PROSPECTUS
VISION GROUP OF FUNDS, INC.
PROSPECTUS DATED JUNE 30, 1997
Vision Group of Funds, Inc. is an open-end management investment
company (a mutual fund) that offers you a choice of seven separate
investment portfolios with distinct investment objectives and
policies. This prospectus relates to three diversified portfolios (the
"Funds"), each of which is a no-load fund, so you pay no sales charge
to purchase Fund shares. The Funds are:
VISION MONEY MARKET FUND
VISION TREASURY MONEY MARKET FUND
VISION NEW YORK TAX-FREE MONEY MARKET FUND
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THE FUNDS ATTEMPT TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT THE FUNDS
WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF MANUFACTURERS AND TRADERS TRUST COMPANY ("M&T BANK"), ARE NOT
ENDORSED OR GUARANTEED BY M&T BANK, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. THESE SHARES INVOLVE INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL. BECAUSE THE VISION NEW YORK TAX-FREE MONEY
MARKET FUND MAY INVEST A SIGNIFICANT PORTION OF ITS ASSETS IN
SECURITIES OF A SINGLE ISSUER, INVESTMENT IN THE VISION NEW YORK
TAX-FREE MONEY MARKET FUND MAY INVOLVE ADDITIONAL RISKS COMPARED TO A
FULLY DIVERSIFIED MONEY MARKET FUND.
This prospectus gives you information about each of the Funds and can
help you decide if any of the Funds is a suitable investment for you.
Please read the prospectus before you invest and keep it for future
reference.
You can find additional facts about each of the Funds in their
combined Statement of Additional Information dated June 30, 1997,
which has also been filed with the Securities and Exchange Commission
("SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. To
obtain a free copy of the Statement of Additional Information, or a
paper copy of this prospectus, if you have received it electronically,
or make other inquiries about any of the Funds, simply call or write
Vision Group of Funds, Inc. at the telephone number or address below.
The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the
Funds is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
VISION GROUP OF FUNDS, INC.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 842-4488
TABLE OF CONTENTS
Synopsis 3
A Summary of the Funds' Expenses 4
Financial Highlights 5
Some Basic Facts About the
Money Market and Money
Market Mutual Funds 7
How the Funds Show Performance 8
How the Funds Invest 9
Vision Money Market Fund 9
Vision Treasury Money Market Fund 11
Vision New York Tax-Free
Money Market Fund 12
Common Fund Investment Techniques,
Features and Limitations 17
Fund Management, Distribution and
Administration 20
Board of Directors 20
Investment Adviser 20
Distribution of Fund Shares 21
Administration of the Funds 22
Your Guide to Using the Funds 23
How the Funds Value Their Shares 23
What Fund Shares Cost 23
How to Buy Shares 23
How to Exchange Shares 25
How to Redeem Shares 27
Tax Information 30
Description of Fund Shares 31
Financial Statements 33
Report of Ernst & Young LLP,
Independent Auditors 45
Addresses 46
SYNOPSIS
INVESTMENT OBJECTIVE
Vision Group of Funds, Inc. (the "Corporation") offers you a convenient,
affordable way to participate in three separate, professionally managed,
diversified portfolios of short-term money market securities.
VISION MONEY MARKET FUND
(THE "MONEY MARKET FUND") SEEKS CURRENT INCOME WITH
LIQUIDITY AND STABILITY OF PRINCIPAL BY INVESTING IN
HIGH QUALITY MONEY MARKET INSTRUMENTS. (SEE PAGE 9
FOR DETAILS.)
VISION TREASURY MONEY
MARKET FUND
(THE "TREASURY FUND") SEEKS CURRENT INCOME WITH
LIQUIDITY AND STABILITY OF PRINCIPAL BY INVESTING IN
DIRECT OBLIGATIONS OF THE U.S. TREASURY, SUCH AS
TREASURY BILLS AND NOTES, AND REPURCHASE AGREEMENTS
SECURED BY THESE OBLIGATIONS. (SEE PAGE 11 FOR MORE
INFORMATION.)
VISION NEW YORK TAX-FREE
MONEY MARKET FUND
(THE "TAX-FREE FUND") SEEKS AS HIGH A LEVEL OF CURRENT INTEREST
INCOME THAT IS EXEMPT FROM FEDERAL REGULAR INCOME TAX AS IS
CONSISTENT WITH LIQUIDITY AND RELATIVE STABILITY OF PRINCIPAL. (SEE
PAGE 12 FOR DETAILS.)
VALUING FUND SHARES
The Funds attempt to maintain a stable market value (referred to as net asset
value) of $1.00 per share, although there is no assurance that they will be able
to do so. (See "How the Funds Value Their Shares.")
BUYING AND REDEEMING FUND SHARES
You can conveniently buy and redeem Fund shares on almost any business day.
Shares of the Funds are bought and redeemed without charge at net asset value.
The minimum initial investment in each Fund is $500 ($250 for retirement plans),
except under certain circumstances described in this prospectus. (See "Your
Guide to Using the Funds.")
FUND MANAGEMENT
The Funds' investment adviser is M&T Bank, which makes investment
decisions for the Funds. M&T Bank is the principal banking subsidiary
of First Empire State Corporation.
SHAREHOLDER SERVICES
When you become a shareholder, you can easily get information about
your account, and about the Funds and their services by calling M&T
Bank's Mutual Fund Services at (800) 836-2211 (in the Buffalo area,
phone 842-4488).
RISK FACTORS
An investment in the Funds may involve certain risks that are
explained more fully in the sections of the prospectus discussing each
Fund's investment policies and their common investment techniques.
A SUMMARY OF THE FUNDS' EXPENSES
Every money market fund incurs expenses in conducting operations,
managing investments and providing service to shareholders. The
following summary breaks out each Fund's expenses. You should consider
this expense information, along with other information provided in
this prospectus, in making investment decisions.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
NEW YORK
TREASURY TAX-FREE
MONEY MARKET MONEY MARKET
MONEY MARKET
(as a percentage of average net assets) FUND
FUND FUND
<S> <C> <C> <C>
Management Fees (after waiver) (1) 0.40%
0.40% 0.15%
12b-1 Fees None
None None
Shareholder Services Fee (2) 0.00%
0.00% 0.00%
Other Expenses 0.21%
0.18% 0.35%
Total Fund Operating Expenses
(after waiver) (3) 0.61%
0.58% 0.50%
The table below can help you understand the various costs and expenses
that a shareholder in the Funds will bear, either directly or
indirectly. For more complete descriptions of the various costs and
expenses, see the section "Fund Management, Distribution and
Administration" on page 20.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming
(A) a 5% annual return; and (B) redemption at the end of each time
period. The Funds charge no redemption fees.
1 Year......................................................... $ 6 $
6 $ 5
3 Years........................................................ $20
$19 $16
5 Years........................................................ $34
$32 $28
10 Years....................................................... $76
$73 $63
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN.
(1) The management fees for the Money Market Fund, Treasury Money
Market Fund, and New York Tax-Free Money Market Fund have been reduced
to reflect the voluntary waivers by the adviser. The adviser may
terminate these voluntary waivers at any time at its sole discretion.
The maximum management fee for each of the above funds is 0.50%.
(2) Money Market Fund, Treasury Money Market Fund, and New York
Tax-Free Money Market Fund have no present intention of accruing or
paying shareholder servicing fees during the fiscal year ending April
30, 1998. If the Funds were accruing or paying shareholder servicing
fees, they would be able to pay up to 0.25% of each Funds' average
daily net assets. See "Fund Management, Distribution and
Administration."
(3) Absent the voluntary waiver described in Note 1, the Annual Total
Fund Operating Expenses for the Money Market Fund, Treasury Money
Market Fund, and New York Tax-Free Money Market Fund would have been
0.71%, 0.68%, and 0.85%, respectively for the year ended April 30,
1997.
VISION MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report fo Ernst & Young LLP, Independent
Auditors on Page 45.
<TABLE>
<CAPTION>
DISTRIBUTIONS TO
NET ASSET SHAREHOLDERS
VALUE, NET FROM NET NET ASSET
YEAR ENDED BEGINNING OF INVESTMENT INVESTMENT VALUE, END OF TOTAL
APRIL 30, PERIOD INCOME INCOME PERIOD RETURN(B)
MONEY MARKET FUND
<S> <C> <C> <C> <C> <C>
1989(a) $ 1.00 0.07 (0.07) $ 1.00 7.52%
1990 $ 1.00 0.08 (0.08) $ 1.00 8.58%
1991 $ 1.00 0.07 (0.07) $ 1.00 7.21%
1992 $ 1.00 0.05 (0.05) $ 1.00 4.60%
1993 $ 1.00 0.03 (0.03) $ 1.00 3.21%
1994 $ 1.00 0.03 (0.03) $ 1.00 3.01%
1995 $ 1.00 0.05 (0.05) $ 1.00 4.77%
1996 $ 1.00 0.05 (0.05) $ 1.00 5.33%
1997 $ 1.00 0.05 (0.05) $ 1.00 4.93%
TREASURY MONEY MARKET FUND
1989(a) $ 1.00 0.07 (0.07) $ 1.00 7.08%
1990 $ 1.00 0.08 (0.08) $ 1.00 8.17%
1991 $ 1.00 0.07 (0.07) $ 1.00 6.96%
1992 $ 1.00 0.04 (0.04) $ 1.00 4.54%
1993 $ 1.00 0.03 (0.03) $ 1.00 3.05%
1994 $ 1.00 0.03 (0.03) $ 1.00 2.88%
1995 $ 1.00 0.04 (0.04) $ 1.00 4.57%
1996 $ 1.00 0.05 (0.05) $ 1.00 5.25%
1997 $ 1.00 0.05 (0.05) $ 1.00 4.82%
NEW YORK TAX-FREE MONEY MARKET FUND
1989(a) $ 1.00 0.04 (0.04) $ 1.00 4.55%
1990 $ 1.00 0.05 (0.05) $ 1.00 5.24%
1991 $ 1.00 0.05 (0.05) $ 1.00 4.73%
1992 $ 1.00 0.03 (0.03) $ 1.00 2.99%
1993 $ 1.00 0.02 (0.02) $ 1.00 1.68%
1994 $ 1.00 0.02 (0.02) $ 1.00 1.88%
1995 $ 1.00 0.03 (0.03) $ 1.00 2.84%
1996 $ 1.00 0.03 (0.03) $ 1.00 3.20%
1997 $ 1.00 0.03 (0.03) $ 1.00 2.96%
</TABLE>
(a) Reflects operations for the period from June 1, 1988 (date of
initial public offering) to April 30, 1989.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c)_ Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
VISION MONEY MARKET FUNDS
FINANCIAL HIGHLIGHTS--CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
NET ASSETS,
NET END OF
YEAR ENDED INVESMENT EXPENSE WAIVER/ PERIOD (000
APRIL 30, EXPENSES INCOME REIMBURSEMENT(D) OMITTED)
MONEY MARKET FUND
<S> <C> <C> <C> <C>
1989(a) 0.74%(c) 8.00%(c) 0.29%(c) $ 84,668
1990 0.72% 8.19% 0.25% $ 121,227
1991 0.81% 6.99% 0.09% $ 86,973
1992 0.75% 4.40% 0.06% $ 143,670
1993 0.36% 3.13% 0.39% $ 226,298
1994 0.28% 2.98% 0.42% $ 266,626
1995 0.51% 4.80% 0.19% $ 431,316
1996 0.58% 5.19% 0.11% $ 489,229
1997 0.61% 4.77% 0.10% $ 599,817
TREASURY MONEY MARKET FUND
1989(a) 0.68%(c) 7.48%(c) 0.34%(c) $ 31,388
1990 0.86% 7.88% 0.25% $ 32,986
1991 0.75% 6.52% 0.06% $ 91,682
1992 0.75% 4.38% 0.04% $ 100,373
1993 0.40% 2.98% 0.39% $ 128,825
1994 0.31% 2.86% 0.43% $ 197,521
1995 0.51% 4.53% 0.19% $ 210,526
1996 0.57% 5.10% 0.09% $ 372,884
1997 0.58% 4.75% 0.10% $ 373,485
NEW YORK TAX-FREE MONEY MARKET FUND
1989(a) 0.68%(c) 4.83%(c) 0.45%(c) $ 8,309
1990 0.83% 5.11% 0.65% $ 8,494
1991 0.69% 4.66% 0.87% $ 9,445
1992 0.95% 2.92% 0.65% $ 7,028
1993 0.71% 1.67% 0.63% $ 17,899
1994 0.41% 1.88% 0.58% $ 40,180
1995 0.40% 2.76% 0.52% $ 41,238
1996 0.48% 3.14% 0.38% $ 65,763
1997 0.50% 2.95% 0.35% $ 56,618
</TABLE>
(a) Reflects operations for the period from June 1, 1988 (date of
initial public offering) to April 30, 1989.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
SOME BASIC FACTS
ABOUT THE MONEY MARKET AND
MONEY MARKET MUTUAL FUNDS
The money market is the marketplace in which governments and companies
borrow money for short periods of time by issuing short-term debt
obligations known as money market instruments or money market
securities. These securities often have maturity dates of a year or
less, at which time the debt obligation comes due and must be repaid
by the issuer. The marketplace is known as the money market because
these instruments can generally be converted into cash quickly.
Among the most common types of money market securities are:
Certificates of deposit issued by banks;
Bankers' acceptances, a means of short-term financing for importers
and exporters; Commercial paper, short-term debt obligations issued
by corporations;
U.S. Treasury bills issued by the U.S. Government; and
Short-term municipal securities, such as bond anticipation notes
("BANs"), tax anticipation notes ("TANs") and revenue anticipation
notes ("RANs") issued by state or local governments.
UNDERSTANDING MONEY MARKET FUNDS
When you invest in a money market fund, your money is pooled with that
of many other investors. Professional investment managers use the
money to purchase a portfolio of various money market securities,
which represent debt issued by different companies or government
entities. The Fund earns interest on the securities in its portfolio
and passes on the income to shareholders in the form of dividend
distributions. That income represents your return on the money you
have invested in the Fund and it is usually referred to as yield.
Money market funds generally offer the following basic advantages.
PROFESSIONAL INVESTMENT MANAGEMENT. You get the benefit of full-time,
experienced, professional management that might otherwise be
unavailable to you. The Fund's portfolio managers make investment
decisions on behalf of you and other shareholders, selecting
securities that they believe will best achieve each Fund's objective,
as stated in the Fund's prospectus.
DIVERSIFICATION. Diversification--spreading investments among a
number of different securities--is a basic principle in reducing
overall investment risk. Money market funds usually invest in a large
number of securities, maintaining a level of diversification that
most investors could not afford on their own because money market
instruments typically require a minimum investment of $10,000 to $1
million.
COMPETITIVE MONEY MARKET YIELDS. Money market funds often offer
higher yields than most investors could obtain on other short-term
savings and investment alternatives. Money market funds are not
insured or guaranteed by the U.S. government, and their yields
fluctuate as market conditions change.
STABILITY OF PRINCIPAL. There is relatively little risk of losing
your principal--the money you invest--with a money market fund
because the securities it holds are short-term and of high credit
quality. In fact, most money market funds are managed with the
objective of maintaining a stable net asset value of $1 per share,
although there is no guarantee that they can do so.
LIQUIDITY. Money market fund shares are highly liquid and easily
converted into cash. The Funds are legally required to redeem or buy
back investors' shares and pay the investors within seven days.
HOW
THE FUNDS SHOW
PERFORMANCE
FROM TIME TO TIME, ADVERTISEMENTS FOR THE FUNDS MAY REFER TO
RATINGS, RANKINGS, AND OTHER INFORMATION IN CERTAIN FINANCIAL
PUBLICATIONS AND/OR COMPARE THE FUNDS' PERFORMANCE TO CERTAIN
INDICES. THE FUNDS MAY ADVERTISE THEIR PERFORMANCE IN TERMS OF
YIELD, EFFECTIVE YIELD, TAX-EQUIVALENT YIELD AND TOTAL RETURN, AS
DEFINED BELOW. OF COURSE, YIELD AND TOTAL RETURN FIGURES ARE BASED
ON PAST RESULTS AND ARE NOT AN INDICATION OF FUTURE PERFORMANCE.
YIELD
The yield of each Fund refers to the income generated by an investment
in the Fund over a seven-day period. This income is then annualized,
which means it is assumed to be generated by the investment each week
for a 52-week period, and then it is expressed as a percentage of the
investment.
EFFECTIVE YIELD
The effective yield is calculated similarly to the yield, but it
assumes that the annualized income earned from the investment is
reinvested in the Fund on a daily basis. The effective yield will be
slightly higher than the yield because this assumed reinvestment
produces a compounding effect.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Tax-Free Fund is calculated similarly
to the yield. However, it is adjusted to show the taxable yield an
investor would have to earn to equal the Fund's tax-free yield,
assuming a specific tax rate, and assuming that income is 100% tax
exempt.
The tax-equivalent yield is computed by dividing the tax-free yield by
the result of one minus the combined federal and state tax rate. For
example, if an investor is in the 31% federal income tax bracket, and
the rate for state taxes is 6.85%, assuming the tax-free yield is
5.0%, the investor would have to receive 8.04% from a taxable
investment to equal that tax-free yield (5.0% divided by 1 - (.31
+.0685) = 8.04%).
TOTAL RETURN
Total return represents the overall change in value of an investment
in a Fund over a specified period of time, assuming all dividend
distributions are reinvested in the Fund. Total return is calculated
by dividing that overall change in value by the amount of the initial
investment, and it is expressed as a percentage.
For example, suppose $1,000 is invested in a Fund on January 1 and on
December 31 of that year the investment is worth $1,075 (assuming all
dividends are reinvested). The overall change in value is $75 and the
total return on the investment over that period of time would be 7.5%
(75 divided by 1,000 = 7.5%).
HOW THE FUNDS INVEST
Vision
Money Market
Fund
THE MONEY MARKET FUND IS DESIGNED
FOR CONSERVATIVE INVESTORS WHO WANT
CURRENT INCOME, LIQUIDITY AND STABILITY
OF PRINCIPAL.
BY INVESTING ONLY IN HIGH QUALITY SECURITIES WITH MINIMAL CREDIT
RISK AND WITH SHORT-TERM MATURITIES, THE FUND SEEKS TO MAINTAIN A
STABLE $1.00 SHARE PRICE, REFERRED TO AS NET ASSET VALUE PER SHARE.
THE FUND CANNOT GUARANTEE A STABLE SHARE PRICE. HOWEVER, THE
SHORT-TERM NATURE OF ITS INVESTMENTS HELPS TO MINIMIZE PRICE
FLUCTUATIONS.
INVESTMENT OBJECTIVE
The investment objective of the Money Market Fund (referred to in this
section as the "Fund") is to seek current income with liquidity and
stability of principal by investing in high quality money market
instruments. The Fund pursues this investment objective by investing
in a broad range of short-term debt obligations issued by the U.S.
government, banks and corporations.
These obligations generally mature and come due for repayment by the
issuer in 397 days or less. However, securities subject to repurchase
agreements may have longer maturities (see "Repurchase Agreements" for
a definition of repurchase agreements). While the Fund may hold
individual securities with longer maturities, the average maturity of
the money market instruments in the Fund's portfolio, computed on a
dollar-weighted basis, must be 90 days or less.
In seeking to achieve its investment objective, the Fund must comply
with the diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual
funds. For a further discussion of these requirements, see the
"Regulatory Compliance" section in the Statement of Additional
Information. The Fund's investment objective and the investment
policies and limitations described below cannot be changed without
shareholder approval.
INVESTMENT POLICIES
THE FUND INVESTS IN A WIDE RANGE OF HIGH QUALITY
MONEY MARKET INSTRUMENTS. THESE INCLUDE CORPORATE
COMMERCIAL PAPER IN S&P'S OR MOODY'S TWO HIGHEST
RATING CATEGORIES, CERTIFICATES OF DEPOSIT ISSUED BY
MAJOR BANKS, AND U.S. GOVERNMENT SECURITIES.
ACCEPTABLE INVESTMENTS
The high quality money market instruments in which the Fund invests
include, but are not limited to, the following:
commercial paper (short-term promissory notes issued by
corporations) rated A-2 or better by Standard & Poor's Ratings
Group ("S&P") or Prime-2 or better by Moody's Investors Service,
Inc. ("Moody's"), money market instruments (including commercial
paper) which are not rated but are determined by M&T Bank, the
Fund's investment adviser, to be of comparable quality pursuant to
guidelines approved by the Corporation's Board of Directors,
variable rate demand notes, and variable amount demand master notes
(as described under "Common Fund Investment Techniques, Features
and Limitations");
instruments of domestic banks and savings and loans (such as
certificates of deposit, time deposits, and bankers' acceptances)
if they have capital, surplus and undivided profits of over
$100,000,000 and if their deposits are insured by the Bank
Insurance Fund ("BIF") or the Savings Association Insurance Fund
("SAIF"), both of which are administered by the Federal Deposit
Insurance Corporation ("FDIC"). The Fund may also make
interest-bearing savings deposits in commercial banks and savings
banks not in excess of 5% of the Fund's total assets. In addition,
the Fund may purchase U.S. dollar-denominated instruments issued or
supported by the credit of U.S. or foreign banks or savings
institutions having total assets at the time of purchase in excess
of $1 billion;
obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities, including certain of these
obligations purchased on a when-issued or delayed delivery basis
(see "When-Issued and Delayed Delivery Transactions"). Some
obligations issued or guaranteed by agencies or instrumentalities
of the U.S. government, such as Government National Mortgage
Association participation certificates, are backed by the full
faith and credit of the U.S. Treasury. Other securities, such as
obligations of the Federal National Mortgage Association, Farm
Credit Banks or Federal Home Loan Mortgage Corporation, are backed
by the credit of the agency or instrumentality issuing the
obligations but not the full faith and credit of the U.S.
government; and
repurchase agreements secured by any of the above instruments (see
"Repurchase Agreements").
RISK FACTORS ASSOCIATED WITH
FOREIGN INVESTMENTS
THE FUND MAY INVEST ONLY IN HIGH QUALITY DEBT
OBLIGATIONS OF FOREIGN BANKS.
The Fund's investment in U.S. dollar- denominated obligations of
foreign banks and foreign branches of U.S. banks is limited to less
than 25% of the value of the Fund's total assets at the time of
purchase. Further, the Fund may invest in an obligation of a foreign
bank or a foreign branch of a U.S. bank only if the investment adviser
considers the instrument to present minimal credit risk. Nevertheless,
this type of investment may subject the Fund to different risks than
investing in domestic obligations of U.S. banks because political,
regulatory, and economic systems and conditions vary from country to
country.
