As filed via EDGAR with the Securities and Exchange Commission on
April 14, 2000
File No. 811-5151
Registration No. 33-14196
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
Pre-Effective Amendment No. |_|
Post-Effective Amendment No. 63 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
Post-Effective Amendment No. 102 |X|
-------------------------------
MUTUAL FUND GROUP
(Exact Name of Registrant as Specified in Charter)
1211 Avenue of the Americas
New York, New York 10036
--------------------------------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 492-1600
George Martinez, Esq. Peter Eldridge, Esq. Sarah Cogan, Esq.
BISYS Fund Services, Inc. Chase Manhattan Bank Simpson Thacher & Bartlett
3435 Stelzer Road 270 Park Avenue 425 Lexington Avenue
Columbus, Ohio 43219 New York, New York 10017 New York, New York 10017
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
| | immediately upon filing pursuant to |_| on ( ) pursuant to
paragraph (b) paragraph (b)
| | 60 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(1) paragraph (a)(1)
|X| 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, 1999 was
filed on January 19, 2000.
<PAGE>
PROSPECTUS XXXXXX, 2000
Chase Vista Funds
H & Q GLOBAL TECHNOLOGY FUND
The Securities and
Exchange Commission
has not approved or
disapproved these
securities or determined
if this prospectus is
truthful or complete.
Any representation to
the contrary is a criminal
offense.
[CHASE LOGO]
THE RIGHT RELATIONSHIP IS EVERYTHING.
PSXXX-1-X00
<PAGE>
<TABLE>
<S> <C>
H & Q GLOBAL TECHNOLOGY FUND 1
THE FUND'S INVESTMENT ADVISER 9
HOW YOUR ACCOUNT WORKS 10
ABOUT SALES CHARGES 10
BUYING FUND SHARES 12
SELLING FUND SHARES 14
OTHER INFORMATION CONCERNING THE FUND 15
DISTRIBUTIONS AND TAXES 16
SHAREHOLDER SERVICES 18
WHAT THE TERMS MEAN 19
HOW TO REACH US Back cover
</TABLE>
<PAGE>
CHASE VISTA H & Q GLOBAL TECHNOLOGY FUND
[SIDE BAR]
The Fund's objective
The Fund seeks
capital growth over
the long term.
[END SIDE BAR]
The Fund's main
investment strategy
The Fund seeks to achieve its objective by investing, under normal market
conditions, at least 65% of its total assets in equity securities of technology
companies. The Fund currently intends to invest in equity securities of U.S and
foreign companies. The Fund will invest in equity securities of companies with
various market capitalizations including large, mid and small capitalizations.
The Fund may invest up to 35% of its assets in debt securities of foreign or
U.S. issuers.
Equity securities include common stocks, preferred stocks, securities that are
convertible into common stocks and warrants to purchase common stocks. These
investments may take the form of depositary receipts.
Technology companies are companies with revenues primarily generated by
technology products and services. These include the internet, computers and
computer peripherals, software, electronic components and systems,
communications equipment and services, semiconductors, media and information
services, pharmaceuticals, hospital supply and medical devices, biotechnology
products, environmental services, chemical products and synthetic materials, and
defense and aerospace products and services.
The Fund's advisers do quantitative analysis and fundamental research in an
attempt to identify equities with the
1
<PAGE>
CHASE VISTA H & Q GLOBAL TECHNOLOGY FUND
best combination of value and growth within the universe of technology
securities. The advisers may look for value-oriented factors, such as a low
price-to-earnings or price-to-cash ratio, in determining whether a stock is
undervalued. They may also look at growth-oriented factors, such as projected
earnings growth, improved earnings characteristics or risk-adjusted price
momentum.
In determining whether to sell a stock, the advisers will use the same type of
analysis that they use in buying a stock in order to determine if the stock is
still an attractive investment opportunity.
While the Fund invests primarily in equities, it may also purchase debt
securities, including lower-rated high yield securities issued by U.S.
companies as well as foreign companies and governments. Lower-rated securities
are those which are rated Ba or lower by Moody's, BB or lower by S&P or the
equivalent by another national rating organization. They also include unrated
securities which are found to be of comparable quality. High yield securities
in the Fund's portfolio may be rated as low as C by Moody's, or D by S&P, or
the equivalent.
The Fund may borrow up to 10% of its total assets (including the amount
borrowed) to buy additional securities. This is called "leveraging." The Fund
can borrow money from banks and through reverse repurchase agreements or dollar
rolls. Reverse repurchase agreements and dollar rolls will not be considered
borrowings if the Fund earmarks liquid assets to cover its obligations on the
reverse repurchase agreement or dollar rolls. The Fund will use leveraging only
when the advisers believe that the returns available through leveraging will
provide a potentially higher return.
The Fund may also invest in high quality money market instruments and repurchase
[SIDE BAR]
FREQUENCY OF TRADING
The Fund may trade securities
actively, which could increase
transaction costs (and lower
performance) and increase your
taxable dividends.
[END SIDE BAR]
2
<PAGE>
agreements. To temporarily defend its assets, the Fund may put any amount of
its assets in these types of investments.
The Fund may purchase or sell foreign currencies. The Fund may also engage in
currency management transactions, including forward currency exchange contacts,
currency options, currency swaps and cross-hedge currencies to hedge currency
exposure.
The Fund may invest in derivatives, which are financial instruments whose value
is based on another security, index or exchange rate. The Fund may use
derivatives to hedge various market risks or to increase the Fund's income or
gain. [LOGO]
The Fund may change any of these investment policies (including its investment
objective) without shareholder approval.
The Funds' main investment risks
All mutual funds carry a certain amount of risk. You may lose money on your
investment in the Fund. Here are some specific risks of investing in the Global
Technology Fund.
The Fund may not achieve its objective if the advisers' expectations regarding
particular securities or markets are not met.
The value of shares of the Fund will be influenced by conditions in the stock
market as well as the performance of companies selected for the Fund's
portfolio.
The Fund's focus on stocks in the technology sector makes it more susceptible
to factors affecting that sector. Investing in technology companies exposes the
Fund to special risks. For example, rapid advances in technology might cause
existing products to become obsolete or have relatively short product cycles,
and the Fund's returns could suffer to
3
<PAGE>
CHASE VISTA H & Q GLOBAL TECHNOLOGY FUND
the extent it holds an affected company's shares. Competition among technology
companies may result in increasingly aggressive pricing of their products and
services, which may affect the profitability of companies in the Fund's
portfolio. Companies in a number of technology industries are also subject to
more governmental regulations and approval processes than many other
industries. This may affect a company's overall profitability and cause its
stock price to be more volatile. Additionally, technology companies are
dependent upon consumer and business acceptance as new technologies evolve.
The Fund may not achieve its objective if securities which the advisers believe
are undervalued do not appreciate as much as the advisers anticipate or if
companies which the advisers believe will experience earnings growth do not
grow as expected.
Investments in foreign securities may be riskier than investments in the U.S.
Because foreign securities are usually denominated in foreign currencies, the
value of the Fund's portfolio may be influenced by currency exchange rates and
exchange control regulations. Foreign securities may be affected by political,
social and economic instability. Some securities may be harder to trade without
incurring a loss and may be difficult to convert into cash. There may be less
public information available, differing settlement procedures, or regulations
and standards that don't match U.S. standards. Some countries may nationalize or
expropriate assets or impose exchange controls. These risks increase when
investing in issuers located in developing countries. The securities of
mid-capitalization and small-capitalization companies may trade less frequently
and in smaller volumes than securities of larger, more established companies.
[SIDE BAR]
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 or guaranteed by the
Federal Deposit Insurance
Corporation, Federal Reserve Board
or any other government agency.
[END SIDE BAR]
4
<PAGE>
As a result, share price changes may be more sudden or more erratic. Mid-sized
and small-sized companies may have limited product lines, markets or financial
resources, and they may depend on a small management group. As a result, the
value of your investment is likely to fluctuate more dramatically than an
investment in a fund which invests mostly in larger companies.
The value of debt securities tends to fall when prevailing interest rates rise.
Such a drop in value could be worse if the Fund invests a larger portion of its
assets in debt securities with longer maturities. That's because long-term debt
securities are more sensitive to interest rate changes than other fixed-income
securities. Note that conversely the value of fixed income investments tends to
increase when prevailing interest rates fall.
High yield debt securities may carry greater risks than securities which have
higher credit ratings, including a risk of default. The yields of lower-rated
securities will more up and down over time. The credit rating of a high yield
security evaluates the ability of the issuer to make principal and interest or
dividend payments; if does not necessarily address its market value risk.
Ratings and market value may change, positively or negatively, from time to
time to refect new developments regarding the issuer. However, since ratings
may not always change quickly and frequently enough to reflect these new
developments, the advisers perform their own analysis of high yield issuers.
Because of this, the Fund's performance may depend more on subjective credit
analysis than other funds which invest in investment-grade securities.
Leveraging is a speculative technique which may expose the Fund to greater risk
and increase its costs. Increases and decreases in the value of the Fund's
portfolio will be more dramatic when the Fund is leveraging. The
5
<PAGE>
CHASE VISTA H & Q GLOBAL TECHNOLOGY FUND
Fund will also have to pay interest on its borrowing, reducing the Fund's
return. In addition, the Fund might be forced to sell portfolio securities when
it would normally keep them in order to make payments.
In early 1999, the European Monetary Union implemented a new currency called
the "euro." It is possible that the euro could increase volatility in financial
markets, which could have a negative effect on the value of shares of the Fund.
The market value of convertible securities tends to decline as interest rates
increase, and increase as interest rates decline. Their value also tends to
change whenever the market value of underlying common or preferred stock
fluctuates.
If the Fund invests a substantial portion of its assets in money market
instruments, repurchase agreements and U.S. Government debt, including where
the Fund is investing for temporary defensive purposes, it could reduce the
Fund's potential return.
Derivatives may be more risky than other types of investments because they may
respond more to changes in economic conditions than other types of investments.
If they are used for non-hedging purposes, they could cause losses that exceed
the Fund's original investment.
The Fund is not diversified. It may invest a greater percentage of its assets
in technology companies than a diversified fund would. That makes the value of
its shares more sensitive to economic problems among those issuing securities.
