 0.611 0.596
-------
Less Distributions:
Dividends from Net Investment Income ................................................... 0.621 0.556
Distributions from Capital Gains ....................................................... -- --
-------- -------
Total Distributions: ................................................................... 0.621 0.556
-------
Net Asset Value, End of Period ........................................................... $ 10.11 $ 10.12
======== =======
Total Return ............................................................................. 6.23% 6.10%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................................................. $ 37,788 $43,242
Ratio of Expenses to Average Net Assets# ................................................ 0.42% 0.35%
Ratio of Net Investment Income to Average Net Assets# ................................... 6.08% 5.59%
Ratio of Expenses without waivers and assumption of expenses to Average Net Assets# ..... 0.93% 0.89%
Ratio of Net Investment Income without waivers and assumption of expenses to Average Net
Assets# ................................................................................. 5.57% 5.05%
Portfolio Turnover Rate .................................................................. 471% 158%
<CAPTION>
Year Ended
----------------------------------
10/31/95 10/31/94 10/31/93
----------- ----------- -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................................... $ 9.91 $ 10.14 $ 10.26
-------- -------- --------
Income from Investment Operations:
Net Investment Income .................................................................. 0.542 0.465 0.489
Net Gains or (Losses) in securities (both realized and unrealized) ..................... 0.168 ( 0.230) ( 0.073)
------- -------- --------
Total from Investment Operations: ...................................................... 0.710 0.235 0.416
------- -------- --------
Less Distributions:
Dividends from Net Investment Income ................................................... 0.542 0.465 0.536
Distributions from Capital Gains ....................................................... -- -- --
------- -------- --------
Total Distributions: ................................................................... 0.542 0.465 0.536
------- -------- --------
Net Asset Value, End of Period ........................................................... $ 10.08 $ 9.91 $ 10.14
======= ======== ========
Total Return ............................................................................. 7.37% 2.38% 4.73%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................................................. $36,246 $ 35,987 $ 70,693
Ratio of Expenses to Average Net Assets# ................................................ 0.37% 0.31% 0.31%
Ratio of Net Investment Income to Average Net Assets# ................................... 5.41% 4.59% 5.25%
Ratio of Expenses without waivers and assumption of expenses to Average Net Assets# ..... 0.90% 0.86% 0.70%
Ratio of Net Investment Income without waivers and assumption of expenses to Average Net
Assets# ................................................................................. 4.83% 4.05% 4.80%
Portfolio Turnover Rate .................................................................. 62% 44% 17%
<CAPTION>
7/1/92** Year 11/30/90*
through Ended through
10/31/92 6/30/92 6/30/91
----------- ----------- ----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................................... $ 10.28 $ 10.13 $ 10.00
-------- -------- -------
Income from Investment Operations:
Net Investment Income .................................................................. 0.190 0.600 0.370
Net Gains or (Losses) in securities (both realized and unrealized) ..................... ( 0.010) 0.190 0.070
-------- ------- -------
Total from Investment Operations: ...................................................... 0.180 0.790 0.440
-------- ------- -------
Less Distributions:
Dividends from Net Investment Income ................................................... 0.200 0.630 0.310
Distributions from Capital Gains ....................................................... -- 0.010 --
-------- ------- -------
Total Distributions: ................................................................... 0.200 0.640 0.310
-------- ------- -------
Net Asset Value, End of Period ........................................................... $ 10.26 $ 10.28 $ 10.13
======== ======= =======
Total Return ............................................................................. 1.67% 8.07% 4.39%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................................................. $ 81,327 $70,960 $70,745
Ratio of Expenses to Average Net Assets# ................................................ 0.30% 0.30% 0.29%
Ratio of Net Investment Income to Average Net Assets# ................................... 5.66% 6.12% 6.56%
Ratio of Expenses without waivers and assumption of expenses to Average Net Assets# ..... 0.66% 0.94% 0.99%
Ratio of Net Investment Income without waivers and assumption of expenses to Average Net
Assets# ................................................................................. 5.30% 5.48% 5.86%
Portfolio Turnover Rate .................................................................. 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
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. The Fund may invest a substantial portion of its total
assets in investment-grade fixed income securities of foreign issuers, which
may include issuers located in developing countries.
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 appropriate for investors who...
[bullet] Are seeking current income
[bullet] Are investing for relatively short-term goals
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] Can assume bond market (i.e., interest rate) risk
6
<PAGE>
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.
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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
FOREIGN SECURITIES. The Fund may invest a substantial portion of its assets in
foreign investment-grade fixed income securities, 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.
The securities markets of certain countries in which the Fund may invest are
smaller, less liquid and have more limited trading volume than those in the
United States. Such factors could cause the prices of foreign securities to be
erratic for reasons apart from factors that affect the quality of securities.
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.
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 and economic
stability. The small size of market 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.
Additionally, special tax considerations will apply to foreign securities, such
as the imposition of withholding taxes, and there may be an absence of
developed legal structure governing private investment and private property.
MONEY MARKET INSTRUMENTS. The Fund may invest in cash or high-quality,
short-term money market instruments. These may include U.S. Government
securities, commercial paper of domestic and foreign issuers and obligations of
domestic and foreign banks. Investments in foreign money market instruments may
involve certain risks associated with foreign investment.
7
<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. 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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of these transactions involves 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.
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
8
<PAGE>
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 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.
9
<PAGE>
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.
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
10
<PAGE>
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 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
11
<PAGE>
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.
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 total 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
12
<PAGE>
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 provides
discretionary investment advisory services to institutional clients. 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. Andrew Russell, a Vice President and Portfolio Manager at
Chase, and Susan Huang, a Managing Director and the Head of U.S. Fixed Income
Management at Chase, have been responsible for the management of the Short-Term
Bond Fund since June 1996. Since joining Chase in 1990, Mr. Russell has held
several positions within the U.S. fixed income area, including portfolio
analyst, taxable fixed-income trader and assistant trader. 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.
Ms. Huang is responsible for developing the asset allocation and risk
management strategies for fixed income portfolios. 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 was head of the
U.S. fixed income management group at Equitable Capital Management. Ms. Huang
is also a manager of Bond Fund, U.S. Government Securities Fund and U.S.
Treasury Income Fund.
13
<PAGE>
HOW TO PURCHASE,
REDEEM AND
EXCHANGE SHARES
HOW TO PURCHASE SHARES
Institutional Shares may be purchased through selected financial service firms,
such as broker-dealer firms and banks ("Dealers") who have entered into a
selected dealer agreement with the Fund's distributor on each business day
during which the New York Stock Exchange is open for trading ("Fund Business
Day"). Qualified investors are defined as institutions, trusts, partnerships,
corporations, qualified and other retirement plans and fiduciary accounts
opened by a bank, trust company or thrift institution which exercises
investment authority over such accounts. The Fund reserves the right to reject
any purchase order or cease offering shares for purchase at any time.
Institutional Shares are 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 Chase 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 Chase 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 Chase
Vista Service Center. A wire redemption may be requested by telephone to the
Chase Vista Service Center. For telephone redemptions, call the Chase 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 Chase 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
14
<PAGE>
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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase Vista
fund into which shares are being exchanged should be read carefully prior to
any exchange and retained for future reference.
15
<PAGE>
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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Chase 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 Chase Vista Service Center before
requesting an exchange. The exchange privilege is subject to change or
termination. See the SAI to find out more about the exchange privilege.
HOW THE FUND
VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined once daily
based upon prices determined as of the close of regular trading on the New York
Stock Exchange (normally 4:00 p.m., Eastern time, however, options are priced
at 4:15 p.m., Eastern time), on each Fund Business Day, by dividing the net
assets of the Fund attributable to that class by the total number of
outstanding shares of that class. Values of assets held by the Fund are
determined on the basis of their market or other fair value, as described in
the SAI.
HOW DISTRIBUTIONS ARE
MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment income at
least monthly. The Fund distributes any net realized capital gains at least
annually. 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 Chase Vista
Service Center in writing. If you do not select an option when you open your
16
<PAGE>
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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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).
17
<PAGE>
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 one or more of the following: 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 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
ADMINISTRATOR
Chase acts as administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of the Fund's
average daily net assets.
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<PAGE>
SUB-ADMINISTRATOR AND
DISTRIBUTOR
Vista Fund Distributors, Inc. ("VFD") acts as the Fund's sub-administrator and
distributor. VFD is a subsidiary of The BISYS Group, Inc. and is unaffiliated
with Chase. For the sub-administrative services it performs, VFD is entitled to
receive a fee from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has agreed to use a portion of this fee to pay
for certain expenses incurred in connection with organizing new series of the
Trust and certain other ongoing expenses of the Trust. VFD is located at One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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 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
19
<PAGE>
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 and may
determine not to offer certain classes of shares. 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 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
20
<PAGE>
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.
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
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<PAGE>
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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<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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.
23
<PAGE>
CHASE 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
[CHASE VISTA FUNDS LOGO]
CHASE VISTA FUNDS
P.O. Box 419392
Kansas City, MO 64141-6392
INST-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS SMALL CAP EQUITY FUND
CLASS A AND B SHARES
-----------------------------------
INVESTMENT STRATEGY: CAPITAL GROWTH
-----------------------------------
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 ....................................... 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 Chase 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) ..................... 5.75% 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 ................................. 0.05%*** 0.25%
Other Expenses ............................................ 0.45% 0.45%
---- ----
Total Fund Operating Expense .............................. 1.40% 2.10%
==== ====
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+ .................... $71 $99 $130 $216
Class B Shares:
Assuming complete redemption
at the end of the period++ +++ ... $73 $98 $136 $225
Assuming no redemptions+++ ........ $21 $66 $113 $225
* 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 financial highlights 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,
1997, 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.
SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
Class A Class B
----------------------------------- ------------------------------------
Year Ended 12/20/94* Year Ended 3/28/95**
---------------------- through ---------------------- through
10/31/97 10/31/96 10/31/95 10/31/97 10/31/96 10/31/95
-------- -------- --------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net Asset Value, Beginning of Period ................. $ 19.19 $ 15.07 $ 10.00 $ 19.00 $ 15.01 $ 11.39
-------- -------- ------- -------- ------- -------
Income from Investment Operations:
Net Investment Income (Loss) ....................... (0.051) 0.005 0.060 (0.270) (0.074) (0.018)
Net Gains or (Losses) in
Securities (both realized and
unrealized) ...................................... 4.720 4.328 5.056 4.754 4.248 3.669
-------- -------- ------- -------- ------- -------
Total from Investment
Operations ........................................ 4.669 4.333 5.116 4.484 4.174 3.651
-------- -------- ------- -------- ------- -------
Less Distributions:
Dividends from Net Investment
Income ............................................. -- 0.033 0.042 -- -- 0.027
Distributions from Capital Gains ................... 0.290 0.180 0.004 0.290 0.180 0.004
-------- -------- ------- -------- ------- -------
Total Distributions ................................ 0.290 0.213 0.046 0.290 0.180 0.031
-------- -------- ------- -------- ------- -------
Net Asset Value, End of Period ....................... $ 23.57 $ 19.19 $ 15.07 $ 23.19 $ 19.00 $ 15.01
======== ======== ======= ======== ======= =======
Total Return(1) ...................................... 24.61% 29.06% 51.25% 23.84% 28.04% 32.09%
Ratios/Supplemental Data:
Net Assets, End of Period (000
omitted) ........................................... $174,017 $144,763 $43,739 $100,341 $72,722 $21,624
Ratio of Expenses to Average Net
Assets# ............................................ 1.45% 1.50% 1.51% 2.16% 2.22% 2.24%
Ratio of Net Investment Income to
Average Net Assets# ................................ (0.23%) 0.03% 0.52% (0.94%) (0.68%) (0.25%)
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ............................... 1.45% 1.52% 2.67% 2.16% 2.25% 3.23%
Ratio of Net Investment Income
without waivers and assumption
of expenses to Average Net Assets# ................ (0.23%) 0.01% (0.64%) (0.94%) (0.71%) (1.24%)
Portfolio Turnover Rate .............................. 55% 78% 75% 55% 78% 75%
Average Commission Rate Paid
per share ........................................... $ 0.0600 $ 0.0595 -- $ 0.0600 $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
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.
Shares of the Fund may be purchased only through accounts which had been
established prior to January 20, 1997, in accordance with a previously
disclosed statement that the Fund could so limit the sale of its shares when
its net assets reached approximately $500 million in order to maintain
investment flexibility. The Fund retains the discretion to modify or eliminate
this limitation on the sale of its 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 appropriate 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.
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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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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"). Unsponsored Depositary Receipts may not carry
comparable voting rights to sponsored Depositary Receipts, and a purchaser of
unsponsored Depositary Receipts may not receive as much information about the
issuer of the underlying securities as with a sponsored Depositary Receipt.
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 AND STAND-BY COMMITMENTS.
The Fund may enter into agreements to purchase and resell securities at an
agreed-upon price and time. The Fund also
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<PAGE>
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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 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.
STRIPS. The Fund may invest up to 20% of its total assets in stripped
obligations (i.e., separately traded
8
<PAGE>
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 from year to year. The Fund's investment policies may lead to
frequent changes in investments, particularly in periods of rapidly changing
market conditions.
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<PAGE>
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.
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
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<PAGE>
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 provides
discretionary investment advisory services to institutional clients. 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
Growth and Income Portfolio and 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 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
11
<PAGE>
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase 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
Chase 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 Chase 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 letter and a deposit slip or voided check to the
Chase Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form.
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In most cases, in order to receive that day's public offering price, the Chase
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.
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 5.75 6.10 5.00
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
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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.
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Class B Shares
Class B shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within a specified period after purchase, as
shown in the table below. The following types of shares may be redeemed without
charge at any time: (i) shares acquired by reinvestment of distributions and
(ii) shares otherwise exempt from the CDSC, as described below. For other
shares, the amount of the charge is determined as a percentage of the lesser of
the current market value or the purchase price of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ------------------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund will first
redeem shares not subject to any charge, and then shares held longest during
the CDSC period. When a share that has appreciated in value is redeemed during
the CDSC period, a CDSC is assessed only on its initial purchase price. For
information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of 4.00% of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay.
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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
14
<PAGE>
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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. 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 Chase Vista 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
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<PAGE>
Fund, the Fund's distributor or the Chase Vista Service Center.
Shareholders of record of any Chase 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
Chase 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 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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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
16
<PAGE>
receive that day's net asset value, the Chase 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 Chase
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 Chase 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. There is a $10.00 charge for each wire transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase Vista Service Center by telephone. In
this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
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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 Chase 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 Chase 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 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC--and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase
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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 Chase Vista
Service Center for prospectuses of other Chase Vista funds. Shares of certain
Chase 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 Chase 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
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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
Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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.
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<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 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 Chase Vista 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 Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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<PAGE>
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 one or more
of the following: 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 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
ADMINISTRATOR AND
SUB-ADMINISTRATOR
Chase acts as the Fund's administrator and is entitled to receive a fee
computed daily and
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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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
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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 and may determine not to issue certain classes of
shares. 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 (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
24
<PAGE>
presented for other periods or without reflecting sales charges. Any quotation
of investment performance not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if such sales charges were
used.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment performance
for any period when a fee waiver or expense limitation was in effect will be
greater than if the waiver or limitation had not been in effect. The Fund's
performance may be compared to other mutual funds, relevant indices and
rankings prepared by independent services. See the SAI.
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<PAGE>
MAKE THE MOST OF YOUR CHASE VISTA PRIVILEGES
The following services are available to you as a Chase 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 Chase Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
o FREE EXCHANGE PRIVILEGE--Exchange money between Chase 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 Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VSC-1-298X
<PAGE>
[LOGO OF CHASE VISTA FUNDS]
PROSPECTUS
SMALL CAP EQUITY FUND
INSTITUTIONAL SHARES
INVESTMENT STRATEGY: CAPITAL GROWTH
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 financial highlights 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,
1997, 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.
SMALL CAP EQUITY FUND
<TABLE>
<CAPTION>
Year 5/7/96*
Ended through
10/31/97 10/31/96
-------- --------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................................... $ 19.22 $ 18.44
--------- -------
Income from Investment Operations
Net Investment Income ................................................... 0.027 0.023
Net Gains or (Losses) in Securities (both realized and unrealized) ...... 4.753 0.757
--------- -------
Total from Investment Operations ....................................... 4.780 0.780
--------- -------
Less Distributions:
Dividends from Net Investment Income .................................... -- --
Distributions from Capital Gains ........................................ 0.290 --
--------- -------
Total Distributions ..................................................... 0.290 --
--------- -------
Net Asset Value, End of Period ........................................... $ 23.71 $ 19.22
========= =======
Total Return ............................................................. 25.15% 4.23%
Ratios/Supplemental Data
Net Assets, End of Perod (000 omitted) .................................. $ 307,103 $51,542
Ratio of Expenses to Average Net Assets # ............................... 1.10% 1.10%
Ratio of Net Investment Income to Average Net Assets # .................. 0.13% 0.27%
Ratio of Expenses without waivers and assumption of expenses to
Average Net Assets # .................................................. 1.14% 1.27%
Ratio of Net Investment Income without waivers and assumption of
Expenses to Average Net Assets# ....................................... 0.09% 0.10%
Portfolio Turnover Rate ................................................. 55% 78%
Average Commission Rate Paid per share .................................. $ 0.0600 $0.0595
</TABLE>
* Commencement of offering class of shares.
# Annualized.
4
<PAGE>
FUND OBJECTIVE
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.
Shares of the Fund may be purchased only through accounts which had been
established prior to January 20, 1997, in accordance with a previously
disclosed statement that the Fund could so limit the sale of its shares when
its net assets reached approximately $500 million in order to maintain
investment flexibility. The Fund retains the discretion to modify or eliminate
this limitation on the sale of its 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 appropriate for investors who...
[bullet] Are seeking long-term growth of capital
[bullet] Are investing for goals several years away
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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
5
<PAGE>
for short-term goals or who are in need of current income.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when consistent
with the Fund's overall objective and policies. These practices, and certain
associated risks, are more fully described in the SAI. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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.
Unsponsored Depositary Receipts may not carry comparable voting rights to
sponsored Depositary Receipts, and a purchaser of unsponsored Depositary
Receipts may not receive as much information about the issuer of the underlying
securities as with a sponsored Depositary Receipt.
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.
6
<PAGE>
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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 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
7
<PAGE>
objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
STRIPS. The Fund may invest up to 20% of its total assets in stripped
obligations (i.e., separately traded principal and interest components of
securities) where the underlying obligations are backed by the full faith and
credit of the U.S. Government, including instruments known as "STRIPS". The
value of these instruments tends to fluctuate more in response to changes in
interest rates than the value of ordinary interest-paying debt securities with
similar maturities. The risk is greater when the period to maturity is longer.
DERIVATIVES AND RELATED INSTRUMENTS. The Fund may invest its assets in
derivative and related instruments to hedge various market risks or to increase
the Fund's income or gain. Some of these instruments will be subject to asset
segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and
options on futures contracts; (iii) employ forward currency contracts; and (iv)
purchase and sell structured products, which are instruments designed to
restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives and related
instruments and no assurance can be given that any strategy will succeed. The
value of certain derivatives or related instruments in which the Fund invests
may be particularly sensitive to changes in prevailing economic conditions and
market value. The ability of the Fund to successfully utilize these instruments
may depend in part upon the ability of its advisers to forecast these factors
correctly. Inaccurate forecasts could expose the Fund to a risk of loss. There
can be no guarantee that there will be a correlation between price movements in
a hedging instrument and in the portfolio assets being hedged. The Fund is not
required to use any hedging strategies. Hedging strategies, while reducing risk
of loss, can also reduce the opportunity for gain. Derivatives transactions not
involving hedging may have speculative characteristics, involve leverage and
result in losses that may exceed the original investment of the Fund. There can
be no assurance that a liquid market will exist at a time when the Fund seeks
to close out a derivatives position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in derivatives markets. In
certain instances, particularly those involving over-the-counter transactions
or forward contracts, there is a greater potential that a counterparty or
broker may default. In the event of a default, the Fund may experience a loss.
For additional information concerning derivatives, related instruments and the
associated risks, see the SAI.
8
<PAGE>
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) 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
9
<PAGE>
of money management experience.
For its investment advisory services to the Fund, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal to
0.65% of the Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Fund's sub-investment adviser under a Sub-Investment Advisory Agreement between
CAM and Chase. CAM is a wholly-owned operating subsidiary of Chase. CAM makes
investment decisions for the Fund on a day-to-day basis. For these services,
CAM is entitled to receive a fee, payable by Chase from its advisory fee, at an
annual rate equal to 0.30% of the Fund's average daily net assets. CAM provides
discretionary investment advisory services to institutional clients. 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
Growth and Income Portfolio and 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.
10
<PAGE>
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 Chase 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 Chase 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 Chase
Vista Service Center. A wire redemption may be requested by telephone to the
Chase Vista Service Center. For telephone redemptions, call the Chase 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 Chase 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 Chase 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. There is a $10.00 charge for each wire transaction. Unless
an investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
11
<PAGE>
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her representative, who
can provide the fund with his or her account registration and address as it
appears on the Fund's records.
The Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase 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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Vista Chase 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
12
<PAGE>
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 Chase
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 Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase Vista
Service Center sends you correspondence returned as "undeliverable,"
distributions will automatically be reinvested in the Fund.
13
<PAGE>
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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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
14
<PAGE>
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 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such shareholder. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase and/or VFD.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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;
15
<PAGE>
registration fees; interest charges; taxes; expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of the Fund's custodian for all services to the Fund, including safekeeping of
funds and securities and maintaining required books and accounts; expenses of
preparing and mailing reports to investors and to government offices and
commissions; expenses of meetings of investors; fees and expenses of
independent accountants, of legal counsel and of any transfer agent, registrar
or dividend disbursing agent of the Trust; insurance premiums; and expenses of
calculating the net asset value of, and the net income on, shares of the Fund.
Shareholder servicing and distribution fees are allocated to specific classes
of the Fund. In addition, the Fund may allocate transfer agency and certain
other expenses by class. Service providers to the Fund may, from time to time,
voluntarily waive all or a portion of any fees to which they are entitled.
ORGANIZATION AND
DESCRIPTION OF SHARES
The Fund is a portfolio of Mutual Fund Group, an open-end management investment
company organized as a Massachusetts business trust in 1987 (the "Trust"). The
Trust has reserved the right to create and issue additional series and classes.
Each share of a series or class represents an equal proportionate interest in
that series or class with each other share of that series or class. The shares
of each series or class participate equally in the earnings, dividends and
assets of the particular series or class. Shares have no pre-emptive or
conversion rights. Shares when issued are fully paid and non-assessable, except
as set forth below. Shareholders are entitled to one vote for each whole share
held, and each fractional share shall be entitled to a proportionate fractional
vote, except that Trust shares held in the treasury of the Trust shall not be
voted. Shares of each class of the Fund generally vote together except when
required under federal securities laws to vote separately on matters that only
affect a particular class, such as the approval of distribution plans for a
particular class.
The Fund issues multiple classes of shares. This Prospectus relates only to
Institutional Shares of the Fund, one class of shares offered by the Fund.
Institutional Shares may be purchased only by qualified investors that make an
initial investment of $1,000,000 or more. "Qualified investors" are defined as
institutions, trusts, partnerships, corporations, qualified and other
retirement plans and fiduciary accounts opened by a bank, trust company or
thrift institution which exercises investment authority over such accounts. The
Fund offers other classes of shares in addition to these classes and may
determine not to issue certain classes of shares. 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
16
<PAGE>
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 public offering price. Total return may also be presented for other
periods.
All performance data is based on the Fund's past investment results and does
not predict future performance. Investment performance, which will vary, is
based on many factors, including market conditions, the composition of the
Fund's portfolio, the Fund's operating expenses and which class of shares you
purchase. Investment performance also often reflects the risks associated with
the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other
mutual funds and other investment vehicles. Quotation of investment performance
for any period when a fee waiver or expense limitation was in effect will be
greater than if the waiver or limitation had not been in effect. The Fund's
performance may be compared to other mutual funds, relevant indices and
rankings prepared by independent services. See the SAI.
17
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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 Chase Vista 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. 4The 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
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
CHASE 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
[LOGO OF CHASE VISTA FUNDS]
P.O. Box 419392
Kansas City, MO 64141-6392
INSC-1-298X
<PAGE>
[CHASE VISTA FUND LOGO]
PROSPECTUS
SMALL CAP OPPORTUNITIES FUND
CLASS A, B AND C SHARES
INVESTMENT STRATEGY: CAPITAL GROWTH
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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
<TABLE>
<S> <C>
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 .................................................................. 11
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the
Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment ....................................................... 11
Choosing a share class
How to Buy, Sell and Exchange Shares ........................................ 12
How the Fund Values its Shares .............................................. 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 ....................................... 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 Chase Vista Privileges ................................ 27
</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 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 Class C
Shares Shares Shares
---- ---- ----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) .............. 5.75% None None
Maximum Deferred Sales Charge
(as a percentage of the lower of original purchase
price or redemption proceeds)* ................... None 5.00% 1.00%
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee # .......................... 0.50% 0.50% 0.50%
12b-1 Fee** ........................................ 0.25% 0.75% 0.75%+
Shareholder Servicing Fee .......................... 0.01%# 0.25% 0.25%+
Other Expenses ..................................... 0.74% 0.74% 0.74%
----- ---- -----
Total Fund Operating Expenses ...................... 1.50% 2.24% 2.24%
===== ==== =====
</TABLE>
EXAMPLES
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
<TABLE>
<CAPTION>
1 3
Year Years
---- ----
<S> <C> <C>
Class A Shares++ ................................................... $ 72 $ 102
Class B Shares:
Assuming complete redemption at the end of the period+++ ......... $ 74 $ 103
Assuming no redemptions ........................................... $ 23 $ 70
Class C Shares:
Assuming complete redemption at the end of the period+++ ......... $ 33 $ 70
Assuming no redemptions ........................................... $ 23 $ 70
</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. The maximum deferred sales charge on Class C shares applies to
redemptions during the first year after purchase; the charge is 1% during
the first year and zero thereafter. See "How to Buy, Sell and Exchange
Shares."
** Long-term shareholders in mutual funds with 12b-1 fees, such as Class A and
Class B shareholders of the Fund, may pay more than the economic equivalent
of the maximum front-end sales charge permitted by rules of the National
Association of Securities Dealers, Inc.
# Reflects current waiver arrangements to maintain the Total Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee would be 0.65%. The Shareholder Servicing Fee
for Class A shares would be 0.25%, and Total Fund Operating Expenses would
be 1.89%, 2.39% and 2.39% for Class A, Class B and Class C shares,
respectively.
+ Beginning with the 13th month following the purchase of Class C shares by
their customers, broker-dealers receive payments at an annual rate of 1.00%
of the average daily net asset value of the Class C shares invested in the
Fund by their customers, consisting of a 12b-1 distribution fee at an annual
rate of 0.75% of such assets and a service fee at an annual rate of 0.25% of
such assets.
++ 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.
3
<PAGE>
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The
examples should not be considered representations of past or future expenses or
returns; actual expenses and returns may be greater or less than shown.
Charges or credits, not reflected in the expense table above, may be incurred
directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those
accounts. See "Other Information Concerning the Fund."
4
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides financial highlights 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, 1997, which is incorporated by reference into the SAI. Shareholders
can obtain a copy of this annual report by contacting the fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below for the periods ended
October 31, 1997, has been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is also included in the Annual Report to
Shareholders.
SMALL CAP OPPORTUNITIES FUND
<TABLE>
<CAPTION>
Class A Class B
---------- ----------
5/19/97* 5/19/97*
through through
10/31/97 10/31/97
---------- ----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ..................... $ 10.00 $ 10.00
---------- ----------
Income From Investment Operations:
Net Investment Income ................................. (0.041) (0.057)
Net Gains or (Losses) in Securities
(both realized and unrealized) ....................... 3.891 3.867
---------- ----------
Total from Investment Operations ....................... 3.850 3.810
---------- ----------
Net Asset Value, End of Period ........................... $ 13.85 $ 13.81
========== ==========
Total Return(1) .......................................... 38.50% 38.10%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ................. $42,635 $38,142
Ratio of Expenses to Average Net Assets# ................ 1.49% 2.24%
Ratio of Net Investment Income to
Average Net Assets# ................................... (1.16%) (1.93%)
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# ......... 2.38% 2.88%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# ......... (2.05%) (2.57%)
Portfolio Turnover Rate .................................. 7% 7%
Average Commission Rate Paid per Share ................... $0.0623 $0.0623
</TABLE>
* 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
Small Cap Opportunities Fund seeks long-term capital growth. The Fund is not
intended to be a complete investment program, and there is no assurance it will
achieve its objective.
INVESTMENT POLICIES
INVESTMENT APPROACH
Under normal market conditions, the Fund will invest at least 80% of its total
assets in equity securities and at least 65% of its total assets in equity
securities of small cap companies. The Fund's advisers define small cap
companies as those with market capitalizations of up to $1 billion at the time
of purchase by the Fund. To pursue the Fund's objective the advisers will seek
to invest in companies with consistent, accelerating earnings and attractive
stock valuations. The Fund's advisers intend to utilize both quantitative and
fundamental research to identify those equities offering the best combination
of value and growth among small cap stocks. Current income is an incidental
consideration to the Fund's objective. You should be aware that an investment
in small cap companies may be more volatile than investments in companies with
greater capitalization, as described under "Risk Factors" below.
To retain investment flexibility, the Fund may determine to discontinue selling
new shares when the Fund's net assets reach approximately $1 billion. Were the
Fund to do so, existing shareholders of the Fund would be permitted to continue
making additional purchases of Fund shares.
The Fund is classified as a "non-diversified" fund under federal securities
law. The Fund's assets may be more concentrated in the securities of any single
issuer or group of issuers than if the Fund were diversified.
The Fund may invest any portion of its assets not invested in equity securities
in high quality money market instruments and repurchase agreements. In
addition, at times when the Fund's advisers deem it advisable to limit the
Fund's exposure to the equity markets, the Fund may invest up to 20% of its
total assets in U.S. Government obligations other than money market
instruments. For temporary defensive purposes, the Fund may invest without
limitation in money market instruments and repurchase agreements. To the extent
that the Fund departs from its investment policies during temporary defensive
periods, the Fund's investment objective may not be achieved.
Instead of investing directly in underlying securities the Fund is authorized
to seek to achieve its objective by investing all of its investable assets in
another investment company having substantially the same investment objectives
and policies.
WHO MAY WANT TO INVEST
This Fund may be most appropriate for investors who. . .
[bullet] Are seeking long-term growth of capital
[bullet] Are investing for goals several years away
[bullet] Own or plan to own other types of investments for diversification
purposes
6
<PAGE>
[bullet] Can assume above-average market risk
This Fund may NOT be appropriate for investors who are unable to tolerate
frequent up and down price changes, are investing for short-term goals or who
are in need of current income.
OTHER INVESTMENT PRACTICES
The Fund may also engage in the following investment practices, when consistent
with the Fund's overall objective and policies. These practices, and certain
associated risks, are more fully described in the SAI. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in
foreign securities, including Depositary Receipts, which are described below.
Since foreign securities are normally denominated and traded in foreign
currencies, the values of the Fund's foreign investments may be influenced by
currency exchange rates and exchange control regulations. There may be less
information publicly available about foreign issuers than U.S. issuers, and
they are not generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the U.S. Foreign securities may
be less liquid and more volatile than comparable U.S. securities. Foreign
settlement procedures and trade regulations may involve certain expenses and
risks. One risk would be the delay in payment or delivery of securities or in
the recovery of the Fund's assets held abroad. It is possible that
nationalization or expropriation of assets, imposition of currency exchange
controls, taxation by withholding Fund assets, political or financial
instability and diplomatic developments could affect the value of the
portfolio's investments in certain foreign countries. Foreign laws may restrict
the ability to invest in certain countries or issuers and special tax
considerations will apply to foreign securities. The risks can increase if the
Fund invests in emerging market securities.
The Fund may invest its assets in securities of foreign issuers in the form of
American Depositary Receipts, European Depositary Receipts or other similar
securities representing securities of foreign issuers (collectively,
"Depositary Receipts"). The Fund treats Depositary Receipts as interests in the
underlying securities for purposes of its investment policies. Unsponsored
Depositary Receipts may not carry comparable voting rights to sponsored
Depositary Receipts, and a purchaser of unsponsored Depositary Receipts may not
receive as much information about the issuer of the underlying securities as
with a sponsored Depositary Receipt.