These risks include possible adverse political and economic
developments, the possible imposition of withholding taxes on interest
income and the possible seizure or nationalization of foreign
deposits. Additional risks include the possible establishment of
exchange controls and the possible adoption of foreign government
restrictions that might adversely affect the payment of principal and
interest on these foreign obligations.
In addition, foreign banks and foreign branches of U.S. banks may be
subject to less stringent reserve requirements and to different
accounting, auditing, reporting and recordkeeping standards than those
applicable to domestic branches of U.S. banks.
Vision
Treasury
Money Market
Fund
THE TREASURY FUND IS DESIGNED FOR CONSERVATIVE
INVESTORS WHO WANT CURRENT INCOME, LIQUIDITY, AND
STABILITY OF PRINCIPAL.
BY INVESTING IN U.S. TREASURY SECURITIES WITH
SHORT-TERM MATURITIES, THE FUND SEEKS TO MAINTAIN A
STABLE $1.00 SHARE PRICE, REFERRED TO AS NET ASSET
VALUE PER SHARE. THE FUND CANNOT GUARANTEE A STABLE
SHARE PRICE. HOWEVER, THE SHORT-TERM NATURE OF ITS
INVESTMENTS HELPS TO MINIMIZE PRICE FLUCTUATIONS.
INVESTMENT OBJECTIVE
The investment objective of the Treasury Fund (referred to in this
section as the "Fund") is to seek current income with liquidity and
stability of principal. The Fund pursues this investment objective by
investing in direct obligations of the U.S. Treasury, such as Treasury
bills and notes, and repurchase agreements secured by these
obligations. A repurchase agreement is an agreement in which the
organization selling U.S. Treasury securities to the Fund agrees to
repurchase the securities at a mutually agreed upon price and time
(see "Repurchase Agreements" for further details).
The Fund invests in direct U.S. Treasury obligations that mature in
397 days or less from the time of investment. However, securities
subject to repurchase agreements may have longer maturities. While the
Fund may hold individual securities with longer maturities, the
average maturity of the obligations in the Fund's portfolio, computed
on a dollar-weighted basis, must be 90 days or less.
In seeking to achieve its investment objective, the Fund must comply
with the diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual
funds. For a further discussion of these requirements, see the
"Regulatory Compliance" section in the Statement of Additional
Information. The Fund's investment objective and the investment
policies and limitations described below cannot be changed without
shareholder approval.
INVESTMENT POLICIES
ACCEPTABLE INVESTMENTS
The Fund invests in short-term U.S. Treasury obligations. The
obligations are issued by the U.S. government and are fully guaranteed
as to principal and interest by the United States. The Fund may also
invest in repurchase agreements secured by these obligations.
Vision
New York Tax-Free
Money Market
Fund
THE TAX-FREE FUND IS DESIGNED FOR INVESTORS WHO WANT INCOME THAT IS
FREE FROM FEDERAL, NEW YORK STATE AND NEW YORK CITY INCOME TAXES,
AS WELL AS LIQUIDITY AND STABILITY OF PRINCIPAL.
BY INVESTING ONLY IN HIGH QUALITY SECURITIES WITH SHORT-TERM
MATURITIES, THE FUND SEEKS TO MAINTAIN A STABLE $1.00 SHARE PRICE,
REFERRED TO AS NET ASSET VALUE PER SHARE. THE FUND CANNOT GUARANTEE
A STABLE PRICE. HOWEVER, THE SHORT-TERM NATURE OF ITS INVESTMENTS
HELPS TO MINIMIZE PRICE FLUCTUATIONS.
INVESTMENT OBJECTIVE
The investment objective of the Tax-Free Fund (referred to in this
section as the "Fund") is to seek as high a level of current interest
income that is exempt from federal regular income tax as is consistent
with liquidity and relative stability of principal. The Fund pursues
this investment objective by investing substantially all of its assets
in a portfolio of high quality, tax-exempt debt obligations (municipal
securities) that mature in 397 days or less from the time of
investment. However, variable rate demand master notes and securities
subject to repurchase agreements may have longer maturities. The
average maturity of the tax-free obligations in the Fund's portfolio,
computed on a dollar-weighted basis, must be 90 days or less.
Under normal market conditions, the Fund intends to invest at least
80% of its net assets in debt obligations that pay interest exempt
from federal regular income tax, although the Fund may also invest in
short-term taxable debt obligations in certain circumstances.
Subject to the Fund's investment objective and policies, the Fund will
attempt to invest its net assets, to the extent practicable, in
tax-exempt obligations issued by the State of New York and its
political subdivisions (New York municipal securities). The Fund
intends to invest, under normal market conditions, at least 80% of its
net assets in New York municipal securities. To the extent dividends
paid by the Fund are derived from interest on New York municipal
securities, they will be exempt from federal regular income tax, as
well as New York State and New York City income taxes. New York
municipal securities are discussed in more detail below.
In seeking to achieve its investment objective, the Fund must comply
with the diversification and other requirements of Rule 2a-7 under the
Investment Company Act of 1940 which regulates money market mutual
funds. For a further discussion of these requirements, see the
"Regulatory Compliance" section in the Statement of Additional
Information. The Fund's investment objective and the investment
policies described below cannot be changed without shareholder
approval.
INVESTMENT POLICIES
THE TYPES OF MUNICIPAL SECURITIES IN WHICH THE FUND
MAY INVEST ARE DISCUSSED IN MORE DETAIL BELOW UNDER
"TYPES OF MUNICIPAL SECURITIES."
ACCEPTABLE INVESTMENTS
The Fund intends to invest exclusively in a diversified portfolio of
short-term, tax-exempt municipal obligations. However, in certain
extraordinary circumstances, the Fund may make temporary investments,
as discussed below under "Temporary Investments."
Municipal securities include securities issued by or on behalf of
states, counties, and municipalities and their agencies, authorities
and other political subdivisions, as well as securities issued by the
District of Columbia and territories and possessions of the United
States, such as Puerto Rico. When these securities are issued,
attorneys representing the issuer provide opinions stating that the
securities are valid municipal securities and that the interest on the
securities is exempt from federal regular income tax. Municipal
securities include, but are not limited to, the following types:
general obligation bonds and notes, revenue bonds and notes, tax and
revenue anticipation notes, bond and grant anticipation notes,
construction loan notes, and tax exempt commercial paper.
CREDIT GUIDELINES
THE FUND HAS STRICT INVESTMENT
STANDARDS.
The Fund invests only in municipal securities that are determined by
M&T Bank, the Fund's investment adviser, to present minimal credit
risks and that are considered to be of "high quality," as defined
below, at the time of purchase.
This includes securities that are:
rated within the two highest rating categories by Moody's (Aaa or Aa) or S&P
(AAA or AA), in the cases of bonds;
rated SP-1 by S&P or MIG-1 by Moody's, in the case of notes;
rated VMIG-1 by Moody's, in the case of variable rate municipal securities;
rated A-1 or higher by S&P or Prime-1 by Moody's, in the case of tax-exempt
commercial paper; and
securities that are not rated at the time of purchase but that are
determined to be of comparable quality to the above ratings by M&T
Bank. M&T Bank uses guidelines approved by the Corporation's Board
of Directors to make these quality determination.
NEW YORK MUNICIPAL SECURITIES
THE FUND INTENDS TO INVEST MOST OF ITS ASSETS IN NEW
YORK MUNICIPAL SECURITIES, PROVIDED A SUFFICIENT
SUPPLY OF SUITABLE QUALITY NEW YORK SECURITIES IS
AVAILABLE.
Whenever possible, M&T Bank intends to invest at least 80% of the
Fund's net assets in New York municipal securities, provided the
investment is consistent with the Fund's investment objective and
policies and its status as a diversified management investment
company. Because the supply of New York municipal securities that meet
the Fund's investment objective may fluctuate, M&T Bank cannot predict
precisely what percentage of the Fund's portfolio will be invested in
such issues.
New York municipal securities are generally issued to finance public
works within the state, such as airports, bridges, highways, housing,
hospitals, mass transportation projects, schools, streets, and water
and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses, or to make
loans to other public institutions and facilities.
New York municipal securities include industrial development bonds
issued by or on behalf of public authorities to provide financing
assistance to acquire sites or construct and equip facilities for
privately or publicly owned corporations. The availability of this
financing encourages these corporations to locate within the
sponsoring communities and thereby increase local employment.
INVESTMENT RISKS OF NEW YORK
MUNICIPAL SECURITIES
Yields on New York municipal securities depend on a variety of
factors, including the general conditions of the short-term municipal
note market and of the municipal bond market, the size of the
particular offering, the maturity of the obligations, and the rating
of the issue. Further, any adverse economic conditions or developments
affecting the State, counties, municipalities or City of New York
could have an impact on the Fund's portfolio. The ability of the Fund
to achieve its investment objective depends on the continuing ability
of issuers of New York municipal securities, or their guarantors, to
meet their obligations for the timely payment of interest and
principal when due. Investing in New York municipal securities that
meet the Fund's quality standards may not be possible if the State,
counties, municipalities and City of New York do not maintain their
current credit ratings.
CONCENTRATION OF INVESTMENTS
Except as stated above with respect to New York municipal securities,
M&T Bank does not intend to invest more than 25% of the Fund's net
assets on a regular basis in securities of issuers in the same
industry.
TO THE EXTENT THE FUND CONCENTRATES ITS INVESTMENTS, IT IS SUBJECT
TO GREATER RISKS.
To the extent the Fund's assets are concentrated in New York municipal
securities, the Fund will be subject to the special risks presented by
the laws and economic conditions relating to that state to a greater
extent than it would be if its assets were not so concentrated. In
particular, an investment in the Fund is subject to the risk of market
value fluctuations inherent in owning New York municipal securities.
TYPES OF MUNICIPAL SECURITIES
The two principal classifications of municipal securities are general
obligation and revenue bonds. These and other types of municipal
securities are discussed below.
GENERAL OBLIGATION BONDS
ISSUERS OF GENERAL OBLIGATION BONDS INCLUDE STATES, COUNTIES,
CITIES, TOWNS AND OTHER GOVERNMENT UNITS.
General obligation bonds are secured by the issuer's pledge of its
full faith and credit and taxing power for the payment of principal
and interest.
REVENUE BONDS
REVENUE BONDS MAY BE ISSUED TO BUILD A TOLL BRIDGE, HIGHWAY,
EDUCATIONAL FACILITY, HOSPITAL OR OTHER FACILITY THAT SERVES A
PUBLIC NEED AND GENERATES REVENUE. THE TOLLS OR OTHER FEES
COLLECTED BY THESE FACILITIES ARE THEN USED TO REPAY THE BONDS.
Interest on and principal of revenue bonds, however, are payable only
from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt or charge against the general
revenues of a municipality or public authority.
INDUSTRIAL DEVELOPMENT AND
POLLUTION CONTROL BONDS
INDUSTRIAL DEVELOPMENT BONDS ARE ISSUED BY A STATE OR LOCAL
GOVERNMENT TO FINANCE PLANTS AND FACILITIES THAT ARE LEASED TO
PRIVATE BUSINESSES.
Industrial development bonds and pollution control bonds are typically
classified as revenue bonds and are not payable from the unrestricted
revenues of the issuer. Consequently, the credit quality of such
revenue bonds is usually directly related to the credit standing of
the corporate user of the facility involved.
MORAL OBLIGATION BONDS
Moral obligation bonds are normally issued by special purpose public
authorities. If an issuer of moral obligation bonds is unable to meet
its interest and principal payments from current revenues, it may draw
on a reserve fund. The state or municipality that created the issuer
has given a moral pledge to appropriate funds to replenish the reserve
fund. But that pledge is only a moral commitment, not a legal
obligation of the state or municipality.
VARIABLE RATE MUNICIPAL SECURITIES
Some of the municipal securities which the Fund purchases may have
variable interest rates. Variable interest rates are ordinarily based
on a published interest rate, interest rate index or some similar
standard, such as the 91-day U.S. Treasury bill rate.
Many variable rate municipal securities are subject to payment of
principal on demand by the Fund (usually in not more than seven days)
which is considered in computing maturity. While some variable rate
municipal securities without this demand feature may not be considered
liquid by M&T Bank, the Fund's investment limitations require that it
will invest no more than 10% of its total assets in illiquid
securities.
All variable rate municipal securities will meet the quality standards
for the Fund. The investment adviser has been instructed by the
Corporation's Board of Directors to monitor the pricing, quality, and
liquidity of the variable rate municipal securities held by the Fund
on the basis of published financial information and reports of the
rating agencies and other analytical services. Where necessary to
ensure that an instrument is of "high quality," the Fund will require
that the issuer's obligation to pay the principal of the instrument be
backed by an unconditional bank letter or line of credit guarantee or
commitment to lend.
AMT OBLIGATIONS
INTEREST ON SOME MUNICIPAL SECURITIES MAY BE SUBJECT TO A SPECIAL
FEDERAL ALTERNATIVE MINIMUM TAX.
While traditional municipal bonds finance roads, schools, libraries,
and other public facilities, some municipal bonds known as private
activity bonds provide benefits to private parties. Examples of
private activity bonds include single-family housing bonds and some
industrial development bonds. Interest on certain private activity
municipal bonds issued after August 7, 1986 is a tax preference item
for purposes of computing the federal alternative minimum tax (AMT),
although interest on these bonds is not subject to regular federal
income tax. These bonds are referred to as AMT bonds or AMT
obligations. For more information about the AMT, please see "Tax
Information."
The Fund may purchase all kinds of municipal securities, including AMT
obligations. To the extent the Fund invests in AMT obligations, a
portion of the Fund's dividends will be treated as a tax preference
item for shareholders potentially subject to the AMT.
As noted earlier, the Fund has a policy of investing at least 80% of
its net assets in securities that pay interest exempt from federal
regular income tax. The Fund does not consider these AMT obligations
tax-exempt for purposes of determining its compliance with this
investment policy.
TEMPORARY INVESTMENTS
THE FUND MAY MAKE TEMPORARY TAXABLE INVESTMENTS.
The Fund invests its assets so that at least 80% of its annual
interest income is exempt from federal regular income tax. However,
from time to time, on a temporary basis, or when M&T Bank determines
that market conditions call for a temporary defensive posture, the
Fund may invest in short-term money market instruments (referred to as
temporary investments). Interest income from temporary investments may
be taxable to shareholders as ordinary income.
These temporary investments may not exceed 20% of the total assets of
the Fund, except when made for temporary defensive purposes, in which
case the Fund may invest 100% of its total assets in such investments.
They include:
obligations issued by or on behalf of municipal or corporate
issuers having the same quality characteristics as the New York
municipal securities purchased by the Fund;
obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities;
certificates of deposit, bankers' acceptances, or other instruments issued by
a U. S. branch of a domestic bank or savings and loan association with
capital, surplus, and undivided profits in excess of $1 billion at the time
of investment;
repurchase agreements and reverse repurchase agreements;
certain specified private activity bonds; and
debt securities, including commercial paper, of issuers having a
quality rating within the two highest rating categories of either
S&P or Moody's at the time of purchase.
In addition, the Fund may temporarily hold uninvested cash reserves
that do not earn income if, in the opinion of M&T Bank, suitable
tax-exempt obligations are unavailable. There is no percentage
limitation on the amount of assets that may be held uninvested.
See the Statement of Additional Information for a further discussion
of these temporary investments.
COMMON FUND
INVESTMENT TECHNIQUES,
FEATURES AND
LIMITATIONS
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Funds may purchase securities on a when-issued or delayed delivery
basis. These transactions are arrangements in which the Funds purchase
securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Funds to
miss a price or yield considered to be advantageous. Under normal
market conditions, each Fund will not enter into commitments to
purchase securities on a when-issued basis that exceed 25% of the
value of its total assets. Settlement dates may be a month or more
after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
As an operating policy, the Funds reserve the right to dispose of a
commitment prior to settlement if the adviser deems it appropriate to
do so. In addition, the Funds may enter into transactions to sell
their purchase commitments to third parties at current market values
and simultaneously acquire other commitments to purchase similar
securities at later dates. The Funds may realize short-term profits or
losses upon the sale of such commitments.
REPURCHASE AGREEMENTS
IN A REPURCHASE AGREEMENT, A FUND BUYS SECURITIES AND
AT THE SAME TIME AGREES TO SELL THEM BACK AT A STATED
PRICE.
The Funds may enter into repurchase agreements for U.S. government
securities and certificates of deposit with banks, broker/dealers, and
other recognized financial institutions. In a repurchase agreement, a
Fund agrees to purchase securities from the selling institution and
the seller simultaneously agrees to repurchase the securities at a
specific price within a stated time. The stated repurchase date must
be within a year of the date the Fund acquires the securities. The
Funds or their custodian (the bank that holds each Fund's assets in
safekeeping) takes possession of securities subject to repurchase
agreements, and these securities are marked to the market or valued
daily.
If the original seller does not repurchase the securities from a Fund,
that Fund could receive less than the repurchase price on any sale of
those securities. If the seller filed for bankruptcy or became
insolvent, the Fund's sale of the securities might be delayed pending
court action. The Funds have regular procedures in effect for taking
custody of portfolio securities subject to repurchase agreements.
Because of those established procedures, the Funds believe that a
court of competent jurisdiction would rule in favor of the Fund and
allow the Fund to retain or dispose of the securities.
The Funds will only enter into repurchase agreements with banks and
other recognized financial institutions such as broker/dealers that
the Funds' adviser considers creditworthy under guidelines approved by
the Corporation's Board of Directors.
VARIABLE RATE DEMAND NOTES
The Funds may purchase variable rate demand notes, which are long-term
debt instruments that have variable or floating interest rates and
provide the Funds with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Many
variable rate demand notes allow the Funds to demand the repurchase of
the security on not more than seven days' prior notice. Other notes
only permit the Funds tender the security at the time of each interest
rate adjustment or at other fixed intervals.
VARIABLE AMOUNT DEMAND
MASTER NOTES
WITH A VARIABLE AMOUNT DEMAND MASTER NOTE, BOTH THE AMOUNT OF THE
LOAN AND THE INTEREST RATE MAY VARY.
The Tax-Free Fund and the Money Market Fund may purchase variable
amount demand master notes. Variable amount demand master notes
represent a borrowing arrangement between a commercial paper issuer,
the borrower, and an institutional lender, such as the Fund. The Fund
has the right to demand payment of the loan it has made upon short
notice. The Fund typically has the right to increase the amount
borrowed under the note, at any time, up to the full amount provided
by the note agreement.
Both the Fund and the borrower have the right to reduce the amount of
outstanding indebtedness at any time. In some instances, however, the
Fund and the borrower may agree that the amount of outstanding
indebtedness remain fixed. Variable amount demand master notes provide
that the interest rate on the amount outstanding varies depending upon
a stated short-term interest rate index.
CREDIT ENHANCEMENT
Certain of the Acceptable Investments of the Tax-Free Fund and the
Money Market Fund may have been credit-enhanced by a guaranty, letter
of credit, or insurance. Any bankruptcy, receivership, or default, or
change in the credit quality of the party providing the credit
enhancement will adversely affect the quality and marketability of the
underlying security and could cause losses to the Tax-Free Fund and
the Money Market Fund and affect their share price. The Tax-Free Fund
and the Money Market Fund may have more than 25% of their total assets
invested in securities credit-enhanced by banks.
DEMAND FEATURES
The Tax-Free Fund and the Money Market Fund may acquire securities
that are subject to puts and standby commitments ("demand features")
to purchase the securities at their principal amount (usually with
accrued interest) within a fixed period (usually seven days) following
a demand by the Funds. The demand feature may be issued by the issuer
of the underlying securities, a dealer in the securities or another
third party, and may not be transferred separately from the underlying
security. The Funds use these arrangements to provide the Funds with
liquidity and not to protect against changes in the market value of
the underlying securities.
The bankruptcy, receivership, or default by the issuer of the demand
feature, or a default on the underlying security or other event that
terminates the demand feature before its exercise, will adversely
affect the liquidity of the underlying security. Demand features that
are exercisable even after a payment default on the underlying
security may be treated as a form of credit enhancement.
INVESTMENT LIMITATIONS
THE FUNDS FOLLOW A NUMBER OF GUIDELINES IN MANAGING THEIR
PORTFOLIOS IN ORDER TO LIMIT INVESTMENT RISKS.
Many of the investment restrictions to which each Fund is subject may
be changed only by a majority vote of the outstanding shares of the
Fund. You can find a more detailed description of the following
investment limitations, together with other investment limitations
that can be changed only with such a vote of shareholders, in the
Statement of Additional Information under "Investment Limitations."
All of the Funds have the following common investment limitations. The
Funds may not:
borrow money or issue senior securities, except, under certain
circumstances, a Fund may borrow from banks or enter into reverse
repurchase agreements for temporary purposes in amounts up to 10%
of the value of its total assets at the time of such borrowing. The
Fund may not purchase securities while its borrowings (including
reverse repurchase agreements) are outstanding; or
enter into repurchase agreements providing for settlement more than
seven days after notice, if such an investment, together with any
other illiquid securities in a Fund, exceeds 10% the Fund's total
assets.
The Tax-Free Fund may not:
purchase any securities which would cause more than 25% of the
value of the Fund's total assets at the time of purchase to be
invested in the securities of issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to obligations issued by the State of New
York or any of its authorities, agencies, instrumentalities, or
political subdivisions; obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities; domestic bank
certificates of deposit and bankers' acceptances; or repurchase
agreements secured by any of the foregoing obligations; or invest
less than 80% of its net assets in securities the interest on which
is exempt from federal regular income tax, except during temporary
defensive periods; AMT obligations are not considered securities
the interest on which is exempt from federal regular income tax.
The Treasury Fund may not:
purchase securities other than direct obligations of the U.S.
Treasury, such as Treasury bills and notes, some of which may be
subject to repurchase agreements.
The Money Market Fund may not:
purchase any securities which would cause 25% or more of the value
of the Fund's total assets at the time of purchase to be invested
in securities of one or more issuers conducting their principal
business activities in the same industry, provided that there is no
limitation with respect to obligations issued or guaranteed by the
U.S. government or its agencies or instrumentalities, domestic bank
certificates of deposit, bankers' acceptances, and repurchase
agreements secured by domestic bank instruments or obligations of
the U.S. government, its agencies or instrumentalities.
The above investment limitations cannot be changed without
shareholder approval. The following limitation, however, may be
changed by the Directors without shareholder approval. Shareholders
will be notified before any material change in this limitation
becomes effective.