The Fund may have to sell stocks at a loss in order to fund shareholder
redemptions. Redemptions are more likely to occur when prices of technology
companies are declining, and prices of these securities may fall more rapidly
than those of other securities. [LOGO]
6
<PAGE>
Fees and expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
SHAREHOLDERS FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
<TABLE>
<CAPTION>
MAXIMUM SALES CHARGE MAXIMUM DEFERRED SALES
(LOAD) WHEN YOU BUY CHARGE (LOAD) SHOWN AS
SHARES, SHOWN AS % OF THE LOWER OF ORIGINAL PURCHASE
OFFERING PRICE(1) PRICE OR REDEMPTION PROCEEDS
- --------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES 5.75% NONE
- --------------------------------------------------------------------------------
CLASS B SHARES NONE 5.00%
- --------------------------------------------------------------------------------
CLASS C SHARES NONE 1.00%
- --------------------------------------------------------------------------------
</TABLE>
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS)*
<TABLE>
<CAPTION>
TOTAL ANNUAL
MANAGEMENT DISTRIBUTION OTHER FUND OPERATING
CLASS OF SHARES FEE (12B-1) FEES EXPENSES EXPENSES
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A 0.75% 0.25% 0.85% 1.85%
- --------------------------------------------------------------------------------
CLASS B 0.75% 0.75% 0.85% 2.35%
- --------------------------------------------------------------------------------
CLASS C 0.75% 0.75% 0.85% 2.35%
- --------------------------------------------------------------------------------
</TABLE>
(1)The offering price is the net asset value of the shares purchased plus any
sales charge.
* The table is based on estimated expenses for the current fiscal year.
The table does not reflect charges or credits which you might incur if you
invest through a financial institution.
7
<PAGE>
CHASE VISTA H & Q GLOBAL TECHNOLOGY FUND
EXAMPLE This example helps you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. The example assumes:
o you invest $10,000
o you sell all your shares at the end of the period
o your investment has a 5% return each year, and
o the Fund's operating expenses remain the same as shown above.
Although your actual costs may be higher or lower, based on these assumptions:
IF YOU SELL YOUR SHARES YOUR COSTS WOULD BE:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES* $752 $1,123 $1,518 $2,619
- --------------------------------------------------------------------------------
CLASS B SHARES** $738 $1,033 $1,455 $2,562***
- --------------------------------------------------------------------------------
CLASS C SHARES** $338 $ 733 $1,255 $2,686
- --------------------------------------------------------------------------------
</TABLE>
IF YOU DON'T SELL YOUR SHARES YOUR COSTS WOULD BE:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS B SHARES $238 $733 $1,255 $2,562***
CLASS C SHARES $238 $733 $1,255 $2,686
</TABLE>
*Assumes sales charge is deducted when shares are purchased.
**Assumes applicable deferred sales charge is deducted when shares are sold.
***Reflects conversion of Class B shares to Class A shares after they have been
owned for eight years.
8
<PAGE>
FUND'S INVESTMENT ADVISER
The Chase Manhattan Bank (Chase) is the investment adviser to the Fund. Chase
is a wholly owned subsidiary of The Chase Manhattan Corporation (CMC), a bank
holding company. Chase provides the Fund with investment advice and
supervision. Chase and its predecessors have more than a century of money
management experience. Chase is located at 270 Park Avenue, New York, NY 10017.
Chase is entitled to receive an annual management fee at the rate of 0.75% of
the average daily net assets.
Chase Asset Management, Inc. (CAM) is a sub-adviser to the Fund. It makes the
day-to-day investment decisions for the Fund. Chase pays CAM a sub-advisory fee
for its services. CAM is a wholly-owned subsidiary of Chase. CAM provides
discretionary investment advice to institutional clients and is located at 1211
Avenue of the Americas, New York, New York 10036.
Chase H & Q provides significant investment research to CAM for the Fund. It is
a wholly-owned subsidiary of The Chase Manhattan Corporation. Chase H & Q is
located at One Bush Street, San Francisco, CA 94104.
[PORTFOLIO MANAGER TO COME]
9
<PAGE>
HOW YOUR ACCOUNT WORKS
About sales charges
There's a sales charge to buy shares in the Fund. There are also ongoing
charges that all investors pay as long as they own their shares, as explained
later.
You have a choice of three different kinds of charges. Class A shares have a
charge you pay when you invest. Class B shares have a deferred sales charge.
You don't pay any charge when you buy the Class B shares, but you may have to
pay a charge when you sell them, depending on how long you hold them. Class C
shares also have a deferred sales charge you may have to pay if you sell your
shares within one year of buying them.
There are a number of plans and special discounts which can decrease or even
eliminate these charges.
This section explains how the three sales charges work.
10
<PAGE>
CLASS A SHARES
The initial sales charge is deducted directly from the money you invest. As the
table shows, the charge is lower the more you invest. The public offering price
of Class A shares is the net asset value plus the initial sales charge. Net
asset value is the value of everything a Fund owns, minus everything it owes,
divided by the number of shares held by investors. The Fund receives the net
asset value.
<TABLE>
<CAPTION>
TOTAL SALES CHARGE
AS % OF THE
OFFERING AS % OF
AMOUNT OF PRICE NET AMOUNT
INVESTMENT PER SHARE INVESTED
- -----------------------------------------
<S> <C> <C>
LESS THAN
$100,000 5.75% 6.10%
- -----------------------------------------
$100,000
BUT UNDER
$250,000 3.75% 3.90%
- -----------------------------------------
$250,000
BUT UNDER
$500,000 2.50% 2.56%
- -----------------------------------------
$500,000
BUT UNDER
$1 MILLION 2.00% 2.04%
- -----------------------------------------
</TABLE>
There is no sales charge for investments of $1 million or more.
CLASS B SHARES
The deferred sales charge is deducted directly from your assets when you sell
your shares. It's a percentage of the original purchase price or the current
value of the shares, whichever is lower. As the table shows, the deferred sales
charge gets lower the longer you hold the shares and disappears altogether
after six years. Class B shares automatically convert into Class A shares at
the beginning of the ninth year after you bought them.
<TABLE>
<CAPTION>
YEAR DEFERRED SALES CHARGE
- ---------------------------------------
<S> <C>
1 5%
- ---------------------------------------
2 4%
- ---------------------------------------
3 3%
- ---------------------------------------
4 3%
- ---------------------------------------
5 2%
- ---------------------------------------
6 1%
- ---------------------------------------
7 None
- ---------------------------------------
8 None
- ---------------------------------------
</TABLE>
We calculate the deferred sales charge from the month you buy your shares. We
always sell the shares with the lowest deferred sales charge first. Shares
acquired by reinvestment distribution can be sold without a deferred sales
charge.
CLASS C SHARES
The deferred sales charge is deducted directly from your assets when you sell
your shares. It's equal to 1% of the original purchase price or the current
value of the shares, whichever is lower. The deferred sales charge on Class C
shares disappears altogether after one year. We calculate the deferred sales
charge from the month you buy your charges. We always sell the shares with the
lowest deferred sales charge first.
Like Class B shares, Class C shares have higher combined distribution and
service fees. Unlike Class B shares, Class C shares are never converted to
Class A shares. That means you keep paying the higher service and distribution
fees as long as you hold them. Over the long term, this can add up to higher
total fees than either Class A or Class B shares.
11
<PAGE>
HOW YOUR ACCOUNT WORKS
GENERAL
Vista Fund Distributors Inc. (VFD) is the distributor for the Fund. It's a
subsidiary of BISYS Group, Inc. and is not affiliated with Chase. The Fund has
adopted Rule 12b-1 distribution plans under which it pays annual distribution
fees of up to 0.25% of the average daily net assets attributed to Class A
shares, up to 0.75% of the average daily net assets attributed to Class B
shares and up to 0.75% of the average daily net assets attributed to Class C
shares.
This payment covers such things as compensation for services provided by
broker-dealers and expenses connected to the sale of shares. Payments are not
tied to actual expenses incurred.
Because 12b-1 expenses are paid out of the Fund's assets on an ongoing basis,
over time these fees will increase the cost of your investment and may cost you
more than other types of sales charges.
WHICH CLASS OF SHARES IS BEST?
Your decision about which class of shares to buy depends on a number of
factors, including the amount you're buying and how long you intend to hold
your shares. If you have no plans to sell your shares for at least six years
and you don't want to pay an up-front sales charge, you may consider buying
Class B shares.
Class A shares may be a good choice if you qualify to have the sales charge
reduced or eliminated. In almost all cases, if you plan to buy $250,000 of
shares or more, Class A is the most economical choice.
Class C shares may be best if you prefer not to pay an initial sales charge and
you're not sure how long you intend to hold your investment.
You should also consider the distribution and service fees, which are lower for
Class A shares. These fees appear in the table called Annual Fund Operating
Expenses (expenses that are deducted from Fund assets) for the Fund.
Your investment representative may be able to advise you about the best class
of shares for you. [LOGO]
Buying Fund shares
You can buy shares three ways:
Through your investment representative
Tell your representative that you want to buy shares of the Fund and he or she
will contact us. Your representative may charge you a fee and may offer
additional services, such as special purchase and redemption programs. Some
representatives charge a single fee that covers all services. Your
representative may impose different minimum investments and earlier deadlines
to buy and sell shares.
Through the Chase Vista Funds Service Center
Call 1-800-34-VISTA
12
<PAGE>
Or
Complete the application form and mail it along with a check for the amount you
want to invest to:
Chase Vista Funds Service Center,
P.O. Box 219392
Kansas City, MO 64121-9392
Through a Systematic Investment Plan
You can make regular automatic purchases of at least $100. See more on the
Systematic Investment Plan later in this document.
--------------------------
Whether you choose Class A, Class B or Class C shares, the price of the shares
is based on the net asset value per share (NAV). NAV is the value of everything
the Fund owns, minus everything it owes, divided by the number of shares held
by investors. You'll pay the public offering price, which is based on the next
NAV calculated after the Chase Vista Funds Service Center accepts your
instructions. The Fund calculates its NAV once each day at the close of regular
trading on the New York Stock Exchange. The Fund generally values its assets at
their market value but may use fair value if market prices are unavailable. The
Chase Vista Funds Service Center will not accept your order until it is in
proper form. An order is in proper form only after payment is converted into
federal funds.
The Fund may invest in securities which are primarily listed on foreign
exchanges and these exchanges may trade on Saturdays or other United States
holidays on which the Fund does not price. As a result, the Fund's portfolio
may trade and its NAV may fluctuate significantly on days when the investor has
no access to the Fund.