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
7
<PAGE>
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. 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. A put transaction will increase
the cost of the underlying security and consequently reduce the available
yield. Each of these transactions involves some risk to the Fund if the other
party should default on its obligation and the Fund is delayed or prevented
from recovering the collateral or completing the transaction.
BORROWINGS AND REVERSE REPURCHASE AGREEMENTS.
The Fund may borrow money from banks for temporary or short-term purposes, but
will not borrow money to buy additional securities, known as "leveraging." The
Fund may also sell and simultaneously commit to repurchase a portfolio security
at an agreed-upon price and time. The Fund may use this practice to generate
cash for shareholder redemptions without selling securities in a down market.
Whenever the Fund enters into a reverse repurchase agreement, it will establish
a segregated account in which it will maintain liquid assets on a daily basis
in an amount at least equal to the repurchase price (including accrued
interest). The Fund would be required to pay interest on amounts obtained
through reverse repurchase agreements, which are considered borrowing under
federal securities laws.
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.
8
<PAGE>
OTHER INVESTMENT COMPANIES. 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. 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
9
<PAGE>
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 the
Fund's shareholders. These restrictions prohibit the Fund from: (a) investing
more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of Trustees
of the Fund); or (b) investing more than 25% of its total assets in any one
industry. A complete description of these and other investment policies is
included in the SAI. Except for restriction (b) above and investment policies
designated as fundamental in the SAI, the investment policies of the Fund
(including the investment objective) are not fundamental. Shareholder approval
is not required to change any non-fundamental policy. However, in the event of
a change in the Fund's investment objective, shareholders will be given at
least 30 days' prior written notice.
RISK FACTORS
The net asset value of the Fund's shares will fluctuate based on the value of
the securities held by the Fund's portfolio. The Fund is aggresively managed
and, therefore, the value of the shares of the Fund is subject to greater
fluctuation and an investment in the Fund's shares involves a higher degree of
risk than an investment in a conservative equity fund or a growth fund
investing entirely in proven growth equities. An investment in the Fund should
not be considered a complete investment program and may not be appropriate for
all investors.
The securities of small cap companies often trade less frequently and in more
limited volume, and may be subject to more abrupt or erratic price movements,
than securities of larger, more established companies. Such companies may have
limited product lines, markets or financial resources, or may depend on a
limited management group.
Because the Fund is "non-diversified," the value of the Fund's shares is more
susceptible to developments affecting issuers in which the Fund invests.
To the extent the Fund invests in longer-term U.S. Government obligations, the
performance of the Fund may also be affected by interest rate changes. As
interest rates increase, the value of any fixed income securities held by the
Fund will tend to decrease.
10
<PAGE>
For a discussion of certain other risks associated with the Fund'sadditional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
THE FUND'S ADVISERS
The Chase Manhattan Bank ("Chase")is the Fund's investment adviser under an
Investment Advisory Agreement and has overall responsibility for investment
decisions of the Fund, subject to the oversight of the Board of Trustees. Chase
is a wholly-owned subsidiary of The Chase Manhattan Corporation, a bank holding
company. Chase and its predecessors have over 100 years of money management
experience.
For its investment advisory services to the Fund, Chase is entitled to receive
an annual fee computed daily and paid monthly based at an annual rate equal to
0.65% of the Fund's average daily net assets. Chase is located at 270 Park
Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
Fund's sub-investment adviser under a Sub-Investment Advisory Agreement between
CAM and Chase. CAM is a wholly-owned operating subsidiary of Chase. CAM makes
investment decisions for the Fund on a day-to-day basis. For these services,
CAM is entitled to receive a fee, payable by Chase from its advisory fee, at an
annual rate equal to 0.30% of the Fund's average daily net assets. CAM provides
discretionary investment advisory services to institutional clients. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York, New
York 10036.
PORTFOLIO MANAGERS. Jill Greenwald and Ronald Zibelli, Vice Presidents and
Senior Portfolio Managers at Chase, are responsible for the management of the
Fund. Ms. Greenwald joined Chase in 1993, specializing in small cap issues.
Prior to joining Chase, Ms. Greenwald was a Director for Prudential Equity
Investors and a Senior Analyst for Fred Alger Management, Inc.
Mr. Zibelli joined Chase in June 1996. Most recently, he held a similar
position at The Portfolio Group, Inc. for one year. Prior to that, he was
Director of Equity Research and Portfolio Manager at Princeton Bank & Trust
Company for seven years, and began his career at J.P. Morgan Investment
Management.
ABOUT YOUR 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 and Class C shares. See "How to Buy, Sell and Exchange
Shares" and "Other Information Concerning the Fund."
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<PAGE>
CLASS B SHARES. Class B shares are sold without an initial sales charge, but
are subject to an annually declining 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."
CLASS C SHARES. Class C shares are sold without an initial sales charge, which
provides the investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. If redeemed within one year after
purchase, Class C shares are subject to a CDSC equal to 1% of the lesser of
their original cost or the net asset value at the time of the redemption. If
you hold your shares for one year or more, you will receive the entire net
asset value of your shares upon redemption at the then-current share price.
Class C shares, like Class B shares, have higher combined 12b-1 and service
fees than Class A shares and, as a consequence, pay correspondingly lower
dividends and may have a lower net asset value than Class A shares. Unlike
Class B shares, Class C shares do not convert into any other class of shares of
the Fund. 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 and anticipate
holding your shares for a number of years, you might consider Class B shares.
If you prefer not to pay an initial sales charge and you are uncertain as to
the intended length of your investment, you might consider Class C shares. In
almost all cases, if you are a long-term investor 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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs.
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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 Chase 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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase Vista Service Center must receive your order before
the close of regular trading on the New York Stock Exchange. If you buy shares
through your investment representative, the representative must receive your
order before the close of regular trading on the New York Stock Exchange to
receive that day's public offering price. Orders for shares are accepted by the
Fund after funds are converted to federal funds.
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 or Class C 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.
<TABLE>
<CAPTION>
Sales charge as a
percentage of:
---------------------------
Amount of sales charge
Amount of transaction Offering Net amount reallowed to dealers as a
at offering price($) price invested percentage of offering price
- ------------------------------------- ---------- ---------- ----------------------------
<S> <C> <C> <C>
Under 100,000 ....................... 5.75 6.10 5.00
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>
Prior to May 1, 1998, for purchases of Class A shares of under $100,000
(based on offering price), the sales charge as a percentage of the offering
price and net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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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<PAGE>
CLASS C SHARES
Class C shares are sold without an initial sales charge, although a CDSC will
be imposed if you redeem shares within one year after purchase. 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.
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 1.00% of the offering price on sales of Class C 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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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
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<PAGE>
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 Chase Vista fund shares), financial institution trust departments investing
an aggregate of $1 million or more in the Chase Vista Funds, and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase Vista Fund as of November 30, 1990 and
certain immediate family members may purchase the Fund's Class A shares with no
initial sales
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<PAGE>
charge for as long as they continue to own Class A shares of any Chase 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 or Class C 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 or Class C shares subject to a systematic
withdrawal plan may also be redeemed each year without a CDSC, provided that
the Class B or Class C 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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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
17
<PAGE>
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 Chase 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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 and
Class C 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 Chase 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
18
<PAGE>
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 Chase 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 or Class
C 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
Chase Vista Funds at net asset value beginning 15 days after purchase. Not all
Chase Vista Funds offer all classes of shares. The prospectus of the other
Chase 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 or Class C shares into
any of the Chase Vista money market funds (other than Prime Money Market Fund's
Class B and Class C shares, respectively) will be treated as a redemption--and
therefore subject to the conditions of the CDSC--and a subsequent purchase.
Class B or Class C shares of any Chase Vista non-money market fund may be
exchanged into the Class B or Class C shares of the Prime Money Market Fund,
respectively, 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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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
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<PAGE>
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 Chase Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
REINSTATEMENT PRIVILEGE. Upon written request, Class A shareholders have a one
time privilege of reinstating their investment in the Fund at net asset value
within 90 calendar days of the redemption. The redemption request must be
accompanied by payment for the shares (not in excess of the redemption), and
shares will be purchased at the next determined net asset value. Class B and
Class C 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 or Class C 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 capital gain 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 and Class C shares because expenses attributable to Class B
and Class C 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
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<PAGE>
all distributions in cash or by ACH. You can change your distribution option by
notifying the Chase 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 Chase 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 Chase Vista fund without a sales charge. If the Chase Vista Service
Center does not receive your election, the distribution will be reinvested in
the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain, at the currently
applicable 28% or 20% rate, 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).
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<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, Class B and Class C
shares, which provide for the payment of distribution fees at annual rates of
up to 0.25%, 0.75% and 0.75% of the average daily net assets attributable to
Class A, Class B and Class C 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, Class B and Class C 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 and 0.75% of the average daily net asset value of Class C 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, Class B and Class C shares will be conducted generally by the Chase
Vista Funds, and activities intended to promote the Fund's Class A, Class B or
Class C shares may also benefit the Fund's other shares and other Chase Vista
funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase Vista Funds. These incentives may include gifts
of up to $100 per person annually; an occassional 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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
22
<PAGE>
Class A, Class B or Class C shares of the Fund. These services include one or
more of the following: 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, Class B or Class C 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
ADMINISTRATOR AND
SUB-ADMINISTRATOR
Chase acts as the administrator of the Fund and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.10% of their
average daily net assets.
VFD provides certain sub-administrative services to the Fund pursuant to a
distribution and sub-administration agreement and is entitled to receive a fee
for these services from the Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD has
23
<PAGE>
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 One Chase Manhattan Plaza, 3rd Floor,
New York, New York 10081.
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, Class B and Class C shares of the Fund. The Fund may
24
<PAGE>
offer other classes of shares in addition to these classes and may determine
not to offer certain classes of shares. 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 (in the case of Class A shares) or reflecting
the deduction of any applicable contingent deferred sales charge (in the case
of Class B and Class C 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,
25
<PAGE>
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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B and Class C accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B and Class C 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 or Class C
shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
27
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Income Fund
Tax Free Income Fund
CHASE 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
CHASE VISTA TAXABLE MONEY MARKET FUNDS(2)
Cash Management Fund
Federal Money Market Fund
100% U.S. Treasury Securities Money Market Fund
U.S. Government Money Market Fund
Treasury Plus Money Market Fund
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VSCO-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
U.S. GOVERNMENT SECURITIES FUND
CLASS A SHARES
INVESTMENT STRATEGY: TOTAL RETURN
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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 ........................................................ 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 ...................................... 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 Chase Vista Privileges ............................... 27
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.
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** .................................... 0.00%
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)** ......... 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+ ............... $52 $68 $85 $134
*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 Investment Advisory Fee, the 12b-1 Fee, the Shareholder Servicing
Fee and Other Expenses would be 0.30%, 0.25%, 0.25% and 0.90%,
respectively, and Total Fund Operating Expenses would be 1.70%.
+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
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides financial highlights 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, 1997, 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.
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Class A
--------------------------
Year 5/6/96*
Ende d through
10/31/97 10/31/96
---------- ----------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ........................... $ 9.90 $ 9.62
----------
Net Investment Income ......................................... 0.580 0.259
Net Gains or Losses in Securities (both realized
and unrealized) ............................................. 0.146 0.255
---------- ---------
Total from Investment Operations ............................. 0.726 0.514
---------- ---------
Less Dividends from Net Investment Income ...................... 0.566 0.234
---------
Net Asset Value, End of Period ................................. $ 10.06 $ 9.90
========== =========
Total Return (1) ............................................... 7.61% 5.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) ....................... $ 2,277 $ 3,333
Ratio of Expenses to Average Net Assets# ...................... 1.05% 1.05%
Ratio of Net Investment Income to Average Net Assets# ......... 5.61% 5.30%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# .............................. 1.57% 1.55%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# ................ 5.09% 5.00%
Portfolio Turnover Rate ....................................... 569% 101%
</TABLE>
*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
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 appropriate for investors who . . .
[bullet] Are seeking current income as well as some growth potential
[bullet] Are investing for mid- to long-term investment goals
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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
7
<PAGE>
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.
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 AND STAND-BY
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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.
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
8
<PAGE>
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 both interest and
principal on the securities are made monthly, in effect "passing through"
monthly
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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, stripped mortgage securities may be illiquid.
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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 instrument and in the portfolio assets being hedged. The Fund is not
required to use any hedging
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<PAGE>
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 net assets in the securities of any one
issuer (other than U.S. Government obligations); (b) investing more than 15% of
its net assets in illiquid securities (which include securities restricted as
to resale unless they are determined to be readily marketable in accordance
with procedures established by the Board of Trustees); or (c) investing more
than 25% of its total assets in any one industry. A complete description of
these and other investment policies is included in the SAI. Except for the
Fund's investment objective, restriction (c) above and investment policies
designated as fundamental in the SAI, the Fund's investment policies are not
fundamental. The Trustees may change any non-fundamental investment policy
without shareholder approval.
RISK FACTORS
The Fund does not constitute a balanced or complete investment program, and the
net asset value of 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
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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 provides
discretionary investment advisory services to institutional clients. 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. Michael Bennis, a Vice President and Senior Portfolio
Manager at Chase, and Susan Huang, a Managing Director and the Head of U.S.
Fixed Income Management at
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Chase, have been responsible for the day-to-day management of the Fund's
portfolio since December and June of 1996, respectively. 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. Ms. Huang is responsible
for developing the asset allocation and risk management strategies for fixed
income portfolios. 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 was head of the U.S. fixed income management
group at Equitable Capital Management. Ms. Huang is also a manager of Bond
Fund, Short-Term Bond Fund and U.S. Treasury Income Fund.
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Educational IRAs. 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 Chase
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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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
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the Chase Vista Service Center receives your order in proper form. In most
cases, in order to receive that day's public offering price, the Chase 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.
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 2.50 2.56 2.25
500,000 but under 1,000,000 2.00 2.04 1.75
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class A
shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 0.75% of the amount under $2.5 million,
0.50% of the next $7.5 million, 0.25% of the next $40 million and 0.15%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
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<PAGE>
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista
fund shares), financial institution trust departments investing an aggregate of
$1 million or more in the Chase Vista Funds and clients of certain
administrators of tax-qualified plans when proceeds from repayments of loans to
participants are invested (or reinvested) in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. No initial sales
charge
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<PAGE>
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 Chase Vista 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 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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
Chase 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
17
<PAGE>
$250 to their customers that invest in the Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase 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 Chase
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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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
18
<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 Chase Vista
Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of
19
<PAGE>
certain Chase 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 Chase 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.
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
Chase Vista Service Center in writing. If you do not select an option when you
open your account, all
20
<PAGE>
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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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).
21
<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 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 Chase Vista Funds, and activities intended to
promote the Fund's Class A shares may also benefit the Fund's other shares and
other Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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 one or more of the following: assisting with purchase and redemption
transactions, maintaining shareholder accounts and records, furnishing customer
statements, transmitting
22
<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 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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One Chase
Manhattan Plaza, 3rd Floor, New York, New York 10081.
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<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 and may determine not to offer certain classes of shares. 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,
24
<PAGE>
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.
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
25
<PAGE>
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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase 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 Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. Investors
may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
27
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VUSG-1-298X
<PAGE>
[LOGO OF CHASE VISTA FUNDS]
PROSPECTUS
U.S. GOVERNMENT SECURITIES FUND
INSTITUTIONAL SHARES
INVESTMENT STRATEGY: TOTAL RETURN
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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>
2
<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
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.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee* ..................................... 0.00%
12b-1 Fee .................................................... None
Shareholder Servicing Fee (after estimated waiver) ........... 0.25%
Other Expenses* .............................................. 0.30%
----
Total Fund Operating Expenses (after waiver of fee)* ......... 0.55%
====
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 $18 $31 $69
* 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 and Other Expenses would be 0.30% and
0.45%, respectively, and Total Fund Operating Expenses would be 1.00%.
The table is provided to help you understand the expenses of investing in the
Fund and your share of the operating expenses that the Fund incurs. The example
should not be considered a representation of past or future expenses or
returns; actual expenses and returns may be greater or less than shown.
Charges 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 U.S. Government Securities Fund, which was created to be
the successor to the Predecessor Fund. The table set forth below provides
financial highlights for one Share of the Predecessor Fund outstanding through
May 3, 1996, and one Institutional Share of the 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 year ended October 31, 1997
and the period December 1, 1995 through 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.
U.S. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Years ended
Year 12/1/95(1) November 30,
ended through -------------------------------------
10/31/97 10/31/96 1995 1994 1993*
-------- --------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ......... $ 9.89 $ 10.18 $ 9.23 $ 10.27 $ 10.00
--------- ---------- ------- ------ --------
Income From Investment Operations
Net Investment Income ..................... 0.590 0.501 0.560 0.500 0.340
Net Gain (Loss) on Securities
(both realized and unrealized) ........... 0.152 (0.302) 0.950 (0.940) 0.270
--------- ---------- ------ ------ --------
Total from Investment Operations ........... 0.742 0.199 1.510 (0.440) 0.610
--------- ----------- ------ ------ --------
Less Distributions:
Dividends from Net Investment
Income ................................... 0.591 0.489 (0.560) (0.500) (0.340)
Distributions from Capital Gains ........... -- -- -- (0.100) --
--------- ----------- ------- ------ ------
Total Distributions ........................ 0.591 0.489 (0.560) (0.600) ( 0.340)
--------- ----------- ------ ------ -------
Net Asset Value, End of Period ............... $ 10.04 $ 9.89 $ 10.18 $ 9.23 $ 10.27
========= =========== ====== ====== ========
Total Return* ................................ 7.78% 2.09% 16.82% (4.41%) 6.16%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) .................................. $ 52,848 $ 67,980 $83,304 $83,649 $86,089
Ratio of Expenses to Average Net Assets# 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of Net Investment Income to
Average Net Assets# ....................... 5.78% 5.55% 5.78% 5.15% 4.26%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets# ............................... 0.91% 1.04% 1.11% 1.04% 1.04%
Ratio of Net Investment Income
without waivers and
assumption of expenses to Average
Net Assets# ............................... 5.72% 5.36% 5.52% 4.96% 4.07%
Portfolio Turnover Rate ...................... 569% 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
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 appropriate for investors who . . .
[bullet] Are seeking current income as well as some growth potential
6
<PAGE>
[bullet] Are investing for mid- to long-term investment goals
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
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
7
<PAGE>
countries or issuers and special tax 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 AND STAND-BY
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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.
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
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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 payments made by the individual borrowers on the residential mortgage
loans which underlie the securities. Early repayment of
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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.
The Fund expects that governmental, government-related or private entities may
create other mortgage-related securities in
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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 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.
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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, 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
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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 provides
discretionary investment advisory services to institutional clients. 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. Michael Bennis, a Vice President and Senior Portfolio
Manager at Chase, and Susan Huang, a Managing Director and the Head of U.S.
Fixed Income Management at Chase, have been responsible for the day-to-day
management of the
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Fund's portfolio since December and June of 1996, respectively. 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. Ms. Huang is
responsible for developing the asset allocation and risk management strategies
for fixed income portfolios. 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 was head of the U.S. fixed
income management group at Equitable Capital Management. Ms. Huang is also a
manager of Bond Fund, Short-Term Bond Fund and 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 Chase 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 Chase Vista funds may be aggregated with purchases of Institutional
Shares of the Fund to meet the $1,000,000 minimum initial investment amount
requirement.
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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 Chase
Vista Service Center. A wire redemption may be requested by telephone to the
Chase Vista Service Center. For telephone redemptions, call the Chase 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 Chase 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 Chase 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. There is a $10.00 charge for each wire
transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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
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Stock Exchange to receive that day's net asset value. Your Dealer will be
responsible for furnishing all necessary documentation to the Chase 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 Chase
Vista funds at net asset value beginning 15 days after purchase. Not all Chase
Vista funds offer Institutional Shares. The prospectus of the other Chase 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 Chase Vista Service Center for procedures for telephone transactions.
Ask your investment representative or the Chase Vista Service Center for
prospectuses of other Chase Vista funds. Shares of certain Chase 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 Chase 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
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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 Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term captial gain at the currently
applicable 28% or 20% rate, 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.
Distributions may also be subject to state and local taxes. However, the laws
of most states and localities
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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 one or more of the following: 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,
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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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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
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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 and may
determine not to offer certain classes of shares. 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
20
<PAGE>
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.
21
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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>
CHASE 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
[LOGO OF CHASE VISTA FUNDS]
P.O. Box 419392
Kansas City, MO 64141-6392
INUS-1-298X
<PAGE>
[LOGO OF CHASE VISTA FUNDS]
PROSPECTUS
U.S. TREASURY INCOME FUND
CLASS A AND B SHARES
INVESTMENT STRATEGY: INCOME
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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>
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<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 ..................................................... 26
How performance is determined, stated and/or advertised
Make the Most of Your Chase 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>
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) ** ...................... 0.23% 0.23%
12b-1 Fee*** ............................................................. 0.00% 0.75%
Shareholder Servicing Fee (after estimated waiver, where indicated) ...... 0.11%** 0.25%
Other Expenses ........................................................... 0.41% 0.41%
------ ----
Total Fund Operating Expenses (after waivers of fees) ** ................. 0.75% 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+ ............................ $52 $68 $ 85 $134
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ ....................... $68 $85 $113 $171
Assuming no redemptions+++ ............... $17 $52 $ 89 $171
</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 12b-1 Fee would be 0.25% for Class A 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 financial highlights 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, 1997, 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, 1997, 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.
U.S. TREASURY INCOME FUND*
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
Year Ended October 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning
of Period ............................... $ 11.13 $ 11.40 $ 10.60 $ 12.10 $ 11.68 $ 11.53
------- -------- ------- -------- ------- -------
Income from Investment
Operations
Net Investment Income ................... 0.662 0.655 0.699 0.646 0.666 0.786
Net Gains or (Losses) in Securities
(both realized and unrealized) ......... 0.126 (0.268) 0.798 (1.297) 0.699 0.267
------- -------- ------- -------- ------- -------
Total from Investment
Operations ............................. 0.788 0.387 1.497 (0.651) 1.365 1.053
------- -------- ------- -------- ------- -------
Less Distributions
Dividends from Net
Investment Income ...................... 0.657 0.656 0.697 0.646 0.667 0.786
Distributions from
Capital Gains .......................... -- -- -- 0.203 0.287 0.111
------- -------- ------- -------- ------- -------
Total Distributions ..................... 0.657 0.656 0.697 0.849 0.954 0.897
------- -------- ------- -------- ------- -------
Net Asset Value, End of Period ............ $ 11.26 $ 11.13 $ 11.40 $ 10.60 $ 12.10 $ 11.68
======= ======== ======= ======== ======= =======
TOTAL RETURN(1) 7.35% 3.56% 14.59% (5.58%) 12.35% 9.40%
Ratios/Supplemental Data*:
Net Assets, End of Period
(000 omitted) .......................... $85,133 $111,482 $99,109 $ 99,524 $93,039 $59,391
Ratio of Expenses to Average
Net Assets# ............................. 0.90% 0.90% 0.87% 0.76% 0.75% 0.38%
Ratio of Net Investment Income to
Average Net Assets# ..................... 5.97% 5.89% 6.37% 5.74% 5.61% 6.52%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ..................... 1.21% 1.29% 1.40% 1.28% 1.14% 1.34%
Ratio of Net Investment Income
without waivers and assumption
of expenses to Average Net
Assets# ................................. 5.66% 5.50% 5.84% 5.22% 5.22% 5.56%
Portfolio Turnover Rate ................... 179% 103% 164% 163% 296% 514%
<CAPTION>
Class A
Year Ended October 31,
--------------------------------------------
1991 1990 1989 1988
---- ---- ---- ----
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning
of Period ............................... $ 10.93 $ 11.21 $ 10.90 $ 10.69
------- --------- -------- --------
Income from Investment
Operations
Net Investment Income ................... 0.883 0.882 0.885 0.842
Net Gains or (Losses) in Securities
(both realized and unrealized) ......... 0.597 ( 0.284) 0.319 0.258
------- --------- -------- --------
Total from Investment
Operations ............................. 1.480 0.598 1.204 1.100
------- --------- -------- --------
Less Distributions
Dividends from Net
Investment Income ...................... 0.882 0.882 0.888 0.890
Distributions from
Capital Gains .......................... -- -- 0.004 --
------- --------- -------- --------
Total Distributions ..................... 0.882 0.882 0.892 0.890
------- --------- -------- --------
Net Asset Value, End of Period ............ $ 11.53 $ 10.93 $ 11.21 $ 10.90
======= ========= ======== ========
TOTAL RETURN(1) 14.07% 5.70% 11.64% 10.70%
Ratios/Supplemental Data*:
Net Assets, End of Period
(000 omitted) .......................... $15,131 $ 6,359 $ 3,725 $ 1,742
Ratio of Expenses to Average
Net Assets# ............................. 0.02% 0.08% 0.00% 0.00%
Ratio of Net Investment Income to
Average Net Assets# ..................... 7.81% 8.08% 8.12% 8.11%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ..................... 2.89% 2.50% 2.50% 2.00%
Ratio of Net Investment Income
without waivers and assumption
of expenses to Average Net
Assets# ................................. 4.94% 5.66% 5.62% 6.11%
Portfolio Turnover Rate ................... 103% 15% 34% 3%
<CAPTION>
Class B
----------------------------------------------------
Year Year Year 11/4/93**
Ended Ended Ended through
10/31/97 10/31/96 10/31/95 10/31/94
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning
of Period ............................... $ 11.11 $ 11.37 $ 10.59 $ 11.98
----------- ---------- ---------- ----------
Income from Investment
Operations
Net Investment Income ................... 0.580 0.571 0.621 0.592
Net Gains or (Losses) in Securities
(both realized and unrealized) ......... 0.125 (0.265) 0.797 (1.187)
----------- ---------- ---------- -----------
Total from Investment
Operations ............................. 0.705 0.306 1.418 (0.595)
----------- ---------- ---------- -----------
Less Distributions
Dividends from Net
Investment Income ...................... 0.565 0.566 0.638 0.592
Distributions from
Capital Gains .......................... -- -- -- 0.203
----------- ---------- ---------- -----------
Total Distributions ..................... 0.565 0.566 0.638 0.795
----------- ---------- ---------- -----------
Net Asset Value, End of Period ............ $ 11.25 $ 11.11 $ 11.37 $ 10.59
=========== ========== ========== ===========
TOTAL RETURN(1) 6.56% 2.82% 13.80% (5.18%)
Ratios/Supplemental Data*:
Net Assets, End of Period
(000 omitted) .......................... $ 10,603 $ 10,764 $ 10,652 $ 5,184
Ratio of Expenses to Average
Net Assets# ............................. 1.64% 1.64% 1.62% 1.50%
Ratio of Net Investment Income to
Average Net Assets# ..................... 5.24% 5.12% 5.53% 5.28%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# ..................... 1.71% 1.79% 1.89% 1.78%
Ratio of Net Investment Income
without waivers and assumption
of expenses to Average Net
Assets# ................................. 5.17% 4.97% 5.26% 5.00%
Portfolio Turnover Rate ................... 179% 103% 164% 163%
</TABLE>
* Formerly known as Vista U.S. Government Income Fund.
** 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.
6 & 7
<PAGE>
FUND OBJECTIVE
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 total
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 appropriate for investors who...
[bullet] Are seeking current income
[bullet] Are investing for mid- to long-term investment goals
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY
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
8
<PAGE>
the securities declines prior to the settlement date. 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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of these transactions involves 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.
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
9
<PAGE>
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
contracts and options on futures contracts; (iii) employ forward currency and
interest rate contracts
10
<PAGE>
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 investment policy
without shareholder approval.
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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 provides
discretionary investment advisory services to institutional clients. 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. Patrick Quilty, Jr., a Vice President and Senior Portfolio
Manager at Chase, and Susan Huang, a Managing Director and the Head of U.S.
Fixed Income Management at Chase,
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have been responsible for the management of the Fund since September 1997 and
January 1997, 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 Balanced Fund and Bond Fund.
Ms. Huang is responsible for developing the asset allocation and risk
management strategies for fixed income portfolios. 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 was head of the
U.S. fixed income management group at Equitable Capital Management. Ms. Huang
is also a manager of Bond Fund, Short-Term Bond Fund and U.S. Government
Securities 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."
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
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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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
If you are considering redeeming or exchanging shares or transferring shares to
another person shortly
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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 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
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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 Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate
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of $1 million or more in the Chase Vista Funds and clients of certain
administrators of tax-qualified plans when proceeds from repayments of loans to
participants are invested (or reinvested) in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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
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<PAGE>
$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
Chase 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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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 Chase
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,
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<PAGE>
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 Chase 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.
There is a $10.00 charge for each wire transaction. 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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
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<PAGE>
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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase 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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC --and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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
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required by law. Consult the Chase 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 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
Chase 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 Chase Vista Service Center will notify you that
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you have the option of requesting another check or reinvesting the distribution
in the Fund or in an established account of another Chase Vista fund without a
sales charge. If the Chase Vista Service Center does not receive your election,
the distribution will be reinvested in the Fund. Similarly, if the Fund or the
Chase 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distribution of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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
22
<PAGE>
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 Chase
Vista 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 Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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 one or more of the following: 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
23
<PAGE>
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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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.
24
<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 and may determine not to offer certain classes of
shares. 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
25
<PAGE>
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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 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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change.
Investors may not maintain, within the same fund, simultaneous plans
for systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
s 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 Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
27
<PAGE>
Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[LOGO OF CHASE VISTA FUNDS]
P.O. Box 419392
Kansas City, MO 64141-6392
VUST-1-298X
<PAGE>
[CHASE VISTA FUNDS LOGO]
PROSPECTUS
U.S. TREASURY INCOME FUND
CLASS A
---------------------------
INVESTMENT STRATEGY: INCOME
---------------------------
February 27, 1998
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 27, 1998 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
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 .................................................... 23
How performance is determined, stated and/or advertised
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
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** ........................................................... 0.00%
Shareholder Servicing Fee (after estimated waiver)* ................... 0.11%
Other Expenses ........................................................ 0.41%
----
Total Fund Operating Expenses (after waivers of fees) * ............... 0.75%
====
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
-------- --------- --------- ---------
Class A Share+ ................ $52 $68 $85 $134
* 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, the 12b-1 Fee and the Shareholder Servicing Fee
would be 0.30%, 0.25% and 0.25%, respectively, 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 financial highlights 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, 1997, 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, 1997, 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.
<TABLE>
<CAPTION>
U.S. TREASURY INCOME FUND*
- ------------------------------------------------------------------------------------------------------------------------------------
Class A
Year Ended October 31,
------------------------------------------------------------------------------------------ -------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
------- -------- ------- ------- ------- ------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning
of Period ..................... $ 11.13 $ 11.40 $ 10.60 $ 12.10 $ 11.68 $ 11.53 $ 10.93 $11.21 $10.90 $ 10.69
------- -------- ------- ------- ------- ------- ------- ------ ------ -------
Income from Investment
Operations
Net Investment Income ..... 0.662 0.655 0.699 0.646 0.666 0.786 0.883 0.882 0.885 0.842
Net Gains or (Losses)
in Securities
(both realized
and unrealized) ......... 0.126 (0.268) 0.798 (1.297) 0.699 0.267 0.597 (0.284) 0.319 0.258
------- -------- ------- ------- ------- ------- ------- ------ ------ -------
Total from Investment
Operations ................ 0.788 0.387 1.497 (0.651) 1.365 1.053 1.480 0.598 1.204 1.100
------- -------- ------- ------- ------- ------- ------- ------ ------ -------
Less Distributions
Dividends from Net
Investment Income ....... 0.657 0.656 0.697 0.646 0.667 0.786 0.882 0.882 0.888 0.890
Distributions from
Capital Gains .............. -- -- -- 0.203 0.287 0.111 -- -- 0.004 --
------- -------- ------- ------- ------- ------- ------- ------ ------ -------
Total Distributions ......... 0.657 0.656 0.697 0.849 0.954 0.897 0.882 0.882 0.892 0.890
-------- ------- ------- ------- ------- ------- ------ ------ -------
Net Asset Value, End of Period $ 11.26 $ 11.13 $ 11.40 $ 10.60 $ 12.10 $ 11.68 $ 11.53 $10.93 $11.21 $ 10.90
======= ======== ======= ======= ======= ======= ======= ====== ====== =======
Total Return(1) ............... 7.35% 3.56% 14.59% (5.58%) 12.35% 9.40% 14.07% 5.70% 11.64% 10.70%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted) ..... $85,133 $111,482 $99,109 $99,524 $93,039 $59,391 $15,131 $6,359 $3,725 $ 1,742
Ratio of Expenses to
Average Net Assets# ....... 0.90% 0.90% 0.87% 0.76% 0.75% 0.38% 0.02% 0.08% -- --
Ratio of Net Investment
Income to Average
Net Assets# ............... 5.97% 5.89% 6.37% 5.74% 5.61% 6.52% 7.81% 8.08% 8.12% 8.11%
Ratio of Expenses without
waivers and assumption
of expenses to Average
Net Assets# ............... 1.21% 1.29% 1.40% 1.28% 1.14% 1.34% 2.89% 2.50% 2.50% 2.00%
Ratio of Net Investment
Income without waivers
and assumption of expenses
to Average Net Assets# .... 5.66% 5.50% 5.84% 5.22% 5.22% 5.56% 4.94% 5.66% 5.62% 6.11%
Portfolio Turnover Rate ....... 179% 103% 164% 163% 296% 514% 103% 15% 34% 3%
</TABLE>
* Formerly known as Vista U.S. Government Income Fund.