All of the Funds may not:
enter into repurchase agreements providing for settlement more than
seven days after notice, if such an investment, together with any
illiquid securities in a Fund, exceeds 10% of the Fund's net
assets.
FUND MANAGEMENT,
DISTRIBUTION AND
ADMINISTRATION
BOARD OF DIRECTORS
A BOARD OF DIRECTORS SUPERVISES THE FUNDS.
The Corporation's Board of Directors are responsible for managing the
business affairs of the Funds and for exercising all the Funds'
powers, except those reserved for the Funds' shareholders.
INVESTMENT ADVISER
MANUFACTURERS AND TRADERS TRUST COMPANY ("M&T BANK") MAKES
INVESTMENT DECISIONS FOR THE FUNDS, ACTING UNDER THE DIRECTION OF
THE BOARD OF DIRECTORS.
As investment adviser, M&T Bank continually conducts investment
research and supervision for the Funds and is responsible for all
purchases and sales of the securities in each Fund's portfolio. M&T
Bank receives an annual fee from each of the Funds for these services.
Both the Corporation and the Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Funds and
their portfolio securities. These codes recognize that such persons
owe a fiduciary duty to the Funds' shareholders and must place the
interests of shareholders ahead of the employees' own interest. Among
other things, the codes: require preclearance and periodic reporting
of personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Funds; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for
less than sixty days. Violations of the codes are subject to review by
the Board of Directors, and could result in severe penalties.
ADVISORY FEES
For the services M&T Bank provides and the expenses it assumes as
investment adviser, M&T Bank is entitled to receive a fee from each
Fund equal to an annual rate of 0.50% of each Fund's average net
assets. This fee is computed daily and paid monthly. M&T Bank has
agreed to pay all expenses it incurs in connection with its advisory
activities, other than the cost of securities (including any brokerage
commissions) purchased for the Funds.
M&T BANK MAY VOLUNTARILY WAIVE PART OF ITS ADVISORY
FEES.
From time to time, M&T Bank may voluntarily waive all or a portion of
its advisory fees in order to help the Fund maintain a competitive
expense ratio.
ADVISER'S BACKGROUND
FOUNDED IN 1856, M&T BANK PROVIDES COMPREHENSIVE
BANKING AND FINANCIAL
SERVICES.
M&T Bank is the principal banking subsidiary of First Empire State
Corporation, a $13 billion bank holding company, as of December 31,
1996, headquartered in Buffalo, New York. M&T Bank has 174 offices
throughout New York State and an office in Nassau, The Bahamas as of
May 31, 1997.
M&T Bank was founded in 1856 and provides comprehensive banking and
financial services to individuals, governmental entities and
businesses throughout New York State. The Fund's investments are
managed through the Trust & Investment Services Division of M&T Bank.
As of December 31, 1996, M&T Bank had $3.1 billion in assets under
management for which it has investment discretion (which includes
employee benefits, personal trusts, estates, agencies and other
accounts). M&T Bank has served as investment adviser to various funds
of the Corporation since 1988. As of December 31, 1996, M&T Bank
managed over $1.2 billion in net assets of the Corporation's money
market funds. As part of its regular banking operations, M&T Bank may
make loans to public companies. Thus, it may be possible, from time to
time, for the Fund to hold or acquire the securities of issuers which
are also lending clients of M&T Bank. The lending relationship will
not be a factor in the selection of securities.
DISTRIBUTION OF FUND SHARES
FEDERATED SECURITIES CORP. IS THE PRINCIPAL
DISTRIBUTOR FOR SHARES OF THE FUNDS.
Shares of the Funds are sold on a continuous basis by Federated Securities
Corp., as the principal distributor. It is a Pennsylvania corporation organized
on November 14, 1969, and is also the principal distributor for a number of
other investment companies. Federated Securities Corp. is a subsidiary of
Federated Investors.
SHAREHOLDER SERVICING ARRANGEMENTS
The Funds have adopted a Shareholder Services Plan, which is
administered by Federated Administrative Services. Under the Plan, M&T
Bank may act as a shareholder servicing agent (the "Shareholder
Servicing Agent") for the Funds. The Funds may pay the Shareholder
Servicing Agent a fee based on the average daily net asset value of
shares for which it provides shareholder services. These shareholder
services include, but are not limited to, distributing prospectuses
and other information, providing shareholder assistance and
communicating or facilitating purchases and redemptions of shares.
This fee will be equal to 0.25% of a Fund's average daily net assets
for which the Shareholder Servicing Agent provides services. The Funds
will not accrue or pay any shareholder servicing agent fees until a
separate class of shares has been created for the Funds or the
prospectus is amended to reflect the imposition of fees.
ADMINISTRATIVE ARRANGEMENTS
The distributor may select brokers and dealers to provide distribution
and administrative services. The distributor may also select
administrators (including depository institutions such as commercial
banks and savings and loan associations) to provide certain
administrative services that are not provided by Federated
Administrative Services (see below). These administrative services
include distributing prospectuses and other information, providing
accounting assistance and shareholder communications, or otherwise
facilitating shareholder purchases and redemptions (sales) of any Fund
shares. The administrators appointed could include affiliates of the
adviser.
Brokers, dealers, and administrators will receive fees from the
distributor based upon shares owned by their clients or customers. The
fees are calculated as a percentage of the average aggregate net asset
value of shareholder accounts during the period for which the brokers,
dealers, and administrators provide services. If the distributor pays
any fees for these services, the fees will be reimbursed by the
adviser and not the Funds.
In addition, brokers, dealers, and administrators may receive
additional payments in the form of cash or promotional incentives
based on the amount of any Fund shares purchased by their clients or
customers.
The distributor, M&T Bank, or affiliates thereof, at their own expense
and out of their own assets, may also provide other compensation to
financial institutions in connection with sales of shares of the Funds
or as financial assistance for providing substantial marketing, sales
and operational support. Compensation may also include, but is not
limited to, financial assistance to financial institutions in
connection with conferences, sales, or training programs for their
employees, seminars for the public, advertising or sales campaigns, or
other special events. In some instances, this compensation may be
predicated upon the amount of shares sold and/or upon the type and
nature of sales or operational support they furnish. Dealers may not
use sales of the Corporation's shares to qualify for this compensation
to the extent such may be prohibited by the laws of any state or any
self-regulatory agency, such as the National Association of Securities
Dealers, Inc. None of the aforementioned other compensation shall be
paid for by the Corporation, the Funds or their shareholders, nor will
it change the price paid by investors for the purchase of Fund shares.
ADMINISTRATION OF THE FUNDS
FEDERATED ADMINISTRATIVE SERVICES, A SUBSIDIARY OF
FEDERATED INVESTORS, PROVIDES THE FUNDS WITH CERTAIN
ADMINISTRATIVE PERSONNEL AND SERVICES NECESSARY TO
OPERATE THE FUNDS.
ADMINISTRATIVE SERVICES
Such services include certain legal and accounting services. Federated
Administrative Services provides these services for an annual fee as
specified in the following table:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AGGREGATE DAILY NET ASSETS OF
FEE VISION GROUP OF FUNDS, INC.
<C> <S>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year will be at
least $50,000 per Fund. Federated Administrative Services may choose
voluntarily to waive a portion of its fee at any time.
YOUR GUIDE
TO USING
THE FUNDS
HOW THE FUNDS VALUE
THEIR SHARES
THE TERM "NET ASSET VALUE" REFERS TO THE VALUE OF ONE
FUND SHARE.
Net asset value is calculated by adding up the value of all of a
Fund's securities and cash (its assets), subtracting all of its
liabilities (including all expenses payable or accrued by the Fund),
and then dividing the result (net assets) by the total number of Fund
shares outstanding.
Each Fund attempts to maintain a stable net asset value of $1.00 per
share through its investment policies, which have been described
previously, and through its policies for valuing securities in its
portfolio. Each Fund values its portfolio securities based on their
amortized cost. This method of valuation assumes a stable rate of
income from the day securities are purchased until they mature,
without taking into account actual changes in market value based on
interest rate changes. Prices of money market securities and other
fixed income securities typically move in the opposite direction of
interest rates. That is, prices generally increase when interest rates
fall and decrease when interest rates rise.
Under the amortized cost method of valuation used by the Funds, the
value of the Funds' assets will not change in response to fluctuating
interest rates. However, each Fund monitors the difference between the
amortized cost value of its assets and their actual market value,
which can be expected to vary inversely with changes in interest
rates. Of course, the Funds cannot guarantee that their net asset
value will always remain at $1.00 per share.
WHAT FUND SHARES COST
THERE IS NO SALES CHARGE TO BUY FUND SHARES.
Shares of the Funds are sold at the next net asset value calculated
after your order is received (normally $1.00 per share). Each Fund's
net asset value is determined at 12:00 p.m. Eastern time, 3:00 p.m.
Eastern time and at the close of trading (normally 4:00 p.m., Eastern
time) on the New York Stock Exchange Monday through Friday, except on:
New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans'
Day, Thanksgiving Day, and Christmas Day.
In connection with the sale of Fund shares, Federated Securities Corp.
may from time to time offer certain items of nominal value to any
shareholder or investor.
HOW TO BUY SHARES
YOU CAN BUY FUND SHARES BY FEDERAL RESERVE WIRE, MAIL OR TRANSFER,
AS EXPLAINED BELOW.
You can buy shares of the Funds on any business day, except on days
when the New York Stock Exchange or M&T Bank is closed, or on holidays
when wire transfers are restricted (Columbus Day, Veterans' Day, and
Martin Luther King Day). The Funds reserve the right to reject any
purchase request. Texas residents must purchase through Federated
Securities Corp. at 1-800-618-8573.
OPENING AN ACCOUNT
To make an initial investment in the Funds, you must open an account
by completing the account application form. Information needed to open
your account may also be taken over the telephone. To apply by phone
or get help in completing the enclosed application, simply call an
account representative at M&T Bank or those affiliates of M&T Bank
which make shares available or M&T Bank's Mutual Fund Services at
(800) 836-2211 (in the Buffalo area, phone 842-4488). The Funds use
this telephone number only to service shareholders of Vision Group of
Funds, Inc. You also may purchase shares of the Funds through any
representative of M&T Securities, Inc. ("M&T Securities") at M&T Bank,
as well as at separate M&T Securities locations, or by calling
1-800-724-5445. M&T Securities (member NASD and SIPC) is a
wholly-owned registered broker-dealer subsidiary of M&T Bank.
MINIMUM INITIAL INVESTMENT
A $500 INITIAL INVESTMENT IS ALL THAT'S REQUIRED.
The minimum initial investment in each Fund is $500, unless the
investment is in a retirement plan, in which case the minimum initial
investment is $250. Subsequent minimum investments must be in amounts
of at least $25, including retirement plans. In addition, the minimum
initial and subsequent investment amounts may be waived or lowered
from time to time, such as for customers participating in automatic
investment services offered by M&T Bank.
BUYING SHARES BY WIRE
You can purchase shares of the Funds by Federal Reserve wire. This is
referred to as wiring federal funds, and it simply means that your
bank sends money to the Funds' bank through the Federal Reserve
System. To purchase shares by Federal Reserve wire, call M&T Bank's
Mutual Fund Services before 11:00 a.m. (Eastern time) to place your
order. The order is considered immediately received. Payment by
federal funds must be received before 3:00 p.m. (Eastern time) that
same day.
BUYING SHARES BY MAIL
To buy shares of a Fund for the first time by mail, complete and sign
the account application form and mail it, together with your check
made payable to (Name of the Fund) in an amount of $500 or more, to
the address below:
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
Current shareholders can purchase shares by mail by sending a check to
the same address. Orders by mail are considered received after payment
by check has been converted into federal funds. This is normally the
next business day after the check has been received.
BUYING SHARES BY TRANSFER
To purchase shares of the Funds by transferring money from a bank
account, you must maintain a checking or NOW deposit account at M&T
Bank or any of its affiliate banks. To place an order, call M&T Bank's
Mutual Fund Services before 11:00 a.m. (Eastern time). The money will
be transferred from your M&T Bank checking or NOW deposit account to
your Fund account that same day.
Shareholders who previously purchased shares of the Funds through The
Fairfield Group, Inc., the Fund's former distributor, may continue to
purchase, exchange, or redeem their shares by calling Federated
Securities Corp. at (800) 618-8573.
CUSTOMER AGREEMENTS
Shareholders normally purchase shares of the Funds through different
types of customer accounts at M&T Bank and its affiliates. You should
read this prospectus together with any applicable agreement between
you and the institution to learn about the services provided, the fees
charged for those services, and any restrictions or limitations that
may be imposed.
SYSTEMATIC INVESTMENT PROGRAM
YOU CAN BUY SHARES CONVENIENTLY THROUGH THE FUNDS'
SYSTEMATIC INVESTMENT PROGRAM.
Once you have opened a Fund account, you can add to your investment on
a regular basis in amounts of $25 or more through automatic deductions
from your bank checking or NOW deposit account. The money may be
withdrawn monthly or quarterly and invested in Fund shares at the next
net asset value calculated after your order is received. To sign up
for this program, please call
M&T Bank's Mutual Fund Services for an application.
DIVIDENDS
YOU EARN DAILY DIVIDENDS.
The Funds declare dividends daily and pay them monthly. Shares
purchased by wire before 3:00 p.m. (Eastern time) begin earning
dividends that day. Shares purchased by check begin earning dividends
on the day after the check is converted into federal funds.
Dividends are automatically reinvested in additional shares of a Fund
on the dates the dividends are paid unless you request cash payments
on the account application form or by contacting M&T Bank's Mutual
Fund Services.
CAPITAL GAINS
If, for some extraordinary reason, a Fund realizes capital gains,
those capital gains could result in an increase in the Fund's
dividends. Conversely, any capital losses realized by a Fund could
result in a decrease in its dividends. In the unlikely event that a
Fund realizes net long-term capital gains, it will distribute them at
least once every 12 months. The Funds do not expect to realize any
capital gains or losses and, therefore, do not foresee paying any
"capital gains dividends," as defined in the Internal Revenue Code.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Shareholder Services
Company maintains a share account for each shareholder. The Funds will
not issue certificates for your shares unless you make a written
request to the Funds. Federated Shareholder Services Company is a
subsidiary of Federated Investors.
Monthly confirmations are sent to report transactions such as
purchases and redemptions as well as dividends paid during the month.
RETIREMENT PLANS
Shares of the Fund can be purchased as an investment for retirement
plans or IRA accounts. For further details, contact the Fund and
consult a tax adviser. You should note that an investment in the
Tax-Free Fund is generally not appropriate for retirement plans or IRA
accounts.
HOW TO EXCHANGE SHARES
IF YOUR INVESTMENT NEEDS CHANGE, YOU CAN CONVENIENTLY EXCHANGE
SHARES OF ANY OF THE FUNDS FOR SHARES OF OTHER FUNDS IN THE
CORPORATION THAT ARE REGISTERED IN YOUR STATE.
All shareholders in any of the Funds are shareholders of Vision Group
of Funds, Inc. and have access to the other portfolios of the
Corporation (referred to as the "Participating Funds" and listed below
under "Description of Fund Shares") through an exchange program. You
may exchange shares of a Participating Fund for shares of other
Participating Funds at net asset value, plus any applicable sales
charge.
When exchanging into and out of Participating Funds with a sales
charge and Participating Funds without a sales charge, shareholders
who have paid a sales charge once upon purchasing shares of any
Participating Fund, including those shares acquired by the
reinvestment of dividends, will not have to pay a sales charge again
on an exchange. When exchanging into and out of Participating Funds
with different sales charges, exchanges are made at net asset value.
Shares of Participating Funds with no sales charge acquired by direct
purchase may be exchanged for shares of other Participating Funds with
a sales charge at net asset value plus the applicable sales charge.
However, shares of Participating Funds with no sales charge that were
acquired by the reinvestment of dividends will not be subject to a
sales charge upon an exchange into shares of a Participating Fund with
a sales charge. Instead, such exchanges will be made at net asset
value.
To be eligible for this exchange privilege, you must exchange shares
with a net asset value of at least $500. This privilege is available
to shareholders resident in any state in which the fund shares being
acquired may be sold. You may exchange your shares only for shares of
Participating Funds that may legally be sold in your state of
residence. Prior to any exchange, you must receive a copy of the
current prospectus of the Participating Fund into which the exchange
is being made.
Once Federated Shareholder Services Company has received proper
instructions and all necessary supporting documents, shares submitted
for exchange will be redeemed at the next net asset value calculated.
If you do not have an account in the Participating Fund whose shares
you want to acquire, you must establish a new account. Unless you
specify otherwise, this account will be registered in the same name
and have the same dividend and capital gains payment options as you
selected with your existing account. If the new account registration
(name, address, and taxpayer identification number) is not identical
to your existing account, you must provide a signature guarantee to
verify your signature. Please see "Signature Guarantees" below for
more information about signature guarantees.
Each exchange is considered a sale of shares of one Fund and a
purchase of shares of another Fund and, depending on the
circumstances, may generate a short or long-term capital gain or loss
for federal income tax purposes.
Each Fund reserves the right to modify or terminate the exchange
privilege at any time. Shareholders will be notified prior to any
modification or termination.
To find out more about the exchange privilege, call M&T Bank's Mutual
Fund Services at the number listed below.
EXCHANGING SHARES BY TELEPHONE
TO BE ELIGIBLE FOR TELEPHONE EXCHANGES, SELECT THAT OPTION WHEN YOU
OPEN YOUR ACCOUNT.
You may exchange shares between Participating Funds by calling M&T
Bank's Mutual Fund Services at (800) 836-2211 (in the Buffalo area,
phone 842-4488). To sign-up for telephone exchanges, you must select
the telephone exchange option on the new account application. It is
recommended that you request this privilege on your initial
application. If you do not and later wish to take advantage of
telephone exchanges, you may call M&T Bank's Mutual Fund Services for
authorization.
You can only exchange shares by telephone between Fund accounts with
identical shareholder registrations (names, addresses, and taxpayer
identification numbers).
Telephone exchange instructions must be received by M&T Bank by 11:00
a.m. (Eastern time) and transmitted to Federated Shareholder Services
Company before 4:00 p.m. (Eastern time) for shares to be exchanged
that same day. You will not receive a dividend from the Fund into
which you are exchanging on the date of the exchange.
You may have difficulty making exchanges by telephone in times of
unusual economic or market changes when the volume of telephone
requests may be exceptionally high. If you cannot contact M&T Bank's
Mutual Fund Services by telephone, please send a written exchange
request by mail for next day delivery to the Vision Group of Funds,
Inc. at the address shown below.
If you have certificates for the shares you want to exchange, you
cannot make a telephone exchange. Instead, the certificates must be
properly endorsed and should be sent by registered or certified mail,
along with your written exchange request, to the Vision Group of
Funds, Inc. at the address shown below. M&T Bank's Mutual Fund
Services will then forward the certificate to the transfer agent,
Federated Shareholder Services Company, and the shares will be
deposited in your account before the exchange is made.
Shareholders requesting the telephone exchange service authorize the
Corporation and its agents to act upon their telephonic instructions
to exchange shares from any account for which they have authorized
such services. Exchange instructions given by telephone may be
electronically recorded for your protection. If reasonable procedures
are not followed by the Funds, the Funds may be liable for losses due
to unauthorized or fraudulent telephone instructions.
EXCHANGING SHARES BY MAIL
You may exchange shares by mail by sending your written request to:
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
HOW TO REDEEM SHARES
YOU CAN REDEEM FUND SHARES BY TELEPHONE, CHECK, OR
MAIL. TO ENSURE YOUR SHARES ARE REDEEMED
EXPEDITIOUSLY, PLEASE FOLLOW THE PROCEDURES EXPLAINED
BELOW.
Each Fund redeems or repurchases your shares at the net asset value
per share next determined after the Fund receives your redemption
request. You may only redeem shares on days when the Funds compute
their net asset value. You cannot redeem shares on days when the New
York Stock Exchange or M&T Bank is closed, or on federal holidays when
wire transfers are restricted (Columbus Day, Veterans' Day, and Martin
Luther King Day). While you may redeem various amounts by telephone,
check, or written request, you can close your account only by writing.
TELEPHONE REDEMPTIONS
TO QUALIFY FOR TELEPHONE REDEMPTIONS, CHOOSE THAT
OPTION WHEN YOU OPEN YOUR ACCOUNT.
You may redeem your shares by calling M&T Bank's Mutual Fund Services
at (800) 836-2211 (in the Buffalo area, phone 842-4488) before 11:00
a.m. (Eastern time). The proceeds will be wired that same day directly
to your account at M&T Bank or an affiliate or to another account you
previously designated at a domestic commercial bank account that is a
member of the Federal Reserve system. M&T Bank reserves the right to
charge a fee for a wire transfer from a customer checking account,
which may contain redemption proceeds, to another commercial bank.
You will be automatically eligible for telephone redemptions, unless
you check the box on the new account application form to decline this
privilege. It is recommended that you provide the necessary
information for the telephone/wire redemption option on your initial
application. If you do not do this and later wish to take advantage of
telephone redemptions, you must call M&T Bank's Mutual Fund Services
for authorization forms. If your redemption request is received after
11:00 a.m. (Eastern time), you will be paid the Fund's daily dividend
on those shares. However, the proceeds will not be wired to your bank
account until the following business day. If your redemption request
is received before 11:00 a.m. (Eastern time), the proceeds will be
wired the same day, but you will not receive that day's dividend.
You may have difficulty redeeming shares by telephone in times of
unusual economic or market changes when the volume of telephone
requests may be exceptionally high. If you cannot contact M&T Bank's
Mutual Fund Services by telephone, please send a written redemption
request by mail for next day delivery to the Vision Group of Funds.
Inc. at the address shown below.
Each Fund reserves the right to modify or terminate the telephone
redemption privilege at any time. Shareholders will be notified prior
to any modification or termination.
If you hold shares in certificate form or hold Fund shares through an
IRA account, you cannot redeem those shares by phone, but instead must
redeem them in writing as explained below.
Shareholders who accept the telephone redemption service authorize the
Corporation and its agents to act upon their telephonic instructions
to redeem shares from any account for which they have authorized such
services. Redemption instructions given by telephone may be
electronically recorded for your protection. If reasonable procedures
are not followed by the Funds, the Funds may be liable for losses due
to unauthorized or fraudulent telephone instructions.