The Chase Vista Funds Service Center accepts purchase orders on any business
day that the New York Stock Exchange is open. Normally, if the Chase Vista
Funds Service Center receives your order in proper form by the close of regular
trading on the New York Stock Exchange, we'll process your order at that day's
price.
You must provide a Social Security Number or Taxpayer Identification Number
when you open an account. The Fund has the right to refuse any purchase order
or to stop offering shares for sale at any time.
TO OPEN AN ACCOUNT, BUY OR SELL SHARES OR GET FUND INFORMATION, CALL:
- ---------------------------------------
THE CHASE VISTA FUNDS SERVICE CENTER
- ---------------------------------------
1-800-34-VISTA
- ---------------------------------------
MINIMUM INVESTMENTS
<TABLE>
<CAPTION>
INITIAL ADDITIONAL
TYPE OF ACCOUNT INVESTMENT INVESTMENTS
- -----------------------------------------------
<S> <C> <C>
REGULAR
ACCOUNT $2,500 $100
- -----------------------------------------------
SYSTEMATIC
INVESTMENT
PLAN $1,000 $100
- -----------------------------------------------
IRAS $1,000 $100
- -----------------------------------------------
SEP-IRAS $1,000 $100
- -----------------------------------------------
EDUCATION
IRAS $ 500 $100
- -----------------------------------------------
</TABLE>
Make your check out to Chase Vista Funds in U.S. dollars. We won't accept
credit cards, cash, or checks from a third party. You cannot sell your shares
until your check has
13
<PAGE>
HOW YOUR ACCOUNT WORKS
cleared, which could take more than 15 calendar days. If you buy through an
Automated Clearing House, you can't sell your shares until the payment clears.
That could take more than seven business days.
Your purchase will be canceled if your check doesn't clear and you'll be
responsible for any expenses and losses to the Fund. Orders by wire will be
cancelled if the Chase Vista Funds Service Center doesn't receive payment by
4:00 p.m. Eastern time on the day you buy.
If you're planning to exchange, sell or transfer shares to another person
shortly after buying the shares, you should pay by certified check to avoid
delays. The Fund will not issue certificates for Class A or Class C shares
unless you request them and they will not issue certificates for Class B
shares.
Selling Fund shares
You can sell your shares three ways:
Through your investment representative
Tell your representative that you want to sell Fund shares. He or she will send
the necessary documents to the Chase Vista Funds Service Center. Your
representative might charge you for this service.
Through the Chase Vista Funds Service Center
Call 1-800-34-VISTA. We will mail you a check or send the proceeds via
electronic transfer or wire. You cannot sell by phone if you have changed your
address of record within the previous 30 days. If you sell $25,000 or more
worth of Fund shares by phone, we'll send it by wire only to a bank account on
our records.
We charge $10 for each transaction by wire.
Or
Send a signed letter with your instructions to:
Chase Vista Funds Service Center,
P.O. Box 219392
Kansas City, MO 64121-9392
Through a Systematic
Withdrawal Plan
You can automatically sell as little as $50 worth of shares. See Shareholder
Services for details.
--------------------------
You can sell your shares on any day the Chase Vista Funds Service Center is
accepting purchase orders. You'll receive the next NAV calculated after the
Chase Vista Funds Service Center accepts your order, less any applicable sales
charges.
Under normal circumstances, if the Chase Vista Funds Service Center receives
your order before the close of regular trading on the New York Stock Exchange,
the Fund will send you the proceeds the next business day. We won't accept an
order to sell shares if the Fund hasn't collected your payment for the shares.
The Fund may stop accepting orders to sell and may postpone payments for more
than seven days, as federal securities laws permit.
You'll need to have signatures guaranteed for all registered owners or their
legal representative if:
14
<PAGE>
o you want to sell shares with a net asset value of $100,000 or more
o you want your payment sent to an address other than the one we have in our
records.
We may also need additional documents or a letter from a surviving joint owner
before selling the shares. Contact the Chase Vista Funds Service Center for
more details.
Exchanging Fund 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 you buy your
shares. For tax purposes, an exchange is treated as a sale of Fund shares. This
will generally result in a capital gain or loss to you.
You can exchange your shares three ways:
Through your investment representative
Tell your representative which Funds you want to exchange from and to. He or
she will send the necessary documents to the Chase Vista Funds Service Center.
Your representative might charge you for this service.
Through the Chase Vista Funds Service Center
Call 1-800-34-VISTA to ask for details.
Through a Systematic
Exchange Plan
You can automatically exchange money from one Chase Vista account to another of
the same class. Call the Chase Vista Funds Service Center for details.
--------------------------
If you exchange Class B shares of the Fund for Class B shares of another Chase
Vista Fund, or Class C for Class C, you will not pay a deferred sales charge
until you sell the shares of the other Fund. The amount of deferred sales
charge will be based on when you bought the original shares, not when you made
the exchange. Carefully read the prospectus of the Fund you want to buy before
making an exchange. You'll need to meet any minimum investment requirements.
You should not exchange shares as means of short-term trading as this could
increase management cost and affect all shareholders. We reserve the right to
limit the number of exchanges or to refuse an exchange. We may also terminate
this privilege. We charge an administration fee of $5 for each exchange if you
make more than 10 exchanges in a year or three in a quarter. See the Statement
of Additional Information to find out more about the exchange privilege. [LOGO]
Other information
concerning the Fund
We may close your account if the balance falls below $500 because you've sold
shares. We may also close the account if you are in the Systematic Investment
Plan and fail to meet investment minimums over a 12-month period. We'll give
you 60 days notice before closing your account.
Unless you indicate otherwise on your account application, we are authorized to
act on redemption and transfer instructions received by phone. If someone
trades on your account by
15
<PAGE>
HOW YOUR ACCOUNT WORKS
phone, we'll ask that person to confirm your account registration and address
to make sure they match those you provided us. If they give us the correct
information, we are generally authorized to follow that person's instructions.
We'll take all reasonable precautions to confirm that the instructions are
genuine. Investors agree that they will not hold the Fund liable for any loss
or expenses from any sales request, if the Fund takes reasonable precautions.
The Fund will be liable for any losses to you from an unauthorized sale or
fraud against you if we do not follow reasonable procedures.
You may not always reach the Chase Vista Funds Service Center by telephone.
This may be true at times of unusual market changes and shareholder activity.
You can mail us your instructions or contact your investment representative or
agent. We may modify or cancel the sale of shares by phone without notice.
The Fund has agreements with certain shareholder servicing agents (including
Chase) under which the shareholder servicing agents have agreed to provide
certain support services to their customers. For performing these services,
each shareholder servicing agent receives an annual fee of up to 0.25% of the
average daily net assets of the Class A, Class B and Class C shares of the Fund
held by investors by the shareholder servicing agent.
Chase and/or VFD may, at their own expense, make additional payments to certain
selected dealers or other shareholder servicing agents for performing
administrative services for their customers. The amount 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 those shareholder servicing agents.
The Fund may issue multiple classes of shares. This prospectus relates only to
Class A, Class B and Class C shares of the Fund. Each class may have different
requirements for who may invest, and may have different sales charges and
expense levels. A person who gets compensated for selling Fund shares may
receive a different amount for each class.
Chase and its affiliates and the Fund and their affiliates, agents and
subagents may share information about shareholders and their accounts with each
other and with others unless this sharing is prohibited by contract or by law.
The information can be used for a variety of purposes, including offering
investment and insurance products to shareholders. [LOGO]
Distributions and taxes
The Fund can earn income and can realize capital gain. The Fund deducts any
expenses then pay out these earnings to shareholders as distributions.
The Fund will distribute any net investment income at least semi-annually. Net
capital gain is distributed annually. You have three options for your
distributions. You may:
o reinvest all of them in additional Fund shares without a sales charge;
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o take distributions of net investment income in cash or as a deposit in a
pre-assigned bank account and reinvest distributions of net capital gain
in additional shares; or
o take all distributions in cash or as a deposit in a pre-assigned bank
account.
If you don't select an option when you open your account, we'll reinvest all
distributions. If your distributions are reinvested, they will be in the form
of shares of the same class. The taxation of dividends won't be affected by the
form in which you receive them.
Dividends of net investment income are usually taxable as ordinary income at
the federal, state and local levels. The state or municipality where you live
may not charge you state and local taxes on tax-exempt interest earned on
certain bonds. Dividends earned on bonds issued by the U.S. government and its
agencies may also be exempt from some types of state and local taxes.
If you receive distributions of net capital gain, the tax rate will be based on
how long a Fund held a particular asset, not on how long you have owned your
shares. If you buy shares just before a distribution, you will pay tax on the
entire amount of the taxable distribution you receive, even though the NAV will
be higher on that date because it includes the distribution amount.
The Fund expects that its distributions will consist primarily of capital
gains.
Investment income received by the Fund from sources in foreign countries may be
subject to foreign taxes withheld at the source. If more than 50% of the Fund's
assets at the close of its taxable year will be in securities of foreign
corporations, the Fund may elect to "pass through" to its shareholder the
foreign taxes that it paid.
Early in each calendar year, the Fund will send you a notice showing the amount
of distributions you received in the preceding year and the tax status of those
distributions.
The above is a general summary of tax implications of investing in the Fund.
Please consult your tax adviser to see how investing in the Fund will affect
your own tax situation. [LOGO]
17
<PAGE>
SHAREHOLDER SERVICES
SYSTEMATIC INVESTMENT PLAN
You can regularly invest $100 or more in the first or third week of any month.
The money is automatically deducted from your checking or savings account.
You can set up a plan when you open an account by completing the appropriate
section of the application. Current shareholders can join by sending a signed
letter and a deposit slip or void check to the Chase Vista Funds Service
Center. Call 1-800-34-VISTA for complete instructions.
SYSTEMATIC WITHDRAWAL PLAN
You can make regular withdrawals of $50 or more ($100 or more for Class B
accounts). You can have automatic withdrawals made monthly, quarterly or
semiannually. Your account must contain at least $5,000 to start the plan. Call
1-800-34-VISTA for complete instructions.
SYSTEMATIC EXCHANGE
You can transfer assets automatically from one Vista account to another on a
regular basis. It's a free service.