(1) Total return figures do not include the effect of any sales load.
# Short periods have been annualized.
4 & 5
<PAGE>
FUND OBJECTIVE
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 total
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 appropriate 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. Except as otherwise
indicated below, the Fund is not subject to any percentage limits with respect
to the practices described below.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY 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. The Fund may
enter into put transactions, including those sometimes referred to as stand-by
commitments, with respect to securities in its portfolio.
6
<PAGE>
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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of 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. 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.
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.
MORTGAGE-RELATED SECURITIES. The Fund may invest in mortgage-related U.S.
Government securities. Mortgage
7
<PAGE>
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 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
8
<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. 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 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
9
<PAGE>
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 provides discretionary investment advisory
services to institutional clients. 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 Vice President and Senior Portfolio
Manager at Chase, and Susan Huang, a Managing Director and the Head of U.S.
Fixed Income Management at Chase, have been responsible for the management of
the Fund since its inception and since September 1997 and January 1997,
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 Balanced Fund and Bond Fund.
Ms. Huang is responsible for developing the asset allocation and risk
management strategies for fixed income portfolios. 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
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<PAGE>
First Boston in 1992, Ms. Huang spent 14 years at the Equitable, where she was
head of the U.S. fixed income management group at Equitable Capital Management.
Ms. Huang is also a manager of Bond Fund, Short-Term Bond Fund and U.S.
Government Securities 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
You can open a Fund account with as little as $2,500 for regular accounts,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Educational IRAs. 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 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
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<PAGE>
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.
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
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<PAGE>
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.
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
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<PAGE>
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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior ninety
days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust departments investing
an aggregate of $1 million or more in the Chase Vista Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998
14
<PAGE>
through December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA, profit sharing plan or money purchase pension
plan for which The Chase Manhattan Bank or its designee serves as trustee or
custodian. 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 Chase Vista 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.
Shareholders of record of any Chase 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
Chase 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
Chase 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
15
<PAGE>
$250 to their customers that invest in the Chase Vista Funds.
Shareholders of other Chase 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 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
16
<PAGE>
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 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 591/2 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
17
<PAGE>
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 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
18
<PAGE>
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 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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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
19
<PAGE>
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 Chase Vista Funds, and activities intended to promote
the Fund's Class A shares may also benefit the Fund's other shares and other
Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase Vista Funds. These incentives may include gifts of
up to $100 per person annually; an occassional 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.
VFD may from time to time, pursuant to objective criteria established by it, pay
additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by VFD
out of compensation retained by it from the Fund or other sources available to
it.
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 one or more of the following: 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
20
<PAGE>
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 Chase
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 Chase 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 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
VFO. Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One Chase
Manhattan Plaza, 3rd Floor, New York, New York 10081.
21
<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.
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.
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 and may determine not to offer certain classes of shares. The
categories of investors that are eligible to purchase shares and minimum
investment requirements
22
<PAGE>
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 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
23
<PAGE>
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>
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<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
CHASE 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
[CHASE VISTA FUNDS LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
<PAGE>
[LOGO OF CHASE VISTA FUNDS]
PROSPECTUS INTERNATIONAL EQUITY FUND
CLASS A AND B SHARES
---------------------------------
INVESTMENT STRATEGY: TOTAL RETURN
---------------------------------
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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
29.
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>
<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 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 .............................................. 24
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, organization and master/feeder Fund structure
Performance Information ..................................................... 30
How performance is determined, stated and/or advertised
Make the Most of Your Chase Vista Privileges ................................ 32
</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) ......................... 5.75% 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%
==== ====
</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+ .............................. $77 $117 $159 $277
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ .......................... $77 $110 $156 $271
Assuming no redemptions+++ .................. $25 $ 78 $133 $271
</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 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 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 financial highlights 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, 1997, 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.
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
----------------------------------------------------
Year Ended
----------------------------------------------------
10/31/97 10/31/96 10/31/95 10/31/94
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period .................................. $ 12.38 $ 12.02 $ 12.31 $ 11.82
--------- -------- --------- ---------
Income from Investment Operations:
Net Investment Income (Loss) ........................................ (0.046)@ 0.056 0.039 (0.022)
Net Gains or (Losses) in Securities
(both realized and unrealized) ..................................... 0.330 0.367 (0.190) 0.566
---------- -------- ---------- ----------
Total from Investment Operations .................................... 0.284 0.423 (0.151) 0.544
---------- -------- ---------- ----------
Less Distributions:
Dividends from Net Investment Income ................................ 0.036 0.063 -- --
Distribution from Capital Gains ..................................... 0.520 -- 0.137 0.054
---------- -------- ---------- ----------
Total Distributions ................................................. 0.556 0.063 0.137 0.054
---------- -------- ---------- ----------
Net Asset Value, End of Period ........................................ $ 12.11 $ 12.38 $ 12.02 $ 12.31
========== ======== ========== ==========
Total Return (1) ...................................................... 2.27% 3.53% (1.19%) 4.61%
Ratios/Supplemental Data**
Net Assets, End of Period (in 000's) ................................. $ 23,267 $ 24,904 $ 26,287 $ 37,926
Ratio of Expenses to Average Net Assets*(2) .......................... 2.01% 2.00% 2.01% 2.00%
Ratio of Net Investment Income (Loss) to Average Net Assets* ......... (0.36%) 0.03% (0.10%) (0.27%)
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets* .................................. 2.08% 2.86% 2.86% 2.86%
Ratio of Net Investment (Loss) Income without
waivers and assumption of expenses to Average Net Assets* ........... (0.43%) ( 0.89%) (0.96%) (1.13%)
<CAPTION>
Class A
-------------
12/31/92+
through
10/31/93
-------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period .................................. $ 10.00
---------
Income from Investment Operations:
Net Investment Income (Loss) ........................................ (0.010)
Net Gains or (Losses) in Securities
(both realized and unrealized) ..................................... 1.830
----------
Total from Investment Operations .................................... 1.820
----------
Less Distributions:
Dividends from Net Investment Income ................................ --
Distribution from Capital Gains ..................................... --
----------
Total Distributions ................................................. --
----------
Net Asset Value, End of Period ........................................ $ 11.82
==========
Total Return (1) ...................................................... 22.23%
Ratios/Supplemental Data**
Net Assets, End of Period (in 000's) ................................. $ 14,290
Ratio of Expenses to Average Net Assets*(2) .......................... 2.13%
Ratio of Net Investment Income (Loss) to Average Net Assets* ......... (0.14%)
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets* .................................. 2.86%
Ratio of Net Investment (Loss) Income without
waivers and assumption of expenses to Average Net Assets* ........... (0.87%)
<CAPTION>
Class B
Year Ended
------------------------------------------
10/31/97 10/31/96 10/31/95
------------- ------------ -----------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period ................................ $ 12.24 $ 11.89 $ 12.23
-------- ------- -------
Income from Investment Operations:
Net Investment Income (Loss) ...................................... (0.111)@ 0.013 (0.026)
Net Gains or (Losses) in Securities
(both realized and unrealized) ................................... 0.330 0.350 (0.180)
-------- -------- -------
Total from Investment Operations .................................. 0.219 0.363 (0.206)
-------- ------- -------
Less Distributions:
Dividends from Net Investment Income .............................. -- -- --
Distribution from Capital Gains ................................... 0.520 0.010 0.137
-------- ------- -------
Total Distributions ............................................... 0.520 0.010 0.137
-------- ------- --------
Net Asset Value, End of Period ...................................... $ 11.94 $ 12.24 $ 11.89
======== ======= =======
Total Return (1) .................................................... 1.74% 3.03% (1.61%)
Ratios/Supplemental Data**
Net Assets, End of Period (in 000's) ............................... $ 7,989 $ 7,819 $ 6,759
Ratio of Expenses to Average Net Assets*(2) ........................ 2.51% 2.50% 2.50%
Ratio of Net Investment Income (Loss) to Average Net Assets* ....... ( 0.88%) (0.43%) (0.53%)
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets* ................................ 2.61% 3.36% 3.36%
Ratio of Net Investment (Loss) Income without
waivers and assumption of expenses to Average Net Assets* ......... ( 0.98%) (1.29%) (1.40%)
<CAPTION>
Class B
------------
11/4/93++
through
10/31/94
------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period .................................. $ 11.69
---------
Income from Investment Operations:
Net Investment Income (Loss) ........................................ (0.053)
Net Gains or (Losses) in Securities
(both realized and unrealized) ..................................... 0.647
--------
Total from Investment Operations .................................... 0.594
--------
Less Distributions:
Dividends from Net Investment Income ................................ --
Distribution from Capital Gains ..................................... 0.054
--------
Total Distributions ................................................. 0.054
--------
Net Asset Value, End of Period ........................................ $ 12.23
========
Total Return (1) ...................................................... 5.09%
Ratios/Supplemental Data**
Net Assets, End of Period (in 000's) ................................. $ 7,182
Ratio of Expenses to Average Net Assets*(2) .......................... 2.50%
Ratio of Net Investment Income (Loss) to Average Net Assets* ......... (0.94%)
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets* .................................. 3.36%
Ratio of Net Investment (Loss) Income without
waivers and assumption of expenses to Average Net Assets* ........... (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.
@ Calculated using average shares outstanding.
6 & 7
<PAGE>
FUND OBJECTIVE
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 appropriate for investors who . . .
[bullet] Are seeking total return from long-term capital growth and income
[bullet] Are investing for goals several years away
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[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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.
Except as otherwise indicated below, the Portfolio is not subject to any
percentage limits with respect to the practices described below.
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. Unsponsored
Depositary Receipts may not carry comparable voting rights to sponsored
Depositary Receipts, and a purchaser of unsponsored Depositary Receipts may not
receive as much information about the issuer of the underlying securities as
with a sponsored Depositary Receipt.
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,
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<PAGE>
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 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 AND STAND-BY 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. 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. A put
transaction will increase the cost of the underlying security and consequently
reduce the available yield. Each of these transactions involves 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
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<PAGE>
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.
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.
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<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.
The securities markets of certain countries in which the Fund may invest are
smaller, less liquid and have more limited trading volume than those in the
United States. Such factors could cause the prices of foreign securities to be
erratic for reasons apart from factors that affect the quality of 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.
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 impede the Portfolio's investment opportunities,
including restrictions on investing in issuers or industries deemed sensitive
to relevant national interests. Additionally, special tax considerations will
apply to foreign securities, such as the imposition of withholding taxes, and
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.
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<PAGE>
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 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 provides
discretionary investment advisory services to institutional clients. 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 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
Southeast Asian Fund and 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
15
<PAGE>
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,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase 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.
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<PAGE>
BUYING SHARES THROUGH THE FUND'S DISTRIBUTOR. Complete and return the enclosed
application and your check in the amount you wish to invest to the Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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 5.75 6.10 5.00
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>
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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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<PAGE>
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Chase 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. For purchases of the Fund's Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Fund's distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank
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<PAGE>
or its designee serves as trustee or custodian. 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 Chase Vista 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 Chase Vista
Service Center.
Shareholders of record of any Chase 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
Chase 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
Chase Vista Funds with balances held in Chase
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<PAGE>
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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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 Chase
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 Chase 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. There is a $10.00 charge for each wire
transaction. Unless an investor indicates otherwise on the account
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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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase Vista fund into which shares are being
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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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC--and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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
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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
Chase 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 Chase 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 Chase Vista fund without a sales charge. If
the Chase Vista Service Center does not receive your election, the distribution
will be reinvested in the Fund. Similarly, if the Fund or the Chase Vista
Service Center sends you correspondence returned as "undeliverable,"
distributions will automatically be reinvested in the Fund.
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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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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).
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
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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 Chase Vista
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 Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of the Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of the Fund and/or other Chase Vista
Funds during a specified period of time. Such compensation does not represent
an additional expense to the Fund or its shareholders, since it will be paid by
VFD out of compensation retained by it from the Fund or other sources available
to it.
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 one or more of the following: 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
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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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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 One
Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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.
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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 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 and may determine not to offer certain classes of
shares. 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
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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 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
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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 Chase 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
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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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. Investors
may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares with no initial
sales charge (in an amount not in excess of their redemption
proceeds) if the purchase occurs within 90 days of the redemption of
the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[LOGO OF CHASE VISTA FUNDS]
P.O. Box 419392
Kansas City, MO 64141-6392
VIE-1-298X
<PAGE>
[LOGO OF CHASE VISTA FUNDS]
PROSPECTUS
SOUTHEAST ASIAN FUND
JAPAN FUND
EUROPEAN FUND
CLASS A AND B SHARES
INVESTMENT STRATEGY: CAPITAL GROWTH
February 27, 1998
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 27, 1998 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Chase 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.
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TABLE OF CONTENTS
<TABLE>
<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 ...................................................................... 18
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management, the
Funds' sub-adviser, and the individuals who manage the Funds
About Your Investment ........................................................... 19
Choosing a share class
How to Buy, Sell and Exchange Shares ............................................ 20
How the Funds Value Their Shares ................................................ 27
How Distributions Are Made; Tax Information ..................................... 27
How the Funds distribute their earnings, and the taxes related to those earnings
Other Information Concerning the Funds .......................................... 28
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information ......................................................... 32
How performance is determined, stated and/or advertised
Make the Most of Your Chase Vista Privileges .................................... 33
</TABLE>
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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 each of the Funds 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) ..................................................... 5.75% 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>
<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+ .............................. $74 $109 $147 $252
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ .......................... $77 $110 $156 $265
Assuming no redemptions+++ .................. $25 $ 78 $133 $265
</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 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.
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+ 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
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FINANCIAL HIGHLIGHTS
The table set forth below provides financial highlights 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, 1997, 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.
EUROPEAN FUND
SOUTHEAST ASIAN FUND
JAPAN FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
European Fund
-----------------------------------------------------
Class A Class B
--------------------------- -------------------------
Year 11/02/95* Year 11/03/95**
Ended through Ended through
10/31/97 10/31/96 10/31/97 10/31/96
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............... $ 11.99 $ 10.00 $ 11.93 $ 9.97
------- ------- ------- -------
Income From Investment Operations:
Net Investment Income ............................ 0.048 0.146 0.047 0.066
Net Gains or (Losses) in Securities
(both realized and unrealized) .................. 3.014 1.929 2.888 1.961
------- ------- ------- -------
Total from Investment Operations ................. 3.062 2.075 2.935 2.027
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income ............. 0.102 0.085 0.084 0.067
Distributions from Capital Gains ................. 0.850 -- 0.850 --
------- ------- ------- -------
Tax return of Capital ............................ -- -- -- --
------- ------- ------- -------
Total Distributions .............................. 0.952 0.085 0.934 0.067
------- ------- ------- -------
Net Asset Value, End of Period ..................... $ 14.10 $ 11.99 $ 13.93 $ 11.93
======= ======= ======= =======
Total Return (1) ................................... 28.19% 20.78% 27.25% 20.35%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ........... $ 12,965 $ 6,358 $ 2,218 $ 190
Ratios to Average Net Assets:#
Ratio of Expenses to Average Net Assets# ......... 1.75% 1.75% 2.51% 2.47%
Ratio of Net Investment Income to Average
Net Assets# ..................................... 0.32% 1.44% (0.30%) 0.80%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 2.84% 3.49% 3.58% 3.83%
Ratio of Net Investment Income without waivers
and assumptions of expenses to Average Net
Assets# ......................................... (0.77%) (0.30%) (1.37%) (0.56%)
Portfolio Turnover Rate ........................... 170% 186% 170% 186%
Average Commission Rate Paid per share ............ $ 0.0364 $0.0242 $0.0364 $0.0242
<CAPTION>
Southeast Asian Fund
------------------------------------------------------
Class A Class B
--------------------------- --------------------------
Year 11/02/95* Year 11/03/95**
Ended through Ended through
10/31/97 10/31/96 10/31/97 10/31/96
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............... $ 11.97 $ 10.00 $ 11.89 $ 10.01
------- ------- ------- -------
Income From Investment Operations:
Net Investment Income ............................ 0.066 (0.013) 0.025 (0.055)
Net Gains or (Losses) in Securities
(both realized and unrealized) .................. (3.305) 1.983 (3.315) 1.935
-------- ------- -------- --------
Total from Investment Operations ................. (3.239) 1.970 (3.290) 1.880
-------- ------- -------- --------
Less Distributions:
Dividends from Net Investment Income ............. -- -- -- --
Distributions from Capital Gains ................. 0.640 -- 0.640 --
-------- ------- -------- --------
Tax return of Capital ............................ 0.021 -- 0.010 --
-------- ------- -------- --------
Total Distributions .............................. 0.661 -- 0.650 --
-------- ------- -------- --------
Net Asset Value, End of Period ..................... $ 8.07 $ 11.97 $ 7.95 $ 11.89
======== ======= ======== ========
Total Return (1) ................................... (28.86%) 19.70% (29.48) 18.78%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ........... $ 6,566 $ 8,451 $ 1,051 $ 1,222
Ratios to Average Net Assets:#
Ratio of Expenses to Average Net Assets# ......... 1.75% 1.74% 2.50% 2.52%
Ratio of Net Investment Income to Average
Net Assets# ..................................... 0.42% (0.12%) (0.23%) (0.90%)
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 2.84% 3.26% 3.60% 3.70%
Ratio of Net Investment Income without waivers
and assumptions of expenses to Average Net
Assets# ......................................... (0.67%) (1.64%) (1.33%) (2.08%)
Portfolio Turnover Rate ........................... 234% 149% 234% 149%
Average Commission Rate Paid per share ............ $0.0100 $0.0129 $ 0.0100 $0.0129
<CAPTION>
Japan Fund
------------------------------------------------------
Class A Class B
--------------------------- --------------------------
Year 11/02/95* Year 11/03/95**
Ended through Ended through
10/31/97 10/31/96 10/31/97 10/31/96
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period ............... $ 9.42 $ 10.00 $ 9.35 $ 10.00
------ ------- ------- -------
Income From Investment Operations:
Net Investment Income ............................ 0.078 (0.083) (0.048) (0.022)
Net Gains or (Losses) in Securities
(both realized and unrealized) .................. 0.242 (0.497) 0.298 (0.628)
------ -------- ------- --------
Total from Investment Operations ................. 0.320 (0.580) 0.250 (0.650)
------ ------- ------- --------
Less Distributions:
Dividends from Net Investment Income ............. 0.220 -- 0.180 --
Distributions from Capital Gains ................. -- -- -- --
------- ------- -------- --------
Tax return of Capital ............................ -- -- -- --
------- -------- -------- --------
Total Distributions .............................. 0.220 -- 0.180 --
------- -------- -------- --------
Net Asset Value, End of Period ..................... $ 9.52 $ 9.42 $ 9.42 $ 9.35
======= ======= ======== ========
Total Return (1) ................................... 3.49% (5.80%) 2.72% (6.50%)
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) ........... $ 5,008 $ 4,781 $ 1,893 $ 162
Ratios to Average Net Assets:#
Ratio of Expenses to Average Net Assets# ......... 1.75% 1.75% 2.51 $ 2.52%
Ratio of Net Investment Income to Average
Net Assets# ..................................... (0.30%) (0.91%) (5.73%) (0.40%)
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 2.89% 3.60% 3.66% 4.00%
Ratio of Net Investment Income without waivers
and assumptions of expenses to Average Net
Assets# ......................................... (1.44%) (2.76%) (6.88%) (1.88%)
Portfolio Turnover Rate ........................... 217% 121% 217% 121%
Average Commission Rate Paid per share ............ $ .0582 $0.0499 $0.0582 $ 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.
6 & 7
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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
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 Hong Kong, Australia,
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 New Zealand, Taiwan, Korea and India. A
substantial portion of the Fund's assets may be invested in Hong Kong and/or
Australia. The Fund may invest in India through a Republic of Mauritius Company
(a "Mauritius Company") in order to take advantage of a favorable tax treaty
between India and Mauritius.
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.
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
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invest include Austria, Belgium, Denmark, Germany, Finland, France, Greece,
Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland and the United Kingdom, as well as other Western European countries
that the Fund's advisers deem to be of investment grade. The Fund's advisers
anticipate that the Fund generally will be invested in a number of different
Western European countries, although it may at times invest most or all of its
assets in a single country.
Each Fund is classified as a "non-diversified" fund under federal securities
law.
WHO MAY WANT TO INVEST
The Southeast Asian, Japan and European Funds may be most appropriate for
investors who . . .
[bullet] Are seeking long-term growth of capital
[bullet] Are investing for goals several years away
[bullet] Own or plan to own other types of investments for diversification
purposes
[bullet] 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
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country or denominated in a particular currency will vary in accordance with
the advisers' assessment of the relative yield and appreciation potential of
such securities and the current and anticipated relationship of a country's
currency to the U.S. dollar. Fundamental economic strength, earnings growth,
quality of management, industry growth, credit quality and interest rate trends
are some of the principal factors which may be considered by the Funds'
advisers in determining whether to increase or decrease the emphasis placed
upon a particular type of security, industry sector, country or currency within
a Fund's investment portfolio. Securities purchased by a Fund may be
denominated in a currency other than that of the country in which the issuer is
domiciled. No Fund is limited as to the amount of its assets that may be
invested in any one country. However, each Fund will attempt to allocate
investments among a wide range of industries and companies. Each Fund will
place primary emphasis on equity securities and securities with equity
features. However, each Fund may also invest in any type of investment grade
debt security and various derivative securities if the advisers believe that
doing so may result in capital growth. 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 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, a Fund may invest its assets without limitation
in these instruments as well as in debt securities issued in various currencies
by supranational entities and by companies and governments located in countries
in which the Fund is permitted to invest and in short-term debt instruments
including 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
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investment policies during such periods, its investment objective may not be
achieved.
For a discussion of certain risks associated with an investment in the Funds,
see "Risk Factors" and "Other Investment Practices" below.
OTHER INVESTMENT
PRACTICES
Each Fund may also engage in the following investment practices, when
consistent with such Fund's overall objective and policies. These practices,
and certain associated risks, are more fully described in the SAI. Except as
otherwise indicated below, the Funds are not subject to any percentage limits
with respect to the practices described below.
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. Unsponsored Depositary Receipts may not
carry comparable voting rights to sponsored Depositary Receipts, and a
purchaser of unsponsored Depositary Receipts may not receive as much
information about the issuer of the underlying securities as with a sponsored
Depositary Receipt.
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.
11
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STRUCTURED PRODUCTS. Each Fund may invest in structured products, which are
interests in entities organized solely for the purpose of restructuring the
investment characteristics of certain other investments. These investments are
deposited with or purchased by the entities, which then issue securities (the
structured products) backed by, or representing interests in, the underlying
investments. The cash flow on the underlying investments may be apportioned
among the newly issued structured products to create securities with different
investment characteristics such as varying maturities, payment priorities or
interest rate provisions, and the extent of the payments made with respect to
structured investments depends on the amount of the cash flow on the underlying
investments. Structured products are subject to the risks associated with the
underlying market or security, and may be subject to greater volatility than
direct investments in the underlying market or security.
INDEXED INVESTMENTS. Each Fund may invest in instruments which are indexed to
certain specific foreign currency exchange rates. The terms of such instruments
may provide that their pincipal amounts or just their coupon interest rates are
adjusted upwards or downwards (but not below zero) at maturity or on
established coupon payment dates to reflect changes in the exchange rate
between two or more currencies while the obligation is outstanding. Such
indexed investments entail the risk of loss of principal and/or interest
payments from currency movements in addition to principal risk, but offer the
potential for realizing gains as a result of changes in foreign currency
exchange rates.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD AND STAND-BY
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. 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. A put transaction will increase the cost of the underlying
security and consequently reduce the available yield. Each of these
transactions involves 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
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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 Funds may use this practice to generate cash
for shareholder redemptions without selling securities during unfavorable
market conditions. Whenever a Funds 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.
CONVERTIBLE SECURITIES. Each Fund may invest in convertible securities, which
are securities generally offering fixed interest or dividend yields which may
be converted either at a stated price or stated rate for common or preferred
stock. Although to a lesser extent than with fixed-income securities generally,
the market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Because of the conversion
feature, the market value of convertible securities also tends to vary with
fluctuations in the market value of the underlying common or preferred stock.
OTHER INVESTMENT COMPANIES. 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. For purposes of this restriction, a Mauritius Company will not be
considered an investment company. 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
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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 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
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investment policy without shareholder approval.
RISK FACTORS
GENERAL. 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.
The securities markets of certain countries in which the Funds may invest are
smaller, less liquid and have more limited trading volume than those in the
United States. Such factors could cause the prices of foreign securities to be
erratic for reasons apart from factors that affect the quality of 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
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.
Certain national policies may impede the Funds' investment opportunities,
including restrictions on investing in issuers or industries deemed sensitive
to relevant national interests. Additionally, special tax considerations will
apply to foreign securities, such as the imposition of withholding taxes, and
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
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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.
SOUTHEAST ASIAN FUND.
The Fund's performance is susceptible to political and economic factors
affecting issuers in Southeast Asian countries. In addition, although this Fund
will not invest in Japanese companies, some Southeast Asian economies are
directly affected by Japanese capital investment in the region, by Japanese
consumer demands and by the state of the Japanese economy.
Southeast Asian economies and financial markets have experienced significant
volatility in recent years. Many of the countries of Southeast Asia are
developing both economically and politically. Southeast Asian countries may
have relatively unstable governments, economies based on only a few commodities
or industries, and securities markets trading infrequently or in low volumes.
Securities of issuers located in some Southeast Asian countries tend to have
volatile prices and such securities may offer significant potential for loss as
well as gain. Further, certain companies in Southeast Asia may not have firmly
established product markets, may lack depth of management, or may be more
vulnerable to political or economic developments such as nationalization of
their own industries.
Since Southeast Asian securities are normally denominated and traded in foreign
currencies, the values of the Fund's Southeast Asian investments may be
influenced by currency exchange rates and exchange control regulation. Many of
the currencies of Southeast Asian countries have recently experienced extreme
volatility relative to the United States dollar, including periods of
devaluation. In particular, Thailand, Indonesia, the Philippines and South
Korea have experienced currency crises warranting assistance from the
International Monetary Fund. Devaluations in the currencies in which the Fund's
portfolio securities are denominated will adversely affect the Fund's net asset
value.
Trading volumes on Southeast Asian stock exchanges, although increasing, are
substantially less than in the U.S. stock market, and the stock markets of
Southeast Asian countries have exhibited extreme volatility. Further,
securities of some Southeast Asian companies are less liquid and more volatile
than securities of comparable U.S. companies. Fixed commissions on Southeast
Asian stock exchanges are generally higher than negotiated commissions in U.S.
exchanges, although the Fund endeavors to achieve the most favorable net
results on its portfolio transaction
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and may be able to purchase securities in which the Fund may invest on other
stock exchanges where commissions are negotiable.
JAPAN FUND. This Fund's performance is susceptible to political and economic
factors affecting issuers in Japan. In addition, although this Fund will invest
primarily in Japanese issuers, the Japanese economy may be affected by
Southeast Asian consumer demands and by the state of Southeast Asian economies.
The Japanese economy and financial markets have experienced considerable
difficulty since 1990. The Japanese stock market has been volatile; for
example, the Japanese stock market, as measured by the Tokyo Stock Price Index
(TOPIX), increased by over 500% during the ten-year period ended December 31,
1989, and it has fluctuated in a downward trend, falling by more than half
since then. A seven-year decline of the Tokyo stock market has made the
country's banks and financial institutions vulnerable because of their large
share portfolios, and has left Japanese banks holding large numbers of
non-performing loans. In addition, the Japanese economy labors under a heavy
government budget deficit and historically low interest rates. As a result of
these factors, several high-profile bankruptcies of Japanese banks, brokerage
firms and insurance companies have occurred. A continuation or recurrence of a
Japanese stock market decline could have an adverse impact throughout Japan's
economy.
Since Japanese securities are normally denominated and traded in the Japanese
yen, the values of the Fund's Japanese investments may be influenced by
currency exchange rates and exchange control regulation. Historically, over a
number of years, the yen has generally appreciated in relation to the dollar.
Nonetheless, the yen has recently experienced increasing volatility relative to
the U.S. dollar, including periods of devaluation. The Japanese yen may also be
adversely affected by currency difficulties of other countries in the Southeast
Asian region. Devaluations in the yen, and any other currencies in which the
Fund's portfolio securities are denominated, will adversely affect the Fund's
net asset value.
Because of the concentration of Japanese exports in highly visible products
such as automobiles, machine tools and semiconductors, and the large trade
surpluses ensuing therefrom, Japan is in a difficult phase in its relations
with its trading partners, particularly the United States, where the trade
imbalance is the greatest. In addition, the economic difficulties of other
countries in the Southeast Asian region, with whom Japan trades, have adversely
affected and may continue to adversely affect Japan's economy as the region's
demand for Japanese exports fluctuates and as many Japanese banks and companies
have exposure to the region.
EUROPEAN FUND. This Fund's performance is susceptible to political, social and
economic factors affecting issuers in European countries. Such factors may
include, but are not limited to: growth of GDP or GNP, rate of inflation,
capital reinvestment, resource
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self-sufficiency and balance of payments position, as well as interest and
monetary exchange rates among European countries.
For a discussion of certain other risks associated with each Fund's additional
investment activities, see "Other Investment Practices" above.
MANAGEMENT
THE FUNDS' 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.
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 Southeast Asian Fund and 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 provides discretionary investment
advisory services to institutional clients. 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 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 provides
discretionary investment advisory services to institutional clients. 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 Southeast Asian Fund and 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.
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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 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 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 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.
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HOW TO BUY, SELL AND EXCHANGE SHARES
HOW TO BUY SHARES
You can open a Fund account with as little as $2,500 for regular accounts,
$1,000 for traditional and Roth IRAs, SEP-IRAs and the Systematic Investment
Plan, or $500 for Education IRAs. 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 Chase
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
Chase Vista Funds. Third party checks, credit cards and cash will not be
accepted. The Funds reserve the right to reject any purchase order or cease
offering shares for purchase at any time. When purchases are made by check,
redemptions will not be allowed until 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 Chase 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 Chase
Vista Service Center. Call the Chase 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 Chase Vista Service Center receives your
order in proper form. In most cases, in order to receive that day's public
offering price, the Chase 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.
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
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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.
<TABLE>
<CAPTION>
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
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under 100,000 ....................... 5.75 6.10 5.00
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>
Prior to May 1, 1998, for purchases of Class A shares of under $100,000 (based
on offering price), the sales charge as a percentage of the offering price and
net amount invested are 4.75% and 4.99%, respectively, and the dealer
reallowance as a percentage of the offering price is 4.00%. 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.
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GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult
your investment representative or the Chase 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. For purchases of the Funds' Class A shares made from January 1, 1998
through April 30, 1998, no initial sales charge will be assessed if you are
opening or adding to a Vista prototype IRA by transferring or rolling over
$5,000 or more of assets from a qualified plan, consisting of redemption
proceeds from non-Chase Vista mutual funds on which you paid a front-end or
deferred sales load. In connection with such purchases of Class A shares, the
Funds' distributor will pay broker-dealers a 1% commission. If you open or add
to a Vista prototype IRA, from January 1, 1998 through April 30, 1998, by
investing $5,000 or more, the annual IRA maintenance fee payable to the IRA
sponsor will be waived for the life of the account. In addition, sales charges
are waived if you are using redemption proceeds received within the prior
ninety days from non-Chase 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 Chase Vista and non-Chase Vista mutual funds. With
Board of Trustee approval, the money that is invested in Chase 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 Chase Vista fund shares), financial institution trust
departments investing an aggregate of $1 million or more in the Chase Vista
Funds and clients of certain administrators of tax-qualified plans when
proceeds from repayments of loans to participants are invested (or reinvested)
in the Chase Vista Funds.