REDEEMING SHARES BY CHECK
At your request, Federated Shareholder Services Company will establish
a checking account that allows you to redeem Fund shares by writing
checks in amounts of $250 or more. The ability to redeem shares by
check may not be available when establishing an account through
certain financial institutions (such as brokers). You should read this
prospectus together with any applicable agreement between you and the
institution to learn about the services provided, the fees charged for
those services, and any restrictions or limitations that may be
imposed. For more information, contact M&T Bank's Mutual Fund
Services.
REDEEMING SHARES BY MAIL
You may also redeem shares by sending your written request to:
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
Please call M&T Bank's Mutual Fund Services for specific instructions
before redeeming by letter. Your written request must include your
name, the Fund's name, your account number, and the share or dollar
amount you want to redeem. If share certificates have been issued to
you, those certificates must be properly endorsed and should be sent
by registered or certified mail along with your redemption request.
SIGNATURE GUARANTEES
A signature guarantee verifies the authenticity of your signature. For
your protection, you must have your signature guaranteed on written
redemption requests in the following instances:
if you are redeeming shares worth $50,000 or more;
if you want a redemption of any amount sent to an address other than your
address on record with a Fund;
if you want a redemption of any amount payable to someone other than yourself
as the shareholder of record; or
if you want to transfer the registration of Fund shares.
Signature guarantee must be provided by:
a trust company or commercial bank whose deposits are insured by BIF, which
is administered by the FDIC;
a savings bank or savings association whose deposits are insured by SAIF,
which is administered by the FDIC;
a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchange; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and their transfer agent have adopted standards for
accepting signature guarantees from the above institutions. The Funds
may elect in the future to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. The
Funds and their transfer agent reserve the right to amend these
standards at any time without notice.
RECEIVING PAYMENT
Normally, a check for the proceeds is mailed within one business day,
but in no event more than seven days, after receipt of a proper
written redemption request, provided the Fund or its agents have
received payment for shares from the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
THE FUNDS' SYSTEMATIC WITHDRAWAL PROGRAM LETS YOU
RECEIVE REGULAR AUTOMATIC PAYMENTS OF A PREDETERMINED
AMOUNT.
If you own Fund shares worth $10,000 or more you can have regular
payments of $50 or more sent from your Fund account to you, another
person you designate or your bank checking or NOW deposit account.
Fund shares are redeemed to provide monthly or quarterly payments in
the amount you specify.
Depending on the amount you are withdrawing, the amount of dividends
and any capital gains distributions paid on the Fund shares, and any
possible fluctuations in a Fund's net asset value per share, these
redemptions may reduce and eventually exhaust your investment in the
Fund. For this reason, you should not consider systematic withdrawal
payments as yield or income received on your investment in the Fund.
For more information and an application form for the Systematic
Withdrawal Program, call M&T Bank's Mutual Fund Services.
INVOLUNTARY REDEMPTIONS
Because of the high cost of maintaining accounts with low balances,
the Funds may redeem your shares and send you the proceeds if your
account balance falls below a minimum value of $250 due to shareholder
redemptions. Shareholders who make large or frequent withdrawals may
be particularly vulnerable to this involuntary redemption process.
However, before shares are redeemed to close an account, the
shareholder will be notified in writing and given 30 days to purchase
additional shares to meet the minimum balance requirement.
Further, each Fund reserves the right to redeem shares involuntarily
or make payment for redemptions in the form of securities if it
appears appropriate to do so in light of the Funds' responsibilities
under the Investment Company Act of 1940.
TAX
INFORMATION
THE FOLLOWING DISCUSSION ON TAXES IS FOR GENERAL
INFORMATION ONLY. PLEASE CONSULT YOUR OWN TAX ADVISER
FOR SPECIFIC TAX INFORMATION ABOUT YOUR PARTICULAR
SITUATION.
Below is a general discussion of tax considerations for each of the
Funds. No attempt has been made to present a detailed explanation of
the federal, state, and local income tax treatment of a Fund or its
shareholders, and this discussion is not intended as a substitute for
careful tax planning.
The tax consequences discussed here apply whether you receive
dividends in cash or reinvest them in additional shares. The Funds
will send you tax information annually regarding the federal income
tax consequences of distributions made during the year. You should
definitely consult your own tax adviser about any state or local taxes
that may apply.
Each Fund will be treated as a separate entity for federal income tax
purposes. Income earned by each of the Funds, including any capital
gains or losses realized, is not combined with income earned on the
Corporation's other portfolios.
The Funds intend to qualify each year as a regulated investment
company under the Internal Revenue Code so that they are not required
to pay federal income taxes on the income and capital gains
distributed to shareholders.
TAX-FREE FUND
THE FUND EXPECTS MOST OF ITS INCOME TO BE EXEMPT FROM FEDERAL
REGULAR INCOME TAX.
FEDERAL TAXES
Shareholders are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest received
from tax-exempt municipal securities (exempt-interest dividends). The
Fund intends to invest its assets so that most of the dividends it
pays will be considered exempt-interest dividends. Shareholders will
be required to pay federal income tax on dividends received from the
Fund attributable to capital gains and net interest received from
taxable temporary investments, although the Fund anticipates that such
amounts will be limited.
However, exempt-interest dividends on certain private activity
municipal securities may be included in calculating the federal
alternative minimum tax ("AMT") for individuals and corporations. The
AMT is a special federal tax that applies to taxpayers who claim
certain large regular income tax deductions, which are referred to as
tax preference items. Among these tax preference items is the income
earned on certain private activity municipal bonds issued after August
7, 1986. Individual taxpayers compute the alternative minimum tax by
adding back these tax preference items to their regular taxable
income, subtracting certain adjustments and applying a tax rate of up
to 28% of income subject to the AMT. You only pay the AMT if it
exceeds your federal regular income tax liability for the year.
The Fund may invest in all types of municipal securities, including
private activity municipals that may be subject to the AMT. To the
extent the Fund invests in AMT obligations, a portion of the Fund's
dividends will be treated as a tax preference item for shareholders
potentially affected by the AMT. But this is only meaningful if you
yourself are subject to the AMT. Ask your own tax adviser for more
information.
NEW YORK TAXES
Under existing New York laws, shareholders will not be subject to New
York State or New York City personal income taxes on dividends to the
extent that such dividends qualify as "exempt interest dividends"
under the Internal Revenue Code of 1986, as amended, and represent
interest income attributable to obligations of the State of New York
and its political subdivisions, as well as certain other obligations,
the interest on which is exempt from New York State and New York City
personal income taxes, such as, for example, certain obligations of
the Commonwealth of Puerto Rico. To the extent that distributions are
derived from other income, such distributions will be subject to New
York State or New York City personal income tax.
The Fund cannot predict in advance the exact portion of its dividends
that will be exempt from New York State and New York City personal
income taxes. However, the Fund will report to shareholders at least
annually what percentage of the dividends it actually paid is exempt
from such taxes.
Dividends paid by the Fund are exempt from the New York City
unincorporated business tax to the same extent that they are exempt
from the New York City personal income tax.
Dividends paid by the Fund are not excluded from net income in
determining New York State or New York City franchise taxes on
corporations or financial institutions.
CORPORATE SHAREHOLDER INFORMATION
In the case of a corporate shareholder, all exempt-interest dividends
paid by the Fund are included in computing the shareholder's adjusted
current earnings, upon which is based a separate corporate preference
item that may be subject to the AMT. The corporate AMT tax rate is
20%.
No portion of any income dividend paid by the Fund is eligible for the
dividends received deduction available to corporations.
Dividends paid by the Fund are not exempt from the New York State
franchise tax on corporations or the New York City general corporation
tax.
THE TAX TREATMENT OF TEMPORARY INVESTMENTS
Dividends paid by the Fund that are attributable to the net interest
earned on some temporary investments and any realized net short-term
capital gains are taxed as ordinary income.
MONEY MARKET FUND AND
TREASURY FUND
FEDERAL INCOME TAXES
Unless shareholders are otherwise exempt from taxes, they are required
to pay federal income taxes on Fund dividends and other distributions
received (including capital gains distributions, if any).
DESCRIPTION OF FUND SHARES
Vision Group of Funds, Inc. (the "Corporation") was organized as a
Maryland corporation on February 23, 1988, and the Funds commenced
operations on June 1, 1988. The Corporation has authorized capital of
10 billion shares of common stock with a par value of $.001 per share
(referred to as capital stock). The Corporation's Articles of
Incorporation permit the Corporation to offer separate series of
shares in the Funds or other future portfolios. Currently, the
Corporation offers seven portfolios: Vision Money Market Fund, Vision
Treasury Money Market Fund, Vision New York Tax-Free Money Market
Fund, Vision U.S. Government Securities Fund, Vision New York Tax-Free
Fund, Vision Growth and Income Fund, and Vision Capital Appreciation
Fund.
Each Fund share represents an equal proportionate interest in the Fund
with other shares of the same class and participates equally in the
dividends and any other distributions that are declared at the
discretion of the Corporation's Board of Directors.
VOTING RIGHTS AND OTHER INFORMATION
EACH SHARE OF EACH FUND IS ENTITLED TO ONE VOTE IN
DIRECTOR ELECTIONS AND OTHER MATTERS SUBMITTED TO
SHAREHOLDERS FOR VOTE.
Shareholders of the Fund are entitled to one vote for each full share
they hold and to fractional votes for any fractional shares they hold.
Shareholders in all the Funds generally vote in the aggregate and not
by class, unless the law expressly requires otherwise or the Board of
Directors determines that the matter to be voted upon affects only the
interests of shareholders of a particular class. (See the "Description
of Fund Shares" in the Statement of Additional Information for
examples of when the Investment Company Act of 1940 requires that
shareholders vote by class.) As of June 9, 1997, Tice & Co., Buffalo,
New York, acting in various capacities for numerous accounts, was the
owner of record of 258,799,987 shares (44.92%) of the Money Market
Fund; 280,382,560 shares (79.69%) of the Treasury Money Market Fund;
and 34,181,051 shares (56.93%) of the Tax-Free Money Market Fund, and,
therefore, may for certain purposes be deemed to control the Fund and
be able to affect the outcome of certain matters presented for a vote
of shareholders.
The Funds are not required to hold annual shareholder meetings, unless
matters arise that require a vote of the shareholders under the
Investment Company Act of 1940. That law requires a vote of the
shareholders to approve changes in the Funds' investment advisory
agreement, to replace the Funds' independent certified public
accountants and, under certain circumstances, to elect members to the
Corporation's Board of Directors.
Directors may be removed by the Corporation's Board of Directors or by
a vote of shareholders at a special meeting. The Corporation's Board
of Directors will promptly call a special meeting of shareholders upon
the written request of shareholders owning at least 10% of any Fund's
outstanding shares.
As used in this prospectus, "assets belonging to the Fund" means the
money received by the Corporation upon the issuance or sale of shares
in a Fund, together with all income, earnings, profits, and proceeds
derived from the investment of that money. This includes any proceeds
from the sale, exchange, or liquidation of these investments, any
funds or payments derived from the reinvestment of these proceeds, and
a portion of the general assets of the Corporation that do not
otherwise belong to the Fund.
Assets belonging to a Fund are charged with the direct expenses and
liabilities of that Fund and with a share of the general expenses and
liabilities of the Corporation. The general expenses and liabilities
of the Corporation are allocated in proportion to the relative asset
values of all the Corporation's portfolios at the time the expense or
liability is incurred.
The management of the Corporation determines each Fund's direct and
allocable liabilities at the time the expense or liability is incurred
as well as each Fund's allocable share of any general assets at the
time the asset is acquired. These determinations are reviewed and
approved annually by the Corporation's Board of Directors and are
conclusive.
VISION MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------------
- --------------
(A)CORPORATE OBLIGATIONS--86.0%
- -----------------------------------------------------------------------------------------------------
BANKING--1.4%
--------------------------------------------------------------------------------------
$ 8,335,000 (b)Atlas Iron Processors, Inc., 5.85%, 5/7/1997
$ 8,335,000
--------------------------------------------------------------------------------------
- --------------
CHEMICALS--4.2%
--------------------------------------------------------------------------------------
25,000,000 Du Pont (E.I.) de Nemours & Co., 5.34%,
5/22/1997 24,922,125
--------------------------------------------------------------------------------------
- --------------
DIVERSIFIED--2.5%
--------------------------------------------------------------------------------------
15,000,000 General Electric Capital Corp., 5.73%,
6/2/1997 14,923,600
--------------------------------------------------------------------------------------
- --------------
FINANCE-AUTOMOTIVE--7.4%
--------------------------------------------------------------------------------------
18,044,000 Daimler-Benz, North America, 5.64%,
7/10/1997 17,846,117
--------------------------------------------------------------------------------------
27,000,000 Ford Motor Credit Corp., 5.35%,
7/1/1997 26,755,238
--------------------------------------------------------------------------------------
- --------------
Total 44,601,355
--------------------------------------------------------------------------------------
- --------------
FINANCE-RECEIVABLES--23.6%
--------------------------------------------------------------------------------------
25,000,000 American Express Credit Corp., 5.29%,
8/19/1997 24,595,903
--------------------------------------------------------------------------------------
25,000,000 Apreco, Inc., 5.34%,
5/7/1997 24,977,750
--------------------------------------------------------------------------------------
20,007,000 (b)Associates Corporation of North America, 5.497%,
5/1/1997 20,007,000
--------------------------------------------------------------------------------------
24,000,000 Ciesco LP, 5.28%,
5/12/1997 23,961,280
--------------------------------------------------------------------------------------
20,000,000 Commercial Credit Co., 5.54%,
5/2/1997 19,996,922
--------------------------------------------------------------------------------------
28,000,000 John Deere Capital Corp., 5.54%,
6/9/1997 27,831,953
--------------------------------------------------------------------------------------
- --------------
Total
141,370,808
--------------------------------------------------------------------------------------
- --------------
FINANCE-RETAIL--4.1%
--------------------------------------------------------------------------------------
25,000,000 Beneficial Corp., 5.51%,
7/2/1997 24,762,764
--------------------------------------------------------------------------------------
- --------------
FINANCIAL SERVICES--7.5%
--------------------------------------------------------------------------------------
20,000,000 (b)Bank One Milwaukee, 5.61%,
5/1/1997 19,999,527
--------------------------------------------------------------------------------------
25,000,000 Toronto Dominion Holdings, 5.54%,
6/23/1997 24,796,097
--------------------------------------------------------------------------------------
- --------------
Total 44,795,624
--------------------------------------------------------------------------------------
- --------------
INSURANCE--15.7%
--------------------------------------------------------------------------------------
25,000,000 AIG Funding Corp., 5.45%,
5/22/1997 24,920,521
--------------------------------------------------------------------------------------
20,000,000 American General Finance Corp., 5.28%,
5/19/1997 19,947,200
--------------------------------------------------------------------------------------
25,000,000 Prudential Funding Corp., 5.32%,
6/30/1997 24,778,333
--------------------------------------------------------------------------------------
10,000,000 Transamerica Corp., 5.57%,
5/2/1997 9,998,453
--------------------------------------------------------------------------------------
15,000,000 Transamerica Finance Group, Inc., 5.36%,
7/23/1997 14,814,633
--------------------------------------------------------------------------------------
- --------------
Total 94,459,140
--------------------------------------------------------------------------------------
- --------------
</TABLE>
VISION MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------------
- --------------
(A)CORPORATE OBLIGATIONS--CONTINUED
- -----------------------------------------------------------------------------------------------------
OIL & OIL FINANCE--4.2%
--------------------------------------------------------------------------------------
$ 25,000,000 Chevron Oil Finance Co., 5.45%, 5/1/1997
$ 25,000,000
--------------------------------------------------------------------------------------
- --------------
TELECOMMUNICATIONS--11.2%
--------------------------------------------------------------------------------------
20,000,000 American Telephone & Telegraph Co., 5.53%,
8/1/1997 19,717,355
--------------------------------------------------------------------------------------
22,615,000 Bell Atlantic Network Funding Corp., 5.47%,
5/21/1997 22,546,276
--------------------------------------------------------------------------------------
25,000,000 Pacific Bell, 5.53%,
5/5/1997 24,984,639
--------------------------------------------------------------------------------------
- --------------
Total 67,248,270
--------------------------------------------------------------------------------------
- --------------
TOBACCO--4.2%
--------------------------------------------------------------------------------------
25,000,000 BAT Capital Corp., 5.32%,
5/13/1997 24,955,667
--------------------------------------------------------------------------------------
- --------------
TOTAL CORPORATE OBLIGATIONS
515,374,353
--------------------------------------------------------------------------------------
- --------------
(A)U.S. GOVERNMENT AGENCY--6.5%
- -----------------------------------------------------------------------------------------------------
30,000,000 Federal National Mortgage Association, Discount Notes, 5.23,
6/17/1997 29,795,158
--------------------------------------------------------------------------------------
10,000,000 Federal National Mortgage Association, Discount Notes,
5.33%,
12/11/1997 9,668,356
--------------------------------------------------------------------------------------
- --------------
TOTAL U.S. GOVERNMENT
AGENCY 39,463,514
--------------------------------------------------------------------------------------
- --------------
(C)REPURCHASE AGREEMENT--7.8%
- -----------------------------------------------------------------------------------------------------
47,013,000 State Street Bank & Trust Co., 5.35%, dated 4/30/1997, due
5/1/1997 47,013,000
--------------------------------------------------------------------------------------
- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $
601,850,867
--------------------------------------------------------------------------------------
- --------------
</TABLE>
(a) Each issue, with the exception of variable rate securities, shows
the coupon or rate of discount at the time of purchase, if
applicable.
(b) Denotes variable rate securities which show current rate and next
demand date.
(c) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($599,817,242) at April 30, 1997.
(See Notes which are an integral part of the Financial Statements)
VISION TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
- -------------- -------------------------------------------------------------------------------------
- --------------
U.S. TREASURY OBLIGATIONS--54.1%
- -----------------------------------------------------------------------------------------------------
$ 205,000,000 U.S. Treasury Bills, 5/1/1997-3/5/1998 $
201,976,948
-------------------------------------------------------------------------------------
- --------------
(A)REPURCHASE AGREEMENTS--46.2%
- -----------------------------------------------------------------------------------------------------
85,000,000 J.P. Morgan Securities Inc., 5.32%, dated 4/30/1997, due
5/1/1997 85,000,000
-------------------------------------------------------------------------------------
87,585,000 State Street Bank and Trust Co., 5.35%, dated 4/30/1997, due
5/1/1997 87,585,000
-------------------------------------------------------------------------------------
- --------------
TOTAL REPURCHASE AGREEMENTS
172,585,000
-------------------------------------------------------------------------------------
- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $
374,561,948
-------------------------------------------------------------------------------------
- --------------
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($373,484,637) at April 30, 1997.
(See Notes which are an integral part of the Financial Statements)
VISION NEW YORK TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR
S&P* VALUE
<C> <S> <C>
<C>
- ------------ ---------------------------------------------------------------------------- ----------
- -------------
SHORT-TERM MUNICIPAL SECURITIES--99.4%
- ------------------------------------------------------------------------------------------
NEW YORK--94.1%
----------------------------------------------------------------------------
$ 2,750,000 Chautauqua County, NY, IDA Weekly VRDNs, (Key Bank LOC) A-1+
$ 2,750,000
----------------------------------------------------------------------------
1,855,000 Chemung County, NY, BANs, 4.00% GO UT Bonds, 10/17/1997
NR 1,856,237
----------------------------------------------------------------------------
1,000,000 Hempstead Town, NY, BANs, 4.25% GO UT Bonds (Series E), 10/30/1997
NR 1,002,165
----------------------------------------------------------------------------
1,000,000 Mamaroneck Village, NY, BANs, 4.10%, GO UT Bonds, 9/11/1997
NR 1,000,795
----------------------------------------------------------------------------
3,000,000 Municipal Assistance Co. for New York, 3.45% CP
(Series F), 6/16/1997
A-1+ 3,000,000
----------------------------------------------------------------------------
2,000,000 Nassau County, NY, BANs, 4.00% GO UT Bonds
(Series B), 8/15/1997
MIG1 2,002,567
----------------------------------------------------------------------------
1,200,000 New York, NY, Cultural Resource Revenue Bonds (Series B) Weekly VRDNs,
(American Museum of Natural History)/(MBIA Insured)
VMIG1 1,200,000
----------------------------------------------------------------------------
2,800,000 New York, NY, HDC (Series 1993A) Weekly VRDNs, (Columbus
Gardens)/(Citibank NA, New York LOC)
A-1+ 2,800,000
----------------------------------------------------------------------------
1,800,000 New York, NY, HDC (Series A) Daily VRDNs,
(East 17th Street)/(Chemical Bank LOC)
A-1 1,800,000
----------------------------------------------------------------------------
1,000,000 New York, NY, HDC (Series A) Weekly VRDNs, (Upper Fifth Avenue)/(Bankers
Trust Co., New York LOC)
VMIG1 1,000,000
----------------------------------------------------------------------------
1,950,000 New York, NY, IDA Weekly VRDNs, (Childrens Oncology Society)/(Barclays Bank
of New York LOC)
A-1+ 1,950,000
----------------------------------------------------------------------------
200,000 New York, NY, Daily VRDNs (Series B-3)/(Morgan Guaranty Trust Co. LOC)
VMIG1 200,000
----------------------------------------------------------------------------
3,200,000 New York State, 3.35% CP, 5/8/1997
A-1 3,200,000
----------------------------------------------------------------------------
2,000,000 New York State Dormatory Authority, 3.31% CP 5/1/1997
VMIG1 2,000,000
----------------------------------------------------------------------------
1,000,000 New York State Energy Research and Development Authority (Series A) Weekly
VRDNs, (Long Island Lighting Co.)/(Union Bank of Switzerland LOC)
VMIG1 1,000,000
----------------------------------------------------------------------------
1,800,000 New York State Energy Research and Development Authority, Monthly VRDNs,
(Rochester Gas & Electric)/(Bank of New York LOC)
VMIG1 1,800,000
----------------------------------------------------------------------------
1,000,000 New York State Energy Research & Development Authority, (Series D) Daily
VRDNs, (Brooklyn Union Gas) /(MBIA)
VMIG1 1,000,000
----------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR
S&P* VALUE
<C> <S> <C>
<C>
- ------------ ---------------------------------------------------------------------------- ----------
- -------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ------------------------------------------------------------------------------------------
NEW YORK--CONTINUED
----------------------------------------------------------------------------
$ 2,900,000 New York State Environmental Facility Solid Waste Revenue Refunding Bonds,
VRNs, (General Electric Co.) A-1+
$ 2,900,000
----------------------------------------------------------------------------
1,100,000 New York State, HFA Weekly VRDNs, (Normandie Court)/ (Societe Generale LOC)
VMIG1 1,100,000
----------------------------------------------------------------------------
2,800,000 New York State Local Government Assistance Corp., (Series E) Weekly VRDNs,
(Canadian Imperial Bank LOC)
VMIG1 2,800,000
----------------------------------------------------------------------------
1,000,000 New York State Medical Care Facility Financial Agency, (Series II-A) Weekly
VRDNs, (Chemical Bank LOC)
VMIG1 1,000,000
----------------------------------------------------------------------------
1,000,000 New York State Power Authority, 3.35% CP (General Purpose), 6/13/1997
P-1 1,000,000
----------------------------------------------------------------------------
1,235,000 New York State Power Authority, 3.50% CP (General Purpose), 9/1/1997
VMIG1 1,235,000
----------------------------------------------------------------------------
2,800,000 Niagara Falls, NY, Bridge Commission (Series A) Weekly VRDNs, (FGIC Insured)
VMIG1 2,800,000
----------------------------------------------------------------------------
1,000,000 Onondaga County, NY, IDA (Series B) Monthly VRDNs,
(Pass & Seymour, Inc.)/(Banque National de Paris LOC)
A-1 1,000,000
----------------------------------------------------------------------------
660,000 Penfield, NY, BANs, 3.75%, 12/23/1997
NR 660,190
----------------------------------------------------------------------------
905,000 Port Authority of New York & New Jersey, 3.25% CP, 6/13/1997
A-1+ 905,000
----------------------------------------------------------------------------
2,000,000 Rochester, NY, BANs, 4.50% (Series III), GO UT Bonds,
10/30/1997
NR 2,007,220
----------------------------------------------------------------------------
1,000,000 Rockland County, NY, BANs, 4.00% GO UT Bonds, 8/7/1997
NR 1,001,442
----------------------------------------------------------------------------
1,000,000 Senaca County, NY, IDA Weekly VRDNs, (New York Chiropractic College)
A-1+ 1,000,000
----------------------------------------------------------------------------
1,800,000 St. Lawrence County, NY, IDA, PCR Daily VRDNs,
(Bank of Nova Scotia LOC)
P-1 1,800,000
----------------------------------------------------------------------------
2,500,000 Yonkers, NY, IDA (Series 1994) Weekly VRDNs, Civic Facility Revenue Bonds,
(AMBAC Insured)/(Credit Local de France)
VMIG1 2,500,000
----------------------------------------------------------------------------
- -------------
Total 53,270,616
----------------------------------------------------------------------------
- -------------
PUERTO RICO--5.3%
----------------------------------------------------------------------------
3,000,000 Commonwealth of Puerto Rico Development Bank,
3.50% CP, 5/20/1997
A-1+ 3,000,000
----------------------------------------------------------------------------
- -------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(A)
$ 56,270,616
----------------------------------------------------------------------------
- -------------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Credit ratings are unaudited.