FREE EXCHANGE PRIVILEGE
You can exchange money between Chase Vista Funds in the same class without
charge. This allows you to adjust your investments as your objectives change.
REINSTATEMENT PRIVILEGE
You can buy back Class A shares you sell, without paying a sales charge, as
long as you make a request in writing within 90 days of the sale. If you sell
Class B shares or Class C on which you've paid a deferred sales charge, you can
use the proceeds to buy Class A shares without a sales charge. You must buy the
class A shares within 90 days of selling the Class B or Class C shares. [LOGO]
18
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What the terms mean
DEBT SECURITIES: securities used by issuers, such as governmental entities
and corporations, to borrow money. The issuer usually pays a fixed, variable or
floating rate of interest and repays the amount borrowed at the maturity date
of the security. However, if a borrower issues a zero coupon debt security, it
does not make regular interest payments.
DEPOSITARY RECEIPTS: instruments which are typically issued by financial
institutions and which represent ownership of securities of foreign
corporations. Depositary receipts are usually designed for use on U.S. and
European securities exchanges.
DISTRIBUTION FEE: covers the cost of the distribution system used to sell
shares to the public.
FUNDAMENTAL RESEARCH: method which concentrates on "fundamental" information
about an issuer such as its financial statements, history, management, etc.
GROWTH APPROACH: approach which focuses on identifying securities of companies
whose earnings growth potential appears to the manager to be greater than the
market in general and whose growth in revenue is expected to continue for an
extended period.
LIQUIDITY: the ability to easily convert investments into cash without losing a
significant amount of money in the process.
MANAGEMENT FEE: a fee paid to the investment adviser to manage the Fund and
make decisions about buying and selling the Fund's investments.
MATURITY: the length of time until the issuer who sold a debt security must pay
back the principal amount of the debt.
OTHER EXPENSES: miscellaneous items, including transfer agency, administration,
shareholder servicing, custody and registration fees.
REPURCHASE AGREEMENTS: a type of short-term investment in which a dealer sells
securities to the Fund and agrees to buy them back later at a set price. The
price includes interest. In effect, the dealer is borrowing the Fund's money
for a short time, using the securities as collateral.
SHAREHOLDER SERVICE FEE: a fee to cover the cost of paying shareholder
servicing agents to provide certain support services for your account.
VALUE APPROACH: approach which focuses on identifying securities that the
advisers believe are undervalued by the market as measured by certain financial
formulas. [LOGO]
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HOW TO REACH US
More information
You'll find more information about the Fund in the following documents:
ANNUAL AND SEMI-ANNUAL REPORTS
Our annual and semi-annual reports contain more information about the Fund's
investments and performance. The annual report also includes details about the
market conditions and investment strategies that had a significant effect on
the Fund's performance during the last fiscal year.
STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI contains more detailed information about the Fund and its policies.
It's incorporated by reference into this prospectus. That means, by law, it's
considered to be part of this prospectus.
You can get a free copy of these documents and other information, or ask us any
questions, by calling us at 1-800-34-VISTA or writing to:
Chase Vista Fund Service Center
P.O. Box 219392
Kansas City, MO 64121-9392
If you buy your shares through The Chase Manhattan Bank or another institution,
you should contact that institution directly for more information. You can also
find information on-line at www.chasevista.com on the internet.
You can write or e-mail the SEC's Public Reference Room and ask them to mail
you information about the Fund, including the SAI. They'll charge you a copying
fee for this service. You can also visit the Public Reference Section and copy
the documents while you're there.
Public Reference Section of the SEC
Washington, DC 20549-0102.
1-202-942-8090
E-mail: [email protected]
Reports, a copy of the SAI and other information about the Fund is also
available on the SEC's website at http://www.sec.gov.
The Fund's Investment Company Act File No. is 811-5151
(C) 2000 The Chase Manhattan Corporation. All Rights Reserved. xxx 2000
[CHASE VISTA FUNDS(SM) LOGO]
Chase Vista Funds Fulfillment Center
393 Manley Street
West Bridgewater, MA 02379-1039
<PAGE>
[CHASE VISTA FUNDS LOGO]
STATEMENT OF
ADDITIONAL INFORMATION
July , 2000
GLOBAL TECHNOLOGY FUND
1211 Avenue of the Americas, 41st 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 Fund. This Statement of Additional
Information should be read in conjunction with the Prospectus offering shares of
Global Technology Fund. Copies of the Prospectus may be obtained by an investor
without charge by contacting Vista Fund Distributors, Inc. ("VFD"), the Fund's
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-200
<PAGE>
'
<TABLE>
<CAPTION>
Table of Contents Page
- ------------------------------------------------------------------------------------------
<S> <C>
The Fund ............................................................................. 3
Investment Policies and Restrictions ................................................. 3
Performance Information .............................................................. 20
Determination of Net Asset Value ..................................................... 22
Purchases, Redemptions and Exchanges ................................................. 23
Distributions; Tax Matters ........................................................... 27
Management of the Trust and the Fund ................................................. 33
Independent Accountants .............................................................. 43
Certain Regulatory Matters ........................................................... 44
General Information .................................................................. 44
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
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THE FUND
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
22 separate series (the "Funds"). Certain of the Funds are diversified and other
Funds are non-diversified, as such term is defined in the Investment Company Act
of 1940, as amended (the "1940 Act"). The shares of the Funds are collectively
referred to in this Statement of Additional Information as the "Shares."
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Global Technology Fund (the
"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 Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Chase Manhattan Bank ("Chase") is
the investment adviser for the Funds. Chase also serves as the administrator of
the Trust, including the Funds . A majority of the Trustees of the Trust are not
affiliated with the investment adviser or sub-advisers. Chase Asset Management,
Inc., ("CAM") is a sub-adviser to the Fund and makes day-to-day investment
deceisions for the Fund. CAM is a wholly-owned subsidiary of Chase.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectus sets forth the investment policies of the Fund. The
following information supplements and should be read in conjunction with the
related sections of the 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. The Fund may invest in 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
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
3
<PAGE>
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
the Fund was required to liquidate any of them, it might not be able to do so
advantageously; accordingly, the Fund 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 the Fund 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.
These investment risks may involve, among other considerations, risks relating
to future political and economic developments, more limited liquidity of foreign
obligations than comparable domestic obligations, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization of
foreign assets and the possible establishment of exchange controls or other
restrictions. There also may be less publicly available information concerning
foreign issuers, difficulties in obtaining or enforcing a judgment against a
foreign issuer (including branches) and differences in accounting, auditing and
financial reporting standards and practices from those applicable to U.S.
issuers. In addition, foreign banks are also not subject to regulations
comparable to U.S. banking regulations. Certain national policies may also
impede the investment opportunities of the Fund in other ways, including
restrictions on investing in issuers or industries deemed sensitive to relevant
national interests.
Foreign Securities. For purposes of the Fund's investment policies, an
issuer of a security may be deemed to be located in a particular country if (i)
the principal trading market for the security is in such country,
4
<PAGE>
(ii) the issuer is organized under the laws of such country or (iii) the issuer
derives at least 50 percent of its revenues or profits from such country or has
at least 50 percent of its assets situated in such country. The Fund may invest
up to 35% of its assets in debt securities of foreign or U.S. issuers.
Depositary Receipts. The Fund may invest its assets in securities of
multinational companies in the form of American Depositary Receipts or other
similar securities representing securities of foreign issuers, such as European
Depositary Receipts, Global Depositary Receipts and 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 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.
Commercial Paper. Commercial paper consists of short-term (usually from 1
to 270 days) unse- cured 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.
Supranational Obligations. The Fund may invest in 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.
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.
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 the Fund and increase its
brokerage and other transaction expenses.
Repurchase Agreements. The Fund may enter into repurchase agreements.
Repurchase agreements are agreements to purchase and resell securities at an
agreed-upon price and time. The Fund 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
is permitted to invest. Under the terms of a typical repurchase agreement, the
Fund would acquire an underlying instru-
5
<PAGE>
ment for a relatively short period (usually not more than one week) subject to
an obligation of the seller to repurchase the instrument and the Fund to resell
the instrument at a fixed price and time, thereby determining the yield during
the Fund's holding period. This procedure results in a fixed rate of return
insulated from market fluctuations during such period. A repurchase agreement is
subject to the risk that the seller may fail to repurchase the security.
Repurchase agreements are considered under the 1940 Act to be loans
collateralized by the underlying securities. All repurchase agreements entered
into by the Fund will be fully collateralized at all times during the period of
the agreement in that the value of the underlying security will be at least
equal to 100% of the amount of the loan, including the accrued interest thereon,
and the Fund or its custodian or sub-custodian will have possession of the
collateral, which the Board of Trustees believes will give it a valid, perfected
security interest in the collateral. Whether a repurchase agreement is the
purchase and sale of a security or a collateralized loan has not been
conclusively established. This might become an issue in the event of the
bankruptcy of the other party to the transaction. In the event of default by the
seller under a repurchase agreement construed to be a collateralized loan, the
underlying securities would not be owned by the Fund, but would only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
the Fund may suffer time delays and incur costs in connection with the
disposition of the collateral. The Board of Trustees believes that the
collateral underlying repurchase agreements may be more susceptible to claims of
the seller's creditors than would be the case with securities owned by the Fund.
Repurchase agreements maturing in more than seven days are treated as illiquid
for purposes of the Funds restrictions on purchases of illiquid securities.
Repurchase agreements are also subject to the risks described below with respect
to stand-by commitments.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow money
from banks for temporary or short-term purposes. The Fund may also borrow up to
10% of its total assets (including the amount borrowed) to buy additional
securities, known as "leveraging." The Fund may enter into reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held by
the Fund with an agreement to repurchase the securities at an agreed upon price
and date. 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. 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 is obliged to purchase the
securities.
Forward Commitments. The Fund may purchase securities on a forward
commitment basis. In order to invest the 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 Fund's assets equal
to the amount of the purchase be held aside or segregated to be used to pay for
the commitment, a separate account of the Fund consisting of cash, cash
equivalents or high quality debt securities equal to the amount of the Fund's
commitments securities will be established at the Fund's custodian bank. For the
purpose of determining the adequacy of the securities in the account, the
deposited securities will be valued at market value. If the market value of such
securities declines, additional cash, cash equivalents or highly liquid
securities will be placed in the account daily so that the value of the account
will equal the amount of such commitments by the Fund.