For purchases of the Fund's Class A shares made from January 1, 1998 through
December 31, 1998, no initial sales charge will be assessed if you are
investing the proceeds of an IRA or other qualified plan for which The Chase
Manhattan Bank or its designee serves as trustee or custodian.
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<PAGE>
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 Chase Vista 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 s erves 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 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 Chase
Vista Service Center.
Shareholders of record of any Chase 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
Chase 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
Chase Vista Funds with balances held in Chase
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<PAGE>
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 Chase Vista Funds.
Shareholders of other Chase 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
Chase 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 Chase
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. 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 Chase
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 Chase 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. There is a $10.00 charge for each wire
transaction. Unless an investor indicates
24
<PAGE>
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 Chase 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 Chase Vista Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Chase 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 Chase 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 Chase 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
Chase Vista funds at net asset value beginning 15 days after purchase. Not all
Chase Vista funds offer all classes of shares. The prospectus of the other
Chase Vista fund into which shares are being exchanged should be read carefully
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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
Chase Vista money market funds other than the Class B shares of the Prime Money
Market Fund will be treated as a redemption--and therefore subject to the
conditions of the CDSC--and a subsequent purchase. Class B shares of any Chase
Vista non-money market fund may be exchanged into the Class B shares of the
Prime Money Market Fund in order to continue the aging of the initial purchase
of such shares.
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 Chase 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 Chase Vista Service Center for prospectuses of other
Chase Vista funds. Shares of certain Chase 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 Chase 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
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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 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 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 Chase 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 Chase Vista fund without a sales
charge. If the Chase Vista Service Center does not receive your election, the
distribution will be reinvested in the particular Fund. Similarly, if a Fund or
the Chase 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
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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. All Fund distributions of net investment income
(which term includes net short-term capital gain) will be taxable as ordinary
income. Any distributions of net capital gain which are designated as "capital
gain dividends" will be taxable as long-term capital gain at the currently
applicable 28% or 20% rate, 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 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
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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 Chase Vista 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 Chase Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
targets for one or more Chase 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.
VFD may from time to time, pursuant to objective criteria established by it,
pay additional compensation to qualifying authorized broker-dealers for certain
services or activities which are primarily intended to result in the sale of
shares of a Fund. In some instances, such compensation may be offered only to
certain broker-dealers who employ registered representatives who have sold or
may sell significant amounts of shares of a Fund and/or other Chase Vista Funds
during a specified period of time. Such compensation does not represent an
additional expense to a Fund or its shareholders, since it will be paid by VFD
out of compensation retained by it from a Fund or other sources available to
it.
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 one or more of the following: assisting with purchase and redemption
transactions, maintaining shareholder accounts and records, furnishing customer
statements, transmitting shareholder reports and communications to customers
and other similar shareholder liaison services. For performing these services,
each shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of Class B shares of each Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their customers,
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
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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.
Chase and its affiliates and the Chase Vista Funds, affiliates, agents, and
subagents may exchange among themselves and others certain information about
shareholders and their accounts, including information used to offer investment
products and insurance products to them, unless otherwise contractually
prohibited.
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
One Chase Manhattan Plaza, 3rd Floor, New York, New York 10081.
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 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
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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 and may determine not to offer certain classes of
shares. The categories of investors that are eligible to purchase shares and
minimum investment requirements may differ for each class of each Fund's
shares. In addition, other classes of Fund shares may be subject to differences
in sales charge arrangements, ongoing distribution and service fee levels, and
levels of certain other expenses, which would affect the relative performance
of the different classes. Investors may call 1-800-34-VISTA to obtain
additional information about other classes of shares of the Funds that are
offered. Any person entitled to receive compensation for selling or servicing
shares of a Fund may receive different levels of compensation with respect to
one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of 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
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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 CHASE VISTA PRIVILEGES
The following services are available to you as a Chase Vista mutual fund
shareholder.
[bullet] SYSTEMATIC INVESTMENT PLAN--Invest as much as you wish ($100 or more)
in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Chase
Vista account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] FREE EXCHANGE PRIVILEGE--Exchange money between Chase Vista funds in
the same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. Investors
may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] REINSTATEMENT PRIVILEGE--Class A shareholders have a one time
privilege of reinstating their investment in their Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not in
excess of the redemption).
Class B shareholders of a Fund who have redeemed their shares and paid
a CDSC with such redemption may purchase Class A shares of that Fund
with no initial sales charge (in an amount not in excess of their
redemption proceeds) if the purchase occurs within 90 days of the
redemption of the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Chase Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
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Chase Vista Mutual Funds & Retirement Products
CHASE VISTA INTERNATIONAL EQUITY FUNDS
Latin American Equity Fund
Southeast Asian Fund
Japan Fund
European Fund
International Equity Fund
CHASE VISTA U.S. EQUITY FUNDS
Small Cap Opportunities Fund
Small Cap Equity Fund (closed to new investors)
The Growth Fund of Washington
Capital Growth Fund
Growth and Income Fund
Large Cap Equity Fund
Balanced Fund
Equity Income Fund
CHASE VISTA FIXED INCOME FUNDS
Bond Fund
U.S. Government Securities Fund
U.S. Treasury Income Fund
Short-Term Bond Fund
CHASE VISTA TAX-FREE FUNDS(1)
New York Tax Free Income Fund
California Intermediate Tax Free Fund
Tax Free Income Fund
CHASE 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
CHASE 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
CHASE VISTA RETIREMENT PRODUCTS
Vista Capital Advantage Variable Annuity(4)
Vista 401(k) Advantage
For complete information on the Chase 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
Chase Vista 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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CHASE 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
[LOGO OF CHASE VISTA FUNDS]
P.O. Box 419392
Kansas City, MO 64141-6392
VEJA-1-298X
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
February 27, 1998
AMERICAN VALUE FUND
BALANCED FUND
BOND FUND
CAPITAL GROWTH FUND
EQUITY INCOME FUND
GROWTH AND INCOME FUND
LARGE CAP EQUITY FUND
SHORT TERM BOND FUND
SMALL CAP EQUITY FUND
SMALL CAP OPPORTUNITIES FUND
U.S. GOVERNMENT SECURITIES FUND
U.S. TREASURY INCOME FUND
One Chase Manhattan Plaza, Third Floor, New York, New York 10081
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 U.S. Government Securities Fund, U.S. Treasury Income Fund, Bond Fund and
Short-Term Bond Fund (collectively, the "Income Funds"), and American Value
Fund, Balanced Fund, Equity Income Fund, Growth and Income Fund, Capital Growth
Fund, Large Cap Equity Fund, Small Cap Equity Fund and Small Cap Opportunities
Fund (collectively, the "Equity Funds"). Any references to a "Prospectus" in
this Statement of Additional Information is a reference to one or more of the
foregoing Prospectuses, as the context requires. Copies of each Prospectus may
be obtained by an investor without charge by contacting Vista Fund
Distributors, Inc. ("VFD"), the Funds' distributor (the "Distributor"), at the
above-listed address.
This Statement of Additional Information is NOT a prospectus and is authorized
for distribution to prospective investors only if preceded or accompanied by an
effective prospectus.
For more information about your account, simply call or write the Vista Service
Center at:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
MFG-SAI
<PAGE>
Table of Contents Page
- --------------------------------------------------------------------------------
The Funds ................................................................. 3
Investment Policies and Restrictions ...................................... 3
Performance Information ................................................... 21
Determination of Net Asset Value .......................................... 30
Purchases, Redemptions and Exchanges ...................................... 30
Tax Matters ............................................................... 33
Management of the Trust and the Funds or Portfolios ....................... 37
Independent Accountants ................................................... 51
Certain Regulatory Matters ................................................ 51
General Information ....................................................... 52
Appendix A--Description of Certain Obligations Issued or Guaranteed by
U.S. Government Agencies or Instrumentalities ............................ A-1
Appendix B--Description of Ratings ........................................ B-1
2
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THE FUNDS
Mutual Fund Group (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 11, 1987. The Trust presently consists of
18 separate series (the "Funds"). Certain of the Funds are diversified and
other Funds are non-diversified, as such term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). The shares of the Funds are
collectively referred to in this Statement of Additional Information as the
"Shares."
The Growth and Income Fund and Capital Growth Fund converted to a master
fund/feeder fund structure in December 1993. Under this structure, each of
these Funds seeks to achieve its investment objective by investing all of its
investable assets in an open-end management investment company which has the
same investment objective as that Fund. The Growth and Income Fund invests in
the Growth and Income Portfolio and the Capital Growth Fund invests in the
Capital Growth Portfolio (collectively the "Portfolios"). Each of the
Portfolios is a New York trust with its principal office in New York. Certain
qualified investors, in addition to a Fund, may invest in a Portfolio. For
purposes of this Statement of Additional Information, any information or
references to either or both of the Portfolios refer to the operations and
activities after implementation of the master fund/feeder fund structure.
On May 3, 1996, The Hanover American Value Fund merged into American Value
Fund, The Hanover Large Cap Equity Fund merged into the Institutional Shares of
Large Cap Equity Fund, The Hanover Short-Term Bond Fund merged into the Class A
shares of Short-Term Bond Fund, Investor Shares of The Hanover Small Cap Equity
Fund merged into the Class A shares of Small Cap Equity Fund, CBC Benefit
Shares of The Hanover Small Cap Equity Fund merged into the Institutional
Shares of Small Cap Equity Fund and The Hanover U.S. Government Securities Fund
merged into the Institutional Shares of U.S. Government Securities Fund. The
foregoing mergers are referred to herein as the "Hanover Reorganization."
Effective as of May 6, 1996, U.S. Government Income Fund changed its name
to U.S. Treasury Income Fund and Equity Fund changed its name to Large Cap
Equity Fund.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. In the case of the Portfolios,
separate Boards of Trustees, the same members as the Board of Trustees of the
Trust, provide broad supervision. The Chase Manhattan Bank ("Chase") is the
investment adviser for the Funds (other than the Growth and Income Fund and
Capital Growth Fund, which do not have their own advisers) and the two
Portfolios. Chase also serves as the Trust's administrator (the
"Administrator") and supervises the overall administration of the Trust,
including the Funds, and is the administrator of the Portfolios. A majority of
the Trustees of the Trust are not affiliated with the investment adviser or
sub-advisers. Similarly, a majority of the Trustees of the Portfolios are not
affiliated with the investment adviser or sub-advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies of each Fund
and Portfolio. The following information supplements and should be read in
conjunction with the related sections of each Prospectus. For descriptions of
the securities ratings of Moody's Investors Service, Inc. ("Moody's"), Standard
& Poor's Corporation ("S&P") and Fitch Investors Service, Inc. ("Fitch"), see
Appendix B.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including: U.S. Treasury bills (maturities of
one year or less), U.S. Treasury notes (maturities of one to ten years) and
U.S. Treasury bonds (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
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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.
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
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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.
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
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.
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
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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 100% 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 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
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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-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.
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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 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
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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 100% 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.
Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Funds and Portfolios may
employ derivative and related instruments as tools in the management of
portfolio assets. Put briefly, a "derivative" instrument may be considered a
security or other instrument which derives its value from the value or
performance of other instruments or assets, interest or currency exchange
rates, or indexes. For instance, derivatives include futures, options, forward
contracts, structured notes and various over-the-counter instruments.
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Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways:
first, to reduce risk by hedging (offsetting) an investment position; second,
to substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives; 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
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
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a loss. In transactions involving currencies, the value of the currency
underlying an instrument may fluctuate due to many factors, including economic
conditions, interest rates, governmental policies and market forces.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by a
Fund or Portfolio.
Options on Securities, Securities Indexes and Debt Instruments. A Fund or
Portfolio may PURCHASE, SELL or EXERCISE call and put options on (i)
securities, (ii) securities indexes, and (iii) debt instruments.
Although in most cases these options will be exchange-traded, the Funds
and Portfolios may also purchase, sell or exercise over-the-counter options.
Over-the-counter options differ from exchange-traded options in that they are
two-party contracts with price and other terms negotiated between buyer and
seller. As such, over-the-counter options generally have much less market
liquidity and carry the risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities the Fund intends to purchase pending its
ability to invest in such securities in an orderly manner. A Fund or Portfolio
may also use combinations of options to minimize costs, gain exposure to
markets or take advantage of price disparities or market movements. For
example, a Fund or Portfolio may sell put or call options it has previously
purchased or purchase put or call options it has previously sold. These
transactions may result in a net gain or loss depending on whether the amount
realized on the sale is more or less than the premium and other transaction
costs paid on the put or call option which is sold. A Fund or Portfolio may
write a call or put option in order to earn the related premium from such
transactions. Prior to exercise or expiration, an option may be closed out by
an offsetting purchase or sale of a similar option. The Funds will not write
uncovered options.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
Fund or Portfolio writing a covered call (i.e., where the underlying securities
are held by the Fund or Portfolio) has, in return for the premium on the
option, given up the opportunity to profit from a price increase in the
underlying securities above the exercise price, but has retained the risk of
loss should the price of the underlying securities decline. The writer of an
option has no control over the time when it may be required to fulfill its
obligation as a writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver the underlying
securities at the exercise price.
If a put or call option purchased by a Fund or Portfolio is not sold when
it has remaining value, and if the market price of the underlying security, in
the case of a put, remains equal to or greater than the exercise price or, in
the case of a call, remains less than or equal to the exercise price, such Fund
or Portfolio will lose its entire investment in the option. Also, where a put
or call option on a particular security is purchased to hedge against price
movements in a related security, the price of the put or call option may move
more or less than the price of the related security. There can be no assurance
that a liquid market will exist when a Fund or Portfolio seeks to close out an
option position. Furthermore, if trading restrictions or suspensions are
imposed on the options markets, a Fund or Portfolio may be unable to close out
a position.
Futures Contracts and Options on Futures Contracts. A Fund or Portfolio
may purchase or sell (i) interest-rate futures contracts, (ii) futures
contracts on specified instruments or indices, and (iii) options on these
futures contracts ("futures options").
The futures contracts and futures options may be based on various
instruments or indices in which the Funds and Portfolios may invest such as
foreign currencies, certificates of deposit, Eurodollar time deposits,
securities indices, economic indices (such as the Consumer Price Indices
compiled by the U.S. Department of Labor).
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Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For example,
a Fund or Portfolio may sell a futures contract--or buy a futures option--to
protect against a decline in value, or reduce the duration, of portfolio
holdings. Likewise, these instruments may be used where a Fund or Portfolio
intends to acquire an instrument or enter into a position. For example, a Fund
or Portfolio may purchase a futures contract--or buy a futures option--to gain
immediate exposure in a market or otherwise offset increases in the purchase
price of securities or currencies to be acquired in the future. Futures options
may also be written to earn the related premiums.
When writing or purchasing options, the Funds and Portfolios may
simultaneously enter into other transactions involving futures contracts or
futures options in order to minimize costs, gain exposure to markets, or take
advantage of price disparities or market movements. Such strategies may entail
additional risks in certain instances. The Funds and Portfolios may engage in
cross-hedging by purchasing or selling futures or options on a security or
currency different from the security or currency position being hedged to take
advantage of relationships between the two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Funds and
Portfolios will only enter into futures contracts or options on futures
contracts which are traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system.
Forward Contracts. A Fund and Portfolio may use foreign currency and
interest-rate forward contracts for various purposes as described below.
Foreign currency exchange rates may fluctuate significantly over short
periods of time. They generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or perceived changes in interest rates and other
complex factors, as seen from an international perspective. A Fund or Portfolio
that may invest in securities denominated in foreign currencies may, in
addition to buying and selling foreign currency futures contracts and options
on foreign currencies and foreign currency futures, enter into forward foreign
currency exchange contracts to reduce the risks or otherwise take a position in
anticipation of changes in foreign exchange rates. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be a fixed number of days from the date of
the contract agreed upon by the parties, at a price set at the time of the
contract. By entering into a forward foreign currency contract, a Fund or
Portfolio "locks in" the exchange rate between the currency it will deliver and
the currency it will receive for the duration of the contract. As a result, a
Fund or Portfolio reduces its exposure to changes in the value of the currency
it will deliver and increases its exposure to changes in the value of the
currency it will exchange into. The effect on the value of a Fund or Portfolio
is similar to selling securities denominated in one currency and purchasing
securities denominated in another. Transactions that use two foreign currencies
are sometimes referred to as "cross-hedges."
A Fund or Portfolio may enter into these contracts for the purpose of
hedging against foreign exchange risk arising from the Fund's or Portfolio'
investments or anticipated investments in securities denominated in foreign
currencies. A Fund or Portfolio may also enter into these contracts for
purposes of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one country to another.
A Fund or Portfolio may also use forward contracts to hedge against
changes in interest rates, increase exposure to a market or otherwise take
advantage of such changes. An interest-rate forward contract involves the
obligation to purchase or sell a specific debt instrument at a fixed price at a
future date.
Interest Rate and Currency Transactions. A Fund or Portfolio may employ
currency and interest rate management techniques, including transactions in
options (including yield curve options), futures, options on futures, forward
foreign currency exchange contracts, currency options and futures and currency
and interest rate swaps. The aggregate amount of a Fund's or Portfolio's net
currency exposure will not exceed the total net asset value of its portfolio.
However, to the extent that a Fund or Portfolio is fully invested while also
maintaining currency positions, it may be exposed to greater combined risk.
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The Funds and Portfolios will only enter into interest rate and currency
swaps on a net basis, i.e., the two payment streams are netted out, with the
Fund or Portfolio receiving or paying, as the case may be, only the net amount
of the two payments. Interest rate and currency swaps do not involve the
delivery of securities, the underlying currency, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate and
currency swaps is limited to the net amount of interest or currency payments
that a Fund or Portfolio is contractually obligated to make. If the other party
to an interest rate or currency swap defaults, a Fund's or Portfolio's risk of
loss consists of the net amount of interest or currency payments that the Fund
or Portfolio is contractually entitled to receive. Since interest rate and
currency swaps are individually negotiated, the Funds and Portfolios expect to
achieve an acceptable degree of correlation between their portfolio investments
and their interest rate or currency swap positions.
A Fund or Portfolio may hold foreign currency received in connection with
investments in foreign securities when it would be beneficial to convert such
currency into U.S. dollars at a later date, based on anticipated changes in the
relevant exchange rate.
A Fund or Portfolio may purchase or sell without limitation as to a
percentage of its assets forward foreign currency exchange contracts when the
advisers anticipate that the foreign currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not held by such Fund or Portfolio. In
addition, a Fund or Portfolio may enter into forward foreign currency exchange
contracts in order to protect against adverse changes in future foreign
currency exchange rates. A Fund or Portfolio may engage in cross-hedging by
using forward contracts in one currency to hedge against fluctuations in the
value of securities denominated in a different currency if its advisers believe
that there is a pattern of correlation between the two currencies. Forward
contracts may reduce the potential gain from a positive change in the
relationship between the U.S. Dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for a Fund
or Portfolio than if it had not entered into such contracts. The use of foreign
currency forward contracts will not eliminate fluctuations in the underlying
U.S. dollar equivalent value of the prices of or rates of return on a Fund's or
Portfolio's foreign currency denominated portfolio securities and the use of
such techniques will subject the Fund or Portfolio to certain risks.
The matching of the increase in value of a forward contract and the
decline in the U.S. dollar equivalent value of the foreign currency denominated
asset that is the subject of the hedge generally will not be precise. In
addition, a Fund or Portfolio may not always be able to enter into foreign
currency forward contracts at attractive prices, and this will limit a Fund's
or Portfolio's ability to use such contract to hedge or cross-hedge its assets.
Also, with regard to a Fund's or Portfolio's use of cross-hedges, there can be
no assurance that historical correlations between the movement of certain
foreign currencies relative to the U.S. dollar will continue. Thus, at any time
poor correlation may exist between movements in the exchange rates of the
foreign currencies underlying a Fund's or Portfolio's cross-hedges and the
movements in the exchange rates of the foreign currencies in which the Fund's
or Portfolio's assets that are the subject of such cross-hedges are
denominated.
A Fund or Portfolio may enter into interest rate and currency swaps to the
maximum allowed limits under applicable law. A Fund or Portfolio will typically
use interest rate swaps to shorten the effective duration of its portfolio.
Interest rate swaps involve the exchange by a Fund or Portfolio with another
party of their respective commitments to pay or receive interest, such as an
exchange of fixed rate payments for floating rate payments. Currency swaps
involve the exchange of their respective rights to make or receive payments in
specified currencies.
Mortgage-Related Securities. A Fund or Portfolio may purchase
mortgage-backed securities-- i.e., securities representing an ownership interest
in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Mortgage loans included in
the pool--but not the security itself--may be insured by the Government National
Mortgage Association or the Federal Housing Administration or guaranteed by the
Federal National Mortgage Association, the Federal Home Loan
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Mortgage Corporation or the Veterans Administration. Mortgage-backed securities
provide investors with payments consisting of both interest and principal as
the mortgages in the underlying mortgage pools are paid off. Although providing
the potential for enhanced returns, mortgage-backed securities can also be
volatile and result in unanticipated losses.
The average life of a mortgage-backed security is likely to be
substantially less than the original maturity of the mortgage pools underlying
the securities. Prepayments of principal by mortgagors and mortgage
foreclosures will usually result in the return of the greater part of the
principal invested far in advance of the maturity of the mortgages in the pool.
The actual rate of return of a mortgage-backed security may be adversely
affected by the prepayment of mortgages included in the mortgage pool
underlying the security.
A Fund or Portfolio may also invest in securities representing interests
in collateralized mortgage obligations ("CMOs"), real estate mortgage
investment conduits ("REMICs") and in pools of certain other asset-backed bonds
and mortgage pass-through securities. Like a bond, interest and prepaid
principal are paid, in most cases, monthly. CMOs may be collateralized by whole
mortgage loans but are more typically collateralized by portfolios of mortgage
pass-through securities guaranteed by the U.S. Government, or U.S.
Government-related entities, and their income streams.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. Monthly payment of principal received from the
pool of underlying mortgages, including prepayments, are allocated to different
classes in accordance with the terms of the instruments, and changes in
prepayment rates or assumptions may significantly affect the expected average
life and value of a particular class.
REMICs include governmental and/or private entities that issue a fixed
pool of mortgages secured by an interest in real property. REMICs are similar
to CMOs in that they issue multiple classes of securities. REMICs issued by
private entities are not U.S. Government securities and are not directly
guaranteed by any government agency. They are secured by the underlying
collateral of the private issuer.
The advisers expect that governmental, government-related or private
entities may create mortgage loan pools and other mortgage-related securities
offering mortgage pass-through and mortgage-collateralized investments in
addition to those described above. The mortgages underlying these securities
may include alternative mortgage instruments, that is, mortgage instruments
whose principal or interest payments may vary or whose terms to maturity may
differ from customary long-term fixed-rate mortgages. A Fund or Portfolio may
also invest in debentures and other securities of real estate investment
trusts. As new types of mortgage-related securities are developed and offered
to investors, the Funds and Portfolios may consider making investments in such
new types of mortgage-related securities.
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 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
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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
Receivables(SM)" or "CARS(SM)" ("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 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
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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.
Investment Restrictions
The Funds and Portfolios have adopted the following investment
restrictions which may not be changed without approval by a "majority of the
outstanding shares" of a Fund or Portfolio which, as used in this Statement of
Additional Information, means the vote of the lesser of (i) 67% or more of the
shares of a Fund or total beneficial interests of a Portfolio present at a
meeting, if the holders of more than 50% of the outstanding shares of a Fund or
total beneficial interests of a Portfolio are present or represented by proxy,
or (ii) more than 50% of the outstanding shares of a Fund or total beneficial
interests of a Portfolio.
Whenever the Trust is requested to vote on a fundamental policy of a
Portfolio, the Trust will hold a meeting of shareholders of the Fund that
invests in such Portfolio and will cast its votes as instructed by the
shareholders of such Fund.
With respect to the Growth and Income Fund and the Capital Growth Fund, it
is a fundamental policy of each Fund that when the Fund holds no portfolio
securities except interests in the Portfolio in which it invests, the Fund's
investment objective and policies shall be identical to the Portfolio's
investment objective and policies, except for the following: a Fund (1) may
invest more than 10% of its net assets in the securities of a registered
investment company, (2) may hold more than 10% of the voting securities of a
registered investment company, and (3) will concentrate its investments in the
investment company. It is a fundamental
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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.
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.
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For purposes of investment restriction (3) above, industrial development
bonds, where the payment of principal and interest is the ultimate
responsibility of companies within the same industry, are grouped together as
an "industry." Investment restriction (3) above, however, is not applicable to
investments by a Fund or Portfolio in municipal obligations where the issuer is
regarded as a state, city, municipality or other public authority since such
entities are not members of an "industry." Supranational organizations are
collectively considered to be members of a single "industry" for purposes of
restriction (3) above.
In addition, each Fund and Portfolio is subject to the following
nonfundamental restrictions which may be changed without shareholder approval:
(1) Each Fund other than the Capital Growth Fund, Growth and Income
Fund, Small Cap Opportunities Fund, Small Cap Equity Fund and U.S.
Treasury Income Fund may not, with respect to 75% of its assets, hold more
than 10% of the outstanding voting securities of any issuer or invest more
than 5% of its assets in the securities of any one issuer (other than
obligations of the U.S. Government, its agencies and instrumentalities);
Each Portfolio and each of the Capital Growth Fund, Growth and Income
Fund, Small Cap Opportunities Fund, Small Cap Equity Fund and U.S.
Treasury Income Fund may not, with respect to 50% of its assets, hold more
than 10% of the outstanding voting securities of any issuer.
(2) Each Fund and Portfolio may not make short sales of securities,
other than short sales "against the box," or purchase securities on margin
except for short-term credits necessary for clearance of portfolio
transactions, provided that this restriction will not be applied to limit
the use of options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and
investment program of a Fund or Portfolio. No Fund or Portfolio has the
current intention of making short sales against the box.
(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 in
the securities of other investment companies to the extent permitted by
applicable Federal securities law; provided, however, that a Mauritius
holding company (a "Mauritius Portfolio Company") will not be considered an
investment company for this purpose.
For purposes of the Funds' and Portfolios' investment restrictions,
the issuer of a tax-exempt security is deemed to be the entity (public or
private) ultimately responsible for the payment of the principal of and
interest on the security.
In order to permit the sale of its shares in certain states, a Fund
or Portfolio may make commitments more restrictive than the investment
policies and limitations described above and in its Prospectus. Should a
Fund or Portfolio determine that any such commitment is no longer in its
best interests, it will revoke the commitment by terminating sales of its
shares in the state involved. In order to comply with certain 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; provided, that this restriction shall not
apply to investments in a Mauritius Portfolio Company, (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
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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; provided, however, that
this restriction shall not apply to investments in a Mauritius Portfolio
Company.
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, 1995, 1996 and 1997, the annual
rates of portfolio turnover for the following Funds were as follows:
1995 1996 1997
-------- --------- --------
American Value Fund -- -- 37%
Balanced Fund 68% 149% 136%
U.S. Treasury Income Fund 164% 103% 179%
Growth and Income Fund * * *
Capital Growth Fund * * *
Equity Income Fund 91% 114% 75%
Bond Fund 30% 122% 823%
Short-Term Bond Fund 62% 158% 471%
Large Cap Equity Fund 45% 89% 72%
Small Cap Equity Fund -- 78% 55%
U.S. Government Securities Fund -- -- 569%
- ----------
* The Growth and Income Fund and the Capital Growth Fund invest all of their
investable assets in their respective Portfolio and do not invest directly
in a portfolio of assets, and therefore do not have reportable portfolio
turnover rates. The portfolio turnover rates for the Growth and Income
Portfolio and the Capital Growth Portfolio for the fiscal year ended October
31, 1995 were 71% and 86%, respectively, for the fiscal year ended October
31, 1996, the portfolio turnover rates were 62% and 90%, respectively and
for the fiscal year ended October 31, 1997, the portfolio turnover rates
were 65% and 67%, respectively.
For the period December 20, 1994 through October 31, 1995, the Small Cap
Equity Fund had a portfolio turnover rate of 75%.
19
<PAGE>
For the period February 3, 1995 through November 30, 1995, the American
Value Fund had a portfolio turnover rate of 11%.
For the fiscal period December 1, 1995 through October 31, 1996, the
annual portfolio turnover rates for the American Value Fund and the U.S.
Government Securities Fund were 25% and 101%, respectively.
For the period May 13, 1997 through October 31, 1997, the Small Cap
Opportunities Fund had a portfolio turnover rate of 7%.
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 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
20
<PAGE>
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, 1995, 1996 and 1997, the Capital
Growth Portfolio paid aggregate brokerage commissions of $2,311,291, $1,618,640
and $2,240,823, respectively. For the fiscal years ended October 31, 1995, 1996
and 1997, the Growth and Income Portfolio paid aggregate brokerage commissions
of $2,352,596, $1,304,272 and $3,456,823, respectively.
For the fiscal years ended October 31, 1995, 1996 and 1997, the Large Cap
Equity Fund paid aggregate brokerage commissions of $23,824, $201,001 and
$171,628, respectively.
For the fiscal years ended October 31, 1995, 1996 and 1997, the Balanced
Fund paid aggregate brokerage commissions of $27,315, $62,036 and $62,342,
respectively.
For the period December 20, 1994 through October 31, 1995 and the fiscal
years ended October 31, 1996 and 1997, the Small Cap Equity Fund paid aggregate
brokerage commissions of $56,980, $327,762 and $716,769, respectively.
For the period from December 1, 1995 through October 31, 1996 and the
fiscal year ended October 31, 1997, the Vista American Value Fund paid
aggregate brokerage commissions of $9,937 and $15,863, respectively.
For the fiscal years ended October 31, 1995, 1996 and 1997, the Equity
Income Fund paid aggregate brokerage commissions of $23,824, $44,136 and
$75,090, respectively.
For the period from May 13, 1997 through October 31, 1997, the Small Cap
Opportunities Fund paid aggregate brokerage commissions of $49,826.
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
21
<PAGE>
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
and Class C 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 or classes. Performance information
is restated to reflect the current maximum front-end sales charge (in the case
of Class A Shares) or the maximum applicable contingent deferred sales charge
(in the case of Class B and Class C 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.
In connection with the Hanover Reorganization, the U.S. Government
Securities and American Value Fund were established to receive the assets of
The Hanover U.S. Government Securities Fund and The
22
<PAGE>
Hanover American Value Fund, respectively. Performance results presented for
each class of the U.S. Government Securities Fund and 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 Organization.