VISION NEW YORK TAX-FREE MONEY MARKET FUND
- --------------------------------------------------------------------------------
(a) Also represents cost for federal tax purposes.
At April 30, 1997, 6.62% of the total investments at market value were
subject to alternative minimum tax.
Note: The categories of investments are shown as a percentage of net assets
($56,617,940) at April 30, 1997.
The following abbreviations are used in this portfolio:
AMBAC--American Municipal Bond Assurance Corporation BANs--Bond
Anticipation Notes CP--Commercial Paper FGIC--Financial Guaranty
Insurance Company GO--General Obligation HDC--Housing Development
Corporation HFA--Housing Finance Authority IDA--Industrial Development
Authority LOCs--Letters of Credit MBIA--Municipal Bond Investors
Assurance PCR--Pollution Control Revenue UT--Unlimited Tax
VRDNs--Variable Rate Demand Notes VRNs--Variable Rate Note
(See Notes which are an integral part of the Financial Statements)
VISION MONEY MARKET FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK
TREASURY
TAX-FREE
MONEY MARKET MONEY MARKET
MONEY MARKET
FUND
FUND FUND
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
<S> <C> <C> <C>
ASSETS:
- ----------------------------------------------------------
Investments in securities $ 554,837,867 $ 201,976,948 $
56,270,616
- ----------------------------------------------------------
Investments in repurchase agreements 47,013,000
172,585,000 --
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
Total investments, at amortized cost and value 601,850,867 374,561,948
56,270,616
- ----------------------------------------------------------
Cash 1,422
964 55,808
- ----------------------------------------------------------
Income receivable 370,321
25,577 322,942
- ----------------------------------------------------------
Receivable for shares sold --
1,085,261 12,691
- ----------------------------------------------------------
Receivable for investments sold --
- -- 100,322
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
Total assets 602,222,610 375,673,750
56,762,379
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
LIABILITIES:
- ----------------------------------------------------------
Income distribution payable 1,379,439
1,630,496 91,879
- ----------------------------------------------------------
Payable for shares redeemed 923,764
493,150 25,738
- ----------------------------------------------------------
Accrued expenses 102,165
65,467 26,822
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
Total liabilities 2,405,368
2,189,113 144,439
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
NET ASSETS $ 599,817,242 $ 373,484,637 $
56,617,940
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS
PER SHARE $1.00
$1.00 $1.00
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
SHARES OUTSTANDING 599,817,242 373,484,637
56,617,940
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VISION MONEY MARKET FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NEW YORK
TREASURY
TAX-FREE
MONEY MARKET MONEY MARKET
MONEY MARKET
FUND
FUND FUND
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------
Interest $ 30,822,679 $ 24,480,513 $
2,425,953
- ----------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------
Investment advisory fee 2,862,559
2,296,162 355,253
- ----------------------------------------------------------
Administrative personnel and services fee 598,092
478,882 74,362
- ----------------------------------------------------------
Custodian fees 76,040
67,447 22,480
- ----------------------------------------------------------
Transfer and dividend disbursing agent fees
and expenses 297,877
40,981 33,801
- ----------------------------------------------------------
Directors' fees 6,195
10,995 6,346
- ----------------------------------------------------------
Auditing fees 10,960
13,754 14,105
- ----------------------------------------------------------
Legal fees 5,425
10,718 6,093
- ----------------------------------------------------------
Portfolio accounting fees 97,126
83,532 36,800
- ----------------------------------------------------------
Share registration costs 67,036
84,252 22,003
- ----------------------------------------------------------
Printing and postage 6,085
8,985 19,468
- ----------------------------------------------------------
Taxes 57,590
39,767 6,681
- ----------------------------------------------------------
Insurance premiums 11,950
5,975 4,092
- ----------------------------------------------------------
Miscellaneous 5,425
3,335 3,307
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
TOTAL EXPENSES 4,102,360
3,144,785 604,791
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
Waivers--
- ----------------------------------------------------------
Waiver of investment advisory fee (555,870)
(448,656) (250,546)
- ----------------------------------------------------------
Waiver of administrative personnel and services fees (27,570)
(11,635) (1,843)
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
TOTAL WAIVERS (583,440)
(460,291) (252,389)
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
NET EXPENSES 3,518,920
2,684,494 352,402
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
NET INVESTMENT INCOME $ 27,303,759 $ 21,796,019 $
2,073,551
- ---------------------------------------------------------- ------------------ ------------------
- ------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VISION MONEY MARKET FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TREASURY NEW
YORK TAX-FREE
MONEY MARKET FUND MONEY MARKET FUND MONEY
MARKET FUND
---------------------------- ---------------------------
- ------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30, YEAR
ENDED APRIL 30,
---------------------------- ---------------------------
- ------------------------
1997 1996 1997 1996
1997 1996
- ------------------------------ -------------- -------------- -------------- --------------
- ---------- ------------
<S> <C> <C> <C> <C>
<C> <C>
INCREASE (DECREASE) IN NET
ASSETS
- ------------------------------
OPERATIONS--
- ------------------------------
Net investment income $ 27,303,759 $ 24,286,778 $ 21,796,019 $ 17,347,687 $
2,073,551 $ 1,746,353
- ------------------------------ -------------- -------------- -------------- --------------
- ------------ ------------
DISTRIBUTIONS TO
SHAREHOLDERS--
- ------------------------------
Distributions from net
investment income (27,303,759) (24,286,778) (21,796,019) (17,347,687)
(2,073,551) (1,746,353)
- ------------------------------ -------------- -------------- -------------- --------------
- ------------ ------------
SHARE TRANSACTIONS--
- ------------------------------
Proceeds from sales of
shares 8,645,835,065 1,490,775,012 3,654,497,462 2,358,398,692
176,252,479 153,490,772
- ------------------------------
Net asset value of shares
issued to shareholders in
payment of distributions
declared 11,569,142 7,919,317 2,819,179 1,995,102
779,290 568,773
- ------------------------------
Cost of shares redeemed (8,546,816,379) (1,440,781,276) (3,656,716,056) (2,198,036,127)
(186,176,785) (129,534,647)
- ------------------------------ -------------- -------------- -------------- --------------
- ------------ ------------
Change in net assets from
share transactions 110,587,828 57,913,053 600,585 162,357,667
(9,145,016) 24,524,898
- ------------------------------ -------------- -------------- -------------- --------------
- ------------ ------------
Change in net assets 110,587,828 57,913,053 600,585 162,357,667
(9,145,016) 24,524,898
- ------------------------------
NET ASSETS:
- ------------------------------
Beginning of period 489,229,414 431,316,361 372,884,052 210,526,385
65,762,956 41,238,058
- ------------------------------ -------------- -------------- -------------- --------------
- ------------ ------------
End of period $ 599,817,242 $ 489,229,414 $ 373,484,637 $ 372,884,052 $
56,617,940 $ 65,762,956
- ------------------------------ -------------- -------------- -------------- --------------
- ------------ ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
VISION MONEY MARKET FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Vision Group of Funds, Inc. (the "Corporation") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as an
open-end management investment company. The Corporation consists of
six diversified portfolios and one non-diversified portfolio
(individually referred to as the "Fund", or collectively as the
"Funds"). The following diversified Funds are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
Vision Money Market Fund ("Money Market") Seeks current income with liquidity and
stability of
principal by investing in high quality money
market
instruments.
Vision Treasury Money Market Fund ("Treasury Money Seeks current
income with liquidity and stability of Market") principal by investing
in direct obligations of the
U.S. Treasury, such as Treasury bills and
notes, and
repurchase agreements secured by these
obligations.
Vision New York Tax-Free Money Market Fund ("New York Seeks as high a
level of current interest income that Tax-Free Money Market") is
exempt from federal regular income tax as is
consistent with liquidity and relative
stability of
principal.
</TABLE>
The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of their
financial statements. These policies are in conformity with generally
accepted accounting principles.
INVESTMENT VALUATIONS--The Funds' use of the amortized cost
method to value their portfolio securities is in accordance with
Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.
The Funds will only enter into repurchase agreements with banks
and other recognized financial institutions, such as
broker/dealers, which are deemed by the Funds' adviser to be
creditworthy pursuant to the guidelines and/or standards reviewed
or established by the Board of Directors (the "Directors"). Risks
may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Funds
could receive less than the repurchase price on the sale of
collateral securities.
VISION MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
FEDERAL TAXES--It is the Funds' policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of their income. Accordingly, no provisions for
federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may
engage in when-issued or delayed delivery transactions. The Funds
record when-issued securities on the trade date and maintain
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
OTHER--Investment transactions are accounted for on the trade
date.
(3) CAPITAL STOCK
At April 30, 1997, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized with respect to each Fund. Capital paid-in
for Money Market aggregated $599,217,424, par value was $599,818;
Treasury Money Market aggregated $373,111,152 par value was $373,485,
New York Tax-Free Money Market aggregated $56,561,222, par value was
$56,718. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
NEW YORK TAX-FREE
MONEY MARKET TREASURY MONEY MARKET
MONEY MARKET
--------------------------- -----------------------------
- -------------------------
YEAR ENDED APRIL 30, YEAR ENDED APRIL 30,
YEAR ENDED APRIL 30,
------------------------------ -----------------------------
- -------------------------
1997 1996 1997 1996
1997 1996
- --------------------------------- -------------- -------------- -------------- --------------
- ------------ ------------
<S> <C> <C> <C> <C>
<C> <C>
Shares sold 8,645,835,065 1,490,775,012 3,654,497,462 2,358,398,692
176,252,479 153,490,772
- ---------------------------------
Shares issued to shareholders in
payment of distributions declared 11,569,142 7,919,317 2,819,179 1,995,102
779,290 568,773
- ---------------------------------
Shares redeemed (8,546,816,379) (1,440,781,276) (3,656,716,056) (2,198,036,127)
(186,176,785) (129,534,647)
- --------------------------------- -------------- -------------- -------------- --------------
- ------------ ------------
Net change resulting from share
transactions 110,587,828 57,913,053 600,585 162,357,667
(9,145,016) 24,524,898
- --------------------------------- -------------- -------------- -------------- --------------
- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Manufacturers and Traders Trust Company, the
Funds' investment adviser (the "Adviser"), receives for its services
an annual investment advisory fee equal to 0.50% of each Fund's
average daily net assets. The Adviser may voluntarily choose to waive
any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
the Funds with certain administrative personnel and services. The fee
paid to FAS is based on the level of average aggregate net assets of
the Corporation for the period. FAS may voluntarily choose to waive a
portion of its fee.
VISION MONEY MARKET FUNDS
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Manufacturers and Traders Trust Company, the Funds can
pay Manufacturers and Traders Trust Company up to 0.25% of average
daily net assets of the Funds for the period. The fee paid to
Manufacturers and Traders Trust Company is used to finance certain
services for shareholders and to maintain shareholder accounts. The
Funds did not pay or accrue Shareholder Services Fees during the
fiscal year ended April 30, 1997.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder
Services Company ("FSSC") serves as transfer and dividend disbursing
agent for the Funds. The fee paid to FSSC is based on the size, type,
and number of accounts and transactions made by shareholders.
SECURITY DEFAULT--On June 25, 1996, an Oswego County Board of
Education Bond (the "Bond") held by New York Tax-Free Money Market
went into technical default, the day it was to mature. On June 26,
1996 the Adviser purchased the Bond from the Fund at face value plus
accrued interest in accordance with Rule 17a-9 under the Act.
GENERAL--Certain of the Officers of the Corporation are Officers and
Directors or Trustees of the above companies.
(5) CONCENTRATION OF CREDIT RISK
Since New York Tax-Free Money Market invests a substantial portion of
its assets in issuers located in one state, it will be more
susceptible to factors adversely affecting issuers of that state than
would be a comparable tax-exempt mutual fund that invests nationally.
In order to reduce the credit risk associated with such factors, at
April 30, 1997, 49% of the securities in the portfolio of investments
are backed by letters of credit or bond insurance of various financial
institutions and financial guaranty assurance agencies. The value of
investments insured by or supported (backed) by a letter of credit
from any one institution or agency did not exceed 5.1% of total
investments.
(6) SUBSEQUENT EVENT
Effective May 1, 1997, State Street Bank and Trust Company ("SSB") was
succeeded by FServ as portfolio accountant to the Funds. FServ will
maintain the Funds' accounting records for which it will receive a
fee. The fee will be based on the level of the Funds' average daily
net assets for the period, plus out-of-pocket expenses. All portfolio
accounting fees for the period ended April 30, 1997 were paid to SSB.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of VISION GROUP OF FUNDS,
INC.:
We have audited the accompanying statement of assets and liabilities
of Vision Money Market Fund, Vision Treasury Money Market Fund, and
Vision New York Tax-Free Money Market Fund (three of the portfolios of
Vision Group of Funds, Inc.), including the portfolios of investments,
as of April 30, 1997, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of
the two years in the period then ended and financial highlights for
each of the periods presented. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of April 30, 1997, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios of Vision
Group of Funds, Inc., as identified above, at April 30, 1997, the
results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended,
and financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 19, 1997
THIS PAGE INTENTIONALLY LEFT BLANK
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ADDRESSES
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 842-4488
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14240
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
ADMINISTRATOR
Federated Administrative Services
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219
Vision
Money Market
Fund
---------------------------------------------
Vision
Treasury
Money Market
Fund
---------------------------------------------
Vision
New York Tax-Free
Money Market
Fund
---------------------------------------------
Prospectus dated
June 30, 1997
[LOGO] FEDERATED INVESTORS MANUFACTURERS AND TRADERS
TRUST COMPANY
---------------------------------------
Federated Securites Corp. Distributor Investment Adviser
A subsidiary of First Empire State
Corporation
92830F307
92830F109
92830F208
1072302A (6/97)
TR1072302A (6/97)
VISION MONEY MARKET FUND
VISION TREASURY MONEY MARKET FUND
VISION NEW YORK TAX-FREE MONEY MARKET FUND
(PORTFOLIOS OF VISION GROUP OF FUNDS, INC.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the
prospectus of three portfolios of the Vision Group of Funds,
Inc., referred to as the Vision Money Market Fund, Vision
Treasury Money Market Fund, and Vision New York Tax-Free Money
Market Fund (collectively, the "Funds" or individually, a
"Fund") dated June 30, 1997.
This Statement of Additional Information is not a prospectus
itself, but should be read in conjunction with the Funds'
current prospectus dated June 30, 1997. This Statement of
Additional Information is incorporated into the Funds'
prospectus by reference. To receive a copy of the prospectus, or
a paper copy of this Statement of Additional Information, if you
have received it electronically, write to Vision Group of Funds,
Inc., P.O. Box 4556, Buffalo, NY 14240-4556, or call (800)
836-2211 or (716) 842-4488. Please retain this Statement of
Additional Information for further reference.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement of Additional Information dated June 30, 1997
MANUFACTURERS AND TRADERS
TRUST COMPANY
Investment Adviser
A subsidiary of First Empire State Corporation
Federated Securities Corp. is distributor for the Funds.
<PAGE>
TABLE OF CONTENTS
I
GENERAL INFORMATION ABOUT THE FUNDS 1
INVESTMENT OBJECTIVES AND POLICIES 1
Types of Investments 1
Municipal Security Issues (Tax-Free Money
Market Fund only) 1
Temporary Investments 2
Credit Enhancement 4
New York Investment Risks 4
INVESTMENT LIMITATIONS 5
Regulatory Compliance 7
VISION GROUP OF FUNDS, INC. MANAGEMENT 7
Fund Ownership 9
Directors' Compensation 9
Director Liability 9
INVESTMENT ADVISORY SERVICES 9
Adviser to the Funds 9
Advisory Fees 10
OTHER SERVICES 10
Administrative Services 10
Custodian and Portfolio Accountant 10
Transfer Agent and Dividend Disbursing
Agent 10
Independent Auditors 10
BROKERAGE TRANSACTIONS 10
DESCRIPTION OF FUND SHARES 11
HOW TO BUY SHARES 12
Conversion to Federal Funds 12
Cash Sweep Program 12
DETERMINING NET ASSET VALUE 12
REDEEMING FUND SHARES 13
BANKING LAWS 13
TAX STATUS 13
The Funds' Tax Status 13
Shareholders' Tax Status 13
TOTAL RETURN 14
YIELD 14
TAX-EQUIVALENT YIELD 14
Tax-Equivalency Table 14
EFFECTIVE YIELD 16
PERFORMANCE COMPARISONS 16
Economic and Market Information 17
APPENDIX 18
<PAGE>
GENERAL INFORMATION ABOUT THE FUNDS
The Funds are portfolios of Vision Group of Funds, Inc. (the "Corporation").
The Corporation was established as a Maryland
corporation under Articles of Incorporation dated February 23, 1988.
INVESTMENT OBJECTIVES AND POLICIES
MONEY MARKET FUND
The investment objective of Vision Money Market Fund ("Money Market
Fund") is to seek current income with liquidity and stability of
principal by investing in high-quality money market instruments.
The Money Market Fund invests in money market instruments which mature
in 397 days or less and which include, but are not limited to,
commercial paper and variable amount demand master notes, bank
instruments, U.S. government obligations, and repurchase agreements.
The instruments of banks and savings and loans that are members of the
Federal Deposit Insurance Corporation, such as certificates of
deposit, demand and time deposits, savings shares, and bankers'
acceptances, are not necessarily guaranteed by those organizations.
TREASURY MONEY MARKET FUND
The investment objective of Vision Treasury Money Market Fund
("Treasury Money Market Fund") is to seek current income with
liquidity and stability of principal by investing in direct
obligations of the U.S. Treasury with remaining maturities of 397
days.
The Treasury Money Market Fund invests in direct obligations of the
U.S. Treasury, such as bills, notes, and bonds, and repurchase
agreements collateralized by U.S. Treasury obligations, which mature
in 397 days or less.
"U.S. Treasury Obligations" refers to evidences of indebtedness issued
by the United States that are fully guaranteed as to principal and
interest by the United States, maturing in one year or less from the
date of acquisition or purchased pursuant to repurchase agreements
that provide for repurchase by the seller within one year from the
date of acquisition.
TAX-FREE MONEY MARKET FUND
The investment objective of Vision New York Tax-Free Money Market Fund
("Tax-Free Money Market Fund") is to seek as high a level of current
interest income that is exempt from federal regular income tax as is
consistent with liquidity and stability of principal by investing in
high-quality tax-exempt obligations with remaining maturities of 397
days or less.
The Tax-Free Money Market Fund invests substantially all its assets in
high-quality tax-exempt obligations having remaining maturities of 397
days or less. While the Fund may also invest in short-term taxable
obligations, under normal conditions at least 80% of the Fund's net
assets will be invested in obligations exempt from federal regular
income tax.
Subject to the Fund's investment objective and policies stated above,
the Fund will attempt to invest its assets, to the extent practicable,
in tax-exempt obligations issued by the State of New York and its
political subdivisions ("New York municipal securities"). The Fund
intends to invest, under normal circumstances, at least 80% of its net
assets in New York municipal securities. To the extent dividends paid
by the Fund are derived from interest on New York municipal
securities, they will be exempt from both federal regular income tax
and New York State and New York City income tax.
MUNICIPAL SECURITY ISSUES (TAX-FREE MONEY MARKET FUND ONLY)
Municipal securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of
outstanding obligations, the payment of general operating expenses and
the extension of loans to public institutions and facilities.
Industrial development bonds that are issued by or on behalf of public
authorities to finance various privately-operated facilities are
included within the term municipal securities if the interest paid
thereon is exempt from federal regular income tax.