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
6
<PAGE>
purchased on a forward commitment basis and the securities held in the Fund'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 Fund will meet its obligations
from then available cash flow, sale of securities held in the separate account,
sale of other securities or, although it would not normally expect to do so,
from sale of the forward commitment securities themselves (which may have a
value greater or lesser than the Fund's payment obligations). The sale of
securities to meet such obligations may result in the realization of capital
gains or losses. Purchasing securities on a forward commitment basis can also
involve the risk of default by the other party on its obligation, delaying or
preventing the Fund from recovering the collateral or completing the
transaction.
Investment Grade Debt Securities. The Fund may invest in investment grade
debt securities. Investment grade debt securities are securities that are rated
in the category BBB or higher by Standard & Poor's Corporation ("S&P"), Baa or
higher by Moody's Investors Service, Inc. ("Moody's"), rated at an equivalent
level by another national rating organization or, if unrated, determined by the
advisers to be of comparable quality.
Low Grade Debt Securities. The Fund may invest in lower-rated high yield
securities. Lower-rated securities are those which are rated Ba or lower by
Moody's or at an equivalent level by another national rating organization.
Lower-rated securities also include unrated securities which are found to be of
comparable qualities.
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. The risk is greater when the period to maturity is
longer. The Fund may invest up to 20 percent of its total assets in stripped
obligations where the underlying obligation is backed by the full faith and
credit of the U.S. Government.
Indexed Investments. The Fund 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.
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, the Fund 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
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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 the Fund 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 Fund's purchases and sales of Rule 144A securities and
Section 4(2) paper.
Stand-By Commitments. The Fund may utilize stand-by commitments in
securities sales transactions. In a put transaction, the Fund 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 the Fund 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 the
Fund and that the maturity of the underlying security will generally be
different from that of the commitment. A put transaction will increase the cost
of the underlying security and consequently reduce the available yield.
Securities Loans. To the extent specified in its Prospectus, the Fund is
permitted to lend its securities to broker-dealers and other institutional
investors in order to generate additional income. Such loans of portfolio
securities may not exceed 30% of the value of the Fund's total assets. In
connection with such loans, the Fund will receive collateral consisting of cash,
cash equivalents, U.S. Government securities or irrevocable letters of credit
issued by financial institutions. Such collateral will be maintained at all
times in an amount equal to at least 100% of the current market value plus
accrued interest of the securities loaned. The Fund can increase its income
through the investment of such collateral. The Fund continues to be entitled to
the interest payable or any dividend-equivalent payments received on a loaned
security and, in addition, to receive interest on the amount of the loan.
However, the receipt of any dividend-equivalent payments by the Fund on a loaned
security from the borrower will not qualify for the dividends-received
deduction. Such loans will be terminable at any time upon specified notice. The
Fund might experience risk of loss if the institutions with which it has engaged
in portfolio loan transactions breach their agreements with the Fund. The risks
in lending portfolio securities, as with other extensions of secured credit,
consist of possible delays in receiving additional collateral or in the recovery
of the securities or possible loss of rights in the collateral should the
borrower experience financial difficulty. Loans will be made only to firms
deemed by the 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.
Other Investment Companies. Apart from being able to invest all of their
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.
For purposes of this restriction, a Mauritius Company will not be considered an
investment company. Additional fees may be charged by other investment
companies.
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Additional Policies Regarding Derivative and Related Transactions
Introduction. As explained more fully below, the Fund may employ derivative
and related instruments as tools in the management of portfolio assets. Put
briefly, a "derivative" instrument may be considered a security or other
instrument which derives its value from the value or performance of other
instruments or assets, interest or currency exchange rates, or indexes. For
instance, derivatives include futures, options, forward contracts, structured
notes and various over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways: First,
to reduce risk by hedging (offsetting) an investment position. Second, to
substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for the Fund.
The Fund may invest its assets in derivative and related instruments
subject only to the Fund's investment objective and policies and the requirement
that the Fund maintain segregated accounts consisting of liquid assets, such as
cash, U.S. Government securities, or other high-grade debt obligations (or, as
permitted by applicable regulation, enter into certain offsetting positions) to
cover its obligations under such instruments with respect to positions where
there is no underlying portfolio asset so as to avoid leveraging the Fund.
The value of some derivative or similar instruments in which the Fund may
invest may be particularly sensitive to changes in prevailing interest rates or
other economic factors, and--like other investments of the Fund--the ability of
the Fund to successfully utilize these instruments may depend in part upon the
ability of the 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 Fund could be exposed to the risk of a loss. The Funds 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 may employ along with risks or special attributes
associated with them. This discussion is intended to supplement the Fund's
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 the Fund and the hedging vehicle so that
the portfolio return might have been greater had hedging not been attempted.
This risk is particularly acute in the case of "cross-hedges" between
currencies. The advisers may inaccurately forecast interest rates, market values
or other economic factors in utilizing a derivatives strategy. In such a case,
the Fund may have been in a better position had it not entered into such
strategy. Hedging strategies, while reducing risk of loss, can also reduce the
opportunity for gain. In other words, hedging usually limits both potential
losses as well as potential gains. The Fund is not required to use any hedging
strategies and strategies not involving hedging involve leverage and may
increase the risk to the Fund. Certain strategies, such as yield enhancement,
can have speculative characteristics and may result in more risk to the Fund
than hedging strategies using the same instruments.
There can be no assurance that a liquid market will exist at a time when
the Fund seeks to close out an option, futures contract or other derivative or
related position. Many exchanges and boards of trade limit the amount of
fluctuation permitted in option or futures contract prices during a single day;
once the daily
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limit has been reached on particular contract, no trades may be made that day at
a price beyond that limit. In addition, certain instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Finally,
over-the-counter instruments typically do not have a liquid market. Lack of a
liquid market for any reason may prevent the 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, foreign
exchanges or foreign boards of trade, there is a greater potential that a
counterparty or broker may default or be unable to perform on its commitments.
In the event of such a default, the Fund may experience a loss. In transactions
involving currencies, the value of the currency underlying an instrument may
fluctuate due to many factors, including economic conditions, interest rates,
governmental policies and market forces.
Specific Uses and Strategies. Set forth below are explanations of various
strategies involving derivatives and related instruments which may be used by
the Fund.
Options on Securities, Securities Indexes, Currencies and Debt Instruments.
The Fund may PURCHASE, SELL or EXERCISE call and put options on: securities;
securities indexes; currencies; or debt instruments. Specifically, 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.
Although in most cases these options will be exchange-traded, the Fund 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. The Fund may also use
combinations of options to minimize costs, gain exposure to markets or take
advantage of price disparities or market movements. For example, the Fund may
sell put or call options it has previously purchased or purchase put or call
options it has previously sold. These transactions may result in a net gain or
loss depending on whether the amount realized on the sale is more or less than
the premium and other transaction costs paid on the put or call option which is
sold. The Fund may write a call or put option in order to earn the related
premium from such transactions. Prior to exercise or expiration, an option may
be closed out by an offsetting purchase or sale of a similar option. The Fund
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, the
Fund writing a covered call (i.e., where the underlying securities are held by
the Fund) has, in return for the premium on the option, given up the opportunity
to profit from a price increase in the underlying securities above the exercise
price, but has retained the risk of loss should the price of the underlying
securities decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price.
If a put or call option purchased by the Fund is not sold when it has
remaining value, and if the market price of the underlying security, in the case
of a put, remains equal to or greater than the exercise price or, in the case of
a call, remains less than or equal to the exercise price, the Fund will lose its
entire investment
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in the option. Also, where a put or call option on a particular security is
purchased to hedge against price movements in a related security, the price of
the put or call option may move more or less than the price of the related
security. There can be no assurance that a liquid market will exist when the
Fund seeks to close out an option position. Furthermore, if trading restrictions
or suspensions are imposed on the options markets, the Fund may be unable to
close out a position.
Futures Contracts and Options on Futures Contracts. The Fund 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,
the Fund may sell a futures contract--or buy a futures option--to protect
against a decline in value, or reduce the duration, of portfolio holdings.
Likewise, these instruments may be used where the Fund intends to acquire an
instrument or enter into a position. For example, the Fund may purchase a
futures contract--or buy a futures option--to gain immediate exposure in a
market or otherwise offset increases in the purchase price of securities or
currencies to be acquired in the future. Futures options may also be written to
earn the related premiums.
When writing or purchasing options, the Fund 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 Fund 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 Fund 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. The Fund may enter into forward contracts. The Fund 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 Fund 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, the Fund "locks in" the exchange rate between
the currency it will deliver and the currency it will receive for the duration
of the contract. As a result, the Fund reduces its exposure to changes in the
value of the currency it will deliver and increases its exposure to changes in
the value of the currency it will exchange into. The effect on the value of the
Fund is similar to selling securities denominated in one currency and purchasing
securities denominated in another. Transactions that use two foreign currencies
are sometimes referred to as "cross-hedges."
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The Fund 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. The 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.
The Fund 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. The Fund 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 the Fund's net currency exposure
will not exceed the total net asset value of its portfolio. However, to the
extent that the Fund is fully invested while also maintaining currency
positions, it may be exposed to greater combined risk.
The Fund 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 the Fund is
contractually obligated to make. If the other party to an interest rate or
currency swap defaults, the Fund'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 Fund expect to achieve an acceptable degree of correlation
between their portfolio investments and their interest rate or currency swap
positions.
The Fund may hold foreign currency received in connection with investments
in foreign securities when it would be beneficial to convert such currency into
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate.
The Fund 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 the Fund. In addition, the Fund may enter into forward
foreign currency exchange contracts in order to protect against adverse changes
in future foreign currency exchange rates. The Fund 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 the Fund
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 the Fund's foreign
currency denominated portfolio securities and the use of such techniques will
subject the Fund 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, the
Fund may not always be able to enter into foreign currency forward contracts at
attractive prices, and this will limit the Fund's ability to use such contract
to hedge or cross-hedge its assets. Also, with regard to the Fund'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 the Fund'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.
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The Fund may enter into interest rate and currency swaps to the maximum
allowed limits under applicable law. The Fund will typically use interest rate
swaps to shorten the effective duration of its portfolio. Interest rate swaps
involve the exchange by the Fund 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. The Fund may invest in structured products. Structured
products are 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. The Fund may invest in structured products which
represent derived investment positions based on relationships among different
markets or asset classes.