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 Chase 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, 1997 and for the period from
commencement of business operations of each such Fund to October 31, 1997 were
as follows:
<TABLE>
<CAPTION>
Since Date of Date of
One Five Ten Fund Fund Class
Fund Year Years Years Inception Inception Introduction
- --------------------------- ----------- ---------- ---------- ----------- ----------- --------------------
<S> <C> <C> <C> <C> <C> <C>
American Value Fund** 33.66% -- -- 19.34% 2/3/95 2/3/95
U.S. Treasury Income Fund 9/8/87
A Shares 7.35% 6.20% 8.21% 8.80% 9/8/87
B Shares+ 6.56% 5.63% 7.92% 8.51% 11/4/93
Balanced Fund 11/4/92
A Shares+ 21.48% -- -- 14.86% 11/4/92
B Shares 20.55% -- -- 14.17% 11/4/93
Equity Income Fund 7/15/93
A Shares 33.66% -- -- 19.34% 7/15/93
B Shares+ 32.87% -- -- 19.06% 5/7/96
C Shares++ 32.87% -- -- 19.06% 1/2/98****
Growth and Income Fund 9/23/87
A Shares 28.84% 16.96% 23.48% 23.21% 9/23/87
B Shares+ 28.20% 16.49% 23.23% 22.96% 11/4/93
C Shares++ 28.20% 16.49% 23.23% 22.96% 1/2/98****
Institutional Shares+++ 29.37% 17.14% 23.57% 23.30% 1/25/96
Capital Growth Fund 9/23/87
A Shares 26.47% 18.29% 21.27% 21.02% 9/23/87
B Shares+ 25.85% 17.84% 21.03% 20.79% 11/4/93
C Shares++ 25.85% 17.84% 21.03% 20.79% 1/2/98****
Institutional Shares+++ 26.98% 18.46% 21.35% 21.10% 1/25/96
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Since Date of Date of
One Five Fund Fund Class
Fund Year Years Inception Inception Introduction
- ------------------------------ ---------- ---------- ----------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Bond Fund 11/30/90
Class A Shares*** 9.45% 7.38% 8.50% 5/6/96
Class B Shares*** 8.32% 7.19% 8.36% 5/6/96
Institutional Shares 9.93% 7.56% 8.63% 11/30/90
Short-Term Bond Fund 11/30/90
Class A Shares*** 5.91% 5.22% 5.82% 5/6/96
Institutional Shares 6.23% 5.35% 5.91% 11/30/90
Large Cap Equity Fund 11/30/90
Class A Shares*** 30.69% 18.07% 17.93% 5/8/96
Class B Shares*** 30.15% 17.93% 17.83% 5/7/96
Institutional Shares 31.50% 18.32% 18.11% 11/30/90
Small Cap Equity Fund 12/20/94
A Shares 24.61% -- 36.33% 12/20/94
B Shares+ 23.84% -- 35.44% 3/28/95
Institutional Shares+++ 25.15% -- 36.61% 5/7/96
U.S. Government
Securities Fund** 2/19/93
A Shares*** 7.61% -- 5.73% 5/6/96
Institutional Shares 7.78% -- 5.82% 2/19/93
Small Cap Opportunities Fund 5/19/97
A Shares -- -- 38.50% 5/19/97
B Shares -- -- 38.10% 5/19/97
C Shares++ -- -- 38.10% 1/2/98****
</TABLE>
- ----------
* The ongoing fees and expenses borne by Class B and Class C Shares are
greater than those borne by Class A Shares; the ongoing fees and
expenses borne by a Fund's Class A, Class B and Class C 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 or classes 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 each class of these Funds includes the performance of
their respective predecessor funds for periods prior to the consummation
of the Hanover Reorganization. Performance information 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
24
<PAGE>
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.
**** Anticipated date of introduction.
+ 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 this class
was introduced is based on the performance of predecessor classes and,
except for the Small Cap Opportunities Fund, for the period prior to
November 5, 1993 (May 7, 1996 in the case of the Equity Income Fund)
does not reflect the distribution fees and 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.
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
and Class C shares for each period length, the average annual total rate of
return figures for the same periods would be as follows:
<TABLE>
<CAPTION>
Since
One Five Ten Fund
Fund Year Years Years Inception
- -------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury Income Fund
A Shares 2.52% 5.23% 7.71% 8.31%
B Shares 1.56% 3.70% 7.92% 8.51%
Balanced Fund
A Shares 16.02% -- -- 13.81%
B Shares 15.55% -- -- 11.17%
Equity Income Fund
A Shares 27.65% -- -- 18.07%
B Shares 27.87% -- -- 15.66%
Growth and Income Fund
A Shares 22.72% 15.83% 22.88% 22.62%
B Shares 23.20% 14.49% 23.23% 22.96%
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Since
One Five Ten Fund
Fund Year Years Years Inception
- ---------------------------------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Capital Growth Fund
A Shares 20.46% 17.15% 20.68% 20.44%
B Shares 20.85% 15.84% 21.03% 20.79%
Bond Fund
Class A Shares 4.53% 6.40% -- 7.78%
Class B Shares 3.32% 5.19% -- 8.36%
Short-Term Bond Fund
Class A Shares 4.32% 4.90% -- 5.59%
Large Cap Equity Fund
Class A Shares 24.48% 16.93% -- 17.10%
Class B Shares 25.15% 15.93% -- 17.83%
Small Cap Equity Fund
A Shares 18.69% -- -- 34.03%
B Shares 18.84% -- -- 32.44%
U.S. Government Securities Fund**
A Shares 2.77% -- -- 4.69%
Small Cap Opportunities Fund
A Shares -- -- -- 31.92%
B Shares -- -- -- 33.10%
</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 hypothetical yield, carried at least to the nearest hundredth of one
percent, based on a thirty calendar day period and shall be calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the maximum offering price per share on the last day
of the period, (b) subtracting 1 from the result, and (c) multiplying the
result by 2.
The yields of the shares of the Funds for the thirty-day period ended
October 31, 1997 were as follows:
<TABLE>
<CAPTION>
Class A Class B Institutional
--------- --------- --------------
<S> <C> <C> <C>
American Value Fund 1.17% -- --
Balanced Fund 2.55% 1.93% --
Bond Fund 5.52% 5.04% 6.19%
Capital Growth Fund 0% 0% 0.13%
Equity Income Fund 1.51% 1.05% --
Growth and Income Fund 0.21% 0% 0.63%
Large Cap Equity Fund 0.75% 0.29% 1.28%
Short-Term Bond Fund 5.52% -- 5.94%
Small Cap Equity Fund 0% 0% 0%
Small Cap Opportunities Fund 0% 0% --
U.S. Government Securities Fund 5.16% -- 5.61%
U.S. Treasury Income Fund 5.12% 4.63% --
</TABLE>
26
<PAGE>
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, 1997. 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>
American Value Fund $15,690 $ 991 $ 472 $17,154 2/3/95
U.S. Treasury Income Fund 9/8/87
A Shares $11,260 $ 1,184 $11,104 $23,548
B Shares $11,250 $ 1,251 $10,415 $22,916
Balanced Fund 11/4/92
A Shares $15,410 $ 1,975 $ 2,601 $19,987
B Shares $15,210 $ 1,934 $ 2,251 $19,395
Equity Income Fund 7/15/92
Class A $14,627 $ 5,329 $ 1,427 $21,383
Class B $14,521 $ 5,283 $ 1,362 $21,166
Class C $14,521 $ 5,283 $ 1,362 $21,166
Growth and Income Fund 9/23/87
Class A $46,210 $26,680 $ 9,672 $82,562
Class B $45,960 $26,180 $ 8,750 $80,890
Class C $45,960 $26,180 $ 8,750 $80,890
Institutional Shares $46,350 $26,873 $ 9,963 $83,186
Capital Growth Fund 9/23/87
Class A $46,760 $17,674 $ 4,453 $68,887
Class B $46,110 $17,418 $ 4,037 $67,565
Class C $46,110 $17,418 $ 4,037 $67,565
Institutional Shares $46,900 $17,786 $ 4,681 $69,367
Bond Fund 11/1/90
Class A Shares $10,820 $ 398 $ 6,371 $17,589
Class B Shares $10,820 $ 394 $ 6,220 $17,434
Institutional Shares $10,820 $ 401 $ 6,512 $17,732
Short-Term Bond Fund 11/30/90
Class A Shares $10,100 $ 18 $ 4,676 $14,794
Institutional Shares $10,110 $ 18 $ 4,754 $14,883
Large Cap Equity Fund 11/30/90
Class A Shares $14,830 $14,317 $ 2,173 $31,320
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of Fund
$10,000 Gains Reinvested Inception
Investment Distributions Dividends Total Value Date
------------ --------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Class B Shares $14,760 $14,245 $2,134 $31,139
Institutional Shares $14,850 $14,461 $2,342 $31,652
Small Cap Equity Fund 12/20/94
A Shares $23,570 $ 619 $ 136 $24,325
B Shares $23,190 $ 612 $ 73 $23,875
Institutional Shares $23,710 $ 622 $ 137 $24,468
U.S. Government Securities Fund 2/19/93
A Shares $10,060 $ 129 $2,801 $12,990
Institutional Shares $10,040 $ 130 $2,873 $13,043
Small Cap Opportunities Fund 5/19/97
Class A $13,850 $ 0 $ 0 $13,850
Class B $13,810 $ 0 $ 0 $13,810
Class C $13,810 $ 0 $ 0 $13,810
</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 or classes, 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.
28
<PAGE>
Non-Standardized Performance Results*
(includes sales charges)
With the current maximum sales charge for Class A shares (1.50% for the
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 and 4.75% for
Growth and Income Fund, Capital Growth Fund, Large Cap Equity Fund, Small Cap
Equity Fund and Small Cap Opportunities Fund) reflected, and the currently
applicable CDSC for Class B and Class C 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, 1997 Investment Distributions Dividends Total Value
- -------------------------------- ------------ --------------- ----------- ------------
<S> <C> <C> <C> <C>
U.S. Treasury Income Fund
A Shares $10,753 $ 1,131 $10,604 $22,488
B Shares $11,250 $ 1,251 $10,415 $22,916
Balanced Fund
A Shares $14,717 $ 1,887 $ 2,484 $19,087
B Shares $14,910 $ 1,934 $ 2,251 $19,095
Equity Income Fund
Class A $13,369 $ 5,089 $ 1,363 $20,421
Class B $14,221 $ 5,283 $ 1,362 $20,866
Class C $14,521 $ 5,283 $ 1,362 $21,166
Growth and Income Fund
Class A $44,015 $25,413 $ 9,213 $78,641
Class B $45,960 $26,180 $ 8,750 $80,890
Class C $45,960 $26,180 $ 8,750 $80,890
Institutional Shares
Capital Growth Fund
Class A $44,539 $16,835 $ 4,241 $65,615
Class B $46,110 $17,418 $ 4,037 $67,565
Class C $46,110 $17,418 $ 4,037 $67,565
Institutional Shares
Bond Fund
Class A Shares $10,333 $ 380 $ 6,085 $16,797
Class B Shares $10,820 $ 394 $ 6,220 $17,434
Short-Term Bond Fund
Class A Shares $ 9,949 $ 18 $ 4,606 $14,572
Large Cap Equity Fund
Class A Shares $14,126 $13,637 $ 2,070 $29,883
Class B Shares $14,760 $14,245 $ 2,134 $31,139
Small Cap Equity Fund
A Shares $22,450 $ 590 $ 129 $23,169
B Shares+ $22,890 $ 612 $ 73 $23,575
U.S. Government Securities Fund
A Shares $ 9,607 $ 123 $ 2,675 $12,406
Institutional Shares
Small Cap Opportunities Fund
Class A $13,192 $ 0 $ 0 $13,192
Class B $13,310 $ 0 $ 0 $13,310
Class C $13,710 $ 0 $ 0 $13,310
</TABLE>
29
<PAGE>
- ----------
* 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 or classes, 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.
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, Martin Luther King Jr.'s Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Equity securities in a Fund's or Portfolio's portfolio are valued at the
last sale price on the exchange on which they are primarily traded or on the
NASDAQ National Market System, or at the last quoted bid price for securities
in which there were no sales during the day or for other unlisted
(over-the-counter) securities not reported on the NASDAQ National Market
System. Bonds and other fixed income securities (other than short-term
obligations, but including listed issues) in a Fund's or Portfolio's portfolio
are valued on the basis of valuations furnished by a pricing service, the use
of which has been approved by the Board of Trustees. In making such valuations,
the pricing service utilizes both dealer-supplied valuations and electronic
data processing techniques that take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. Short-term obligations which
mature in 60 days or less are valued at amortized cost, which constitutes fair
value as determined by the Board of Trustees. Futures and option contracts that
are traded on commodities or securities exchanges are normally valued at the
settlement price on the exchange on which they are traded. Portfolio securities
(other than short-term obligations) for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees.
Interest income on long-term obligations in a Fund's or Portfolio's
portfolio is determined on the basis of coupon interest accrued plus
amortization of discount (the difference between acquisition price and stated
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,
30
<PAGE>
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 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 Chase 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
31
<PAGE>
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 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 and Class C 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
con-
32
<PAGE>
nection 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 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 regard to the
deduction for dividends paid ) and net capital gain (i.e., the excess of net
long-term capital gain over net short-term capital loss) 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. 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
33
<PAGE>
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").
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.
Each Fund may engage in hedging or derivatives transactions involving
foreign currencies, forward contracts, options and futures contracts (including
options, futures and forward contracts on foreign currencies) and short sales.
See "Additional Policies Regarding Derivative and Related Transactions." Such
transactions will be subject to special provisions of the Code that, among
other things, may affect the character of gains and losses realized by the Fund
(that is, may affect whether gains or losses are ordinary or capital),
accelerate recognition of income of the Fund and defer recognition of certain
of the Fund's losses. These rules could therefore affect the character, amount
and timing of distributions to shareholders. In addition, these provisions (1)
will require a Fund to "mark-to-market" certain types of positions in its
portfolio (that is, treat them as if they were closed out) and (2) may cause a
Fund to recognize income without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the Distribution Requirement
and avoid the 4% excise tax (described below). Each Fund intends to monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it acquires any option,
futures contract, forward contract or hedged investment in order to mitigate
the effect of these rules.
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.
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 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 qualify for the 70% dividends-received deduction for
corporations only
34
<PAGE>
to the extent discussed below. Dividends paid on Class A, Class B and Class C
shares are calculated at the same time. In general, dividends on Class B and
Class C shares are expected to be lower than those on Class A shares due to the
higher distribution expenses borne by the Class B and Class C 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.
Under recently enacted legislation, the maximum rate of tax on long-term
capital gains of individuals will generally be reduced from 28% to 20% (10% for
gains otherwise taxed at 15%) for long-term capital gains realized after July
28, 1997 with respect to capital assets held for more than 18 months.
Additionally, beginning after December 31, 2000, the maximum tax rate for
capital assets with a holding period beginning after that date and held for
more than five years will be 18%. Under a literal reading of the legislation,
capital gain dividends paid by a regulated investment company would not appear
eligible for the reduced capital gain rates. However, the legislation
authorizes the Treasury Department to promulgate regulations that would apply
the new rates to capital gain dividends paid by a regulated investment company.
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) during the 90 day period
beginning on the date which is 45 days before the date on which such share
becomes ex-dividend with respect to such dividend (during the 180 day period
beginning 90 days before such date in the case of certain preferred stock)
under the Rules of the Code Section 246(c)(3) and (4); (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 if the corporate shareholder fails to satisfy the foregoing
requirements with respect to its shares of a Fund. In the case where a Fund
invests all of its assets in a Portfolio and the Fund satisfies the holding
period rules pursuant to Code Section 246(c) as to its interest in the
Portfolio, a corporate shareholder which satisfies the foregoing requirements
with respect to its shares of the Fund should receive the dividends-received
deduction.
For purposes of the Corporate AMT, the corporate dividends-received
deduction is not itself an item of tax preference that must be added back to
taxable income or is otherwise disallowed in determining a corporation's AMT.
However, corporate shareholders will generally be required to take the full
amount of any dividend received from a Fund into account (without a
dividends-received deduction) in determining its adjusted current earnings.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at
the source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be
invested in various countries is not known.
35
<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.
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, dividends paid to a foreign
shareholder from net investment income 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 and
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
36
<PAGE>
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 their
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
State and Local Tax Matters
Depending on the residence of the shareholder for tax purposes,
distributions may also be subject to state and local taxes or withholding
taxes. Most states provide that a regulated investment company may pass through
(without restriction) to its shareholders state and local income tax exemptions
available to direct owners of certain types of U.S. government securities (such
as U.S. Treasury obligations). Thus, for residents of these states,
distributions derived from a Fund's investment in certain types of U.S.
government securities should be free from state and local income taxes to the
extent that the interest income from such investments would have been exempt
from state and local income taxes if such securities had been held directly by
the respective shareholders themselves. Certain states, however, do not allow a
regulated investment company to pass through to its shareholders the state and
local income tax exemptions available to direct owners of certain types of U.S.
government securities unless the regulated investment company holds at least a
required amount of U.S. government securities. Accordingly, for residents of
these states, distributions derived from a Fund's investment in certain types
of U.S. government securities may not be entitled to the exemptions from state
and local income taxes that would be available if the shareholders had
purchased U.S. government securities directly. Shareholders' dividends
attributable to a Fund's income from repurchase agreements generally are
subject to state and local income taxes, although states and regulations vary
in their treatment of such income. The exemption from state and local income
taxes does not preclude states from asserting other taxes on the ownership of
U.S. government securities. To the extent that a Fund invests to a substantial
degree in U.S. government securities which are subject to favorable state and
local tax treatment, shareholders of such Fund will be notified as to the
extent to which distributions from the Fund are attributable to interest on
such securities. Rules of state and local taxation of ordinary income dividends
and capital gain dividends from regulated investment companies may differ from
the rules for U.S. federal income taxation in other respects. Shareholders are
urged to consult their tax advisers as to the consequences of these and other
state and local tax rules affecting investment in a Fund.
Effect of Future Legislation
The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in
effect on the date of this Statement of Additional 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.
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: 65. Address: 202 June Road, Stamford, CT 06903.
37
<PAGE>
*H. Richard Vartabedian--Trustee and President of the Trust. Investment
Management Consultant; 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.
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: 68. Address: 322 Main Street, Lakeville,
CT 06039.
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: 64. Address: 108 Valley
Road, Cos Cob, CT 06807.
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: 65. Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
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.
*Sarah E. Jones--Trustee. President and Chief Operating Officer of Chase
Mutual Funds Corp.; formerly Managing Director for the Global Asset Management
and Private Banking Division of The Chase Manhattan Bank. Age: 46. Address: One
Chase Manhattan Plaza, Third Floor, New York, NY 10081.
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: 70. Address:
624 East 45th Street, Savannah, GA 31405.
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: 70. Address: RR 1 Box 102, Weston, VT 05181.
*Leonard M. Spalding, Jr.--Trustee. Chief Executive Officer of Chase
Mutual Funds Corp.; formerly President and Chief Executive Officer of Vista
Capital Management and formerly Chief Investment Executive of The Chase
Manhattan Private Bank. Age: 62. Address: One Chase Manhattan Plaza, Third
Floor, New York, NY 10081.
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: 63. Address: 4 Barnfield Road, Pittsford, NY 14534.
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.
Martin R. Dean--Treasurer. Associate Director, Accounting Services, BISYS
Fund Services; formerly Senior Manager, KPMG Peat Marwick (1987-1994). Age: 34.
Address: 3435 Stelzer Road, Columbus, OH 43219.
38
<PAGE>
Richard Baxt--Secretary. Senior vice President, Client Services, BISYS
Fund Services; formerly General Manager of Investment and Insurance, First
Fidelity Bank, President of First Fidelity Brokers, and President of Citicorp
Investment Services. Age: 44. Address: 125 W. 55th Street, New York, NY 10019.
Vicky M. Hayes--Assistant Secretary. Vice President and Global Marketing
Manager, Vista Fund Distributors, Inc.; formerly Assistant Vice President,
Alliance Capital Management and held various positions with J. & W. Seligman &
Co. Age: 36. Address: One Chase Manhattan Plaza, 3rd Fl., New York, NY 10081.
Alaina Metz--Assistant Secretary. Chief Administrative Officer, BISYS Fund
Services; formerly Supervisor, Blue Sky Department, Alliance Capital Management
L.P. Age: 30. Address: 3435 Stelzer Road, Columbus, OH 43219.
Lee Schultheis--Assistant Treasurer and Assistant Secretary. President,
BISYS Fund Distributors; formerly Managing Director, Forum Financial Group.
Age: 41. Address: One Chase Manhattan Plaza, 3rd Fl., New York, New York 10081.
- ----------
* 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), Armstrong,
Eppley, MacCallan and Thode. 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,
1997.
The Board of Trustees of the Trust has established an Investment
Committee. The members of the Investment Committee are Messrs. Vartabedian
(President), Reid and Spalding. The function of the Investment Committee is to
review the investment management process of the Trust.
The Trustees and officers of the Trust appearing in the table above also
serve in the same capacities with respect to Mutual Fund Trust, Mutual Fund
Variable Annuity Trust, Mutual Fund Select Group, Mutual Fund Select Trust,
Capital Growth Portfolio, Growth and Income Portfolio and International Equity
Portfolio (these entities, together with the Trust, are referred to below as
the "Chase Vista Funds").
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisers is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the advisers. Each Trustee
receives a fee, allocated among all investment companies for which the Trustee
serves, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1997 for each Trustee of the Trust:
<TABLE>
<CAPTION>
American Capital Equity Growth and
Value Balanced Bond Growth Income Income
Fund Fund Fund Fund Fund Fund
---------- ------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee $ 50.62 $ 407.61 $ 117.00 $ 3,165.53 $ 153.79 $ 5,960.37
H. Richard Vartabedian, Trustee 41.43 335.03 96.52 2,635.42 121.78 4,933.97
William J. Armstrong, Trustee 26.30 213.68 61.73 1,679.21 77.82 3,144.65
John R.H. Blum, Trustee 29.41 236.31 68.42 1,860.74 85.63 3,485.89
Stuart W. Cragin, Jr., Trustee 27.63 223.36 64.34 1,756.93 81.20 3,289.30
Ronald R. Eppley, Jr., Trustee 27.63 223.36 64.34 1,756.93 81.20 3,289.30
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
American Capital Equity Growth and
Value Balanced Bond Growth Income Income
Fund Fund Fund Fund Fund Fund
---------- ----------- ---------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Harkins, Trustee 28.83 231.97 67.05 1,827.03 84.03 3,420.83
Sarah E. Jones, Trustee - - - - - -
W.D. MacCallan, Trustee 27.63 223.36 64.34 1,756.93 81.20 3,289.30
W. Perry Neff, Trustee 28.83 231.97 67.05 1,827.03 84.03 3,420.83
Leonard M. Spalding, Jr., Trustee - - - - - -
Richard E. Ten Haken, Trustee $ 27.63 $ 223.36 $ 64.34 $ 1,756.93 $ 81.20 $ 3,289.30
Irving L. Thode, Trustee 27.63 223.36 64.34 1,756.93 81.20 3,289.30
</TABLE>
<TABLE>
<CAPTION>
Large Cap Short-Term Small Cap Small Cap U.S. Treasury U.S. Gov't
Equity Bond Equity Opportunities Income Securities
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee $ 593.90 $ 251.04 $ 2,346.25 $ 44.99 $ 578.90 $ 348.37
H. Richard Vartabedian, Trustee 491.90 211.11 1,907.18 33.72 484.54 292.85
William J. Armstrong, Trustee 312.97 134.11 1,222.93 22.31 307.89 185.94
John R.H. Blum, Trustee 346.37 149.42 1,357.11 22.48 341.99 206.87
Stuart W. Cragin, Jr., Trustee 327.93 140.74 1,271.48 22.48 323.03 195.23
Ronald R. Eppley, Jr., Trustee 327.93 140.74 1,271.48 22.48 323.03 195.23
Joseph J. Harkins, Trustee 340.17 146.66 1,329.34 22.48 335.77 203.03
Sarah E. Jones, Trustee - - - - - -
W.D. MacCallan, Trustee 327.93 140.74 1,271.48 22.48 323.03 195.23
W. Perry Neff, Trustee 340.17 146.88 1,329.34 22.48 335.77 203.03
Leonard M. Spalding, Jr., Trustee - - - - - -
Richard E. Ten Haken, Trustee 327.93 140.74 1,271.48 22.48 323.03 195.23
Irving L. Thode, Trustee 327.93 140.74 1,271.48 22.48 323.03 195.23
</TABLE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Accrued from
by the Fund Complex(1) "Fund Complex"(2)
------------------------ ------------------
<S> <C> <C>
Fergus Reid, III, Trustee $56,368 $129,500
H. Richard Vartabedian, Trustee 47,622 102,750
William J. Armstrong, Trustee 38,372 67,000
John R.H. Blum, Trustee 41,363 73,000
Stuart W. Cragin, Jr., Trustee 34,965 68,500
Ronald R. Eppley, Jr., Trustee 53,267 68,500
Joseph J. Harkins, Trustee 52,508 71,500
Sarah E. Jones, Trustee -- --
W.D. MacCallan, Trustee 66,323 68,500
W. Perry Neff, Trustee 66,323 71,500
Leonard M. Spalding, Jr., Trustee -- --
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Accrued from
by the Fund Complex(1) "Fund Complex"(2)
------------------------ ------------------
<S> <C> <C>
Richard E. Ten Haken, Trustee 31,463 68,500
Irving L. Thode, Trustee 41,876 68,500
</TABLE>
- ----------
(1) Data reflects total benefits accrued by the Trust, Mutual Fund Select
Group, Capital Growth Portfolio, Growth and Income Portfolio and
International Equity Portfolio for the fiscal year ended October 31, 1997,
and by Mutual Fund Trust, Mutual Fund Select Trust and Mutual Fund
Variable Annuity Trust for the fiscal year ended August 31, 1997.
(2) Data reflects total compensation earned during the period January 1, 1997
to December 31, 1997 for service as a Trustee to the Trust, Mutual Fund
Trust, Mutual Fund Variable Annuity Trust, Mutual Fund Select Group,
Mutual Fund Select Trust, Capital Growth Portfolio, Growth and Income
Portfolio and International Equity Portfolio.
As of December 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, 1997, 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
$9,200, which amount was then apportioned among the Funds comprising the Trust.
Chase 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 Chase Vista Funds, the advisers, administrator or
distributor or any of their affiliates) may be entitled to certain benefits
upon retirement from the Board of Trustees. Pursuant to the Plan, the normal
retirement date is the date on which the eligible Trustee has attained age 65
and has completed at least five years of continuous service with one or more of
the investment companies advised by the adviser (collectively, the "Covered
Funds"). Each Eligible Trustee is entitled to receive from the Covered Funds an
annual benefit commencing on the first day of the calendar quarter coincident
with or following his date of retirement equal to the sum of (i) 8% of the
highest annual compensation received from the Covered Funds multiplied by the
number of such Trustee's years of service (not in excess of 10 years) completed
with respect to any of the Covered Funds and (ii) 4% of the highest annual
compensation received from the Covered Funds for each year of service in excess
of 10 years, provided that no Trustee's annual benefit will exceed the highest
annual compensation received by that Trustee from the Covered Funds. Such
benefit is payable to each eligible Trustee in monthly installments for the
life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of October 31, 1997, the estimated credited years
of service for Messrs. Reid, Vartabedian, Armstrong, Blum, Cragin, Eppley,
Harkins, MacCallan, Neff, Spalding, Ten Haken and Thode and for Ms. Jones are
12, 4, 9, 12, 4, 8, 6, 7, 7, 0, 12, 4 and 0, respectively.
<TABLE>
<CAPTION>
Highest Annual Compensation Paid by All Chase Vista Funds
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$60,000 $80,000 $100,000 $120,000 $140,000
Years of
Service Estimated Annual Benefits upon Retirement
- -------- --------------------------------------------------------------------
14 $57,600 $76,800 $ 96,000 $115,200 $134,400
12 52,800 70,400 88,000 105,600 123,200
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Years of Estimated Annual Benefits upon Retirement
Service ----------------------------------------------------
<S> <C> <C> <C> <C> <C>
10 48,000 64,000 80,000 96,000 112,000
8 38,400 51,200 64,000 76,800 89,600
6 28,800 38,400 48,000 57,600 67,200
4 19,200 25,600 32,000 38,400 44,800
</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 Chase 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. Eppley, Ten Haken, Thode and Vartabedian each executed a deferred
compensation agreement for the 1997 calendar year and as of October 31, 1997
they had contributed $55,334, $27,669, $49,803 and $83,000, 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 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.
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.
42
<PAGE>
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 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 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 advisory agreement with Van Deventer
& Hoch ("VDH"), dated as of May 6, 1997. 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 provides discretionary investment advisory services
43
<PAGE>
to institutional clients, 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 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, 1995, 1996 and 1997, 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:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
-------------------------------------------------------------------------------------------
1995 1996 1997
Fund paid/accrued waived paid/accrued waived paid/accrued waived
- --------------------------------- -------------- -------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
American Value Fund -- -- $ 57,746 $ (57,746) $ 75,380 $(66,383)
Balanced Fund $145,295 $(145,295) 253,986 (125,808) 419,971 (19,663)
Bond Fund 162,618 (162,618) 143,017 (143,017) 74,105 (74,105)
Capital Growth Fund * -- * -- * --
Equity Income Fund $ 44,277 $ (35,433) $ 54,769 $ (53,342) 142,666 (14,010)
Growth and Income Fund * -- * -- * --
Large Cap Equity Fund 250,452 (250,452) 337,772 (337,772) 476,896 (476,885)
Short-Term Bond Fund 85,353 (85,353) 105,509 (105,509) 120,146 (120,146)
Small Cap Equity Fund 130,401 (130,401) 1,069,668 (31,530) 3,122,539 --
U.S. Government Securities Fund -- -- 288,582 (17,569)# 195,014 --
U.S. Treasury Income Fund 319,705 (220,998) 331,915 (137,440) 329,197 (78,607)
</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. For the year ended October 31, 1997, Chase was paid or accrued
investment advisory fees of $9,877,868 and $4,971,835, respectively, with
respect to such Portfolios.
# Fees paid or accrued for the period from December 1, 1995 through October 31,
1996.
With respect to Small Cap Opportunities Fund, for the period from May 19,
1997 through October 31, 1997, Chase was paid or accrued the following
investment advisory fees and waived the amount in parentheses following such
fees: $123,519($110,695).
44
<PAGE>
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
of each Fund or by a Portfolio on 60 days' written notice when authorized
either by a majority vote of such Fund's or Portfolio shareholders or by vote
of a majority of the Board of Trustees, including a majority of the Trustees
who are not "interested persons" (as defined in the 1940 Act) of the Trust or
Portfolios, or by Chase on 60 days' written notice, and will automatically
terminate in the event of their "assignment" (as defined in the 1940 Act). The
Administration Agreements also provide that neither Chase or its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration of the Funds or Portfolios, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and
duties under the Administration Agreements.
In addition, the Administration Agreements provide that, in the event the
operating expenses of any Fund or Portfolio, including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for
any fiscal year exceed the most restrictive expense limitation applicable to
that Fund imposed by the securities laws or regulations thereunder of any state
in which the shares of such Fund are qualified for sale, as such limitations
may be raised or lowered from time to time, Chase shall reduce its
administration fee (which fee is described below) to the extent of its share of
such excess expenses. The amount of any such reduction to be borne by Chase
shall be deducted from the monthly administration fee otherwise payable to
Chase during such fiscal year, and if such amounts should exceed the monthly
fee, Chase shall pay to such Fund or Portfolio its share of such excess
expenses no later than the last day of the first month of the next succeeding
fiscal year.
In consideration of the services provided by Chase pursuant to the
Administration Agreements, Chase receives from each Fund a fee computed daily
and paid monthly at an annual rate equal to 0.10% of each of the Fund's average
daily net assets, on an annualized basis for the Fund's then-current fiscal
year, except that with respect to the Growth and Income Fund and Capital Growth
Fund, Chase receives from each of the Funds and the Portfolios a fee computed
daily and paid monthly at an annual rate equal to 0.05% of their respective
average daily net assets. Chase may voluntarily waive a portion of the fees
payable to it with respect to each Fund on a month-to-month basis.
For the fiscal years ended October 31, 1995, 1996 and 1997, Chase was paid
or accrued the following administration fees and voluntarily waived the amounts
in parentheses following such fees:
45
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
---------------------------------------------------------------------------------------
1995 1996 1997
Fund paid/accrued waived paid/accrued waived paid/accrued waived
- --------------------------- -------------- ------------- -------------- --------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
American Value Fund -- -- $ 7,293 $ (7,293)* $ 10,769 $ (4,671)
Balanced Fund $ 29,053 $ (29,053) 50,797 (14,689) 83,940 None
Bond Fund 54,206 (54,206) 47,715 (47,715) 24,703 (24,703)
Capital Growth Fund+ 435,695 (116,282) 526,852 None 619,816 None
Equity Income Fund 11,069 (8,855) 13,692 (13,293) 35,929 (1,560)
Growth and Income Fund+ 830,077 (252,586) 971,251 None 1,169,015 None
Large Cap Equity Fund 52,613 (62,613) 84,443 (84,443) 119,235 (119,235)
Short-Term Bond Fund 34,141 (34,141) 42,171 (42,171) 48,058 (48,058)
Small Cap Equity Fund 20,040 (20,040) 164,564 (6,152) 480,368 None
U.S. Government Securities
Fund -- -- 63,984 (26,354)* 65,005 None
U.S. Treasury Income Fund 106,559 (76,094) 110,678 (23,372) 109,732 None
</TABLE>
- ----------
+ On November 23, 1993, these Funds changed their structure to a Master/Feeder
Structure. The Portfolios' administrator is Chase. With respect to the Growth
and Income Portfolio and the Capital Growth Portfolio, for the fiscal year
ended October 31, 1995, Chase was paid or accrued administration fees of
$851,900 and $445,399, respectively. For the fiscal year ended October 31,
1996, Chase was paid or accrued administration fees of $1,012,648 and
$528,308, respectively. For the fiscal year ended October 31, 1997, Chase was
paid or accrued administration fees of $1,234,733 and $621,480, respectively.