There are, of course, variations in the quality of municipal
securities both within a particular classification and between
classifications, and the yields on municipal securities depend upon a
variety of factors, including general money market conditions, the
financial condition of the issuer, general conditions of the municipal
bond market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's
Investors Service Inc. ("Moody's") and Standard & Poor's Ratings Group
("S&P") described in the prospectus represent their opinions as to the
quality of municipal securities. It should be emphasized, however,
that ratings are general and are not absolute standards of quality,
and municipal securities with the same maturity, interest rate and
rating may have different yields while municipal securities of the
same maturity and interest rate with different ratings may have the
same yield. Subsequent to its purchase by the Tax-Free Money Market
Fund, an issue of municipal securities may cease to be rated or its
rating may be reduced below the minimum rating required for purchase
by the Tax-Free Money Market Fund. Manufacturers and Traders Trust
Company ("M&T Bank"), the investment adviser to the Tax-Free Money
Market Fund, will consider such an event and the requirements of Rule
2a-7 under the Investment Company Act of 1940 in determining whether
the Tax-Free Money Market Fund will continue to hold the obligation.
The payment of principal and interest on most municipal securities
purchased by the Tax-Free Money Market Fund will depend upon the
ability of the issuers to meet their obligations. An issuer's
obligations under its municipal securities are subject to the
provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, such as the federal Bankruptcy Code,
and laws, if any, which may be enacted by federal or state
legislatures extending the time for payment of principal or interest,
or both, or imposing other constraints upon enforcement of such
obligations or upon the ability of municipalities to levy taxes. The
power or ability of an issuer to meet its obligations for the payment
of interest on and principal of its municipal securities may be
materially adversely affected by litigation or other conditions. For
purposes of this Statement of Additional Information and the
prospectus, the District of Columbia, each state, each of their
political subdivisions, agencies, instrumentalities and authorities
and each multi-state agency of which a state is a member is considered
to be an "issuer." Further, the nongovernmental user of facilities
financed by industrial development bonds is considered to be an
"issuer." With respect to those municipal securities that are
supported by a bank guarantee or other credit facility, the bank or
other institution (or governmental agency) providing the guarantee or
credit facility may also be considered to be an "issuer" in connection
with the guarantee or facility.
Among other types of municipal securities, the Tax-Free Money Market
Fund may purchase short-term general obligation notes, tax
anticipation notes, bond anticipation notes, revenue anticipation
notes, tax-exempt commercial paper, construction loan notes and other
forms of short-term loans. Such instruments are issued with a
short-term maturity in anticipation of the receipt of tax funds, the
proceeds of bond placements or other revenues. In addition, the Fund
may invest in other types of tax-exempt instruments, such as municipal
bonds and industrial development bonds, provided they have remaining
maturities of 397 days or less at the time of purchase.
Examples of New York municipal securities are:
o tax exempt project notes issued by the U.S. Department of Housing
and Urban Development to provide financing for housing,
redevelopment, and urban renewal;
o municipal notes and tax-exempt commercial paper;
o serial bonds sold with a series of maturity dates;
o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes at a later date;
o bond anticipation notes sold in anticipation of the issuance of
longer-term bonds in the future;
o revenue anticipation notes sold in expectation of receipt
of federal income available under the Federal Revenue
Sharing Program; and
o pre-refunded municipal bonds refundable at a later date.
TEMPORARY INVESTMENTS
As stated in the prospectus, the Tax-Free Money Market Fund may invest
a portion of its assets on a temporary basis for temporary purposes in
short-term taxable money market instruments ("Temporary Investments").
Temporary Investments in which the Tax-Free Money Market Fund may
invest include instruments within the classes listed below. Although
the Tax-Free Money Market Fund has retained the flexibility of
investing up to 20% of its total assets in these Temporary Investments
during non-defensive periods (and 100% of its total assets during
temporary defensive periods), the Tax-Free Money Market Fund
anticipates that it would not invest more than 5% of its net assets in
any one of the following classes of Temporary Investments. As noted
below, the Money Market Fund and Treasury Money Market Fund also may
invest in the following list of investments without the same temporary
limitations.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Money
Market Fund and Tax-Free Money Market Fund may invest
generally include direct obligations of the U.S. Treasury
(such as U.S. Treasury bills, notes, and bonds) and
obligations issued or guaranteed by U.S. government agencies
or instrumentalities. These securities are backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always
receive financial support from the U.S. government are:
o Farm Credit Banks;
o Student Loan Marketing Association;
o Federal Home Loan Banks;
o Federal Home Loan Mortgage Corporation; and
o Federal National Mortgage Association.
The Treasury Money Market Fund may only invest in direct
obligations of the U.S. Treasury which matures in 397 days or
less, and repurchase agreements collateralized by such
securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to
be an advantageous price or yield for the Funds. Each of the
Funds engage in when-issued and delayed delivery transactions
only for the purpose of acquiring portfolio securities
consistent with a Fund's investment objective and policies,
not for investment leverage. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid
assets of a Fund sufficient to make payment for the
securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been
settled. The Funds do not intend to engage in when-issued and
delayed delivery transactions to an extent that would cause
the segregation of more than 25% of the total value of its
assets.
CERTIFICATES OF DEPOSIT AND BANKERS' ACCEPTANCES
The Money Market Fund and Tax-Free Money Market Fund may
invest in certificates of deposit of domestic branches of
U.S. commercial banks which are members of the Federal
Reserve System or the deposits of which are insured by the
Federal Deposit Insurance Corporation having total assets at
the time of purchase in excess of $1 billion, and bankers'
acceptances guaranteed by domestic branches of U.S.
commercial banks having total assets at the time of purchase
in excess of $1 billion.
COMMERCIAL PAPER
The Money Market Fund and Tax-Free Money Market Fund may
invest in commercial paper rated at the time of purchase
"A-2" or better by S&P or "Prime-2" or better by Moody's or,
if not rated, found by M&T Bank to be of comparable quality
pursuant to guidelines approved by the Board of Directors.
REPURCHASE AGREEMENTS
The Funds may invest in repurchase agreements as described in
the prospectus.
<PAGE>
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements.
This transaction is similar to borrowing cash. In a reverse
repurchase agreement a Fund transfers possession of a
portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of
the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration
plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Funds to avoid selling
portfolio instruments at a time when a sale may be deemed to
be disadvantageous, but the ability to enter into reverse
repurchase agreements does not ensure that the Funds will be
able to avoid selling portfolio instruments at a
disadvantageous time.
When effecting reverse repurchase agreements, liquid assets
of a Fund, in a dollar amount sufficient to make payment for
the obligations to be purchased, are segregated on the Fund's
records at the trade date. These securities are marked to
market daily and maintained until the transaction is settled.
With respect to the Money Market Fund and Tax-Free Money Market Fund,
the above investment objectives and policies cannot be changed without
approval of a majority of the outstanding shares of the Fund.
CREDIT ENHANCEMENT
The Money Market Fund and Tax-Free Money Market Fund typically
evaluate the credit quality and ratings of credit-enhanced securities
based upon the financial condition and ratings of the party providing
the credit enhancement (the "credit enhancer"), rather than the
issuer. However, credit-enhanced securities will not be treated as
having been issued by the credit enhancer for diversification
purposes, unless the Fund has invested more than 10% of its assets in
securities issued, guaranteed or otherwise credit enhanced by the
credit enhancer, in which case the securities will be treated as
having been issued by both the issuer and the credit enhancer.
NEW YORK INVESTMENT RISKS
The Tax-Free Money Market Fund invests in obligations of New York (the
"State") issuers which result in the Fund's performance being subject
to risks associated with the overall conditions present within the
State. The following information is a general summary of the State's
financial condition and a brief summary of the prevailing economic
conditions. This information is based on various sources that are
believed to be reliable but should not be considered as a complete
description of all relevant information.
The State has achieved fiscal balance for the last few years after
large deficits in the middle and late 1980's. Growing social service
needs, education and Medicare expenditures have been the areas of
largest growth while prudent program cuts and increases in revenues
through service fees has enabled the State's budget to remain within
balance for the last few years. The State also benefits from a high
level of per capita income that is well above the national average and
from significant amounts of international trade. While the State still
has a large accumulated deficit as a percentage of its overall budget,
the fiscal performance in recent years has demonstrated a changed
political environment that has resulted in realistic revenue and
expenditure projections to achieve financially favorable results. The
recent budgets have included personal income tax cuts and emphasized
cost control. Budgets in recent years have been delayed due to
disagreements between the Governor and the New York State legislature.
Last year's budget was not passed until July, four months late.
Failure to pass a budget in a timely manner can have a negative impact
on New York municipalities dependent upon state aid.
New York's economy is large and diverse. While several upstate
counties benefit from agriculture, manufacturing and high technology
industries, New York City nonetheless still dominates the State's
economy through its international importance in economic sectors such
as advertising, finance, and banking. The State's economy has been
slow to recover after the late 1980's recession that resulted in the
loss of over 400,000 jobs in the New York City metropolitan area
alone. Any major changes to the financial condition of New York City
would ultimately have an affect on the State.
Obligations of issuers within the State are subject to the provisions
of bankruptcy, insolvency, and other laws affecting the rights of and
remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by the U.S. Congress,
state legislators, or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon
enforcement of such obligations, or upon the ability of the State or
its political subdivisions to levy taxes. There is also the
possibility that, as a result of litigation or other conditions
(including delays in adopting budgets), the power or ability of any
issuer to pay, when due, the principal of and interest on its
municipal securities may be materially affected.
A substantial principal amount of bonds issued by various State
agencies and authorities are either guaranteed by the State or
supported by the State through lease-purchase arrangements, or other
contractual or moral obligation provisions. Moral obligation
commitments by the State impose no immediate financial obligations on
the State and require appropriations by the legislature before any
payments can be made. Failure of the State to appropriate necessary
amounts or to take other action to permit the authorities and agencies
to meet their obligations could result in defaults on such
obligations. If a default were to occur, it would likely have a
significant adverse impact on the market price of obligations of the
State and its authorities and agencies. In recent years, the State has
had to appropriate large amounts of funds to enable State agencies to
meet their financial obligations and, in some cases, prevent default.
Additional assistance is expected to be required in current and future
fiscal years since certain localities and authorities continue to
experience financial difficulties.
To the extent State agencies and local governments require State
assistance to meet their financial obligations, the ability of the
State of New York to meet its own obligations as they become due or to
obtain additional financing could be adversely affected. This
financial situation could result not only in defaults of State and
agency obligations but also impairment of the marketability of
securities issued by the State, its agencies and local governments.
The overall financial condition of the State can also be illustrated
by changes to its debt ratings. During the period in which the State
experienced financial difficulties, its general obligation long-term
debt ratings as determined by Moody's Investors Service, Inc. and
Standard & Poor's Ratings Group decreased from A1 and A, respectively,
to A and A-, which are the current ratings as of April 1997.
The Fund's concentration in municipal securities issued by the State
and its political subdivisions provides a greater level of risk than a
fund which is diversified across numerous states and municipal
entities. The ability of the State or its municipalities to meet their
obligations will depend on the availability of tax and other revenues;
economic, political, and demographic conditions within the State; and
the underlying fiscal condition of the State, its counties, and its
municipalities.
INVESTMENT LIMITATIONS
The Funds will not change any of the investment limitations described
below without approval of a majority of the outstanding shares of the
Funds.
INVESTING IN EXEMPT-INTEREST OBLIGATIONS
The Tax-Free Money Market Fund will not invest less than 80%
of its net assets in securities the interest on which is
exempt from federal regular income tax, except during
temporary defensive periods. AMT obligations are not counted
as securities the interest on which is exempt from federal
regular income tax.
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short or purchase any
securities on margin, or participate on a joint or joint and
several basis in any securities trading account.
BORROWING MONEY
The Funds may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with the
terms described in the prospectus. No Fund anticipates
entering into reverse repurchase agreements in excess of 5%
of its net assets.
PLEDGING SECURITIES
The Funds will not mortgage, pledge, or hypothecate any
assets, except in connection with any such borrowing and in
amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Fund's total assets at
the time of its borrowing. The Tax-Free Money Market Fund
will not purchase securities while its borrowings (including
reverse repurchase agreements) are outstanding.
INVESTING IN COMMODITIES, COMMODITY CONTRACTS, OR REAL ESTATE
The Funds will not invest in commodities, commodity contracts
(including futures contracts), real estate, oil, gas, or
mineral exploration or development programs, except that it
may purchase marketable securities of companies engaged in
such activities.
UNDERWRITING
The Funds will not engage in underwriting securities issued
by others.
LENDING CASH OR SECURITIES
The Funds will not make loans, except that each Fund may
purchase or hold debt instruments, including repurchase
agreements, in accordance with its investment objective and
policies.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds will not invest in securities issued by any other
investment company, except as part of a merger,
consolidation, reorganization, or acquisition of assets.
DIVERSIFICATION OF INVESTMENTS
The Money Market Fund and Tax-Free Money Market Fund will not
purchase securities issued by any one issuer (other than
cash, cash items, or securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, and
repurchase agreements collateralized by such securities) if
as a result more than 5% of the value of its total assets
would be invested in the securities of that issuer, except
that up to 25% of the value of the Fund's total assets may be
invested without regard to this 5% limitation.
CONCENTRATION OF INVESTMENTS
The Money Market Fund and Tax-Free Money Market Fund will not
invest more than 25% of the value of their respective total
assets in issuers in the same industry.
With respect to the Money Market Fund, utilities will be
divided according to their services; for example, gas, gas
transmissions, electric and gas, electric, and telephone will
each be considered a separate industry. Wholly-owned finance
companies will be considered to be in the industries of their
parents if their activities are primarily related to the
financing activities of their parents.
The Money Market Fund and Tax-Free Money Market Fund may
invest more than 25% of the value of its total assets in
obligations issued by any state, territory, or possession of
the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political
subdivisions, in cash or cash items (including instruments
issued by a U.S. branch of a domestic bank or savings and
loan association and bankers' acceptances), securities issued
or guaranteed by the U.S. government, its agencies or
instrumentalities, or instruments secured by these money
market instruments (i.e., repurchase agreements).
ISSUING SENIOR SECURITIES
The Funds will not issue senior securities.
INVESTING IN RESTRICTED SECURITIES
The Funds will not invest in securities subject to legal or
contractual restrictions.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND DIRECTORS
OF THE CORPORATION
The Funds will not purchase or retain the securities of any
issuer if the officers or Directors of the Corporation or the
Funds' investment adviser owning beneficially more than
one-half of 1% of the issuer's securities together own
beneficially more than 5% of such securities.
DEALING IN PUTS AND CALLS
The Funds will not write or purchase put or call options.
INVESTING IN NEW ISSUERS
The Funds will not invest more than 10% of the value of its
total assets in the securities of issuers which have records
of less than three years of continuous operation, including
the operation of any predecessor.
VOTING SECURITIES AND REVENUE BONDS
The Funds will not buy common stocks or voting securities of
state, municipal or industrial revenue bond issuers.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Funds will not invest in any issuer for purposes of
exercising control or management.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
The Funds did not borrow money in excess of 5% of the value of their
respective net assets during the last fiscal year and have no present
intent to do so in the coming fiscal year.
REGULATORY COMPLIANCE
The Funds are money market funds. Many of a Fund's investment policies
are fundamental, cannot be changed without vote of shareholders, and
were constructed so as to comply with Rules promulgated by the
Securities and Exchange Commission (SEC) governing mutual funds' use
of the amortized cost method of accounting, as they were in effect at
the time a Fund was created.
The SEC has subsequently revised Rule 2a-7 under the Investment
Company Act of 1940 which governs money market funds' use of the
amortized cost method of accounting. As a result of the revisions, the
Funds will adhere to certain nonfundamental operating policies that
are more restrictive in order to comply with revised Rule 2a-7. Since
the Funds may follow such operating policies without violating their
fundamental investment policies and limitations, the Funds do not
presently intend to ask for shareholder approval of changes to a
Fund's investment policies or limitations.
The Funds will invest in money market instruments (See the section of
the prospectus entitled "Acceptable Investments") rated in one of the
two highest short-term rating categories by nationally recognized
statistical rating organizations ("NRSROs") or of comparable quality
to securities having such rating.
The Funds will follow applicable regulations in determining whether a
security rated by NRSROs can be treated as being in the two highest
short-term rating categories.
The Funds will invest more than 5% of their respective total assets in
any one issuer only under circumstances permitted by Rule 2a-7. The
Funds will also determine the effective maturity of their investments,
as well as their ability to consider a security as having received the
requisite short-term ratings by NRSROs, according to Rule 2a-7. The
Fund may change these operating policies to reflect changes in the
laws and regulations without the approval of their shareholders,
unless such changes are more permissive than the Funds' fundamental
policies.
VISION GROUP OF FUNDS, INC. MANAGEMENT
Officers and Directors are listed with their addresses, birthdates,
present positions with Vision Group of Funds, Inc., and principal
occupations.
Randall I. Benderson
570 Delaware Avenue
Buffalo, NY
Birthdate: January 12, 1955
Director
Senior Vice President and Chief Operating Officer, Benderson Development
Company, Inc.
- --------------------------------------------------------------------------------
Joseph J. Castiglia
Roycroft Campus
21 South Grove Street, Suite 291
East Aurora, NY 14052
Birthdate: July 20, 1934
Director
Director, New York State Electric & Gas Corp.; Secewsow Environmental
Services, Inc.; Blue Cross & Blue Shield of Western New York; Buffalo
Branch, Federal Reserve Bank of New York; and Former President, Chief
Executive Officer and Vice Chairman, Pratt & Lambert United, Inc.
- --------------------------------------------------------------------------------
<PAGE>
Daniel R. Gernatt, Jr.
Richardson & Taylor Hollow Roads
Collins, NY
Birthdate: July 14, 1940
Director
President and CFO of Gernatt Asphalt Products, Inc.; Executive Vice
President, Dan Gernatt Gravel Products, Inc.; Vice President,
Countryside Sand & Gravel, Inc.
- --------------------------------------------------------------------------------
George K. Hambleton, Jr.
670 Young Street
Tonawanda, NY
Birthdate: February 8, 1933
Director
Former President, Brand Name Sales, Inc.; President, Hambleton & Carr, Inc.
- --------------------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.,
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of other funds distributed by Federated
Securities Corp.; President, Executive Vice President and Treasurer of
other funds distributed by Federated Securities Corp.
- --------------------------------------------------------------------------------
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of other funds distributed by Federated Securities
Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Victor R. Siclari
Federated Investors Tower
Pittsburgh, PA
Birthdate: November 17, 1961
Secretary
Corporate Counsel and Vice President, Federated Administrative
Services; formerly Attorney, Morrison & Foerster (law firm).
- --------------------------------------------------------------------------------
<PAGE>
FUND OWNERSHIP
As of June 9, 1997, Officers and Directors own less than 1% of each
Fund's outstanding shares.
As of June 9, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Money Market Fund: Tice & Co.,
Buffalo, New York, owned approximately 258,799,987 shares (44.92%) and
National Financial Services Co., New York, New York, owned
approximately 29,515,542 shares (5.12%).
As of June 9, 1997, the following shareholder of record owned 5% or
more of the outstanding shares of the Treasury Money Market Fund: Tice
& Co., Buffalo, New York, owned approximately 280,382,560 shares
(79.69%).
As of June 9, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Tax-Free Money Market Fund: Tice
& Co., Buffalo, New York, owned approximately 34,181,051 shares
(56.93%) and National Financial Services Co., New York, New York,
owned approximately 5,912,186 shares (9.85%).
DIRECTORS' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION * #
- --------------------------------------------------------------------------------
Randall I. Benderson,
Director $8,500
Joseph J. Castiglia,
Director $8,000
Daniel R. Gernatt, Jr.,
Director $8,500
George K. Hambleton, Jr.,
Director $8,000
*Information is furnished for the fiscal year ended April 30, 1997.
The Corporation is the only investment company in the Fund Complex.
#The aggregate compensation is provided for the Corporation which is comprised
of seven portfolios.
DIRECTOR LIABILITY
With respect to the removal of a Director of the Corporation, the
Corporation's By-Laws provide, in accordance with applicable law, that
a Director may be removed from the Board at a meeting of shareholders
called for that purpose upon the majority vote of the shareholders of
the Corporation entitled to vote at such meeting. Such a meeting shall
be called by the President or the Board of Directors or at the request
in writing of shareholders entitled to cast at least ten percent (10%)
of the votes entitled to be cast at such meeting. Such shareholders'
request shall state the purpose of the proposed meeting, and the
Corporation shall inform those shareholders of the reasonably
estimated cost of preparing and mailing a notice of the meeting to the
other shareholders and, on payment of these costs, shall notify each
shareholder entitled to notice of the meeting.
INVESTMENT ADVISORY SERVICES
ADVISER TO THE FUNDS
Investment advisory services are provided to the Funds by
Manufacturers and Traders Trust Company ("M&T Bank"), pursuant to an
investment advisory agreement dated April 25, 1988. The advisory
services provided and the expenses assumed by M&T Bank, as well as the
advisory fees payable to it, are described in the Funds' prospectus.
The investment advisory agreement provides that M&T Bank shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by a Fund in connection with its performance under the
advisory agreement, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence
on the part of M&T Bank in the performance of its duties, or from
reckless disregard by it of its duties and obligations thereunder.
Because of internal controls maintained by M&T Bank to restrict the
flow of non-public information, Fund investments are typically made
without any knowledge of M&T Bank's or its affiliates' lending
relationships with an issuer.
Unless sooner terminated, the advisory agreement between the Funds and
M&T Bank will continue in effect from year to year if such continuance
is approved at least annually by the Corporation's Board of Directors,
or by vote of a majority of the outstanding shares of a Fund (as
defined in the prospectus), and by a majority of the Directors who are
not parties to the advisory agreement or interested persons (as
defined in the Investment Company Act of 1940) of any party to the
advisory agreement, by vote cast in person at a meeting called for
such purpose. The advisory agreement is terminable at any time on 60
days' written notice without penalty by the Directors, by vote of a
majority of the outstanding shares of a Fund, or by M&T Bank. The
advisory agreement also terminates automatically in the event of its
assignment, as defined in the Investment Company Act of 1940.
ADVISORY FEES
For its advisory services, M&T Bank receives an annual investment
advisory fee as described in the prospectus.
During the fiscal years ended April 30, 1997, 1996, and 1995, for the
Money Market Fund and Treasury Money Market Fund, M&T Bank earned
$2,862,559, $2,339,981, and $1,635,164 and $2,296,162, $1,699,400, and
$1,120,905, respectively, which was reduced by $555,870, $530,234, and
$618,151 and $448,656, $319,668, and $418,701, respectively, because
of undertakings to limit the Funds' expenses. All advisory fees were
computed on the same basis as in the advisory contract described in
the Prospectus.