The Fund 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 the Fund 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 the Fund may invest may involve no
credit enhancement, the credit risk of those structured products generally would
be equivalent to that of the underlying instruments. The Fund 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 the Fund'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 the Fund's fundamental investment limitation related to borrowing
and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the 1940 Act. As a result, an investment in these
structured products may be limited by the restrictions contained in the 1940
Act. Structured products are typically sold in private placement transactions,
and there currently is no active trading market for structured products. As a
result, certain structured products in which a Fund or Portfolio invests may be
deemed illiquid and subject to its limitation on illiquid investments.
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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. The
Fund is not 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 the 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 the Fund purchases a futures contract, an amount of cash or cash
equivalents or high quality debt securities will be deposited in a segregated
account with the Fund's 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 Fund have adopted the following investment restrictions which may not
be changed without shareholder approval by a "majority of the outstanding
shares" of a Fund which, as used in this Statement of Additional Information,
means the vote of the lesser of (i) 67% or more of the shares of a Fund present
at a meeting, if the holders of more than 50% of the outstanding shares of a
Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of a Fund.
The Fund may not:
(1) borrow money, except that (i) the Fund 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,
and (ii) the Fund may borrow money to buy additional securities, in an
amount not exceeding 10% of its total assets (including the amount
borrowed.)
(2) make loans, except that the Fund 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 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 the Fund'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
the Fund 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;
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(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent
the Fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).
Investments by the Fund 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) the Fund 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)
the 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, the Fund 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
the Fund 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 the Fund may not:
(8) make or guarantee loans to any person or otherwise become liable
for or in connection with any obligation or indebtedness of any person
without the prior written consent of the Trustees, provided that for
purposes of this restriction the acquisition of bonds, debentures, or other
corporate debt securities and investments in government bonds, short-term
commercial paper, certificates of deposit and bankers' acceptances shall
not be deemed to be the making of a loan;
(9) invest in securities which are not traded or have not sought a
listing on a stock exchange, over-the-counter market or other organized
securities market that is open to the international public and on which
securities are regularly traded if, regarding all such securities, more
than 10% of its total net assets would be invested in such securities
immediately after and as a result of such transaction;
(10) deal in put options, write or purchase call options, including
warrants, unless such options or warrants are covered and are quoted on a
stock exchange or dealt in on a recognized market, and, at the date of the
relevant transaction: (i) call options written do not involve more than
25%, calculated at the exercise price, of the market value of the
securities within the Fund's portfolio excluding the value of any
outstanding call options purchased, and (ii) the cost of call options or
warrants purchased does not exceed, in terms of premium, 2% of the value of
the net assets of the Fund; or
(11) purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such issuer
to be held by the Fund.
In addition, as a matter of fundamental policy, notwithstanding any other
investment policy or restriction, the 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 the Fund or Portfolio in municipal obligations where the issuer
is regarded as a state, city, municipality or other
15
<PAGE>
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, the Fund is subject to the following nonfundamental
restrictions which may be changed without shareholder approval:
(1) The Fund may not, with respect to 50% of its assets, hold more
than 10% of the outstanding voting securities of an issuer.
(2) The Fund 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 the Fund or Portfolio. The Fund has the current intention of making
short sales against the box.
(3) The Fund may not purchase or sell interests in oil, gas or
mineral leases.
(4) The Fund may not invest more than 15% of its net assets in
illiquid securities.
(5) The Fund 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 the Fund'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, the Fund 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, the Fund is subject to the following nonfundamental
restrictions which may be changed without shareholder approval:
(7) The value of the 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) The 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) The 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 Fund'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.
16
<PAGE>
With respect to the Fund, 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, the Fund
may make commitments more restrictive than the investment policies and
limitations described above and in its Prospectus. Should the Fund
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, the Fund 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 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 the Fund will not be considered a violation. If the value
of the Fund'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
Lower Rated Securities. The Fund is permitted to invest in non-investment
grade securities. Such securities, though higher yielding, are characterized by
risk. The 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
17
<PAGE>
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. The Fund 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 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 portfolio has been changed, the Investment Adviser will
consider all circumstances deemed relevant in determining whether the Fund
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 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 the 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 the Fund to obtain accurate market quotations for purposes of valuing the
Fund's or 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.
The Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund 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.
18
<PAGE>
The Fund 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 Fund 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 the Fund are made by
a portfolio manager who is an employee of the adviser or sub-adviser to the Fund
and who is appointed and supervised by senior officers of such adviser or
sub-adviser. Changes in the Fund'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 the Fund's portfolio transactions--the portfolio turnover
rate--will vary from year to year depending upon market conditions. Because a
high turnover rate may increase the Fund's transaction costs and the possibility
of taxable short-term gains, as well as make it more difficult for the Fund to
qualify as a registered investment company under federal tax law. Therefore, the
advisers will weigh the added costs of short-term investment against anticipated
gains. The Fund will engage in portfolio trading if its advisers believe a
transaction, net of costs (including custodian charges), will help it achieve
its investment objective.
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 Fund. 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 the Fund on
any particular transaction, and are not required to execute any order in a
fashion either preferential to the 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 the Fund 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 the Fund's portfolio securities in so-called tender or exchange
offers. Such soliciting dealer fees are in effect recaptured for the Fund by the
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 Fund to pay a broker-dealer which provides brokerage and research
services to the adviser or sub-advisers, the Fund and/or other accounts for
which they exercise investment discretion an amount of commission for effecting
a securities transaction for the Fund in excess of the amount other
broker-dealers would have charged for the transaction if 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 Fund. The adviser and
sub-advisers report to the Board of Trustees regarding overall commissions paid
19
<PAGE>
by the Fund and their reasonableness in relation to the benefits to the Fund.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or of purchasers or sellers of securities,
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts,
and effecting securities transactions and performing functions incidental
thereto such as clearance and settlement.
The management fees that the Fund 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 Fund's portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Fund will exceed
those that might otherwise be paid by an amount which cannot be presently
determined. Such services 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 Fund. 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 Fund as well as one or more of the adviser's or sub-adviser's, other
clients. Investment decisions for the Fund 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 the Fund 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 Fund are concerned. However, it is believed that the
ability of the Fund to participate in volume transactions will generally produce
better executions for the Fund.
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, the Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Performance is calculated separately for each
class of shares. 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 the Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of the Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of a Fund or its classes. The Fund's performance may be compared with
indices such as the Lehman Brothers Government/Corporate Bond Index, the Lehman
Brothers
20
<PAGE>
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, the Fund may, with proper authorization,
reprint articles written about the Fund and provide them to prospective
shareholders.
The Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in 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 the 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 the
Fund's operating expenses on a month-to-month basis. These actions would have
the effect of increasing the net income (and therefore the yield and total rate
of return) of the classes of shares of the Fund during the period such waivers
are in effect. These factors and possible differences in the methods used to
calculate the yields and total rates of return should be considered when
comparing the yields or total rates of return of the classes of shares of the
Fund to yields and total rates of return published for other investment
companies and other investment vehicles (including different classes of shares).
The 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.
The 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 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 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.
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 the 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.
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<PAGE>
Total Rate of Return
The Fund's total rate of return for any period will be calculated by (a)
dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains declared during such period with
respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. Any annualized total rate of return quotation
will be calculated by (x) adding 1 to the period total rate of return quotation
as calculated above, (y) raising such sum to a power which is equal to 365
divided by the number of days in such period, and (z) subtracting 1 from the
result.
The Fund 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 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.
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 Fund does not price, the Fund's
portfolios will trade and the net asset value of the Fund shares may be
significantly affected on days on which the investor has no access to the Fund.
The Fund calculates its NAV once each day at the close of regular trading
on the New York Stock Exchange. Equity securities are valued at the last sale
price on the exchange on which they are primarily traded or on the NASDAQ
National Market System, or at the last quoted bid price for securities in which
there were no sales during the day or for other unlisted (over-the-counter)
securities. Bonds and other fixed income securities (other than short-term
obligations, but including listed issues) are valued on the basis of valuations
furnished by a pricing service, the use of which has been approved by the Board
of Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures and option contracts that are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Portfolio securities (other than short-term obligations) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Interest income on long-term obligations is determined on the basis of
interest accrued plus amortization of discount (generally, the difference
between coupon acquisition price and stated redemption price
22
<PAGE>
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 Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in Section 6 of the Account Application. The Telephone Exchange
Privilege is not available if you were issued certificates for shares that
remain outstanding.
An investor can buy Fund shares three ways: (i) through an investment
representative; (ii) through the Fund's distributor by calling the Chase Vista
Service Center or (iii) through the Systematic Investment Plan. Upon receipt of
any instructions or inquiries by telephone from a shareholder or, if held in a
joint account, from either party, or from any person claiming to be the
shareholder, the Fund or its agent is authorized, without notifying the
shareholder or joint account parties, to carry out the instructions or to
respond to the inquiries, consistent with the service options chosen by the
shareholder or joint shareholders in his or their latest account application or
other written request for services, including purchasing, exchanging, or
redeeming shares of the Fund and depositing and withdrawing monies from the bank
account specified in the Bank Account Registration section of the shareholder's
latest account application or as otherwise properly specified to the Fund in
writing.
Subject to compliance with applicable regulations, the 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 $250,000).
Class A Shares
The public offering price of Class A shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
<TABLE>
<CAPTION>
Amount of
Sales charge as a sales charge
percentage of: reallowed to
------------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price ($) 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>
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
23
<PAGE>
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 payments
with respect to short-term investments.
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
the Fund has only one class and is subject to an initial sales charge, shares of
the 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 the 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 the 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 the Fund (or if the Fund has only one class
and is subject to an initial sales charge, shares of the Fund) at the reduced
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares (or if the
Fund has only one class and is subject to an initial sales charge, shares of the
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 the
Fund has only one class and is subject to an initial sales charge, shares of the
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 the Fund has only one class and is subject
24
<PAGE>
to an initial sales charge, shares of the 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 the Fund has only one class and is subject to an initial
sales charge, shares of the Fund) purchased thereafter.
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.
No initial sales charge will apply to the purchase of the Fund's Class A
shares if (i) one is investing proceeds from a qualified retirement plan where a
portion of the plan was invested in the Chase Vista Funds, (ii) one is investing
through any qualified retirement plan with 50 or more participants or (iii) the
investor is a participant in certain qualified retirement plans and is investing
(or reinvesting) the proceeds from the repayment of a plan loan made to him or
her.