* Fees paid or accrued for the period from December 1, 1995 through October 31,
1996.
With respect to the Small Cap Opportunities Fund, for the period May 19,
1997 through October 31, 1997, Chase was paid or accrued the following
administration fees and voluntarily waived the amount in parentheses following
such fees: $18,909($7,783).
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 and Class C 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 and Class C shares of up
to 4.00% and 1.00%, respectively, 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 0.75%
annualized of the average net asset value of the Class C shares, maintained in
a Fund by such broker-dealers' customers. Trail or maintenance commissions on
Class B and Class C shares will be paid to broker-dealers beginning the 13th
month following the purchase of such Class B or Class C shares. Since the
distribution fees are not directly tied to expenses, the amount of distribution
fees paid by a Fund during any year may
46
<PAGE>
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 and Class C 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
or Class C 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 or Class C 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 and Class C 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 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, 1997, the Distributor was paid or accrued the
following Distribution Fees and voluntarily waived the amounts of such fees:
<TABLE>
<CAPTION>
Fund Paid/Accrued Waived
- -------------------------- -------------- -------------
<S> <C> <C>
American Value Fund $ 26,921 $ (26,921)
U.S. Treasury Income Fund
A Shares 248,112 --
B Shares 78,656 --
Balanced Fund
A Shares 179,363 --
B Shares 91,463 --
Growth and Income Fund
A Shares 3,744,605 --
B Shares 3,277,746 --
Capital Growth Fund
A Shares 2,030,033 --
B Shares 2,885,630 --
Equity Income Fund
A Shares 72,607 --
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
Fund Paid/Accrued Waived
- ---------------------- -------------- ------------
<S> <C> <C>
B Shares 51,643 --
Bond Fund
Class A Shares 13,451 --
Class B Shares 8,367 --
Short-Term Bond Fund
Class A Shares 21,379 $ (8,902)
Large Cap Equity Fund
Class A Shares 37,298 --
Class B Shares 21,655 --
Small Cap Equity Fund
A Shares 408,427 --
B Shares 679,155 --
U.S. Government
Securities Fund
A Shares 7,685 $ (7,685)
</TABLE>
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
A Shares $ 53,096 $ 152,093 $ 42,923
Balanced Fund
A Shares 38,384 109,950 31,030
Capital Growth Fund
A Shares 434,427 1,244,410 351,196
Equity Income Fund
A Shares 15,538 44,508 12,561
Growth and Income Fund
A Shares 801,345 2,295,443 647,817
Bond Fund
Class A Shares 2,879 8,245 2,327
Short-Term Bond Fund
Class A Shares 2,670 7,648 2,159
Large Cap Equity Fund
Class A Shares 7,982 22,864 6,453
Small Cap Equity Fund
A Shares 87,403 250,366 70,658
</TABLE>
With respect to Small Cap Opportunities Fund, for the period May 13, 1997
through October 31, 1997, the Distributor was paid or accrued the following
fees and voluntarily waived the amount in parentheses following such fees:
$27,016 ($0) in the case of Class A shares and $60,398 ($0) in the case of
Class B shares.
With respect to the Class A shares of Small Cap Opportunities Fund, the
Distribution Fee was allocated as follows: $5,781 (Printing, Postage and
Handling); $16,561 (Sales Compensation); and $4,674 (Advertising and
Administrative Filings).
With respect to the Class B shares of the Funds, the Distribution Fee was
paid to FEP Capital L.P. for acting as finance agent.
48
<PAGE>
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, 1995, 1996 and
1997 the Distributor was paid or accrued the following sub-administration fees
under the Distribution Agreement, and voluntarily waived the amounts in
parentheses following such fees:
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
----------------------------------------------------------------------------------
1995 1996 1997
Fund payable waived payable waived payable waived
- --------------------- ---------- ------------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
American Value Fund -- -- $ 2,213 None* $ 5,384 None
Balanced Fund $14,527 $ (14,527) 25,399 $ (1,680) 41,997 None
Bond Fund 27,103 None 23,793 None 12,350 $(6,968)
Capital Growth Fund 435,488 None 526,852 None 619,911 None
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
---------------------------------------------------------------------------
1995 1996 1997
Fund payable waived payable waived payable waived
- --------------------------------- --------- ----------- --------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Equity Income Fund 5,535 None 6,846 None 17,963 None
Growth and Income Fund 830,077 None 971,201 None 1,169,014 None
Large Cap Equity Fund 31,306 None 42,221 None 59,617 None
Short-Term Bond Fund 17,071 None 21,085 None 24,030 (5,836)
Small Cap Equity Fund 10,030 (3,488) 82,282 None 240,179 None
U.S. Government Securities Fund -- -- 18,814 None* 32,502 (15,205)
U.S. Treasury Income Fund 53,284 None 53,339 None 54,866 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.
With respect to Small Cap Opportunities Fund, for the period May 13, 1997
through October 31, 1997, the Distributor was paid or accrued the following
sub-administration fees under the Distribution Agreement and voluntarily waived
the amount in parentheses following such fees: $9,451 ($3,891).
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, 1995, 1996 and 1997, 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,
-----------------------------------------------------------------------------------------
1995 1996 1997
Fund payable waived payable waived payable waived
- -------------------------- ----------- -------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
American Value Fund 26,921 $ (23,326)
U.S. Treasury Income Fund
A Shares $246,251 $ (197,001) $249,561 $ (222,710) $248,112 $ (238,380)
B Shares 20,753 -- 27,059 -- $ 26,319 --
Balanced Fund
A Shares 60,650 (48,520) 107,171 (98,086) $179,498 $ (179,498)
B Shares 11,983 -- 19,822 -- $ 30,353 --
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year-Ended October 31,
--------------------------------------------------------------------------------------------
1995 1996 1997
Fund payable waived payable waived payable waived
- ----------------------- ------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Growth and Income Fund
Class A $3,610,762 -- $3,989,725 -- $3,744,600 --
Class B $ 539,805 -- $ 820,579 -- $1,092,905 --
Institutional -- -- $ 46,244 -- $1,007,567 --
Capital Growth Fund
Class A $1,674,668 -- $1,836,642 -- $2,029,200 --
Class B $ 503,805 -- $ 746,722 -- $ 962,344 --
Institutional -- -- $ 50,897 -- $ 107,773 --
Equity Income Fund
Class A $ 27,673 $ (26,964) $ 33,998 $ (33,998) $ 67,368 (43,638)
Class B -- -- $ 240 -- $ 17,214 --
Bond Fund
Class A Shares -- -- $ 733 $ (733) $ 13,451 $ (13,451)
Class B Shares -- -- $ 516 -- $ 2,789 --
Institutional Shares -- -- $ 43,872 $ (12,631) $ 45,514 $ (45,313)
Short-Term Bond Fund
Class A Shares -- -- $ 12,200 $ (8,772) $ 22,218 $ (8,902)
Institutional Shares -- -- $ 46,925 $ (31,710) 97,928 $ (58,693)
Large Cap Equity Fund
Class A Shares -- -- $ 8,140 -- $ 37,298 --
Class B Shares -- -- 96 -- $ 7,218 --
Institutional Shares -- -- $ 131,164 $ (24,277) $ 253,543 --
Small Cap Equity Fund
A Shares -- -- $ 37,103 -- $ 66,388 --
B Shares -- -- $ 117,011 -- $ 226,585 --
Institutional Shares -- -- $ 38,235 $ (38,235) $ 566,164 $ (90,765)
U.S. Government
Securities Fund
A Shares -- -- $ 3,551 $ (3,551) $ 7,685 $ (7,685)
Institutional Shares -- -- $ 195,938 (935,060) $ 154,826 $ (21,879)
</TABLE>
With respect to Class A shares of Small Cap Opportunities Fund, for the
period May 13, 1997 through October 31, 1997, fees paid to the Shareholder
Servicing Agents (all of which are currently related parties) and the amount
voluntarily waived for such period (as indicated in parentheses) were as
follows: $27,016 ($26,585).
With respect to the Class B shares of Small Cap Opportunity Fund, for the
period May 19, 1997 through October 31, 1997, fees paid to the Shareholder
Servicing Agents (all of which are currently related parties) and the amount
voluntarily waived for such period (as indicated in parentheses) were as
follows: $20,133 ($--).
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.
51
<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended October 31, 1997, 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.
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 18
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
52
<PAGE>
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 Class A, Class B and Class C 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 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
53
<PAGE>
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.
Principal Holders
As of January 31, 1998, the following persons owned of record 5% or more
of the outstanding shares of the following classes of the following Funds:
AMERICAN VALUE FUND
Balsa and Co. 43.93%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Charles Schwab and Co. Inc. 27.25%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
BALANCED FUND A SHARES
Testa and Company 21.54 %
C/O Chase Manhattan Bank
Attn: Mutual Funds / T-C
PO Box 1412
Rochester, NY 14603-1412
Chase Manhattan Bank N/A 10.92%
Global Sec Services Omnibus
Attn: Alex Kwong
3 Chase Metro Tech Center
7th Floor
Brooklyn, NY 11245-0001
Hamill and Company 9.93%
FBO Texas New Mexico Power
Mail Sta 16-HCB-09
PO Box 2558
Houston, TX 77252
Trulin and Company 9.13%
C/O Chase Manhattan Bank
Attn: Mutual Funds FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
BALANCED FUND B SHARES
MLPF&S for the sole benefit of its customers 7.89%
Attn: Fund Administration
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
BOND FUND A SHARES
Liva & Company 59.37%
C/O Chase Manhattan Bank
Attn: Mut FDS / T-C
PO Box 1412
Rochester NY 14603-1412
Balsa and Company 9.10%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Balsa and Company 7.67%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
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<PAGE>
Testa and Company 5.73%
C/O Chase Manhattan Bank
Attn: Mutual Funds / T-C
PO Box 1412
Rochester, NY 14603-1412
BOND FUND B SHARES
Marilyn M. White TTEE 13.12%
U/A DTD Aug 10 90
Marilyn M. White Survivors Trust
6211 Prospect Road
San Jose, CA 95129-4740
Phyllis Ruedy TTEE 6.71%
U/A DTD Jun 30 84
Mathilde R. Ruedy Trust
195 Cypress PL
Sausalito, CA 94965-1566
BOND FUND INSTITUTIONAL SHARES
Trulin and Company 60.67%
C/O Chase Manhattan Bank
Attn: Mutual Funds FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
Texas Commerce Bank 10.45%
Avesta
MSC 101111F 342
Asset Trading Unit
PO Box 2558
Houston, TX 77252-2558
SEI Trust Co. 6.71%
First National Bank of Rochester
Attn: Mutual Fund Administrator
One Freedom Valley Drive
Oaks, PA 19456
Testa and Company 5.55%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
CAPITAL GROWTH FUND
C SHARES
NFSC FEBO # B7B--517526 55.78%
Miriam M. Levine
7414 Lake Meadow Way # 102
Boynton Beach, FL 33437-5909
Wheat First Securities 22.64%
A/C 4455-3932
Gary Jaffe & Beverly A. Jaffee
209 Clarion Avenue
Melrose Park, PA 19027-3424
Everen Clearing Corp Trust 6.91%
FBO Jennifer Goldman
A/C 3239-4526
SEP IRA
22 Belmont #3
Long Beach, CA 90803-1566
Everen Clearing Corp 5.01%
A/C 4072-6760
Chris Jennings and
111 East Kilborn Avenue
Milwaukee, WI 53202-6611
CAPITAL GROWTH FUND
INSTITUTIONAL SHARES
Bankers Trust of the Southwest 24.46%
As TTEE for the Mapco Inc & Subsid
Profit Sharing & Savings Plan
Attn: Deborah L. Turri
348 Grassmere Park Drive
Nashville, TN 37211-3658
Testa and Company 22.81%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
Chase Manhattan Bank TTEE 17.79%
FBO Berg Electronics Savings Plan
Attn: Kurt Smailus
770 Broadway
10th Floor
New York, NY 10003-9522
International Wire 15.69%
Retirement Savings Plan
770 Broadway
10th Floor
New York, NY 10003-9522
Bankers Trust Trustee 14.76%
Alliance Coal Corp PSSP
Attn: Elijah Outen
34 Exchange Place
Jersey City, NJ 07302-3901
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<PAGE>
EQUITY INCOME FUND
A SHARES
Liva & Company 11.83%
C/O Chase Manhattan Bank
Attn: Mut FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
EQUITY INCOME FUND
C SHARES
Noel Goulston 57.75%
Mary T. Goulston JTWROS
6241 Evian Place
Boynton Beach, FL 33437-4908
Thomas E. Gress 14.31%
Marie B. Gress JTWROS
803 Durham Court
Southlake, TX 76092-8621
Erwin H. Levine 14.26%
Raenne Levine JTWROS
875 Robert Treat Ext
Orange, CT 06477-1649
NFSC FBO # 0C8-364754 5.77%
NFSC /FMTC IRA Rollover
FB0 Linda S. Degreef
500 West Rand Road
Apt. B104
Arlington Heights, IL 60004-2347
Donaldson Lufkin Jenrette 5.77%
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-2052
GROWTH AND INCOME FUND
C SHARES
Wheat First Securities 47.38%
A/C 2811-9207
Dorothy Disner Trust
Dorothy Disner Judith Malamud
430 Sycamore Avenue
Merion Station, PA 19066-1541
NFSC FEB0 #B7B-534340 39.22%
Martin Epstein
2817 Avenue U
Brooklyn, NY 11229-5053
GROWTH AND INCOME FUND
INSTITUTIONAL SHARES
Testa and Company 100.00%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
INTERNATIONAL EQUITY FUND
A SHARES
Balsa and Company 12.14%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Balsa and Company 8.51%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
LARGE CAP EQUITY FUND
A SHARES
Balsa and Company 34.87%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Liva & Company 16.57%
C/O Chase Manhattan Bank
Attn: Mut FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
Corelink Financial Services 8.78%
PO Box 4054
Concord, CA 94524-4054
LARGE CAP EQUITY FUND
B SHARES
NFSC FEB0 # CL7-450251 5.33%
NFSC/FMTC IRS rollover
FBO Seymour Weiner
6545 164th Street
Fresh Meadows, NY 11365-2651
LARGE CAP EQUITY FUND
INSTITUTIONAL SHARES
Trulin and Company 24.35%
C/O Chase Manhattan Bank
Attn: Mutual Funds FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
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<PAGE>
Testa and Company 9.02%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
Chase Manhattan Bank 5.98%
FBA Jericho OCI Pension PL SLRD EE
Future Benefits--Custody
Attn: Terry Zimmardi
One Chase Manhattan Plaza
4th Floor
New York, NY 10081-1000
SHORT TERM BOND FUND
A SHARES
Mass Mutual Agents Health 27.68%
Benefit Trust
C/O Richard Peck D113
1295 State Street
Springfield, MA 01111-0002
Voluntary Hospitals of American Southwest 12.44%
14901 Quorum Drive
Suite 300
Dallas, TX 75240-6784
Balsa and Company 11.65%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
MLPF&S for the sole benefit of 10.04%
its customers
Attn: Fund Administration
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
SHORT TERM BOND FUND
INSTITUTIONAL SHARES
Trulin and Company 36.30%
C/O Chase Manhattan Bank
Attn: Mutual Funds FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
Liva & Company 26.52%
C/O Chase Manhattan Bank
Attn: Mut FDS/T-C
PO Box 1412
Rochester, NY 14603-1412
Testa and Company 17.96%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
Fleet Trust Co 8.69%
#20842002 DTD Jul 91
Custodian for Rochester area Foundation
Attn: 227-401512
PO Box 92800
Rochester, NY 14692-8900
Fleet National Bank 5.97%
FBO Rochester Area Foundation
Attn: #20845012
PO Box 92800
Rochester, NY 14692-8900
SMALL CAP EQUITY FUND
A SHARES
Charles Schwab & Co. 9.19%
Reinvest Account
Attn: Mutual Funds Dept
101 Montgomery Street
San Francisco, CA 94104-4122
SMALL CAP OPPORTUNITIES FUND
INSTITUTIONAL SHARES
Balsa and Company 9.39%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
SMALL CAP OPPORTUNITIES FUND
B SHARES
MLPF&S for the sole benefit of 5.90%
its customers
Attn: Fund Administration
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
SMALL CAP OPPORTUNITIES FUND
C SHARES
MLPF&S for the sole benefit of 56.64%
its customers
Attn: Fund Administration
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
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<PAGE>
Donaldson Lufkin Jenrette 13.43%
Securities Corporation Inc.
PO Box 2052
Jersey City, NJ 07303-2052
Randy Kevin Litzau 11.32%
Pamela Sue Litzau
3621 Tenbrook Road
Arnold, MO 63010-3182
Everen Clearing Corp. 8.49%
A/C 4072-6760
Chris Jennings &
111 East Kilbourn Avenue
Milwaukee, WI 53202-6611
David H. Henkelmann 5.49%
Yvonne Henkelmann
3636 Antonia Woods Drive
Imperial, MO 63052-2930
SMALL CAP EQUITY FUND
INSTITUTIONAL SHARES
Chase Manhattan Bank N/A 100.00%
Global Sec Services Omnibus
CMB Thrift Incentive Plan
Attn: Jeff Rosenberg
3 Chase Metro Tech Center
7th Floor
Brooklyn, NY 11245-0001
US GOVERNMENT SECURITIES FUND
A SHARES
Testa and Company 24.15%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
Chemical Bank 14.37%
Custodian for the IRA of Rose Faggan
7 East 14th Street
Apt
Chemical Bank 7.20%
Custodian for the IRA of
Edward McCabe
226 West Broadway
New York, NY 10013-2408
Chemical Bank 5.94%
Custodian for the IRA of Alice Ann Berryhill
PO Box 232
Mendham, NJ 10013-2408
US GOVERNMENT SECURITIES FUND
INSTITUTIONAL SHARES
Chase Manhattan Bank 7.58%
FBA Jericho Rockaway
Future Benefits--Custody
Attn: Terry Zimmardi
One Chase Manhattan Plaza
4th floor
New York, NY 10081-1000
Chase Manhattan Bank 6.26%
Future Benefits--Custody
Fred Schildwachter Pension Plan
Attn: Terry Zimmardi
One Chase Manhattan Plaza
4th floor
New York, NY 10081-1000
Chase Manhattan Bank 5.79%
FBA Jericho Alleghany Corp Retire
Future Benefits--Custody
Attn: Terry Zimmardi
One Chase Manhattan Plaza
4th floor
New York, NY 10081-1000
US TREASURY INCOME FUND
A SHARES
Testa and Company 18.28%
C/O Chase Manhattan Bank
Attn: Mutual Funds/ T-C
PO Box 1412
Rochester, NY 14603-1412
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<PAGE>
Financial Statements
The 1997 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, 1997 contained therein, are incorporated herein
by reference.
<TABLE>
<S> <C>
Specimen Computations of Offering Prices Per Share
Growth and Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 46.21
Maximum Offering Price per Share ($46.21 divided by .9525) (reduced on purchases of
$100,000 or more)................................................................... $ 48.51
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 45.96
C Shares:
Net Asset Value and Redemption Price Per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 45.96
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 46.35
Capital Growth Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 46.76
Maximum Offering Price per Share ($46.76 divided by .9525) (reduced on purchases of
$100,000 or more)................................................................... $ 49.09
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 46.11
C Shares:
Net Asset Value and Redemption Price Per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 46.11
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 46.90
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Equity Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 19.32
Maximum Offering Price per Share ($19.32 divided by .955) (reduced on purchases of
$100,000 or more)................................................................... $ 20.19
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 19.09
C Shares:
Net Asset Value and Redemption Price Per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 19.09
Small Cap Opportunities Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 13.85
Maximum Offering Price per Share ($13.85 divided by .9525) (reduced on purchases of
$100,000 or more)................................................................... $ 14.54
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 13.81
C Shares:
Net Asset Value and Redemption Price Per Share of Beneficial Interest at
October 31, 1997 ................................................................... $ 13.81
Balanced Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ................................................................... $ 15.41
Maximum Offering Price per Share ($15.41 divided by .955) (reduced on purchases of
$100,000 or more)................................................................... $ 16.14
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ................................................................... $ 15.21
Large Cap Equity Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1996 ................................................................... $ 14.83
Maximum Offering Price per Share ($14.83 divided by .9525) (reduced on purchases of
$100,000 or more)................................................................... $ 15.57
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 14.76
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 14.85
Bond Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at October 31, 1997 $ 10.82
Maximum Offering Price per Share ($10.82 divided by .955) (reduced on purchases of
$100,000 or more)........................................................................ $ 11.33
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 10.87
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 10.82
Short-Term Bond Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 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, 1997 ........................................................................ $ 10.11
Small Cap Equity Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 23.57
Maximum Offering Price per Share ($23.57 divided by .9525) (reduced on purchases of
$100,000 or more)........................................................................ $ 24.75
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 23.19
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 ........................................................................ $ 23.71
</TABLE>
61
<PAGE>
<TABLE>
<S> <C>
American Value Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 .................................................................. $ 15.69
U.S. Government Securities Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 .................................................................. $ 10.06
Maximum Offering Price per Share ($10.06 divided by .955) (reduced on purchases of
$100,000 or more).................................................................. $ 10.53
Institutional Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 .................................................................. $ 10.04
U.S. Treasury Income Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 .................................................................. $ 11.26
Maximum Offering Price per Share ($11.26 divided by .955) (reduced on purchases of
$100,000 or more).................................................................. $ 11.79
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at
October 31, 1997 .................................................................. $ 11.25
</TABLE>
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<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 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.
Not Prime--Issuers rated "Not Prime" do not fall within any of the Prime rating
categories.
B-2
<PAGE>
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.
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.
B-3
<PAGE>
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>
STATEMENT OF
ADDITIONAL INFORMATION
February 27, 1998
EUROPEAN FUND
INTERNATIONAL EQUITY FUND
JAPAN FUND
LATIN AMERICAN EQUITY FUND
SOUTHEAST ASIAN FUND
One Chase Manhattan Plaza, Third Floor, New York, New York 10081
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 International Equity Fund, European Fund, Japan Fund, Latin American Equity
Fund and 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 64141
INTL-SAI
<PAGE>
<TABLE>
<CAPTION>
Table of Contents Page
- --------------------------------------------------------------------------------------------
<S> <C>
The Funds .. 3
Investment Policies and Restrictions .. 3
Performance Information .. 26
Determination of Net Asset Value .. 31
Purchases, Redemptions and Exchanges .. 32
Tax Matters .. 35
Management of the Trust and Funds or Portfolios .. 40
Independent Accountants .. 52
Certain Regulatory Matters .. 52
General Information .. 53
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
18 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 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>
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.
Corporate Reorganizations. In general securities that are subject to 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
shareholder 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 apprise 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 or Portfolio and increase its brokerage and other transaction
expenses.
Loan Participations. The Latin American Equity Fund may invest in loan
participations. The Fund may have difficulty disposing of participations
because to do so it will have to assign such securities to a third party.
Because there is no established secondary market for such securities, the Fund
anticipates that such securities could be sold only to a limited number of
institutional investors. The lack of an established secondary market may have
an adverse impact on the value of such securities and the Fund's ability to
dispose of particular assignments or participations when necessary to meet the
Fund's liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the borrower. The lack of an
established secondary market for assignments and participations also may make
it more difficult for the Fund to assign a value to these securities for
purposes of valuing the Fund's portfolio and calculating its net asset value.
The Fund will not invest more than 15% of the value of its net assets in
participations and assignments that are illiquid, and in other illiquid
securities.
Brady Bonds. The Latin American Equity Fund may invest in Brady Bonds. The
Brady Plan framework, as it has developed, contemplates the exchange of
external commercial bank debt for newly issued bonds, called Brady Bonds. Brady
Bonds may also be issued in respect of new money being advanced by existing
lenders in connection with the debt restructuring. Brady Bonds issued to date
generally have maturities of between 15 and 30 years from the date of issuance.
The following Latin American countries have
5
<PAGE>
issued Brady Bonds: Argentina, Brazil, Costa Rica, the Dominican Republic,
Ecuador, Mexico, Uruguay and Venezuela. In addition, other countries may
announce plans to issue Brady Bonds. The Funds may invest in Brady Bonds of
countries that have been issued to date, as well as those which may be issued
in the future.
Agreements implemented under the Brady Plan to date are designed to
achieve debt and debt-service reduction through specific options negotiated by
a debtor nation with its creditors. As a result, the financial packages offered
by each country differ. The types of options have included the exchange of
outstanding commercial bank debt for bonds issued at 100% of face value of such
debt which carry a below-market stated rate of interest (generally known as par
bonds), bonds issued at a discount from the face value of such debt (generally
known as discount bonds), bonds bearing an interest rate which increases over
time and bonds issued in exchange for the advancement of new money by existing
lenders. Regardless of the stated face amount and stated interest rate of the
various types of Brady Bonds, the Fund will purchase Brady Bonds in secondary
markets, as described below, in which the price and yield to the investor
reflect market conditions at the time of purchase. Brady Bonds issued to date
have traded at a deep discount from their face value. Brady Bonds are often
viewed as having three or four valuation components: (i) the collateralized
repayment of principal at final maturity; (ii) the collateralized interest
payments; (iii) the uncollateralized interest payments; and (iv) any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constitute the "residual risk"). The Fund may purchase Brady Bonds with
no or limited collateralization and will be relying for payment of interest and
(except in the case of principal collateralized Brady Bonds) principal
primarily on the willingness and ability of the foreign government to make
payment in accordance with the terms of the Brady Bonds. Brady Bonds issued to
date are purchased and sold in secondary markets through U.S. securities
dealers and other financial institutions and are generally maintained through
European transnational securities depositories.
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 100% of the
amount of the loan, including the accrued interest thereon, and the Fund or
Portfolio or its custodian or sub-custodian will have possession of the
collateral, which the Board of Trustees believes will give it a valid,
perfected security interest in the collateral. Whether a repurchase agreement
is the purchase and sale of a security or a collateralized loan has not been
conclusively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. In the event of default by
the seller under a repurchase agreement construed to be a collateralized loan,
the underlying securities would not be owned by the Fund or Portfolio, but
would only constitute collateral for the seller's obligation to pay the
repurchase price. Therefore, a Fund or Portfolio may suffer time delays and
incur costs in connection with the disposition of the collateral. The Board of
Trustees believes that the collateral underlying repurchase agreements may be
more susceptible to claims of the seller's creditors than would be the case
with securities owned by a Fund or Portfolio. Repurchase agreements maturing in
more than seven days are treated as illiquid for purposes of the Funds' and
Portfolios' restrictions on purchases of illiquid securities. Repurchase
agreements are also subject to the risks described below with respect to
stand-by commitments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund or Portfolio with an agreement to repurchase
the securities at an agreed upon price and date. The repurchase price is
generally equal to the original sales price plus interest. Reverse repurchase
agree-
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ments are usually for seven days or less and cannot be repaid prior to their
expiration dates. Reverse repurchase agreements involve the risk that the
market value of the portfolio securities transferred may decline below the
price at which the Fund or Portfolio is obliged to purchase the securities.
Forward Commitments. In order to invest a Fund's assets immediately, while
awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will
normally be purchased. When a commitment to purchase a security on a forward
commitment basis is made, procedures are established consistent with the
General Statement of Policy of the Securities and Exchange Commission
concerning such purchases. Since that policy currently recommends that an
amount of the respective Fund's or Portfolio's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the commitment,
a separate account of such Fund or Portfolio consisting of cash, cash
equivalents or high quality debt securities equal to the amount of such Fund's
or Portfolio's commitments securities will be established at such Fund's or
Portfolio's custodian bank. For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market
value. If the market value of such securities declines, additional cash, cash
equivalents or highly liquid securities will be placed in the account daily so
that the value of the account will equal the amount of such commitments by the
respective Fund or Portfolio.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis may
involve more risk than other types of purchases. Securities purchased on a
forward commitment basis and the securities held in the respective Fund's or
Portfolio's portfolio are subject to changes in value based upon the public's
perception of the issuer and changes, real or anticipated, in the level of
interest rates. Purchasing securities on a forward commitment basis can involve
the risk that the yields available in the market when the delivery takes place
may actually be higher or lower than those obtained in the transaction itself.
On the settlement date of the forward commitment transaction, the respective
Fund or Portfolio will meet its obligations from then available cash flow, sale
of securities held in the separate account, sale of other securities or,
although it would not normally expect to do so, from sale of the forward
commitment securities themselves (which may have a value greater or lesser than
such Fund's or Portfolio's payment obligations). The sale of securities to meet
such obligations may result in the realization of capital gains or losses.
To the extent a Fund or Portfolio engages in forward commitment
transactions, it will do so for the purpose of acquiring securities consistent
with its investment objective and policies and not for the purpose of
investment leverage, and settlement of such transactions will be within 90 days
from the trade date.
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 100% 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. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for a Fund or Portfolio.
Each Fund and Portfolio may invest its assets in derivative and related
instruments subject only to the Fund's or Portfolio's investment objective and
policies and the requirement that the Fund or Portfolio maintain segregated
accounts consisting of liquid assets, such as cash, U.S. Government securities,
or other high-grade debt obligations (or, as permitted by applicable
regulation, enter into certain offsetting positions) to cover its obligations
under such instruments with respect to positions where there is no underlying
portfolio asset so as to avoid leveraging the Fund or Portfolio.
The value of some derivative or similar instruments in which the Funds and
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.
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
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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 (2) above, loan participations are
considered to be debt instruments. 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. No Fund or
Portfolio has the current intention of making short sales against the box.
(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 Port-
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folio'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 the Portfolio may invest
in the securities of other investment companies to the extent permitted by
applicable Federal securities law; provided, however, that a Mauritius
holding company (a "Mauritius Portfolio Company") will not be considered
an investment company for this purpose.
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.
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,
including predecessors, have a record of less than three years' continuous
operation; provided that this restriction shall not apply to investments
in a Mauritius Portfolio
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Company, (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; provided, however, that this restriction shall not apply
to investments in a Mauritius Portfolio Company.
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.
Special Considerations
Investing in Southeast Asia. Investing in securities of Southeast Asian
countries entails risks of nationalization, expropriation or confiscatory
taxation, political changes, government regulation, social instability or
diplomatic developments that could adversely impact a Southeast Asian country
or the Fund's investment in that country.
Southeast Asian Fund. Southeast Asian economies and financial markets have
experienced significant volatility in recent years. Many of the countries of
Southeast Asia are developing both economically and politically. Southeast
Asian countries may have relatively unstable governments, economies based on
only a few commodities or industries, and securities markets trading
infrequently or in low volumes. Securities of issuers located in some Southeast
Asian countries tend to have volatile prices and such may offer significant
potential for loss as well as gain. Further, certain companies in Southeast
Asia may not have firmly established product markets, may lack depth of
management, or may be more vulnerable to political or economic developments
such as nationalization of their own industries.
The Fund is susceptible to political and economic factors affecting
issuers in Southeast Asian countries. In addition, although this Fund will not
invest in Japanese companies, some Southeast Asian economies are directly
affected by Japanese capital investment in the region, by Japanese consumer
demands and by the state of the Japanese economy.
Southeast Asian securities are normally denominated and traded in the
currencies of Southeast Asian countries. Accordingly, changes in the values of
these currencies against the U.S. dollar will result in corresponding changes
in the U.S. dollar value of the Fund's assets denominated in those currencies.
Many of the currencies of Southeast Asian countries have recently experienced
extreme volatility relative to the United States dollar. In particular,
Thailand, Indonesia, the Philippines and South Korea have experienced currency
crises of a magnitude warranting assistance from the International Monetary
Fund. Devaluations in the currencies in which the Fund's portfolio securities
are denominated will adversely affect the Fund's net asset value.
Trading volumes on Southeast Asian stock exchanges, although increasing,
are substantially less than in the U.S. stock market, and the stock markets of
Southeast Asian countries have exhibited extreme volatility. Further,
securities of some Southeast Asian companies are less liquid and more volatile
than securities of comparable U.S. companies. Fixed commissions on Southeast
Asian stock exchanges are generally
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higher than negotiated commissions in U.S. exchanges, although the Fund
endeavors to achieve the most favorable net results on its portfolio
transaction and me be able to purchase securities in which the Fund may invest
on other stock exchanges where commissions are negotiable.
These considerations are more of a concern in developing countries. For
example, the possibility of revolution and the dependence on foreign economic
assistance may be greater in these countries than in developed countries. The
management of the Fund seeks to mitigate the risks associated with the
foregoing considerations through continuous professional management.