During the fiscal years ended April 30, 1997, 1996, and 1995, for the
New York Tax-Free Money Market Fund, M&T Bank earned $355,253,
$277,858, and $218,054, respectively, of which $250,546, $211,303, and
$198,560, respectively, were voluntarily waived.
OTHER SERVICES
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds
for a fee as described in the prospectus. For the fiscal years ended
April 30, 1997, 1996, and 1995 the Money Market Fund, Treasury Money
Market Fund, and Tax-Free Money Market Fund incurred costs for
administrative services of $598,092, $531,676, and $415,548; $478,882,
$384,262, and $285,906; and $74,362, $62,956, and $55,419,
respectively, of which $27,570, $5,988, and $0; $11,635, $2,303, and
$0; and $1,843, $392, and $31,013, respectively, were voluntarily
waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Funds.
Federated Services Company, Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 provides certain accounting and recordkeeping
services with respect to the Funds' portfolio investments.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company, Pittsburgh, Pennsylvania, the
Funds' registered transfer agent, maintains all necessary shareholder
records.
INDEPENDENT AUDITORS
The independent auditors for the Funds are Ernst & Young LLP,
Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
Pursuant to the Funds' advisory agreement, M&T Bank determines which
securities are to be sold and purchased by the Funds and which brokers
are to be eligible to execute its portfolio transactions. Portfolio
securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from
underwriters of portfolio securities include a commission or
concession paid by the issuer to the underwriter and purchases from
dealers serving as market makers may include the spread between the
bid and asking price. While M&T Bank generally seeks competitive
spreads or commissions, a Fund may not necessarily pay the lowest
spread or commission available on each transaction for reasons
discussed below.
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the
Board of Directors. The adviser may select brokers and dealers who
offer brokerage and research services. These services may be furnished
directly to the Funds or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and
reports; economic studies; industry studies; receipt of quotations for
portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the adviser or its
affiliates in advising the Funds and other accounts. To the extent
that receipt of these services may supplant services for which the
adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage
and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided.
The Funds will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter
into repurchase or reverse repurchase agreements with M&T Bank or its
affiliates, and will not give preference to M&T Bank's correspondents
with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements. While serving
as investment adviser to the Funds, M&T Bank has agreed to maintain
its policy and practice of conducting its Trust and Investment
Services Division independently of its Commercial Department.
The Funds' advisory agreement provides that, in making investment
recommendations for the Funds, Trust and Investment Services Division
personnel will not inquire or take into consideration whether the
issuer of securities proposed for purchase or sale by the Funds is a
customer of the Commercial Department and, in dealing with its
commercial customers, the Commercial Department will not inquire or
take into consideration whether securities of such customers are held
by the Funds.
Although investment decisions for the Funds are made independently
from those of the other accounts managed by M&T Bank, investments of
the type the Fund may make may also be made by those other accounts.
When the Funds and one or more other accounts managed by M&T Bank are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by M&T Bank to be equitable to each. In some cases,
this procedure may adversely affect the price paid or received by the
Funds or the size of the position obtained or disposed of by the
Funds. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Funds.
The Tax-Free Money Market Fund does not intend to seek profits through
short-term trading. The Fund's annual portfolio turnover will be
relatively high but portfolio turnover is not expected to have a
material effect on the net income of the Fund.
For the fiscal years ended April 30, 1997, 1996, and 1995, the Money
Market Fund, Treasury Money Market Fund, and Tax-Free Money Market
Fund paid no commissions on brokerage transactions.
DESCRIPTION OF FUND SHARES
The Corporation's Articles of Incorporation authorize the Board of
Directors to issue up to ten billion full and fractional shares of
Common Stock, of which seven billion shares have been classified into
seven classes of one billion shares each. Three billion shares remain
unclassified at this time. Classes A, B, C, D, E, F and G Common Stock
represent interests in Vision Money Market Fund, Vision Treasury Money
Market Fund, Vision New York Tax-Free Money Market Fund, Vision U.S.
Government Securities Fund, Vision New York Tax-Free Fund, Vision
Growth and Income Fund, and Vision Capital Appreciation Fund,
respectively.
The Board of Directors may classify or reclassify any unissued shares
of the Corporation into one or more additional classes by setting or
changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of
redemption.
Shares have no subscription or pre-emptive rights and only such
conversion or exchange rights as the Board of Directors may grant in
its discretion. When issued for payment as described in the Funds'
Prospectus and this Statement of Additional Information, the Funds'
shares will be fully paid and non-assessable. In the event of a
liquidation or dissolution of the Corporation, shares of the Funds are
entitled to receive the assets available for distribution belonging to
the respective Funds and a proportionate distribution, based upon the
relative asset values of that Fund and the Corporation's other
portfolios, of any general assets not belonging to any particular
portfolio which are available for distribution.
Rule 18f-2 under the Investment Company Act of 1940 provides that any
matter required to be submitted to the holders of the outstanding
voting securities of an investment company such as the Corporation
shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of
each portfolio affected by the matter. A portfolio is affected by a
matter unless it is clear that the interests of each portfolio in the
matter are identical or that the matter does not affect any interest
of the portfolio. Under Rule 18f-2, the approval of an investment
advisory agreement or any change in a fundamental investment policy
would be effectively acted upon with respect to a portfolio only if
approved by a majority of the outstanding shares of such portfolio.
However, Rule 18f-2 also provides that the ratification of independent
certified public accountants, the approval of principal underwriting
contracts and the election of directors may be effectively acted upon
by shareholders of the Corporation voting without regard to class.
Notwithstanding any provision of Maryland law requiring a greater vote
of the Corporation's shares (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law
(for example, by Rule 18f-2) or by the Corporation's Articles of
Incorporation, the Corporation may take or authorize such action upon
the favorable vote of the holders of more than 50% of the outstanding
Common Stock of the Fund and the Corporation's other portfolios
(voting together without regard to class).
HOW TO BUY SHARES
- ----------------------------------------------
Shares of the Funds are sold at their net asset value without a sales
charge on days on which the New York Stock Exchange and the Federal
Reserve wire system are open for business. The procedure for
purchasing shares of the Funds is explained in the prospectus under
"How to Buy Shares."
CONVERSION TO FEDERAL FUNDS
It is the Funds' policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds. M&T Bank and State Street Bank act as the shareholders' agents
in depositing checks and converting them to federal funds.
CASH SWEEP PROGRAM
The Funds reserve the right to create a Cash Sweep Program in the
future. For participating accounts, cash accumulations in demand
deposit accounts with M&T Bank would be automatically invested in
shares of the Funds on a day selected by M&T Bank and its customer, or
when the demand deposit account reaches a predetermined dollar amount
(e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS
Participating depository institutions would be responsible
for prompt transmission of orders relating to the program.
These depository institutions would be the record owners of
the shares of the Funds. Depository institutions
participating in this program would be able to charge their
customers for services relating to the program. This
Statement of Additional Information should, therefore, be
read together with any agreement between the customer and the
depository institution with regard to the services to be
provided, the fees to be charged for those services, and any
restrictions and limitations that would be imposed.
Beneficial ownership of shares of the Funds held by M&T Bank
and other institutional investors on behalf of their
customers would be recorded by the institutions and reflected
in the regular account statements provided by institutions to
their customers.
DETERMINING NET ASSET VALUE
- ------------------------------------------------------------------------
The Directors have decided that the best method for determining the
value of portfolio instruments is amortized cost. Under this method,
portfolio instruments are valued at the acquisition cost as adjusted
for amortization of premium or accumulation of discount rather than at
current market value. Accordingly, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio. In periods of declining interest rates,
the indicated daily yield on shares of the Funds computed by dividing
the annualized daily income on a Fund's portfolio by the net asset
value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the
opposite may be true.
The Funds' use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions of Rule
2a-7 (the "Rule") promulgated by the Securities and Exchange
Commission under the Investment Company Act of 1940. Under the Rule,
the Directors must establish procedures reasonably designed to
stabilize the net asset value per share, as computed for purposes of
distribution and redemption, at $1.00 per share, taking into account
current market conditions and a Fund's investment objective. The
procedures include monitoring the relationship between the amortized
cost value per share and the net asset value per share based upon
available indications of market value. The Directors will decide what,
if any, steps should be taken if there is a difference of more than
0.5% between the two values. The Directors will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
REDEEMING FUND SHARES
- ---------------------------------------------------------------
The Funds redeem shares at the next computed net asset value after the
Funds receive the redemption request. Redemption procedures are
explained in the Prospectus under "Redeeming Shares."
BANKING LAWS
- -----------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company registered under the
Bank Holding Company Act of 1956 or any affiliate thereof from
sponsoring, organizing or controlling a registered, open-end investment company
continuously engaged in the issuance of its shares, and from issuing,
underwriting, selling or distributing
securities in general. Such laws and regulations do not prohibit such a holding
company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or
from purchasing shares of such company as agent for and upon the order
of their customers. Some entities providing services to the Funds are
subject to such banking laws and regulations. They believe that they
may perform those services for the Funds contemplated by any agreement
entered into with the Funds without violating those laws or
regulations. Changes in either federal or state statutes and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future
statutes and regulations, could prevent these entities from continuing
to perform all or a part of the above services. If this happens, the
Corporation's Board of Directors would consider alternative means of
continuing available services. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of
these occurrences. TAX STATUS
- -------------------------------------------------------------------------
THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet
the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, a Fund must, among other requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Funds is eligible for
the dividends received deduction available to corporations. These
dividends (to the extent taxable), and any short-term capital gains,
are taxable as ordinary income.
Net income for dividend purposes includes (i) interest and dividends
accrued and discount earned on a Fund's assets (including both
original issue and market discount), less (ii) amortization of any
premium and accrued expenses directly attributable to such Fund, and
the general expenses (e.g. legal, accounting and directors' fees) of
the Corporation prorated to each Fund on the basis of its relative net
assets.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an
increase in dividends. Capital losses could result in a
decrease in dividends. If for some extraordinary reason a
Fund realizes net long-term capital gains, it will distribute
them at least once every 12 months.
TOTAL RETURN
- -----------------------------------------------------------------------------
The Money Market Fund's, Treasury Money Market Fund's, and Tax-Free
Money Market Fund's average annual total returns for the one-year and
five-year periods ended April 30, 1997, and for the period from June
1, 1988 (date of initial public investment for the Funds) to April 30,
1997, were 4.93%, 4.24%, and 5.50%; 4.82%, 4.11%, and 5.29%; and
2.96%, 2.51%, and 3.37%, respectively.
The average annual total return for the shares is the average
compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of shares owned at the end of the period by the offering price
per share at the end of the period. The number of shares owned at the
end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends
and distributions.
YIELD
- ------------------------------------------------------------------
The yields for the Money Market Fund, Treasury Money Market Fund, and
Tax-Free Money Market Fund for the seven-day period ended April 30,
1997, were 4.90%, 4.80%, and 3.45%, respectively. The Fund calculates
its yield daily, based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by:
o determining the net change in the value of a hypothetical
account with a balance of one share at the beginning of
the base period, with the net change excluding capital
changes but including the value of any additional shares
purchased with dividends earned from the original one
share and all dividends declared on the original and any
purchased shares;
o dividing the net change in the account's value by the
value of the account at the beginning of the base period
to determine the base period return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an
investment in the Fund, the performance will be reduced for those
shareholders paying those fees.
TAX-EQUIVALENT YIELD
The Tax-Free Money Market Fund's tax-equivalent yield for the
seven-day period ended April 30, 1997, was 4.54%.
The tax-equivalent yield of the Tax-Free Money Market Fund is
calculated similarly to the yield, but is adjusted to reflect the
taxable yield that the Fund would have had to earn to equal its actual
yield, assuming a 28% federal tax rate and the regular personal income
tax rate imposed by New York and assuming that its income is 100%
tax-exempt.
TAX-EQUIVALENCY TABLE
The Tax-Free Money Market Fund may also use a tax-equivalency table in
advertising and sales literature. The interest earned by the municipal
bonds in the Fund's portfolio generally remains free from federal
regular income taxes,* and is often free from state and local taxes as
well. As the table on the next page indicates a "tax-free" investment
is an attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
<PAGE>
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF NEW YORK
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL
AND STATE 21.850% 34.850% 37.850% 42.850% 46.450%
- ---------------------------------------------------------------------------------------------------------------------------------
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
- ---------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
- ---------------------------------------------------------------------------------------------------------------------------------
1.50% 1.92% 2.30% 2.41% 2.62% 2.80%
2.00% 2.56% 3.07% 3.22% 3.50% 3.73%
2.50% 3.20% 3.84% 4.02% 4.37% 4.67%
3.00% 3.84% 4.60% 4.83% 5.25% 5.60%
3.50% 4.48% 5.37% 5.63% 6.12% 6.54%
4.00% 5.12% 6.14% 6.44% 7.00% 7.47%
4.50% 5.76% 6.91% 7.24% 7.87% 8.40%
5.00% 6.40% 7.67% 8.05% 8.75% 9.34%
5.50% 7.04% 8.44% 8.85% 9.62% 10.27%
6.00% 7.68% 9.21% 9.65% 10.50% 11.20%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The chart on the previous page is for illustrative purposes only. It
is not an indicator of past or future performance of Fund shares.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
<PAGE>
EFFECTIVE YIELD
- -----------------------------------------------------------------
The Money Market Fund's, Treasury Money Market Fund's, and Tax-Free
Money Market Fund's effective yields for the seven-day period ended
April 30, 1997, were 5.02%, 4.92%, and 3.51%, respectively.
The Fund's effective yield is computed by compounding the unannualized
base period return by:
o adding 1 to the base period return;
o raising the sum to the 365/7th power; and
o subtracting 1 from the result.
PERFORMANCE COMPARISONS
- ------------------------------------------------------------
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in Fund expenses; and
o the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a
more complete view of the each Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Funds use in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any.
o SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of
the most representative yields for selected securities
issued by the U.S. Treasury maturing in 30 days.
o BANK RATE MONITOR NATIONAL INDEX, Miami Beach, Florida, is
a financial reporting service which publishes weekly
average rates of 50 leading banks and thrift institution
money market deposit accounts. The rates published in the
index are an average of the personal account rates offered
on the Wednesday prior to the date of publication by ten
of the largest banks and thrifts in each of the five
largest Standard Metropolitan Statistical Areas. Account
minimums range upward from $2,500 in each institution and
compounding methods vary. If more than one rate is
offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields
of hundreds of money market funds on a weekly basis and
through its MONEY MARKET INSIGHT publication reports
monthly and year-to-date investment results for the same
money funds.
From time to time, the Funds will quote their Lipper rankings in the
"money market instrument funds" category in advertising and sales
literature. Investors may use such a reporting service in addition to
the Funds' prospectus to obtain a more complete view of the Funds'
performance before investing. Of course, when comparing Fund
performance to any reporting service, factors such as composition of
the reporting service and prevailing market conditions should be
considered in assessing the significance of such comparisons.
Advertising and other promotional literature may include charts,
graphs and other illustrations using the Funds' returns, or returns in
general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment. In addition, a Fund can compare its performance, or
performance for the types of securities in which it invests, to a
variety of other investments, such as federally insured bank products,
including time deposits, bank savings accounts, certificates of
deposit, and Treasury bills, and to money market funds using the
Lipper Analytical Services money market instruments average. Unlike
federally insured bank products, the shares of the Funds are not
insured.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by Funds' portfolio managers and
their views and analysis on how such developments could affect the
Funds. In addition, advertising and sales literature may quote
statistics and give general information about the mutual fund
industry, including the growth of the industry, from sources such as
the Investment Company Institute ("ICI"). For example, according to
the ICI, thirty-seven percent of American households are pursuing
their financial goals through mutual funds. These investors, as well
as businesses and institutions, have entrusted over $3.5 trillion to
the more than 6,000 funds available.
<PAGE>
APPENDIX
- ------------------------------------------------------------------
Standard & Poor's Ratings Group Bond Ratings
AAA-Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A-Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible o the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB-Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
NR-Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Investors Service, Inc. Bond Ratings
AAA-Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA-Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in AAA
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in AAA securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA-Bonds which are rated BAA are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal 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.
NR-Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Baa in 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.
Fitch Investors Service, Inc. Long-Term Debt Ratings
AAA-Bonds 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 considered to be investment grade and of very high 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 issuers is generally rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB-Bonds 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 impact 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.
NR-NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the AAA
category.
Standard & Poor's Ratings Group Municipal Note Ratings
SP-1-Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2-Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. Short-Term Loan Ratings
MIG1/VMIG1-This designation denotes best quality. There is a present
strong protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG2/VMIG2-This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
Fitch Investors Service, Inc. Short-Term Debt Ratings
F-1+-EXCEPTIONALLY STRONG CREDIT QUALITY. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1-VERY STRONG CREDIT QUALITY. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2-GOOD CREDIT QUALITY. Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as the F-1+ and F-1 ratings.
Standard & Poor's Ratings Group Commercial Paper Ratings
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.
Moody's Investors Service, Inc. Commercial Paper Ratings
PRIME-1-Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well
established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earning 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 rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
92830F307
92830F109
92830F208
G01716-06 (6/97)
[LOGO OF VISION]
PROSPECTUS
VISION GROUP OF FUNDS, INC.
PROSPECTUS DATED JUNE 30, 1997
Vision Group of Funds, Inc. is an open-end management investment company (a
mutual fund) that offers you a choice of seven separate investment portfolios
with distinct investment objectives and policies. This prospectus relates to
four of the seven portfolios ("Funds"). The Funds are:
VISION U.S. GOVERNMENT SECURITIES FUND
VISION NEW YORK TAX-FREE FUND
VISION GROWTH AND INCOME FUND
VISION CAPITAL APPRECIATION FUND
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS
OF MANUFACTURERS AND TRADERS TRUST COMPANY ("M&T BANK"), ARE NOT
ENDORSED OR GUARANTEED BY M&T BANK, AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. THESE SHARES INVOLVE INVESTMENT RISKS INCLUDING
POSSIBLE LOSS OF PRINCIPAL.
This prospectus gives you information about each of the Funds, and can
help you decide which of the Funds are suitable investments for you.
Please read the prospectus before you invest and keep it for future
reference.
You can find additional facts about each of the Funds in their
combined Statement of Additional Information dated June 30, 1997,
which has also been filed with the Securities and Exchange Commission
("SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. To
obtain a free copy of the Statement of Additional Information, or a
paper copy of this prospectus, if you have received it electronically,
or make other inquiries about any of these Funds, simply call or write
Vision Group of Funds, Inc. at the telephone number or address below.
The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the
Funds is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
VISION GROUP OF FUNDS, INC.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 842-4488
TABLE OF CONTENTS
Synopsis 3
A Summary of the Funds' Expenses 5
Financial Highlights 7
How the Funds Invest 10
Fund Objective and Policies 10
Vision U.S. Government Securities Fund 11
Vision New York Tax-Free Fund 12
Vision Growth and Income Fund 14
Vision Capital Appreciation Fund 16
Investment Techniques, Features,
and Limitations 17
Fund Management, Distribution and
Administration 28
Board of Directors 28
Investment Adviser 28
Distribution of Fund Shares 29
Administration of the Funds 31
Your Guide to Using the Funds 32
How the Funds Value Their Shares 32
What Fund Shares Cost 32
How to Buy Shares 35
How to Exchange Shares 36
How to Redeem Shares 38
Tax Information 40
New York Tax-Free Fund 40
How the Funds Show Performance 42
Financial Statements 43
Report of Ernst & Young LLP,
Independent Auditors 67
Addresses 68
SYNOPSIS
INVESTMENT OBJECTIVE AND POLICIES
Vision Group of Funds, Inc. (the "Corporation") offers you a
convenient, affordable way to participate in seven separate,
professionally managed portfolios. This prospectus describes four of
the portfolios: the Vision U.S. Government Securities Fund, Vision New
York Tax-Free Fund, Vision Growth and Income Fund, and Vision Capital
Appreciation Fund. The three other portfolios, Vision Money Market
Fund, Vision Treasury Money Market Fund, and Vision New York Tax-Free
Money Market Fund, are described in a separate prospectus.
VISION U.S. GOVERNMENT
SECURITIES FUND
("U.S. GOVERNMENT SECURITIES FUND") IS A DIVERSIFIED
PORTFOLIO WHICH SEEKS CURRENT INCOME BY INVESTING
PRIMARILY IN SECURITIES THAT ARE GUARANTEED AS TO
PAYMENT OF PRINCIPAL AND INTEREST BY THE U.S. GOVERN-
MENT, ITS AGENCIES OR INSTRUMENTALITIES. CAPITAL
APPRECIATION IS A SECONDARY INVESTMENT CONSIDERATION.
(SEE "HOW THE FUNDS INVEST").
VISION NEW YORK
TAX-FREE FUND
("NEW YORK TAX-FREE FUND") SEEKS CURRENT INCOME WHICH IS EXEMPT
FROM FEDERAL INCOME TAX AND THE PERSONAL INCOME TAXES IMPOSED BY
THE STATE OF NEW YORK AND NEW YORK MUNICIPALITIES AND IS CONSISTENT
WITH THE PRESERVATION OF CAPITAL. (SEE "HOW THE FUNDS INVEST").
VISION GROWTH AND
INCOME FUND
("GROWTH AND INCOME FUND") IS A DIVERSIFIED PORTFOLIO
WHICH SEEKS LONG-TERM GROWTH OF CAPITAL AND INCOME.
THE
GROWTH AND INCOME FUND PURSUES ITS INVESTMENT OBJECTIVE BY
INVESTING IN A DIVERSIFIED PORTFOLIO CONSISTING PRIMARILY OF EQUITY
SECURITIES (E.G., COMMON STOCK, CONVERTIBLE SECURITIES), ALTHOUGH
IT MAY ALSO INVEST IN DEBT SECURITIES (E.G., BONDS, NOTES). (SEE
"HOW THE FUNDS INVEST").
VISION CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") IS A
DIVERSIFIED PORTFOLIO WHICH SEEKS TO PRODUCE LONG-TERM CAPITAL
APPRECIATION BY INVESTING IN A DIVERSIFIED PORTFOLIO CONSISTING
PRIMARILY OF COMMON STOCKS THAT THE ADVISER BELIEVES OFFER
OPPORTUNITY FOR GROWTH OF CAPITAL, ALTHOUGH IT MAY ALSO INVEST IN
OTHER SECURITIES HAVING SOME OF THE CHARACTERISTICS OF COMMON
STOCKS, SUCH AS CONVERTIBLE PREFERRED STOCKS, CONVERTIBLE BONDS AND
WARRANTS. (SEE "HOW THE FUNDS INVEST").