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 institutions 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.
Purchases of a 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 a 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 pre-approved 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 Funds
Service Center.
Shareholders of record of any Chase Vista fund as of November 30, 1990 and
certain immediate family members may purchase a 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.
Shareholders of other Chase Vista Funds may be entitled to exchange their
shares for, or reinvest distributions from their funds in, shares of a Fund at
net asset value.
25
<PAGE>
The Fund reserves the right to change any of these policies at any time and
may reject any request to purchase shares at a reduced sales charge.
Reinstatement Privilege. Upon written request, Class A shareholders of the
Fund 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. 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 (or 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 C) shares.
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 the 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 Fund's distributor pays broker-dealers a commission of 4.00% of the
offering price on sales of Class B shares and a commission of 1.00% of the
offering price on sales of Class C shares. The distributor keeps the entire
amount of any CDSC the investor pays.
The contingent deferred sales charge for Class B and Class C shares will be
waived for certain exchanges and for redemptions in connection with the Fund's
systematic withdrawal plan, subject to the conditions described in the
Prospectuses. In addition, subject to confirmation of a shareholder's status,
the contingent deferred sales charge will be waived for: (i) a total or partial
redemption made within one year of the shareholder's death or initial
qualification for Social Security disability payments; (ii) a redemption in
connection with a Minimum Required Distribution from an IRA, Keogh or custodial
account under section 403(b) of the Internal Revenue Code or a mandatory
distribution from a qualified plan; (iii) redemptions made from an IRA, Keogh or
custodial account under section 403(b) of the Internal Revenue Code through an
established Systematic Redemption Plan; (iv) a redemption resulting from an
over-contribution to an IRA; (v) distributions from a qualified plan upon
retirement; and, (vi) an involuntary redemption of an account balance under
$500. 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.
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.
The Fund may require signature guarantees for changes that shareholders
request be made in Fund records with respect to their accounts, including but
not limited to, changes in bank accounts, for any written
26
<PAGE>
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. The 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.
DISTRIBUTIONS; 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 the Fund or its shareholders, and the discussion here
and in the Prospectus is not intended as a substitute for careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code") 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. Net investment
income for the Fund consists of all interest accrued and discounts earned, less
amortization of any market premium on the portfolio assets of the Fund and the
accrued expenses of the Fund. As a regulated investment company, the 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.
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, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses.
The 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 addi-
27
<PAGE>
tion, these provisions (1) will require the 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 the 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). The 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 the Fund purchases shares in a "passive foreign investment company" (a
"PFIC"), the 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 the 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, the 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 the Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment company
that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). The
balance of such income must be distributed during the next calendar year. For
the foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
The Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
The Fund anticipates distributing substantially all of their net investment
income for each taxable year. An investor can choose from three distribution
options: (i) reinvest all distributions in additional Fund shares without a
sales charge; (ii) 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. One can change his or her distribution option
by notifying the Chase Vista service center in writing. If an investor does not
select an option when he or she opens his or her account, all
28
<PAGE>
distributions will be reinvested. All distributions not paid in cash or by ACH
will be reinvested in shares of the same share class. The investor 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 the investor that
he or she has 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
the investor's 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. 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.
The 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.
Under current legislation, the maximum rate of tax on long-term capital
gains of individuals is 20% (10% for gains otherwise taxed at 15%) for long-term
capital gains realized with respect to capital assets held for more than 12
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%.
Conversely, if the Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. In certain circumstances,
a shareholder that (i) has held shares of the 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
29
<PAGE>
a foreign tax credit for foreign taxes deemed imposed on dividends paid on such
shares. The 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.
The 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 the Fund that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and in reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund. Shareholders receiving a distribution in the form
of additional shares will be treated as receiving a distribution in an amount
equal to the fair market value of the shares received, determined as of the
reinvestment date. In addition, if the net asset value at the time a shareholder
purchases shares of the Fund reflects undistributed net investment income or
recognized capital gain net income, or unrealized appreciation in the value of
the assets of the Fund, distributions of such amounts will be taxable to the
shareholder in the manner described above, although such distributions
economically constitute a return of capital to the shareholder.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income dividends and capital gain dividends, and
the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares.
30
<PAGE>
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, 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 the
Fund's election to treat any foreign taxes paid by it as paid by its
shareholders, but may not be allowed a deduction against this gross income or a
credit against this U.S. withholding tax for the foreign shareholder's pro rata
share of such foreign taxes which it is treated as having paid. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, and capital gain dividends and
amounts retained by the Fund that are designated as undistributed capital gains.
If the income from the Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, the Fund may be required
to withhold U.S. federal income tax at a rate of 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 the 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 the 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 the 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 the
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 the Fund invests to a substantial degree in U.S.
government securities which are subject to favorable state and local tax
treatment, shareholders of the Fund will be notified as to the extent
31
<PAGE>
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 the 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.
32
<PAGE>
MANAGEMENT OF THE TRUST AND THE FUND
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: 67. 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: 64. 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: 58. 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: 70. 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: 66. 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: 67.
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: 68. 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: 47. Address:
Chase Mutual Funds Corp., 1211 Avenue of the Americas, 41st 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: 72. 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: 72. Address:
RR 1 Box 102, Weston, VT 05181.
33
<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: 64. 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: 65. 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: 69. 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: 37. Address: 3435 Stelzer Road, Columbus, OH 43219.
Lisa Hurley--Secretary. Senior Vice President and General Counsel, BISYS
Fund Services; formerly Counsel to Moore Capital Management and General Counsel
to Global Asset Management and Northstar Investments Management. Age: 44.
Address: 90 Park Avenue, New York, NY 10016.
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: 37. Address: 1211 Avenue of the Americas, 41st Floor, 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: 31. Address: 3435 Stelzer Road, Columbus, OH 43219.
- ----------
* 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, 1999.
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").
34
<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.
35
<PAGE>
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended [ ] for each Trustee of the Trust:
<TABLE>
<CAPTION>
Total
Compensation
Pension or from
Retirement "Fund Complex"(2)
Benefits Accrued (includes all Chase Vista
by the Fund Complex(1) Trusts and Portfolios)
------------------------ --------------------------
<S> <C> <C>
Fergus Reid, III, Trustee $108,490 $160,000
H. Richard Vartabedian, Trustee 69,858 120,000
William J. Armstrong, Trustee 35,695 80,000
John R.H. Blum, Trustee 70,084 87,500
Stuart W. Cragin, Jr., Trustee 42,785 82,500
Ronald R. Eppley, Jr., Trustee 52,102 80,000
Joseph J. Harkins, Trustee 60,009 80,000
Sarah E. Jones, Trustee -- --
W.D. MacCallan, Trustee 73,291 80,000
W. Perry Neff, Trustee 70,365 80,000
Leonard M. Spalding, Jr., Trustee 25,509 80,000
Richard E. Ten Haken, Trustee 55,162 83,750
Irving L. Thode, Trustee 50,414 80,000
</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, 1999, and by Mutual
Fund Trust, Mutual Fund Select Trust and Mutual Fund Variable Annuity Trust
for the fiscal year ended [ ].
(2) Data reflects total compensation earned during the period [ ]
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.
- ----------
[ ], 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 [ ] , 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 $[ ] which amount is 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 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.
36
<PAGE>
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, 1998, 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 15, 7, 12,
15, 6, 10, 9, 9, 15, 1, 14, 6 and 0, respectively.
<TABLE>
<CAPTION>
Highest Annual Compensation Paid by All Chase Vista Funds
--------------------------------------------------------------------
$80,000 $100,000 $120,000 $140,000 $160,000
Years of
Service Estimated Annual Benefits Upon Retirement
- -------- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
16 $80,000 $100,000 $120,000 $140,000 $160,000
14 76,800 96,000 115,200 134,400 153,600
12 70,400 88,000 105,600 123,200 140,800
10 64,000 80,000 96,000 112,000 128,000
8 51,200 64,000 76,800 89,600 102,400
6 38,400 48,000 57,600 67,200 76,800
4 25,600 32,000 38,400 44,800 51,200
</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 1999 calendar year and as of October 31,
1999 they had contributed $52,400, $27,700, $58,950 and $98,250, respectively.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices or with
respect to any matter unless it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best interest
of the Trust. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination based upon a
review of readily available facts, by vote of a 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 Fund 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 Fund. Pursuant to the terms of the Advisory
Agreement, Chase provides the Fund with such investment advice and supervision
as it deems necessary for the proper supervision of the Fund's 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 Fund's assets shall be held uninvested. The advisers to the Fund furnish, at
their own expense, all
37
<PAGE>
services, facilities and personnel necessary in connection with managing the
investments and effecting portfolio transactions for the Fund. The Advisory
Agreement for the Fund 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 Fund 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 Fund 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 Fund 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 Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to the Fund imposed by the securities laws or regulations thereunder
of any state in which the shares of the Fund are qualified for 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 Fund during such fiscal year; and if such amounts should exceed
the monthly fee, the adviser shall pay to the Fund its share of such excess
expenses no later than the last day of the first month of the next succeeding
fiscal year.
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 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 day-to-day management of the Fund, 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
38
<PAGE>
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 Fund.
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. Chase is located
at 270 Park Avenue, New York, New York 10017.
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. CAM is located at 1211 Avenue of the
Americas, New York, New York 10036.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreement, the adviser is entitled to receive from the Fund an
investment advisory fee computed daily and paid monthly based on a rate equal to
a percentage of the Fund'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
the Fund, such compensation, payable by the adviser out of its advisory fee, as
is described in the relevant Prospectuses.
Administrator
Pursuant to separate Administration Agreements (the "Administration
Agreements"), Chase is the administrator of the Fund. Chase provides certain
administrative services to the Fund, including, among other responsibilities,
coordinating the negotiation of contracts and fees with, and the monitoring of
performance and billing of, the Fund'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 Fund 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 Fund, 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 the Fund 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 the Fund on 60 days' written notice
when authorized either by a majority vote of the Fund's shareholders or by vote
of a majority of the Board of Trustees, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) of the Trust or
Portfolios, or by 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 Fund, 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.