Investing in Japan. Japan currently has the second largest GDP in the
world. The Japanese economy has grown substantially in the last three decades.
During the last seven years, however, despite small rallies and market gains,
Japan has been plagued with economic sluggishness. Economic conditions have
weakened considerably in Japan since October 1992. The boom in Japan's equity
and property markets during the expansion of the late 1980s supported high
rates of investment and consumer spending on durable goods, but both of these
components of demand have retreated sharply following the decline in asset
prices. It is suffering through its worst recession in two decades. Profits
have fallen sharply, unemployment has reached a historical high of 3.2% and
consumer confidence is low. The banking sector continues to suffer from
non-performing loans. Nine discount rate cuts since its 6% peak in 1991, a
succession of fiscal stimulus packages, support plans for a debt-burdened
financial system and spending for reconstruction following the Kobe earthquake
should help contain the recessionary forces, but substantial uncertainties
remain. The general government position has deteriorated as a result of
weakening economic growth, as well as stimulative measures taken recently to
support economic activity and to restore financial stability.
In addition to a cyclical downturn, Japan is suffering through structural
adjustments. The Japanese have seen a deterioration of their competitiveness
due to high wages, a string currency and structural rigidities. Japan has also
become a mature industrial economy and, as a result, will see its long-term
growth rate slow down over the next ten years. Finally, Japan is reforming its
political process and deregulating its economy. This has brought about turmoil,
uncertainty and a crisis of confidence.
Japan is heavily dependent upon international trade and, accordingly, has
been and may continue to be adversely affected by trade barriers and other
protectionist or retaliatory measures of, as well as economic conditions in the
U.S. and other countries with which it trades. Industry, the most important
sector of the economy, is heavily dependent on imported raw materials and
fuels. Japan's major industries are in the engineering, electrical, textile,
chemical, automobile, fishing and telecommunication fields. Japan imports iron
ore, copper, and many forest products. Only 19% of its land is suitable for
cultivation. Japan's agricultural economy is subsidized and protected. It is
about 50% self-sufficient in food production. Even though Japan produces a
minute rice surplus, it is dependent upon large imports of wheat, sorghum and
soybeans for m other countries. Japan's high volume of exports such as
automobiles, machine tools and semiconductors have caused trade tensions with
other countries, particularly the United States. Some trading agreements
between the countries have reduced the friction caused by the current trade
imbalance.
The relaxing of official and de facto barriers to imports, or hardships
created by any pressure brought by trading partners, could adversely affect
Japan's economy. A substantial rise in world oil or commodity prices could also
have a negative effect on the country's economy. The strength of the yen itself
may prove an impediment to string continued exports, because of the high prices
its means for Japanese goods sold in other countries. Because the Japanese
economy is so dependent on exports, any fall-off in exports may be seen as a
sign of economic weakness, which may adversely affect the market and the Fund.
Japanese securities are normally denominated and traded in the Japanese
yen. Accordingly, changes in the value of the yen, or other the currencies of
other securities in which the Fund has invested, against the U.S. dollar will
result in corresponding changes in the U.S. dollar value of the Fund's assets
denominated
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in the yen, or such other currency. Historically, over a number of years, the
yen has generally appreciated in relation to the dollar. Nonetheless, the yen
has recently experienced increasing volatility relative to the U.S. dollar,
including periods of devaluation. The Japanese yen may also be adversely
affected by currency difficulties of other countries in the Southeast Asian
region. Devaluations in the yen, and any other currencies in which the Fund's
portfolio securities are denominated, will adversely affect the Fund's net
asset value.
In 1990, the Japanese stock market, as measured by the Tokyo Stock Price
Index (TOPIX), began a spectacular decline which continued through 1992. Since
then, the market has failed to rebound and continues to exhibit substantial
volatility. The decline in the Japanese securities markets has contributed to a
weakness in the Japanese economy, and the impact of a further decline cannot be
ascertained. The common stocks of many Japanese companies continue to trade at
high price-earnings ratios in comparison with those of the United States, even
after recent market decline. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States.
While the Japanese governmental system seems stable, the country's
politics have been unpredictable in recent years. The economic crisis of
1990-92 brought the downfall of the conservative Liberal Democratic Party,
which had ruled since 1955. Since then, the country has seen a series of
unstable multi-party coalitions and several prime ministers come and go,
because of politics as well as personal scandals. While there appears to be no
reason for anticipating civil unrest, its is impossible to know when the
political instability will end and what trade and fiscal policies might be
pursued by the government that emerges.
A seven-year decline of the Tokyo stock market has made the country's
banks and financial institutions vulnerable because of their large share
portfolios, and has left Japanese banks holding large numbers of non-performing
loans. In addition, the Japanese economy labors under a heavy government budget
deficit and historically low interest rates. As a result of these factors,
several high-profile bankruptcies of Japanese banks, brokerage firms and
insurance companies have occurred, and there can be no assurance that the
number of such bankruptcies will not increase. The economic difficulties of
other countries in the Southeast Asian region have adversely affected and may
continue to adversely affect the Japan's economy as many Japanese banks and
companies have exposure to the region and as the region's demand for Japanese
exports fluctuates.
Geologically, Japan is located in a volatile area of the world, and has
historically been vulnerable to earthquakes, volcanoes and other natural
disasters. As demonstrated by the Kobe earthquake in January of 1995, in which
5,000 people were killed and billions of dollars of damage was sustained, these
natural disasters can be significant enough to affect the country's economy.
As in the United States and other markets, small company stocks are
typically more volatile than large company stocks, reacting more extremely to
good or bad news. Since Japan's market is dominated by large stocks (the
average company size in Japan is the largest anywhere in the world), the
behavior of the Japanese market in general and of the small-stock segment in
particular may be affected by the trading activity on a relatively small number
of large-company stocks to a much greater degree than is typically seen in the
United States. Further, during periods of economic difficulty, small companies
can find it harder to compete or survive. Since August 1990, the shares of
smaller Japanese companies have underperformed those of larger companies, as
they tend to do in periods of declining industrial production. However, the
reverse trend tends to apply in periods of economic recovery.
Investing in Europe. Investment in the securities of European countries
may entail risks relating to restrictions on foreign investment and on
repatriation of capital invested as well as risks relating to economic
conditions of the region.
The securities markets of many European countries are relatively small,
with the majority of market capitalization and trading volume concentrated in a
limited number of companies representing a small number of industries.
Consequently, the Fund's investment portfolio may experience greater price
volatility and
20
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significantly lower liquidity than a portfolio invested in equity securities of
U.S. companies. These markets may be subject to a greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities, than is usual in the U.S. Securities
settlements may in some instances be subject to delays and related
administrative uncertainties.
Foreign investment in the securities markets of certain European countries
is restricted or controlled to varying degrees. These restrictions or controls
may at times limit or preclude investment in certain securities and may
increase the cost and expenses of the Fund, As illustrations, certain countries
require governmental approval prior to investments by foreign persons, or limit
the amount of investment by foreign persons in a particular company, or limit
the investment by foreign persons to only a specific class of securities of a
company which may have less advantageous terms than securities of the company
available for purchase by nationals. In addition, the repatriation of both
investment income and capital from certain of the countries is controlled under
regulations, including in some case the need for certain advance government
notification or authority. The Fund could be adversely affected by delays in,
or a refusal to grant, any required governmental approval for repatriation.
The economies of individual European countries may differ favorably or
unfavorably from the U.S economy in such respects as growth of gross domestic
product or gross national product, as the case may be, rate of inflation,
capital reinvestment, resource self-sufficiency and balance of payments
position. In addition, securities traded in certain emerging European
securities trading markets may be subject to risks due to inexperience of
financial intermediaries, the lack of modern technology, the lack of sufficient
capital base to expand business operations and the possibility of permanent or
temporary termination of trading and greater spreads between bid and asked
prices for securities in such markets.
Investing in Latin America. Investing in securities of Latin American
Issuers may entail risks relating to the potential political and economic
instability of certain Latin American countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of
expropriation, nationalization or other confiscation by any country, the Fund
could lose its entire investment in any such country.
The securities market of Latin American countries are substantially
smaller, less developed, less liquid and more volatile than the major
securities markets in the Unites States. Disclosure and regulatory standards
are in many respects less stringent that Unites States standards. Furthermore,
there is a lower level of monitoring and regulation of the markets and the
activities of investors in such markets.
The limited size of many Latin American securities markets and limited
trading volume in the securities of Latin American issuers compared to volume
of trading in the securities of Unites States issuer could cause prices to be
erratic for reasons apart from factors that affect the soundness and
competitiveness of the securities issuers. For example, limited market size may
cause prices to be unduly influenced by traders who control large positions.
Adverse publicity and investors' perceptions, whether or not based on in-depth
fundamental analysis, may decrease the value and liquidity of portfolio
securities.
The Latin American Equity Fund invests insecurities denominated in
currencies of Latin American countries. Accordingly, changes in the value of
these currencies against the Unites States dollar will result in corresponding
changes in the United States dollar value of the Fund's assets denominated in
those currencies.
Some Latin American countries also may have managed currencies, which are
not free floating against the Unites States dollar. In addition, there is risk
that certain Latin American countries may restrict the free conversion of their
currencies into other currencies. Further, certain Latin American currencies
may not be internationally traded. Certain of these currencies have experienced
a steep devaluation relative to the Unites States dollar. Amy devaluations in
the currencies win which the Fund's portfolio securities are denominated may
have a detrimental impact on the Fund's net asset value.
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The economies of individual Latin American countries may differ favorably
or unfavorably from the United States economy in such respects as the rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. Certain Latin
American countries have experienced high levels of inflation which can have a
debilitating effect on an economy. furthermore, certain Latin American
countries may impose withholding taxes on dividends payable to the Fund at a
higher rate than those imposed by other foreign countries. this may reduce the
Fund's investment income available for distribution to shareholders.
Certain Latin American countries such as Argentina, Brazil and Mexico are
among the world's largest debtors to commercial banks and foreign governments.
At times, certain Latin American counties have declared moratoria on the
payment of principal and/or interest on outstanding debt. Investment in
sovereign debt can involve a high degree of risk. The governmental entity that
controls the repayment of sovereign debt may not be able to willing to repay
the principal and/or interest when due in accordance with the terms of such
debt. A governmental entity's willingness or ability to repay principal and
interest due in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the governmental entity's
policy towards the International Monetary Fund, and the political constraints
to which a governmental entity may be subject. Governmental entities may also
be dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearage on their
debt. The commitment on the part of these governments, agencies and others to
make such disbursements may be conditioned on a governmental entities
implementation of economic reforms and/or economic performance and the timely
service of such debtor's obligations. Failure to implement such reforms,
achieve such levels of economic performance or repay principal or interest when
due may result in the cancellation of such third parties' commitments to lend
funds to the governmental entity, which may further impair such debtor's
ability or willingness to service its debts in a timely manner. Consequently,
governmental entities may default on their sovereign debt.
Holders of sovereign debt, including the Fund, may be requested to
participate in the rescheduling of such debt and the extend further loans to
governmental entities. There is no bankruptcy proceeding by which defaulted
sovereign debt say be collected in whole or in part.
Latin America is a region rich in natural resources such as oil, copper,
tin, silver, iron, ore, forestry, fishing, livestock and agriculture. The
region has a large population (roughly 300 million) representing a large
domestic market. economic growth was strong in the 1960's and 1970's, but
slowed dramatically (and in sumo was negative ) in the 1980's as a result of
poor economic policies, higher international interest rates, and the denial of
access to new foreign capital. Although a number of Latin American countries
are currently experiencing lower rates of inflation and higher rates of real
growth in gross domestic product than the have in the past, other Latin
American countries continue to experience significant problems, including high
inflation rates and high interest rates. Capital flight has proven a persistent
problem and external debt has been forcibly rescheduled. Someway turmoil, high
inflation, capital repatriation restrictions, and nationalization have further
exacerbated conditions.
Governments of many Latin American countries have exercised and continue
to exercise substantial influence over many aspects of the private sector
through the ownership or control of many companies, including some of the
largest in those countries. As a result, government actions in the future could
have a significant effect on economic conditions which may adversely affect
prices of certain portfolio securities. Expropriation, confiscatory taxation,
nationalization, political economic or social instability or other similar
developments, such as military coups, have occurred in the past and could also
adversely affect the Fund's investments in this region.
Changes in political leadership, the implementation of market oriented
economic policies, such as he North American Free Trade Agreement ("NFTA"),
privatization, trade reform and fiscal and monetary reform are among the recent
steps taken to renew economic growth. External debt is being restructured and
flight capital (domestic
22
<PAGE>
capital that has left home country) has begun to return. Inflation control
efforts have also been implemented. Latin American equity markets can be
extremely volatile and in the past have shown little correlation with the
United States market. Currencies are typically weak, but most are now
relatively free floating, and it is not unusual for the currencies to undergo
wide fluctuations in value over short periods of time.
Lower Rated Securities. Each Fund and the Portfolio is permitted to
invest in non-investment grade securities. Such securities, though higher
yielding, are characterized by risk. Each Fund may invest in debt securities
rated as low as B- by Moody's or S&P or, if not rated, are determined to be of
comparable quality. Lower rated securities are securities such as those rated
Ba by Moody's or BB by S&P or as low as the lowest rating assigned by Moody's
or S&P. They generally are not meant for short-term investing and may be
subject to certain risks with respect to the issuing entity and to greater
market fluctuation than certain lower yielding, higher rated fixed income
securities. Obligations rated Ba by Moody's are judged to have speculative
elements; their future cannot be considered well assured and often the
protection of interest and principal payments may be very moderate. Obligations
rated BB by S&P are regarded as having predominantly speculative
characteristics and, while such obligations have less near-term vulnerability
to default than other speculative grade debt, they face major ongoing
uncertainties or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. Obligations rated C by Moody's are regarded as having extremely poor
prospects of ever attaining any real investment standing. Obligations rated D
by S&P are in default and the payment of interest and/or repayments of
principal is in arrears. Such obligations, though high yielding, are
characterized by great risk. See "Appendix B" herein for a general description
of Moody's and S&P ratings.
The ratings of Moody's and S&P represent their opinions as to the quality
of the securities which they undertake to rate. The ratings are relative and
subjective and, although ratings may be useful in evaluating the safety of
interest and principal payments, they do not evaluate the market risk of these
securities. Therefore, although these ratings may be an initial criterion for
selection of portfolio investments, the Investment Adviser will also evaluate
these securities and the ability of the issuers of such securities to pay
interest and principal. Each Fund or the Portfolio will rely on the Investment
Adviser's judgment, analysis and experience in evaluating the creditworthiness
of an issuer. In this evaluation, the Investment Adviser will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. The Fund's or
Portfolio's ability to achieve its investment objective may be more dependent
on the Investment Adviser's credit analysis than might be the case for funds
that invested in higher rated securities. Once the rating of a security in the
Fund's or Portfolio's portfolio has been changed, the Investment Adviser will
consider all circumstances deemed relevant in determining whether the Fund or
Portfolio should continue to hold the security.
The market price and yield of debt securities rated Ba or lower by Moody's
and BB or lower by S&P are more volatile that those of higher rated securities.
Factors adversely affecting the market price and yield of these securities will
adversely affect a Fund's net asset value. It is likely that any economic
recession could disrupt severely the market for such securities and may have an
adverse impact on the value of such securities. In addition, it is likely that
any such economic downturn could adversely affect the ability of the issuers of
such securities to repay principal and pay interest thereon and increase the
incidence for default for such securities.
The market values of certain lower rated debt securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates, and tend to be more sensitive to economic conditions than are
higher rated securities. Companies that issue such securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore the risk associated with acquiring the securities of such
issuers generally is greater than is the case with higher rated securities. For
example, during an economic downturn or a sustained period of rising interest
rates, highly leveraged issuers of these securities may experience financial
stress. During such periods, such issuers may not have sufficient revenues to
meet their interest
23
<PAGE>
payment obligations. The issuer's ability to service its debt obligations also
may be affected adversely by specific corporate developments or the issuer's
inability to meet specific projected business forecasts, or the unavailability
of additional financing. The risk of loss because of default by the issuer is
significantly greater for the holders of these securities because such
securities generally are unsecured and often are subordinated to other
creditors of the issuer.
Because there is no established retail secondary market for many of these
securities, the Investment Adviser anticipates that such securities could be
sold only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it generally
is not as liquid as the secondary market for higher rated securities. The lack
of a liquid secondary market may have an adverse impact on market price and
yield and a Fund's ability to dispose of particular issues when necessary to
meet that Fund's liquidity needs or in response to a specific economic event
such as a deterioration in the creditworthiness of the issuer. The lack of a
liquid secondary market for certain securities also may make it more difficult
for a Fund or Portfolio to obtain accurate market quotations for purposes of
valuing that Fund's or Portfolio's portfolio and calculating its net asset
value. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of these
securities. In such cases, judgment may play a greater role in valuation
because less reliable, objective data may be available.
A Fund or Portfolio may acquire these securities during an initial
offering. Such securities may involve special risks because they are new
issues. The Funds and Portfolio have no arrangement with any persons concerning
the acquisition of such securities, and the Investment Adviser will review
carefully the credit and other characteristics pertinent to such new issues.
Each Fund and Portfolio may invest in lower rated zero coupon securities
and pay-in-kind bonds (bonds which pay interest through the issuance of
additional bonds), which involve special considerations. These securities may
be subject to greater fluctuations in value due to changes in interest rates
that interest-bearing securities. These securities carry an additional risk in
that, unlike bonds which may interest throughout the period to maturity, the
Funds will realize no cash until the cash payment date unless a portion of such
securities are sold and, if the issuer defaults, the Funds or Portfolio may
obtain no return at all on their investment. See "Tax Matters." 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, 1995, was 137%. For the fiscal year ended October
31, 1996, the portfolio turnover rate was 179%. For the fiscal year ended
October 31, 1997, the portfolio turnover rate was 199%. 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 period November 2, 1995 (commencement of operations) through
October 31, 1996, the annual portfolio turnover rates for the Southeast Asian
Fund, Japan Fund and European Fund were 149%, 121% and 186%, respectively.
For the fiscal period ending October 31, 1997, the annual portfolio
turnover rates for the Southeast Asian Fund, Japan Fund and European Fund were
234%, 217% and 170%.
24
<PAGE>
For the fiscal period ending October 31, 1998, the annual portfolio
turnover rate for the Latin American Equity Fund is not expected to exceed
100%.
Under the advisory agreement and the sub-advisory agreements, the adviser
and sub-advisers shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs or
proceeds being the most favorable to the Funds and Portfolios. In assessing the
best overall terms available for any transaction, the adviser and sub-advisers
consider all factors they deem relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to the adviser
or sub-advisers, and the reasonableness of the commissions, if any, both for
the specific transaction and on a continuing basis. The adviser and
sub-advisers are not required to obtain the lowest commission or the best net
price for any Fund or Portfolio on any particular transaction, and are not
required to execute any order in a fashion either preferential to any Fund or
Portfolio relative to other accounts they manage or otherwise materially
adverse to such other accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the adviser or
sub-adviser to a Fund or Portfolio normally seeks to deal directly with the
primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's or Portfolio's portfolio
securities in so-called tender or exchange offers. Such soliciting dealer fees
are in effect recaptured for the Funds and 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, they would, through use of
the services, avoid the additional expenses which would be incurred if they
should attempt to develop comparable information through their own staffs.
In certain instances, there may be securities that are suitable for one or
more of the Funds and Portfolio as well as one or more of the adviser's or
sub-adviser's, other clients. Investment decisions for the Funds
25
<PAGE>
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 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
10/31/95 10/31/96 10/31/97
---------- ---------- -----------
<S> <C> <C> <C>
International
Equity Portfolio $383,649 $263,816 $222,212
European Fund -- $ 56,205 $109,903
Japan Fund -- $ 82,509 $ 78,861
Southeast Asian Fund -- $153,351 $241,480
</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 Morgan Stanley Capital
International Europe Index (Europe Fund); the Tokyo Stock Exchange (TOPIX)
First Section Index (Japan Fund); the Morgan Stanley Capital International (All
Countries) Asia Pacific ex Japan Free Index (Southeast Asian Fund); the Morgan
Stanley Capital International Europe, Australia and Far East Index
(International Equity Portfolio); the S&P 500 Index, the Dow Jones Industrial
Average or any other commonly quoted index of common stock prices; and the
Russell 2000 Index and the NASDAQ Composite Index. Additionally, a Fund may,
with proper authorization, reprint articles written about such Fund and provide
them to prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in a
Fund over a period (which period shall be stated in any adver-
26
<PAGE>
tisement or communication with a shareholder) based on any change in net asset
value per share including the value of any shares purchased through the
reinvestment of any dividends or capital gains distributions declared during
such period. For Class A shares, the average annual total rate of return
figures will assume payment of the maximum initial sales load at the time of
purchase. For Class B shares, the average annual total rate of return figures
will assume deduction of the applicable contingent deferred sales charge
imposed on a total redemption of shares held for the period. One-, five-, and
ten-year periods will be shown, unless the class has been in existence for a
shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values of the classes of
shares of a Fund will vary based on market conditions, the current market value
of the securities held by a Fund and changes in the Fund's expenses. The
advisers, Shareholder Servicing Agents, the Administrator, the Distributor and
other service providers may voluntarily waive a portion of their fees on a
month-to-month basis. In addition, the Distributor may assume a portion of a
Fund's operating expenses on a month-to-month basis. These actions would have
the effect of increasing the net income (and therefore the yield and total rate
of return) of the classes of shares of a Fund during the period such waivers
are in effect. These factors and possible differences in the methods used to
calculate the yields and total rates of return should be considered when
comparing the yields or total rates of return of the classes of shares of a
Fund to yields and total rates of return published for other investment
companies and other investment vehicles (including different classes of
shares). The Trust is advised that certain Shareholder Servicing Agents may
credit to the accounts of their customers from whom they are already receiving
other fees amounts not exceeding the Shareholder Servicing Agent fees received,
which will have the effect of increasing the net return on the investment of
customers of those Shareholder Servicing Agents. Such customers may be able to
obtain through their Shareholder Servicing Agents quotations reflecting such
increased return.
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 Chase 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.
27
<PAGE>
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
the Funds with other measures of investment return.
Average Annual Total Returns*
(excluding sales charges)
The average annual total rates of return 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 year period ended October 31, 1997 and for the period from commencement
of business operations of each such Fund to October 31, 1997, were as follows:
<TABLE>
<CAPTION>
Date of Date of
One Since Fund Class
Year Inception Inception Introduction
--------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
European Fund 11/2/95
Class A Shares 28.19% 24.43% 11/2/95
Class B Shares 27.25% 23.57% 11/3/95
Japan Fund 11/2/95
Class A Shares 3.49% (1.27%) 11/2/95
Class B Shares 2.72% (2.00%) 11/3/95
Southeast Asian Fund 11/2/95
Class A Shares (28.86%) (7.72%) 11/2/95
Class B Shares (29.48%) (8.43%) 11/3/95
International Equity Fund 12/31/92
A Shares 2.27% 5.47% 12/31/92
B Shares** 1.74% 5.02% 11/4/93
Latin American Equity Fund 12/1/97
A Shares N/A N/A 12/1/97
B Shares N/A N/A 12/1/97
</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.
28
<PAGE>
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:
One Since
Year Inception
---- ---------
European Fund
Class A Shares 22.10% 21.44%
Class B Shares 22.25% 21.94%
Japan Fund
Class A Shares (1.43%) (3.64%)
Class B Shares (2.28%) (3.94%)
Southeast Asian Fund
Class A Shares (32.24%) (9.94%)
Class B Shares (32.82%) (10.19%)
International Equity Fund
A Shares (2.58%) 4.41%
B Shares (3.26%) 4.50%
Latin American Equity Fund
A Shares N/A N/A
B Shares N/A N/A
- ----------
*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 International Equity Fund,
European Fund, Japan Fund, and the Southeast Asian Fund for the thirty-day
period ended October 31, 1997 were (0%), (0.01%), (0%) and (0%), respectively.
The yields of the Class B shares of those Funds were (0%), (0%), (0%) and (0%),
respectively.
Non-Standardized Performance Results*
(including 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
for each Fund, with values reflecting an assumption that capital gain
distributions and
29
<PAGE>
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 Value
Initial $10,000 Capital Gains Reinvested Total
Investment Distributions Dividends Value
----------------- ---------------- --------------- ----------
<S> <C> <C> <C> <C>
International Equity Fund
A Shares $12,110 $ 729 $ 99 $12,938
B Shares 11,940 720 10 12,670
European Fund
A Shares 14,110 1,016 366 15,482
B Shares 13,390 1,009 329 15,269
Japan Fund
A Shares 9,520 0 228 9,748
B Shares 9,420 0 185 9,605
Southeast Asian Fund
A Shares 8,070 438 7 8,515
B Shares 7,950 435 0 8,385
Latin American Equity Fund
A Shares NA NA NA NA
B Shares NA NA NA NA
</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 sales charge of 4.75% for Class A Shares and the
currently applicable CDSC for Class B Shares for each period length, the
performance periods for the same periods would be as follows:
30
<PAGE>
<TABLE>
<CAPTION>
Value of Value of Value
Initial $10,000 Capital Gains Reinvested Total
Investment Distributions Dividends Value
----------------- ---------------- --------------- ----------
<S> <C> <C> <C> <C>
International Equity Fund
A Shares $11,535 $ 694 $ 94 $12,323
B Shares 11,640 720 10 12,370
European Fund
A Shares 13,430 968 349 14,747
B Shares 13,530 1,009 329 14,869
Japan Fund
A Shares 9,068 0 218 9,285
B Shares 9,035 0 185 9,220
Southeast Asian Fund
A Shares 7,687 417 7 8,111
B Shares 7,632 417 0 8,049
Latin American Equity Fund
A Shares NA NA NA NA
B Shares NA NA NA NA
</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.
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, Martin Luther King, Jr.'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 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.
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Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between coupon acquisition price and stated redemption price at maturity) and
premiums (generally, the excess of purchase price over stated redemption price
at maturity). Interest income on short-term obligations is determined on the
basis of interest and discount accrued less amortization of premium.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Funds' Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses are not
available until a completed and signed account application has been received by
the Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in Section 6 of the Account Application.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, a Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service
options chosen by the shareholder or joint shareholders in his or their latest
account application or other written request for services, including
purchasing, exchanging, or redeeming shares of such Fund and depositing and
withdrawing monies from the bank account specified in the Bank Account
Registration section of the shareholder's latest account application or as
otherwise properly specified to such Fund in writing.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of readily marketable portfolio securities
(instead of cash). The securities so distributed would be valued at the same
amount as that assigned to them in calculating the net asset value for the
shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash. The Trust has filed an election under Rule 18f-1 committing to pay in
cash all redemptions by a shareholder of record up to amounts specified by the
rule (approximately $250,000).
With respect to the 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
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so determined will then be applied to determine the value of the investor's
interest in the Portfolio as of such time on the following day the New York
Stock Exchange is open for trading.
Investors in Class A shares may qualify for reduced initial sales charges
by signing a statement of intention (the "Statement"). This enables the
investor to aggregate purchases of Class A shares in the Fund with purchases of
Class A shares of any other Fund in the Trust (or if a Fund has only one class,
shares of such Fund), excluding shares of any Chase 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 Chase Vista fund excluding any Chase 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
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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 purchase (the "CDSC Period"),
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares attributable to the
Class B shares then converting. The conversion of Class B shares purchased on
or after May 1, 1996, will be effected at the relative net asset values per
share of the two classes on the first business day of the month following the
eighth anniversary of the original purchase. The conversion of Class B shares
purchased prior to May 1, 1996, will be effected at the relative net asset
values per share of the two classes on the first business day of the month
following the seventh anniversary of the original purchase. If any exchanges of
Class B shares during the CDSC Period occurred, the holding period for the
shares exchanged will be counted toward the CDSC Period. At the time of the
conversion the net asset value per share of the Class A shares may be higher or
lower than the net asset value per share of the Class B shares; as a result,
depending on the relative net asset values per share, a shareholder may receive
fewer or more Class A shares than the number of Class B shares converted.
A Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written requests for
additional account services made after a shareholder has submitted an initial
account application to the Fund, and in certain of the circumstances described
in the Prospectuses. A Fund may also refuse to accept or carry out any
transaction that does not satisfy any restrictions then in effect. A signature
guarantee may be obtained from a bank, trust company, broker-dealer or other
member of a national securities exchange. Please note that a notary public
cannot provide a signature guarantee.
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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 regard to the deduction
for dividends paid) and net capital gain (i.e., the excess of net long-term
capital gain over net short-term capital loss) 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. Because
International Equity Fund invests all of its assets in the Portfolio which will
be classified as a partnership for federal income tax purposes, the Fund will
be deemed to own a proportionate share of the income of the Portfolio for
purposes of determining whether the Fund satisfies the Distribution Requirement
and the other requirements necessary to qualify as a regulated investment
company (e.g., Income Requirement (hereinafter defined), etc.).
In addition to satisfying the Distribution Requirement, a regulated
investment company must (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities)
and other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement").
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.
Each Fund may engage in hedging or derivatives transactions involving
foreign currencies, forward contracts, options and futures contracts (including
options, futures and forward contracts on foreign currencies) and short sales.
See "Additional Policies Regarding Derivative and Related Transactions." Such
transactions will be subject to special provisions of the Code that, among
other things, may affect the character of gains and losses realized by the Fund
(that is, may affect whether gains or losses are ordinary or capital),
accelerate recognition of income of the Fund and defer recognition of certain
of the Fund's losses. These rules could therefore affect the character, amount
and timing of distributions to shareholders. In addition, these provisions (1)
will require a Fund to "mark-to-market" certain types of positions in its
portfolio (that is, treat them as if they were closed out) and (2) may cause a
Fund to recognize income without receiving cash with which to pay dividends or
make distributions in amounts necessary to satisfy the Distribution Requirement
and avoid the 4% excise tax (described below). Each Fund intends to monitor its
transactions,
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will make the appropriate tax elections and will make the appropriate entries
in its books and records when it acquires any option, futures contract, forward
contract or hedged investment in order to mitigate the effect of these rules.
If a Fund purchases shares in a "passive foreign investment company" (a
"PFIC"), such Fund may be subject to U.S. federal income tax on a portion of
any "excess distribution" or gain from the disposition of such shares even if
such income is distributed as a taxable dividend by the Fund to its
shareholders. Additional charges in the nature of interest may be imposed on
the Fund in respect of deferred taxes arising from such distributions or gains.
If a Fund were to invest in a PFIC and elected to treat the PFIC as a
"qualified electing fund" under the Code (a "QEF"), in lieu of the foregoing
requirements, the Fund would be required to include in income each year a
portion of the ordinary earnings and net capital gain of the qualified electing
fund, even if not distributed to the Fund. Alternatively, under recently
enacted legislation, the Fund can elect to mark-to-market at the end of each
taxable year its shares in a PFIC; in this case, the Fund would recognize as
ordinary income any increase in the value of such shares, and as ordinary loss
any decrease in such value to the extent it did not exceed prior increases
included in income. Under either election, a Fund might be required to
recognize in a year income in excess of its distributions from PFICs and its
proceeds from dispositions of PFIC stock during that year, and such income
would nevertheless be subject to the Distribution Requirement and would be
taken into account for purposes of the 4% excise tax (described below).
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.
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.
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Under recently enacted legislation, the maximum rate of tax on long-term
capital gains of individuals will generally be reduced from 28% to 20% (10% for
gains otherwise taxed at 15%) for long-term capital gains realized after July
28, 1997 with respect to capital assets held for more than 18 months.
Additionally, beginning after December 31, 2000, the maximum tax rate for
capital assets with a holding period beginning after that date and held for
more than five years will be 18%. Under a literal reading of the legislation,
capital gain dividends paid by a regulated investment company would not appear
eligible for the reduced capital gain rates. However, the legislation
authorizes the Treasury Department to promulgate regulations that would apply
the new rates to capital gain dividends paid by a regulated investment company.
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.
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 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. In certain circumstances, a shareholder that (i) has held
shares of a Fund for less than a specified minimum period during which it is
not protected from risk of loss or (ii) is obligated to make payments related
to the dividends, will not be allowed a foreign tax credit for foreign taxes
deemed imposed on dividends paid on such shares. A Fund must also meet this
holding period requirement with respect to its foreign stock and securities in
order to flow through "creditable" taxes. 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.
A Fund may make investments that produce income that is not matched by a
corresponding cash distribution to the Fund, such as investments in obligations
such as certain Brady Bonds or zero coupon securities having original issue
discount or market discount if the Fund elects to accrue market discount on a
current basis. In addition, income may continue to accrue for federal income
tax purposes with respect to a non-performing investment. Any of the foregoing
income would be treated as income earned by the Fund and therefore would be
subject to the distribution requirements of the Code. Because such income may
not be matched by a corresponding cash distribution to the Fund, the Fund may
be required to dispose of other securities to be able to make distributions to
its investors.
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.
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Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares
received, determined as of the reinvestment date. In addition, if the net asset
value at the time a shareholder purchases shares of a Fund reflects
undistributed net investment income or recognized capital gain net income, or
unrealized appreciation in the value of the assets of the Fund, distributions
of such amounts will be taxable to the shareholder in the manner described
above, although such distributions economically constitute a return of capital
to the shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Each Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is
a corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of such Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares.
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, dividends paid to a foreign
shareholder from net investment income 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, and
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.
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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 their
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 RIC 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 RIC 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 RIC holds at
least a required amount of U.S. government securities. Accordingly, for
residents of these states, distributions derived from a Fund's investment in
certain types of U.S. government securities may not be entitled to the
exemptions from state and local income taxes that would be available if the
shareholders had purchased U.S. government securities directly. Shareholders'
dividends attributable to a Fund's income from repurchase agreements generally
are subject to state and local income taxes, although states and regulations
vary in their treatment of such income. The exemption from state and local
income taxes does not preclude states from asserting other taxes on the
ownership of U.S. government securities. To the extent that a Fund invests to a
substantial degree in U.S. government securities which are subject to favorable
state and local tax treatment, shareholders of such Fund will be notified as to
the extent to which distributions from the Fund are attributable to interest on
such securities. Rules of state and local taxation of ordinary income dividends
and capital gain dividends from RICs 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.
39
<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: 65. Address: 202 June Road, Stamford, CT 06903.
*H. Richard Vartabedian--Trustee and President of the Trust. Investment
Management Consultant, 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.
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: 68. Address: 322 Main
Street, Lakeville, CT 06039.
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: 64. Address: 108 Valley
Road, Cos Cob, CT 06807.
Roland R. Eppley, Jr.--Trustee. Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association Inc., (1971-1988);
Director, Janel Hydraulics, Inc.; Director of The Hanover Funds, Inc. Age: 65.
Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
Joseph J. Harkins--Trustee. Retired; Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He has been employed by Chase in numerous capacities and offices since
1954. Director of Blessings Corporation, Jefferson Insurance Company of New
York, Monticello Insurance Company and National. Age: 65. Address: 257
Plantation Circle South, Ponte Vedra Beach, FL 32082.
*Sarah E. Jones--Trustee. President and Chief Operating Officer of Chase
Mutual Funds Corp.; formerly Managing Director for the Global Asset Management
and Private Banking Division of The Chase Manhattan Bank. Age: 46. Address:
Chase Mutual Funds Corp., One Chase Manhattan Plaza, Third Floor, New York, New
York 10081.
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer of
The Adams Express Co. and Petroleum & Resources Corp.; Director of The Hanover
Funds, Inc. and The Hanover Investment Funds, Inc. Age: 70. Address: 624 East
45th Street, Savannah, GA 31405
W. Perry Neff--Trustee. Independent Financial Consultant; Director of
North America Life Assurance Co., Petroleum & Resources Corp. and The Adams
Express Co.; Director and Chairman of The Hanover Funds, Inc.; Director,
Chairman and President of The Hanover Investment Funds, Inc. Age: 70. Address:
RR 1 Box 102, Weston, VT 05181.
40
<PAGE>
*Leonard M. Spalding, Jr.--Trustee. Chief Executive Officer of Chase
Mutual Funds Corp.; formerly President and Chief Executive Officer of Vista
Capital Management; Chief Investment Executive of The Chase Manhattan Bank.
Age: 62. Address: Chase Mutual Funds Corp., One Chase Manhattan Plaza, Third
Floor, New York, New York 10081.
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: 63. Address: 4 Barnfield Road, Pittsford, NY 14534.
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.
Martin R. Dean--Treasurer and Assistant Secretary. Associate Director,
Accounting Services, BISYS Fund Services; formerly Senior Manager, KPMG Peat
Marwick (1987-1994). Age: 33. Address: 3435 Stelzer Road, Columbus, OH 43219.
Richard Baxt--Secretary. Senior Vice President, Client Services, BISYS
Fund Services; formerly General Manager of Investment and Insurance, First
Fidelity Bank, President of First Fidelity Brokers, and President of Citicorp
Investment Services. Age: 44. Address: 125 W. 55th Street, New York, NY 10019.
Vicky M. Hayes--Assistant Secretary. Vice President and Global Marketing
Manager, Vista Fund Distributors, Inc.; formerly Assistant Vice President,
Alliance Capital Management and held various positions with J. & W. Seligman &
Co. Age: 36. Address: One Chase Manhattan Plaza, 3rd Fl., New York, NY 10081.
Alaina Metz--Assistant Secretary. Chief Administrative Officer, BISYS Fund
Services; formerly Supervisor, Blue Sky Department, Alliance Capital Management
L.P. Age: 30. Address: 3435 Stelzer Road, Columbus, OH 43219.
Lee Schultheis--Assistant Treasurer and Assistant Secretary. President,
BISYS Fund Distributors; formerly Managing Director, Forum Financial Group.
Age: 41. Address: One Chase Manhattan Plaza, 3rd Fl., New York, New York 10081.
- ----------
* Asterisks indicate those Trustees that are "Interested Persons" (as defined
in the 1940 Act). Mr. Reid is not an interested person of the Trust's
investment advisers or principal underwriter, but may be deemed an
interested person of the Trust solely by reason of being an officer of the
Trust.
The Board of Trustees of the Trust presently has an Audit Committee. The
members of the Audit Committee are Messrs. Ten Haken (Chairman), Armstrong,
Eppley, MacCallan and Thode. 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,
1997.
The Board of Trustees of the Trust has established an Investment
Committee. The members of the Investment Committee are Messrs. Vartabedian
(Chairman) Reid and Spalding. The function of the Investment Committee is to
review the investment management process of the Trust.
The Trustees and officers of the Trust appearing in the table above also
serve in the same capacities with respect to Mutual Fund Trust, Mutual Fund
Variable Annuity Trust, Mutual Fund Select Group, Mutual Fund Select
Trust,Capital Growth Portfolio, Growth and Income Portfolio and International
Equity Portfolio (these entities, together with the Trust, are referred to
below as the "Chase Vista Funds").
41
<PAGE>
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.
42
<PAGE>
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended October 31, 1997 for each Trustee of the Trust:
<TABLE>
<CAPTION>
International Latin American Southeast
European Equity Japan Equity Asian
Fund Fund Fund Fund Fund
---------- --------------- ---------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Fergus Reid, III, Trustee 48.60 79.31 22.48 0 60.42
H. Richard Vartabedian, Trustee 38.06 65.25 17.83 0 48.45
William J. Armstrong, Trustee 24.67 41.61 11.61 0 30.83
John R.H. Blum, Trustee 26.97 46.30 12.58 0 34.39
Stuart W. Cragin, Jr., Trustee 25.35 43.49 11.88 0 32.29
Ronald R. Eppley, Jr., Trustee 25.35 43.49 11.88 0 32.29
Joseph J. Harkins, Trustee 26.37 45.38 12.34 0 33.63
Sarah E. Jones, Trustee -- -- -- -- --
W.D. MacCallan, Trustee 25.35 43.49 11.88 0 32.29
W. Perry Neff, Trustee 26.37 45.38 12.34 0 33.63
Leonard M. Spalding, Jr., Trustee -- -- -- -- --
Richard E. Ten Haken, Trustee 25.35 43.49 11.88 0 32.29
Irving L. Thode, Trustee 25.35 43.49 11.88 0 32.29
</TABLE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits Accrued from
by the Fund Complex(1) "Fund Complex"(2)
------------------------ ------------------
<S> <C> <C>
Fergus Reid, III, Trustee $56,368 $129,500
H. Richard Vartabedian, Trustee 47,622 102,750
William J. Armstrong, Trustee 38,372 67,000
John R.H. Blum, Trustee 41,363 73,000
Stuart W. Cragin, Jr., Trustee 34,965 68,500
Ronald R. Eppley, Jr., Trustee 53,267 68,500
Joseph J. Harkins, Trustee 52,508 71,500
Sarah E. Jones, Trustee -- --
W.D. MacCallan, Trustee 66,323 68,500
W. Perry Neff, Trustee 66,323 71,500
Leonard M. Spalding, Jr., Trustee -- --
Richard E. Ten Haken, Trustee 31,463 68,500
Irving L. Thode, Trustee 41,876 68,500
</TABLE>
- ----------
(1) Data reflects total benefits accrued by the Trust, Mutual Fund Select
Group, Capital Growth Portfolio, Growth and Income Portfolio and
International Equity Portfolio for the fiscal year ended October 31, 1997,
and by Mutual Fund Trust, Mutual Fund Select Trust and Mutual Fund
Variable Annuity Trust for the fiscal year ended August 31, 1997.
(2) Data reflects total compensation earned during the period January 1, 1997
to December 31, 1997 for service as a Trustee to the Trust, Mutual Fund
Trust, Mutual Fund Variable Annuity Trust, Mutual Fund Select Group,
Mutual Fund Select Trust, Capital Growth Portfolio, Growth and Income
Portfolio and International Equity Portfolio.
- ----------
As of December 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, 1997, 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 $9,200
which amount is then apportioned among the Funds comprising the Trust.
43
<PAGE>
Chase Vista Funds Retirement Plan for Eligible Trustees
Effective August 21, 1995, the Trustees also instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not
an employee of any of the Funds, the advisers, administrator or distributor or
any of their affiliates) may be entitled to certain benefits upon retirement
from the Board of Trustees. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the adviser (collectively, the "Covered Funds"). Each
Eligible Trustee is entitled to receive from the Covered Funds an annual
benefit commencing on the first day of the calendar quarter coincident with or
following his date of retirement equal to 10% of the highest annual
compensation received from the Covered Funds multiplied by the number of such
Trustee's years of service (not in excess of 10 years) completed with respect
to any of the Covered Funds. Such benefit is payable to each eligible Trustee
in monthly installments for the life of the Trustee.
Set forth below in the table are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of October 31, 1997, the estimated credited years
of service for Messrs. Reid, Vartabedian, Armstrong, Blum, Cragin, Eppley,
Harkins, MacCallan, Neff, Spalding, Ten Haken and Thode and for Ms. Jones are
12, 4, 9, 12, 4, 8, 6, 7, 7, 0, 12, 4 and 0, respectively.
<TABLE>
<CAPTION>
Highest Annual Compensation Paid by All Chase Vista Funds
--------------------------------------------------------------------
$60,000 $80,000 $100,000 $120,000 $140,000
Years of
Service Estimated Annual Benefits Upon Retirement
- ---- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
14 $57,600 $76,800 $ 96,000 $115,200 $134,000
12 52,800 70,400 88,000 105,600 123,200
10 48,000 64,000 80,000 96,000 112,000
8 38,400 51,200 64,000 76,800 89,600
6 28,800 38,400 48,000 57,600 67,200
4 19,200 25,600 32,000 38,400 44,800
</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 Chase 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. Eppley, Ten Haken, Thode and Vartabedian have each executed a
deferred compensation agreement for the 1997 calendar year and as of October
31, 1997 they had contributed $55,334, $27,669, $49,803 and $83,000,
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
44
<PAGE>
disposition, or by a reasonable determination based upon a review of readily
available facts, by vote of a majority of disinterested Trustees or in a
written opinion of independent counsel, that such officers or Trustees have not
engaged in willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties.
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 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.
45
<PAGE>
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement provides
that Chase may render services through its own employees or the employees of
one or more affiliated companies that are qualified to act as an investment
adviser of the Fund and are under the common control of Chase as long as all
such persons are functioning as a part of an organized group of persons,
managed by authorized officers of Chase.
Chase, on behalf of the Funds or Portfolio, has entered into an investment
sub-advisory agreement dated as of May 6, 1996 with Chase Asset Management,
Inc. ("CAM"). With respect to the day-to-day management of the Funds or
Portfolio, under the sub-advisory agreement CAM makes decisions concerning, and
places all orders for, purchases and sales of securities and helps maintain the
records relating to such purchases and sales. CAM may, in its discretion,
provide such services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser to the
Company under applicable laws and are under the common control of Chase;
provided that (i) all persons, when providing services under the sub-advisory
agreement, are functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by authorized officers
of the sub-advisers. This arrangement will not result in the payment of
additional fees by the Funds.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. The Chase Manhattan Corporation is the entity resulting from
the merger of The Chase Manhattan Corporation into Chemical Banking Corporation
on March 31, 1996. Chemical Banking Corporation was thereupon renamed The Chase
Manhattan Corporation. Also included among Chase's accounts are commingled
trust funds and a broad spectrum of individual trust and investment management
portfolios. These accounts have varying investment objectives.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange Commission as an investment adviser
and provides discretionary investment advisory services to institutional
clients, and the same individuals who serve as portfolio managers for CAM also
serve as portfolio managers for Chase.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from each Fund or
Portfolio an investment advisory fee computed daily and paid monthly based on a
rate equal to a percentage of such Fund's or Portfolio's average daily net
assets specified in the relevant Prospectuses. However, the adviser may
voluntarily agree to waive a portion of the fees payable to it on a
month-to-month basis. For its services under its sub-advisory agreement, CAM
will be entitled to receive, with respect to each such Fund or Portfolio, such
compensation, payable by the adviser out of its advisory fee, as is described
in the relevant Prospectuses.
For the fiscal years ended October 31, 1995, 1996 and 1997, 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:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
---------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------- ------------------------------- -------------------------------
Fund paid/accrued waived paid/accrued wavied paid/accrued waived
- ---------------------- -------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
International
Equity Portfolio* $462,855 ($ 202,144) $431,019 ($ 276,302) $325,433 ($325,433)
European Fund -- -- $112,618 ($112,618)
Japan Fund -- -- $ 55,120 ($ 55,120)
Southeast Asian Fund -- -- $125,923 ($125,923)
</TABLE>
46
<PAGE>
- ----------
* 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 each respective Fund in each
respective Portfolio.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Funds and the administrator of
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 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
47
<PAGE>
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, 1995, 1996 and 1997, Chase was paid
or accrued administration fees and voluntarily waived the amount in parentheses
following such fees:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
-----------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------ ------------------------------ -----------------------------
paid/accrued waived paid/accrued waived paid/accrued waived
-------------- ------------- -------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Fund* $16,367 ($ 16,367) $18,799 ($ 18,799) $16,230 ($ 6,230)
European Fund -- -- $11,266 ($ 6,348)
Japan Fund -- -- $ 5,512 ($ 5,512)
Southeast Asian Fund -- -- $12,592 ($ 8,056)
</TABLE>
*On November 23, 1993, the Fund changed its structure to a Master/Feeder
Structure. The Portfolio's administrator is Chase. With respect to the
International Equity Portfolio, for the fiscal year ended October 31, 1995,
October 31, 1996 and October 31, 1997, Chase was paid or accrued administration
fees of $21,632, $16,550 and $16,272, respectively, and voluntarily waived all
of such fees.
Distribution Plans
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") on behalf of certain classes
or shares of certain Funds as described in the Prospectuses, which provide that
such classes of such Funds shall pay for distribution services a distribution
fee (the "Distribution Fee"), including payments to the Distributor, at annual
rates not to exceed the amounts set forth in their respective Prospectuses. The
Distributor may use all or any portion of such Class A Distribution Fee to pay
for Fund expenses of printing prospectuses and reports used for sales purposes,
expenses of the preparation and printing of sales literature and other such
distribution-related expenses.
Class B shares pay a Distribution Fee of up to 0.75% of average daily net
assets. The Distributor currently expects to pay sales commissions to a dealer
at the time of sale of Class B shares of up to 4.00% of the purchase price of
the shares sold by such dealer. The Distributor will use its own funds (which
may be borrowed or otherwise financed) to pay such amounts. Because the
Distributor will receive a maximum Distribution Fee of 0.75% of average daily
net assets with respect to Class B shares, it will take the Distributor several
years to recoup the sales commissions paid to dealers and other sales expenses.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to exceed
0.25% annualized of the average net asset value of Class A shares, or 0.25%
annualized of the average net asset value of the Class B shares maintained in a
Fund by such broker-dealers' customers. Trail or maintenance commissions on
Class B shares will be paid to broker-dealers beginning the 13th month
following the purchase of such Class B shares. Since the distribution fees are
not directly tied to expenses, the amount of distribution fees paid by a Fund
during any year may be more or less than actual expenses incurred pursuant to
the Distribution Plans. For this reason, this type of distribution fee
arrangement is characterized by the staff of the Securities and Exchange
Commission as being of the "compensation variety" (in contrast to
"reimbursement" arrangements by which a distributor's payments are directly
linked to its expenses). With respect to Class B shares, because of the 0.75%
annual limitation on the compensation paid to the Distributor during a fiscal
year, compensation relating to 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.
48
<PAGE>
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, 1995, 1996 and 1997, the
Distributor was paid or accrued distribution fees with respect to the Funds,
and voluntarily waived the amount in parentheses following such fees:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
------------------------------------
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
A Shares-
International Equity Fund $75,652 $63,418 $60,160
European Fund -- $13,367 $25,027
Japan Fund -- $11,515 $11,895
Southeast Asian Fund -- $17,928 $27,118
B Shares-
International Equity Fund $55,080 $57,266 $62,911
European Fund -- $ 409 $ 9,344
Japan Fund -- $ 878 $ 5,656
Southeast Asian Fund -- $ 4,693 $13,089
</TABLE>
With respect to the share of the Class A shares of the Funds, the Basic
Distribution Fee was allocated as follows:
<TABLE>
<CAPTION>
Printing, Postage Sale Advertising &
Fund and Handling Compensation Administrative Filings
- --------------------------- ------------------- -------------- -----------------------
<S> <C> <C> <C>
International Equity Fund $12,874 $36,878 $10,408
European Fund $ 5,356 $15,342 $ 4,330
Japan Fund $ 2,546 $ 7,292 $ 2,058
Southeast Asian Fund $ 5,803 $16,623 $ 4,691
</TABLE>
With respect to the Class B shares of the Funds, the Distribution Fee was
paid to FEP Capital L.P. for acting as a finance agent.
49
<PAGE>
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, 1995, 1996 and 1997, the Distributor was
paid or accrued sub-administration fees with respect to the Funds and
voluntarily waived the amount in parentheses following such fees:
<TABLE>
<CAPTION>
Fiscal Year Ended October 31,
----------------------------------------------------------------------------------
1995 1996 1997
-------------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
International Equity Fund: $18,799 ($ 18,794) $16,500 ($ 2,804) $16,220 ($ 8,136)
European Fund -- -- $ 2,701 ($ 2,701) $ 5,628 ($ 3,184)
Japan Fund -- -- $ 2,374 ($ 2,374) $ 2,755 ($ 2,755)
Southeast Asian Fund -- -- $ 3,899 ($ 3,899) $ 6,296 ($ 4,030)
</TABLE>
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, 1995, 1996 and 1997, 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,
-----------------------------------------------------------------
1995 1996 1997
-------------------- -------------------- -------------------
payable waived payable waived payable waived
--------- -------- --------- -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
International Equity Fund:
Class A $75,631 -- $63,469 -- $60,160 --
Class B $18,367 -- $19,089 -- $20,965 --
European Fund
Class A -- -- $ 0 -- -- --
Class B -- -- $ 136 -- $ 3,107 --
Southeast Asian Fund
Class A -- -- $ 0 -- -- --
Class B -- -- $ 273 -- $ 4,363 --
Japan Fund
Class A -- -- $ 0 -- -- --
Class B -- -- $ 1,564 -- $ 1,886 --
</TABLE>
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which DST acts as transfer agent for the
Trust. DST's address is 210 West 10th Street, Kansas City, MO 64105.
Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund and receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight and
record keeping for the assets held in the portfolios of each Fund. Chase also
provides fund accounting services for the income, expenses and shares
outstanding for such Funds. Chase is located at 3 Metro- tech Center, Brooklyn,
NY 11245. Investors Bank and Trust Co., One First Canadian Place, Toronto,
Canada M5X 1C8, provides similar services for the International Equity
Portfolio.
51
<PAGE>
INDEPENDENT ACCOUNTANTS
The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended October 31, 1997, 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.
52
<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 18 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 Class A, Class B and Class C 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 of all
53
<PAGE>
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, 1998 the following persons owned of record 5% or more of
the outstanding shares of the following classes of the following Funds:
EUROPEAN FUND A SHARES
Balsa & Co. 27.50%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Balsa & Co. 15.84 %
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Cudd & Company 13.78%
Custody Division
1211 6th Avenue
35th Floor
New York, NY 10036-8701
Cudd & Company Custody 13.57%
Division
1211 6th Avenue
35th Floor
New York, NY 10036-8701
54
<PAGE>
Balsa & Co. PO Box 1768 6.70%
Grand Central Station
New York, NY 10163-1768
JAPAN FUND A SHARES
Cudd & Company 23.58%
Custody Division
1211 6th Avenue
35th Floor
New York, NY 10036-8701
Balsa & Co. 21.42%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Balsa & Co. 20.39%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Balsa & Co. 18.11%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
JAPAN FUND B SHARES
MLPF&S for sole benefit of its 56.67%
customers
Attn: Fund Adminsitration
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246-6484
Prudential Securities Inc. FBO 7.80%
Leah Sullivan TTEE
Leah Sullivan Living Trust
UA DTD 9/30/97
17792 San Leandro
Huntington, CA 92647-6640
SOUTHEAST ASIAN FUND A
SHARES
Balsa & Co. 19.23%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Cudd & Company 15.35%
Custody Division
1211 6th Avenue
35th Floor
New York, NY 10036-8701
Balsa & Co. 11.84%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
Balsa & Co. 9.74%
PO Box 1768
Grand Central Station
New York, NY 10163-1768
CAMLL Rotterdam Ventures 5.92%
Attn: Cliff Bishop
Chase Asset Management
London
Coleville House
32 Curzon Street
London, England
United Kingdom
Financial Statements
The 1997 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, 1997 contained therein, are incorporated
herein by reference.
55
<PAGE>
Specimen Computations of Offering Prices Per Share
International Equity Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 12.11
Maximum Offering Price per Share ($12.11 divided by .9525)
(reduced on purchases of $100,000 or more) $ 12.71
B Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 11.94
European Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 14.10
Maximum Offering Price per Share ($14.10 divided by .9525)
(reduced on purchases of $100,000 or more) $ 14.80
B Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 13.93
Japan Fund (specimen computations)
A Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 9.52
Maximum Offering Price per Share ($9.52 divided by .9525)
(reduced on purchases of $100,000 or more) $ 9.99
B Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 9.42
56
<PAGE>
<TABLE>
<CAPTION>
Southeast Asian Fund (specimen computations)
<S> <C>
A Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 8.07
Maximum Offering Price per Share ($8.07 divided by .9525)
(reduced on purchases of $100,000 or more) $ 8.47
B Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at October 31, 1997 $ 7.95
Latin American Equity Fund
A Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at an assumed net asset value
of $10.00 per share $ 10.00
Maximum Offering Price per Share
(an assumed net asset value of $10.00 per share divided by .9525)
(reduced on purchases of $100,000 or more) $ 10.50
B Shares:
Net Asset Value and Redemption Price per Share of Beneficial Interest at an
assumed net asset value of $10.00 per share $ 10.00
</TABLE>
The European Fund, Japan Fund and Southeast Asian Fund commenced offering of
Shares on November 1, 1995. The Latin American Equity Fund commenced offering
of Shares on December 1, 1997.
57
<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 1997 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 7, 1998,
accession number 0000950146-98-000027, 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.(6)
1(c) Certificate of Amendment to Declaration of Trust dated October 19,
1995.(6)
1(d) Certificate of Amendment to Declaration of Trust dated July 25,
1993.(6)
1(e) Certificate of Amendment of Declaration of Trust dated
November 1997.(10)
2 By-laws, as amended. (1)
3 None.
4 Specimen share certificate. (1)
5(a) Form of Proposed Investment Advisory Agreement.(6)
5(b) Form of Proposed Sub-Advisory Agreement between The Chase Manhattan
Bank and Chase Asset Management, Inc.(6)
5(c) Form of Proposed Investment Subadvisory Agreement between The Chase
Manhattan Bank and Van Deventer & Hoch(6).
6(a) Distribution and Sub-Administration Agreement dated August 21,
1995.(6)
7(a) Retirement Plan for Eligible Trustees.(6)
7(b) Deferred Compensation Plan for Eligible Trustees.(6)
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. (6)
C-1
<PAGE>
9(f) Agreement and Plan of Reorganization and Liquidation.(6)
9(g) Form of Administration Agreement.(6)
10 Opinion re: Legality of Securities being Registered.(1)
11 Consent of Price Waterhouse LLP.(11)
12 None.
13 Not Applicable
14 None.
15(a) Rule 12b-1 Distribution Plan of Mutual Funds including
Selected Dealer Agreement and Shareholder Service Agreement. (1)
15(b) Rule 12b-1 Distribution Plan of Premier Funds including
Selected Dealer Agreement and Shareholder Service Agreement. (1)
15(c) Rule 12b-1 Distribution Plan for each of Bond Fund,
Short-Term Bond Fund, Equity Fund and U.S. Government
Money Market Fund including Selected Dealer Agreement and
Shareholder Service Agreement.(2)
15(d) Form of Rule 12b-1 Distribution Plan for Class B shares of the
Prime Money Market Fund.(3)
15(e) Form of Rule 12b-1 Distribution Plan for Small Cap Equity
Fund.(4)
15(f) Form of Rule 12b-1 Distribution Plan - Class A Shares -
American Value Fund (including forms of Selected Dealer Agreement
and Shareholder Servicing Agreement).(6)
15(g) Rule 12b-1 Distribution Plan - Class B Shares (including forms of
Selected Dealer Agreement and Shareholder Servicing Agreement).(6)
15(h) Form of Rule 12b-1 Distribution Plan - Class C Shares (including
forms of Shareholder Servicing Agreements).(9)
16 Schedule for Computation for Each Performance Quotation.(5)
17 Financial Data Schedule.(11)
18 Form of Rule 18f-3 Multi-Class Plan.(6)
99(a) Powers of Attorney for: Fergus Reid, III, H. Richard Vartabedian,
William J. Armstrong, John R.H. Blum, Stuart W. Cragin, Jr., Roland
R. Eppley, Jr., Joseph J. Harkins, W.D. MacCallan, W. Perry Neff,
Richard E. Ten Haken, Irving L. Thode.(8)
99(b) Powers of Attorney for: Sarah E. Jones and Leonard M. Spalding,
Jr.(9)
- --------------------
(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. 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.
(3) 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.
(4) 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.
(5) 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.
(6) 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.
(7) Filed as an Exhibit to Amendment No. 42 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) on February 28, 1997.
(8) Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A of Mutual Fund Trust (File No.
33-75250) as filed with the Securities and Exchange Commission on September
6, 1996.
(9) Filed as an Exhibit to Amendment No. 45 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) filed on October 28, 1997.
(10) Filed as an Exhibit to Amendment No. 46 to the Registration Statement on
Form N-1A of the Registrant (File No. 33-14196) filed on December 1, 1997.
(11) 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
Mutual Fund Group as of January 31, 1998
- ----------------- -----------------------------
A B Institutional
Shares Shares Shares
------ ------ -------------
U.S. Treasury Income Fund 2,103 683 n/a
U.S. Government Securities Fund 87 n/a 78
Balanced Fund 2,046 1,080 n/a
Short-Term Bond Fund 248 n/a 61
Bond Fund 248 133 59
Large Cap Equity Fund 775 347 172
American Value Fund 169 n/a n/a
Equity Income Fund 2,197 1,247 n/a
Small Cap Equity Fund 8,468 7,232 10
Growth and Income Fund 68,519 26,585 7
Capital Growth Fund 34,259 25,015 13
International Equity Fund 1,904 1,134 n/a
Southeast Asian Fund 383 221 n/a
European Fund 300 263 n/a
Japan Fund 111 54 n/a
Select Growth and Income Fund n/a n/a none
Latin American Equity Fund 28 6 n/a
Small Cap Opportunities Fund 3,792 3,787 n/a
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
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.
</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.
Frank A. Bennack, Jr. Director President and Chief Executive Officer
The Hearst Corporation
Susan V. Berresford Director President, The Ford Foundation
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
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
John R. Stafford Director Chairman, President and Chief Executive
Officer, American Home Products
Corporation
Marina v. N. Whitman Director Professor of Business Administration and
Public Policy, University of Michigan
</TABLE>
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<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.
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<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-8
<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. One Chase Manhattan Plaza, 3rd Floor
New York, NY 10081
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.
(4) 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 effective date of the post-effective
amendment to the registration statement relating to Vista Latin American Equity
Fund except as is otherwise permitted by the Staff of the Securities and
Exchange Commission.
C-9
<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 of 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, 1998.
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, 1998
- -------------------------------
Fergus Reid, III
/s/ H. Richard Vartabedian President February 27, 1998
- ------------------------------- and Trustee
H. Richard Vartabedian
* Trustee February 27, 1998
- -------------------------------
William J. Armstrong
* Trustee February 27, 1998
- -------------------------------
John R.H. Blum
* Trustee February 27, 1998
- -------------------------------
Stuart W. Cragin, Jr.
*
- ------------------------------- Trustee February 27, 1998
Roland R. Eppley, Jr.
* Trustee February 27, 1998
- -------------------------------
Joseph J. Harkins
* Trustee February 27, 1998
- -------------------------------
Sarah E. Jones
*
- ------------------------------- Trustee February 27, 1998
W.D. MacCallan
*
- ------------------------------- Trustee February 27, 1998
W. Perry Neff
* Trustee February 27, 1998
- -------------------------------
Leonard M. Spalding, Jr.
<PAGE>
* Trustee February 27, 1998
- -------------------------------
Irv Thode
* Trustee February 27, 1998
- -------------------------------
Richard E. Ten Haken
/s/ Martin R. Dean Treasurer and February 27, 1998
_______________________________ Principal Financial
Martin R. Dean Officer
/s/ H. Richard Vartabedian Attorney in February 27, 1998
_______________________________ Fact
H. Richard Vartabedian
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
Amendment No. 50 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated December 17, 1997, relating to the financial
statements and financial highlights of Vista American Value Fund, Vista Balanced
Fund, Vista Bond Fund, Vista Capital Growth Fund, Vista Equity Income Fund,
Vista Growth and Income Fund, Vista Large Cap Equity Fund, Vista Short Term Bond
Fund, Vista Small Cap Equity Fund, Vista Small Cap Opportunities Fund, Vista
U.S. Government Securities Fund, Vista U.S. Treasury Income Fund, Vista European
Fund, Vista International Equity Fund, Vista Japan Fund and Vista Southeast
Asian Fund appearing in the October 31, 1997 Annual Reports to Shareholders of
Mutual Fund Group ("Annual Reports"), and of our reports dated December 17,
1997, relating to the financial statements of Capital Growth Portfolio, Growth
and 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 24, 1998
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<OTHER-ITEMS-LIABILITIES> 223,717
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<SHARES-COMMON-PRIOR> 808,541
<ACCUMULATED-NII-CURRENT> (388)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,307,405)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (2,428,938)
<NET-ASSETS> 7,617,662
<DIVIDEND-INCOME> 214,889
<INTEREST-INCOME> 60,424
<OTHER-INCOME> 0
<EXPENSES-NET> 233,466
<NET-INVESTMENT-INCOME> 41,847
<REALIZED-GAINS-CURRENT> (1,402,735)
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<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 19,890
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<PER-SHARE-NII> .066
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<RETURNS-OF-CAPITAL> .021
<PER-SHARE-NAV-END> 8.07
<EXPENSE-RATIO> 1.75
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<AVG-DEBT-PER-SHARE> 0
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<NUMBER> 021
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<OVERDISTRIBUTION-GAINS> 0
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<NET-INVESTMENT-INCOME> 2,362,950
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<DISTRIBUTIONS-OF-GAINS> 3,997,114
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<NET-INVESTMENT-INCOME> (2,431,588)
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<GROSS-EXPENSE> 12,010,922
<AVERAGE-NET-ASSETS> 1,239,569,785
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<PER-SHARE-NII> (.022)
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<NAME> VISTA BOND FUND - CLASS A
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