39
<PAGE>
In addition, the Administration Agreements provide that, in the event the
operating expenses of the Fund, including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to the
Fund imposed by the securities laws or regulations thereunder of any state in
which the shares of the Fund are qualified for sale, as such limitations may be
raised or lowered from time to time, 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 the 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 will receive from the 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, Chase receives from each of the Fund 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
the Fund on a month-to-month basis.
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 the Fund as described in the Prospectus, which provide that such
classes of the Fund 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. Promotional activities for the sale of each class
of shares of the Fund will be conducted generally by the Chase Vista Funds, and
activities intended to promote one class of shares of the Fund may also benefit
the Fund's other shares and other Chase Vista Funds.
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 value 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 and 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 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 and Class C shares in any one year
40
<PAGE>
will be accrued and paid by a Fund to the Distributor in fiscal years subsequent
thereto. In determining whether to purchase Class B and 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. 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 the Fund, by vote of a majority of the
outstanding voting Shares of the class of the 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. The Fund 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.
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 Fund's exclusive underwriter,
provides certain administration services and promotes and arranges for the sale
of each class of Shares. 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 Distribution Agreement provides that the Distributor will bear the
expenses of printing, distributing and filing prospectuses and statements of
additional information and reports used for sales purposes, and of preparing and
printing sales literature and advertisements not paid for by the Distribution
Plan. The Trust pays for all of the expenses for qualification of the shares of
the Fund for sale in connection with the public offering of such shares, and all
legal expenses in connection therewith. In addition, pursuant to the
Distribution Agreement, the Distributor provides certain sub-administration
services to the Trust, including providing officers, clerical staff and office
space. Payments may also 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, Class B or 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 sales targets for one or more Vista Funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater for entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
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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.
The Distribution Agreement is currently in effect and will continue in
effect thereafter with respect to the Fund only if such continuance is
specifically approved at least annually by the Board of Trustees or by vote of a
majority of the Fund's outstanding voting securities and, in either case, by a
majority of the Trustees who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any such party. The
Distribution Agreement is terminable without penalty by the Trust on behalf of
the Fund on 60 days' written notice when authorized either by a majority vote of
the Fund's shareholders or by vote of a majority of the Board of Trustees of the
Trust, including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, or by the Distributor on 60 days' written
notice, and will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The Distribution Agreement also provides that neither
the Distributor nor its personnel shall be liable for any act or omission in the
course of, or connected with, rendering services under the Distribution
Agreement, except for wilful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties.
In the event the operating expenses of the Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to that Fund imposed by the securities laws or regulations thereunder
of any state in which the shares of the Fund are qualified for sale, as such
limitations may be raised or lowered from time to time, the Distributor shall
reduce its sub-administration fee with respect to the 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 the Fund during
such fiscal year; and if such amounts should exceed the monthly fee, the
Distributor shall pay to the Fund its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
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.
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
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to the Fund proxies executed by shareholders with respect to meetings of
shareholders of the Fund; and provide such other related services as the Fund or
a shareholder may request. Shareholder servicing agents may be required to
register pursuant to state securities law. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of the shares of the Funds 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.
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 the Fund on a month-to-month basis.
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 amounts 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 the Distributor 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 if 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 the Distributor.
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 the 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.
INDEPENDENT ACCOUNTANTS
[The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended October 31, 1999, 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 PricewaterhouseCoopers 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.
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PricewaterhouseCoopers 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
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund 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 the Fund. Chase has informed the Fund 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 Fund should be aware that, subject to applicable
legal or regulatory restrictions, Chase and its affiliates may exchange among
themselves certain information about the shareholder and his account.
Transactions with affiliated broker-dealers will only be executed on an agency
basis in accordance with applicable federal regulations.
GENERAL INFORMATION
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 funds, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Fund. Shareholder servicing and
distribution fees are all allocated to specific classes of the Funds. 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.
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 22 series of shares of beneficial interest,
par value $.001 per share. With respect to the Fund, 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
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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 whole share held, and each
fractional share shall be entitled to a proportional fractional vote, except
that Trust shares held in the treasury of the Trust shall not be voted. 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.
The Fund offers 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 business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees.The Trust is not
required to hold annual meetings of shareholders but will hold special meetings
of shareholders of a series or class when, in the judgment of the Trustees, it
is necessary or desirable to submit matters for a shareholder vote. Shareholders
have, under certain circumstances, the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have, in certain
circumstances, the right to remove one or more Trustees without a meeting. No
material amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of each
series affected by the amendment. The Trust's Declaration of Trust provides
that, at any meeting of shareholders of the Trust or of any series or class, a
Shareholder Servicing Agent may vote any shares as to which such Shareholder
Servicing Agent is the agent of record and which are not represented in person
or by proxy at the meeting, proportionately in accordance with the votes cast by
holders of all shares of that series or class otherwise represented at the
meeting in person or by proxy as to which such Shareholder Servicing Agent is
the agent of record. Any shares so voted by a Shareholder Servicing Agent will
be deemed represented at the meeting for purposes of quorum requirements. Shares
have no preemptive or conversion rights. Shares, when issued, are fully paid and
non-assessable, except as set forth below. Any series or class may be terminated
(i) upon the merger or consolidation with, or the sale or disposition of all or
substantially all of its assets to, another entity, if approved by the vote of
the holders of two thirds of its outstanding shares, except that if the Board of
Trustees recommends such merger, consolidation or sale or disposition of assets,
the approval by vote of the holders of a majority of the series' or class'
outstanding shares will be sufficient, or (ii) by the vote of the holders of a
majority of its outstanding shares, or (iii) by the Board of Trustees by written
notice to the series' or class' shareholders. Unless each series and class is so
terminated, the Trust will continue indefinitely.
Stock certificates are issued only upon the written request of a
shareholder, subject to the policies of the investor's Shareholder Servicing
Agent, but the Trust will not issue a stock certificate with respect to
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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.
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Principal Holders
As of [ ] the following persons owned of record 5% or more of the
outstanding shares of the following classes of the following Funds:
GLOBAL TECHNOLOGY FUND SHARES
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Specimen Computations of Offering Prices Per Share
Global Technology Fund (specimen computations)
A Shares:
<TABLE>
<S> <C>
Net Asset Value and Redemption Price per Share
of Beneficial Interest at [] $[ ]
Maximum Offering Price per Share ($[ ] divided by .[ ])
(reduced on purchases of $100,000 or more) $[ ]
B Shares:
Net Asset Value and Redemption Price per Share
of Beneficial Interest at [] $[ ]
</TABLE>
48
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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
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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
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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 23. 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 to Declaration of Trust dated
November 1997.(10)
1(f) Certificate of Amendment to Declaration of Trust dated June 5,
1998.(12)
2 By-laws, as amended. (1)
3 None.
4(a) Form of Investment Advisory Agreement.(6)
4(b) Form of Sub-Advisory Agreement between The Chase Manhattan
Bank and Chase Asset Management, Inc.(6)
5 Distribution and Sub-Administration Agreement dated August 21,
1995.(6)
6(a) Retirement Plan for Eligible Trustees.(6)
6(b) Deferred Compensation Plan for Eligible Trustees.(6)
7 Custodian Agreement. (1)
8(a) Transfer Agency Agreement. (1)
8(b) Form of Shareholder Servicing Agreement. (6)
C-1
<PAGE>
8(c) Form of Administration Agreement.(6)
9 Opinion re: Legality of Securities being Registered.(1)
10 Consent of Price Waterhouse LLP.(13)
11 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 1999 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 5, 2000,
accession number 0000950146-00-000021,
0000950146-00-000023, 0000950146-00-000024, and
0000950146-00-000025 which are incorporated into
Part B by reference.
12 None.
13(a) Rule 12b-1 Distribution Plan of Mutual Funds including
Selected Dealer Agreement and Shareholder Service Agreement. (1)
13(b) Rule 12b-1 Distribution Plan - Class B Shares (including forms of
Selected Dealer Agreement and Shareholder Servicing Agreement).(6)
13(c) Form of Rule 12b-1 Distribution Plan - Class C Shares (including
forms of Shareholder Servicing Agreements).(9)
14 Financial Data Schedule.(11)
15 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 as an Exhibit to Amendment No. 50 to the Registration Statement on
Form N-1A on February 27, 1998.
(12) Filed as an Exhibit to Amendment No. 53 to the Registration Statement on
Form N-1A on June 29, 1998.
(13) Filed herewith.
ITEM 24. Persons Controlled by or Under Common
Control with Registrant
Not applicable
C-2
<PAGE>
ITEM 25. 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 26(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>
C-6
<PAGE>
Item 26(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.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
<S> <C> <C>
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
</TABLE>
Item 26(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.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Sub-Advisor Nature During Past Two Years
- ---- --------------- ----------------------------
<S> <C> <C>
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.
</TABLE>
C-7
<PAGE>
ITEM 27. 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 28. 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:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
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
</TABLE>
ITEM 29. Management Services
Not applicable
ITEM 30. Undertakings
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.
C-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment to its Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of New York and the
State of New York on the 14th day of April, 2000.
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.
<TABLE>
<S> <C> <C>
* Chairman and Trustee April 14, 2000
- -------------------------------
Fergus Reid, III
/s/ H. Richard Vartabedian President April 14, 2000
- ------------------------------- and Trustee
H. Richard Vartabedian
* Trustee April 14, 2000
- -------------------------------
William J. Armstrong
* Trustee April 14, 2000
- -------------------------------
John R.H. Blum
* Trustee April 14, 2000
- -------------------------------
Stuart W. Cragin, Jr.
*
- ------------------------------- Trustee April 14, 2000
Roland R. Eppley, Jr.
* Trustee April 14, 2000
- -------------------------------
Joseph J. Harkins
* Trustee April 14, 2000
- -------------------------------
Sarah E. Jones
*
- ------------------------------- Trustee April 14, 2000
W.D. MacCallan
*
- ------------------------------- Trustee April 14, 2000
W. Perry Neff
* Trustee April 14, 2000
- -------------------------------
Leonard M. Spalding, Jr.
* Trustee April 14, 2000
- -------------------------------
Irv Thode
* Trustee April 14, 2000
- -------------------------------
Richard E. Ten Haken
/s/ Martin R. Dean Treasurer and April 14, 2000
- ------------------------------- Principal Financial
Martin R. Dean Officer
/s/ H. Richard Vartabedian Attorney in April 14, 2000
- ------------------------------- Fact
H. Richard Vartabedian
</TABLE>