BUYING AND REDEEMING FUND SHARES
You can conveniently buy and redeem Fund shares on almost any business day.
Shares of the Funds are sold at net asset value plus a sales charge and may be
redeemed at net asset value. The minimum initial investment in each Fund is $500
($250 for retirement plans and IRA accounts), and it may be waived or lowered
from time to time. (See "Your Guide to Using the Funds.")
MANAGEMENT OF THE FUNDS
The Funds' investment adviser is Manufacturers and Traders Trust
Company ("M&T Bank" or "Adviser"). M&T Bank makes investment decisions
for the Funds. M&T Bank is the principal banking subsidiary of First
Empire State Corporation (See "Adviser's Background").
SHAREHOLDER SERVICES
When you become a shareholder, you can easily get information about
your account, and about the Funds and their services by calling M&T
Bank's Mutual Fund Services at (800) 836-2211 (in the Buffalo area,
phone 842-4488).
RISK FACTORS
An investment in the Funds may involve certain risks that are
explained more fully in the sections of the prospectus discussing each
Fund's investment techniques.
A SUMMARY OF THE FUNDS' EXPENSES
Every mutual fund incurs expenses in conducting operations, managing
investments and providing services to shareholders. The following
summary breaks out the Funds' expenses. You should consider this
expense information, along with other information provided in the
prospectus, in making your investment decision.
<TABLE>
<CAPTION>
U.S.
GOVERNMENT NEW YORK GROWTH CAPITAL
SECURITIES TAX-FREE AND INCOME APPRECIATION
SHAREHOLDER TRANSACTION EXPENSES FUND FUND FUND FUND
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.50% 4.50% 5.50% 5.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None None None None
Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, as
applicable) None None None None
Redemption Fees (as a percentage of amount redeemed,
if applicable) None None None None
Exchange Fee None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees (after waivers) 0.53%(1) 0.35%(1) 0.70% 0.85%
12b-1 Fees (2) 0.00% 0.00% 0.00% 0.00%
Shareholder Servicing Fees (3) 0.00% 0.00% 0.25% 0.25%
Other Expenses (after waivers) 0.58%(4) 0.66%(4) 0.33% 0.50%(4)
Total Fund Operating Expenses (5) 1.11% 1.01% 1.28% 1.60%
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of the Funds will
bear, either directly or indirectly. For more complete descriptions
of the various costs and expenses, see "Fund Management,
Distribution and Administration" in the prospectus. Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
EXAMPLE:
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return; (2) redemption at the end of each period; and
(3) payment of the maximum sales charge. The Funds charge no
redemption fees.
1 Year..................................................... $ 56 $ 55 $ 67 $ 70
3 Years.................................................... $ 79 $ 76 $ 93 $103
5 Years.................................................... $103 $ 98 $121 $137
10 Years................................................... $174 $163 $201 $235
</TABLE>
THE ABOVE EXAMPLES FOR GROWTH AND INCOME FUND AND CAPITAL APPRECIATION FUND ARE
ESTIMATED BASED UPON EXPECTED EXPENSES FOR THE FISCAL YEAR ENDING APRIL 30,
1998.
(1) The management fees have been reduced to reflect the voluntary
waivers of portions of the management fees by the investment adviser
with respect to U.S. Government Securities Fund and New York Tax-Free
Fund. The investment adviser can terminate these voluntary waivers at
any time at its sole discretion. The maximum management fees for U.S.
Government Securities Fund and New York Tax-Free Fund are 0.70% and
0.70%, respectively.
(2) The Funds have no present intention of accruing or paying 12b-1 fees during
the fiscal year ending April 30, 1998. If the Funds were accruing or paying
12b-1 fees they would be able to pay up to 0.25% of each Fund's average daily
net assets. See "Fund Management, Distribution and Administration."
(3) U.S. Government Securities Fund and New York Tax-Free Fund have no
present intention of accruing or paying shareholder servicing fees
during the fiscal year ending April 30, 1998. If the Funds were
accruing or paying shareholder servicing fees, they would be able to
pay up to 0.25% of each Funds' average daily net assets. Growth and
Income Fund and Capital Appreciation Fund will begin paying and
accruing shareholder servicing fees on July 1, 1997 at 0.25% of each
of the Funds' average daily net assets. See "Fund Management,
Distribution and Administration."
(4) Other Expenses for U.S. Government Securities Fund and New York
Tax-Free Fund were 0.61% and 0.69%, respectively, absent the voluntary
waivers of portions of the administrative fees by the administrator.
Other Expenses for Capital Appreciation Fund were 0.99% absent the
voluntary waiver of a portion of the administrative fee by the
administrator and reimbursement of other operating expenses by the
investment adviser. Other Expenses for Capital Appreciation Fund are
expected to be 0.54% absent the voluntary waiver of a portion of the
administrative services fee by the administrator. The administrator
and the adviser can terminate these voluntary waivers and/or
reimbursements at any time at their sole discretion.
(5) Total Fund Operating Expenses for U.S. Government Securities Fund
and New York Tax Free Fund would have been 1.31% and 1.39%,
respectively, absent the voluntary waivers by the investment adviser
and administrator. The Total Fund Operating Expenses for Growth and
Income Fund and Capital Appreciation Fund were 1.14% and 0.88%,
respectively, for the fiscal year ended April 30, 1997. Capital
Appreciation Fund's Total Operating Expenses would have been 1.84%
absent the voluntary waivers of a portion of the management fee and
administrative fee and the reimbursement of other expenses by the
investment adviser. The Total Fund Operating Expenses in the table
above for Growth and Income Fund and Capital Appreciation Fund reflect
a reduction in the anticipated other operating expenses by the
administrator and the addition of a shareholder servicing fee for the
fiscal year ending April 30, 1998. The Total Fund Operating Expenses
for Capital Appreciation Fund are expected to be 1.64% absent the
voluntary waiver by the administrator.
VISION EQUITY AND INCOME FUNDS
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent
Auditors on Page 67.
<TABLE>
<CAPTION>
NET ASSET NET REALIZED AND
VALUE, NET UNREALIZED GAIN TOTAL FROM
YEAR ENDED BEGINNING OF INVESTMENT (LOSS) ON INVESTMENT
APRIL 30, PERIOD INCOME INVESTMENTS OPERATIONS
U.S. GOVERNMENT SECURITIES FUND
<S> <C> <C> <C> <C>
1994(a) $ 10.00 0.34 (0.75) (0.41)
1995 $ 9.25 0.56 (0.16) 0.40
1996 $ 9.09 0.52 0.22 0.74
1997 $ 9.31 0.58 (0.03) 0.55
<CAPTION>
New York Tax-Free Fund
<S> <C> <C> <C> <C>
1994(a) $ 10.00 0.20 (0.39) (0.19)
1995 $ 9.61 0.46 0.06 0.52
1996 $ 9.67 0.46 0.23 0.69
1997 $ 9.90 0.48 0.18 0.66
<CAPTION>
Growth and Income Fund
<S> <C> <C> <C> <C>
1994(e) $ 10.00 0.07 (0.08) (0.01)
1995 $ 9.93 0.21 0.43 0.64
1996 $ 10.35 0.13 2.98 3.11
1997 $ 13.35 0.13 2.35 2.48
<CAPTION>
Capital Appreciation Fund
<S> <C> <C> <C> <C>
1997(f) $ 10.00 0.02(h) 1.35 1.37
</TABLE>
(a) Reflects operations for the period from September 22, 1993 (date
of initial public investment) to April 30, 1994.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(e) Reflects operations for the period from November 29, 1993 (date of
initial public investment) to April 30, 1994.
(f) Reflects operations for the period from July 3, 1996 (date of
initial public investment) to April 30, 1997.
(g) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged. This disclosure is required for fiscal years
beginning on or after September 1, 1995.
(h) Per share information presented is based upon the monthly average
number of shares outstanding due to large fluctuations in the
number of shares outstanding during the period.
(i) Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of
capital for federal tax purposes.
(See Notes which are an integral part of the Financial Statements)
VISION EQUITY AND INCOME FUNDS
FINANCIAL HIGHLIGHTS--CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DISTRIBUTIONS
DISTRIBUTIONS IN EXCESS
FROM NET OF NET DISTRIBUTIONS NET ASSET
YEAR ENDED INVESTMENT INVESTMENT FROM NET REALIZED TOTAL VALUE, END OF TOTAL
APRIL 30, INCOME INCOME GAINS DISTRIBUTIONS PERIOD RETURN(B)
U.S. GOVERNMENT SECURITIES FUND
<S> <C> <C> <C> <C> <C> <C>
1994(a) (0.34) -- -- (0.34) $ 9.25 (4.23%)
1995 (0.56) -- -- (0.56) $ 9.09 4.59%
1996 (0.52) -- -- (0.52) $ 9.31 8.10%
1997 (0.58) -- -- (0.58) $ 9.28 6.05%
<CAPTION>
NEW YORK TAX-FREE FUND
<S> <C> <C> <C> <C> <C> <C>
1994(a) (0.20) -- -- (0.20) $ 9.61 (1.22%)
1995 (0.46) -- -- (0.46) $ 9.67 5.58%
1996 (0.46) -- -- (0.46) $ 9.90 7.18%
1997 (0.48) -- -- (0.48) $ 10.08 6.76%
<CAPTION>
GROWTH AND INCOME FUND
<S> <C> <C> <C> <C> <C> <C>
1994(e) (0.06) -- -- (0.06) $ 9.93 (0.12%)
1995 (0.22) -- -- (0.22) $ 10.35 6.61%
1996 (0.11) -- -- (0.11) $ 13.35 30.18%
1997 (0.13) -- (0.59) (0.72) $ 15.11 18.61%
<CAPTION>
CAPITAL APPRECIATION FUND
<S> <C> <C> <C> <C> <C> <C>
1997(f) (0.02) (0.03)(i) (0.06) (0.11) $ 11.26 13.97%
</TABLE>
(a) Reflects operations for the period from September 22, 1993 (date
of initial public investment) to April 30, 1994.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(e) Reflects operations for the period from November 29, 1993 (date of
initial public investment) to April 30, 1994.
(f) Reflects operations for the period from July 3, 1996 (date of
initial public investment) to April 30, 1997.
(g) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged. This disclosure is required for fiscal years
beginning on or after September 1, 1995.
(h) Per share information presented is based upon the monthly average
number of shares outstanding due to large fluctuations in the
number of shares outstanding during the period.
(i) Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of
capital for federal tax purposes.
(See Notes which are an integral part of the Financial Statements)
VISION EQUITY AND INCOME FUNDS
FINANCIAL HIGHLIGHTS--CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS NET ASSETS,
EXPENSES END AVERAGE
YEAR ENDED NET INVESTMENT WAIVER/ OF PERIOD COMMISSION PORTFOLIO
APRIL 30, EXPENSES INCOME REIMBURSEMENT(D) (000 OMITTED) RATE PAID(G) TURNOVER
U.S. GOVERNMENT SECURITIES FUND
<S> <C> <C> <C> <C> <C> <C>
1994(a) 0.00%(c) 6.11%(c) 1.86%(c) $ 24,468 -- 320%
1995 0.43% 6.20% 1.01% $ 29,573 -- 78%
1996 1.16% 5.41% 0.17% $ 34,492 -- 132%
1997 1.11% 6.23% 0.20% $ 44,485 -- 121%
<CAPTION>
NEW YORK TAX-FREE FUND
<S> <C> <C> <C> <C> <C> <C>
1994(a) 0.00%(c) 4.79%(c) 1.78%(c) $ 25,225 -- 21%
1995 0.40% 4.80% 1.12% $ 27,346 -- 51%
1996 1.04% 4.60% 0.34% $ 32,621 -- 113%
1997 1.01% 4.74% 0.38% $ 35,480 -- 79%
<CAPTION>
GROWTH AND INCOME FUND
<S> <C> <C> <C> <C> <C> <C>
1994(e) 0.00%(c) 2.24%(c) 2.15%(c) $ 22,944 -- 27%
1995 0.47% 2.16% 0.96% $ 39,358 -- 79%
1996 1.16% 1.09% -- $ 65,119 -- 77%
1997 1.14% 0.87% -- $ 114,090 $ 0.0549 134%
<CAPTION>
CAPITAL APPRECIATION FUND
<S> <C> <C> <C> <C> <C> <C>
1997(f) 0.88%(c) 0.18%(c) 0.96%(c) $ 33,440 $ 0.0628 41%
</TABLE>
(a) Reflects operations for the period from September 22, 1993 (date
of initial public investment) to April 30, 1994.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(e) Reflects operations for the period from November 29, 1993 (date of
initial public investment) to April 30, 1994.
(f) Reflects operations for the period from July 3, 1996 (date of
initial public investment) to April 30, 1997.
(g) Represents total commissions paid on portfolio securities divided
by total portfolio shares purchased or sold on which commissions
were charged. This disclosure is required for fiscal years
beginning on or after September 1, 1995.
(h) Per share information presented is based upon the monthly average
number of shares outstanding due to large fluctuations in the
number of shares outstanding during the period.
(i) Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting
principles. These distributions do not represent a return of
capital for federal tax purposes.
(See Notes which are an integral part of the Financial Statements)
HOW THE FUNDS INVEST
FUND OBJECTIVE
AND POLICIES
The investment objective and policies of each Fund appear below. The
investment objective of a Fund cannot be changed without shareholder
approval. While a Fund cannot assure that it will achieve its
investment objective, it attempts to do so by following the investment
policies described below.
Unless indicated otherwise, the investment policies of a Fund may be
changed by the Board of Directors ("Directors") without shareholder
approval. However, shareholders will be notified before any material
change in these policies becomes effective. Additional information
about investments, investment limitations and strategies, and certain
investment policies appears in the "Investment Techniques, Features,
and Limitations" section of this prospectus.
Vision
U.S. Government
Securities Fund
INVESTMENT OBJECTIVE
The investment objective of the U.S. Government Securities Fund
(referred to in this section as the "Fund") is current income.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing, under normal
market circumstances, at least 65% of its total assets in a
diversified portfolio consisting of securities that are guaranteed as
to payment of principal and interest by the U.S. government or its
agencies or instrumentalities (see "U.S. Government Securities" under
"Investment Techniques, Features and Limitations"). Capital
appreciation is a secondary investment consideration. The Fund
anticipates that most of its assets will be invested in fixed income
securities having maturities greater than one year. Certain
mortgage-backed securities, including ARMS and CMOs (as defined in the
"Investment Techniques, Features, and Limitations" section), are
included within the definition of "U.S. Government Securities."
Depending upon market conditions, the Fund may invest a substantial
portion of its assets in mortgage-backed securities. For a description
of these securities and the following list of Acceptable Investments,
see the "Investment Techniques, Features, and Limitations" section.
ACCEPTABLE INVESTMENTS
The Fund's investments include:
U.S. Government Securities;
mortgage-backed securities that directly or indirectly represent a
participation in, or are secured by and payable from, mortgage
loans on real property;
asset-backed securities that are similar to mortgage-backed
securities, but have underlying assets that are not mortgage loans
or interests in mortgage loans;
taxable municipal securities;
domestic issues of corporate debt obligations, including demand
master notes, rated at the time of purchase Aaa, Aa, or A by
Moody's Investors Service, Inc. ("Moody's"), or AAA, AA, or A by
Standard & Poor's Ratings Group ("S&P") or by Fitch Investors
Service, Inc. ("Fitch"), or, if unrated, of comparable quality as
determined by the Adviser;
commercial paper that at the time of purchase is rated not less
than P-1, A-1, or F-1 by Moody's, S&P, or Fitch, respectively, or,
if unrated, of comparable quality as determined by the Adviser;
securities of other investment companies;
time and savings deposits (including certificates of deposit) in commercial
or savings banks;
bankers' acceptances;
repurchase agreements collateralized by high quality, liquid investments; and
money market instruments.
Vision
New York Tax-Free
Fund
INVESTMENT OBJECTIVE
The investment objective of the New York Tax-Free Fund (referred to in
this section as the "Fund") is to provide current income which is
exempt from federal income tax and the personal income taxes imposed
by the State of New York and New York municipalities and is consistent
with the preservation of capital.
Interest income of the Fund that is exempt from the income taxes
described above retains its exempt status when distributed to the
Fund's shareholders. Income distributed by the Fund may not
necessarily be exempt from state or municipal taxes in states other
than New York.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing primarily in
securities, the interest of which is exempt from federal income tax
and personal income taxes imposed by the State of New York and New
York municipalities. The Fund invests in these securities to earn
income consistent with the preservation of capital. Under normal
market conditions, at least 80% of the Fund's net assets will be
invested in securities that pay interest exempt from federal income
tax. This policy may not be changed without approval of shareholders.
For purposes of this policy, the tax-free interest must not be a
preference item for purposes of computing the federal alternative
minimum tax. (See "AMT Obligations" below for additional information.)
Under normal market conditions, at least 65% of the value of the
Fund's total assets will be invested in obligations issued by or on
behalf of the State of New York, its political subdivisions or
agencies the interest of which is exempt from the personal income tax
imposed by the State of New York and New York municipalities. For a
description of these securities and the following list of Acceptable
Investments, see the "Investment Techniques, Features, and
Limitations" section.
ACCEPTABLE INVESTMENTS
The Fund's investments include:
obligations issued by or on behalf of the State of New York, its political
subdivisions, or agencies ("New York municipal securities");
debt obligations of any state, territory, or possession of the United States,
including the District of Columbia, or any political subdivision of any of
these; and
participation interests, as described below, in any of the above
obligations, the interest from which is, in the opinion of bond
counsel for the issuers or in the opinion of officers of the
Corporation or the opinion of the Adviser, exempt from both federal
income tax and the personal income tax imposed by the State of New
York and New York municipalities.
The Fund also may invest in municipal leases, variable amount demand
master notes, securities of other investment companies, temporary
investments and certain other investments as well as engage in certain
investment techniques as noted in this prospectus.
MATURITY
The maturity of debt securities may be considered long (10 plus
years), intermediate (3 to 10 years), or short-term (3 years or less).
The proportion invested by the Fund in each category can be expected
to vary depending upon the evaluation of market patterns and trends by
the Adviser. However, the Fund anticipates that, under normal
circumstances, at least 65% of its total assets will be invested in
fixed income securities having maturities of greater than one year.
RATING CHARACTERISTICS
The Fund may buy municipal securities which, at the time of purchase,
are investment grade. For example, investment grade bonds are those
that are rated Aaa, Aa, A, or Baa by Moody's, or AAA, AA, A, or BBB by
S&P or by Fitch. In certain cases, the Adviser may purchase securities
which are unrated if it determines that they are of comparable quality
to the investment grade securities described above. If any security
purchased by the Fund is subsequently downgraded below investment
grade, the Fund is not required to sell or otherwise dispose of the
security, but may consider doing so. It should be noted that bonds
receiving the lowest of the four investment grade ratings listed above
(e.g., Baa or BBB) 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 on such
bonds than higher rated bonds. A description of the rating categories
is contained in the Appendix to the Statement of Additional
Information.
AMT OBLIGATIONS
As noted earlier, the Fund has a policy of investing at least 80% of
its net assets in securities that pay interest exempt from federal
income tax. Interest on certain private activity municipal bonds
issued after August 7, 1986 is a tax preference item for purposes of
computing the federal alternative minimum tax ("AMT"), although
interest on these bonds is not subject to federal income tax. These
bonds are referred to as AMT bonds or AMT obligations. The Fund does
not consider these AMT obligations tax-exempt for purposes of
determining its compliance with this investment policy and the Fund
will, therefore, limit AMT obligations to 20% of net assets under
normal market conditions. The Directors unanimously approved the
removal of this 20% limitation. However, this change cannot be
implemented unless the Fund's shareholders also approve this change,
which cannot be guaranteed. A shareholder meeting to consider this
change is scheduled to be held September 29, 1997. Shareholders
entitled to vote will receive a proxy statement containing information
about this proposal.
TEMPORARY INVESTMENTS
As noted above, under normal circumstances, the Fund invests its
assets so that at least 80% of its net assets are invested in
securities that pay interest exempt from federal income tax and at
least 65% of its total assets are invested in securities the interest
on which is exempt from the personal income taxes imposed by the State
of New York and New York municipalities. From time to time, when the
Adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term non-New York
municipal tax-exempt obligations or taxable temporary investments.
These temporary investments include: obligations issued by or on
behalf of municipal or corporate issuers; obligations issued or
guaranteed by the U.S. government, its agencies, or instrumentalities;
money market instruments; commercial paper; certificates of deposit,
bankers' acceptances or other instruments issued by a U.S. branch of a
domestic bank, or savings and loan association with capital, surplus,
and undivided profits in excess of $1 billion at the time of purchase;
shares of other investment companies; repurchase agreements; and
reverse repurchase agreements. Although the Fund is permitted to make
taxable, temporary investments, there is no current intention of
generating income subject to federal income tax or personal income
taxes imposed by the State of New York or New York municipalities.
INVESTMENT RISKS
Yields on New York municipal securities depend on a variety of
factors, including, but not limited to: the general conditions of the
short-term municipal note market and the municipal bond market; the
size of the particular offering; the maturity of the obligations; and
the rating of the issue. Further, any adverse economic conditions or
developments affecting the State, counties, municipalities or City of
New York could impact the Fund's portfolio. The ability of the Fund to
achieve its investment objective also depends on the continuing
ability of the issuers of New York municipal securities and
participation interests, or the guarantors of either, to meet their
obligations for the payment of interest and principal when due.
Investing in New York municipal securities which meet the Fund's
quality standards may not be possible if the State, counties,
municipalities and City of New York do not maintain their current
credit ratings. An expanded discussion of the current economic risks
associated with the purchase of New York municipal securities is
contained in the Statement of Additional Information.
Vision
Growth and Income Fund
INVESTMENT OBJECTIVE
The investment objective of the Growth and Income Fund (referred to in
this section as the "Fund") is to provide long-term growth of capital
and income.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a
diversified portfolio consisting primarily of equity securities (e.g.,
common stock, convertible securities) and debt securities (e.g.,
bonds, notes). The Adviser will select equity securities to achieve
growth and will select fixed-income, convertible securities and other
interest-paying debt securities to obtain income. However, either
category of equity or debt securities may be purchased for growth of
capital and/or income. The Adviser will invest in companies on the
basis of traditional research techniques, including assessment of the
companies' earnings and dividend growth prospects, sound management
techniques, ability to finance expected growth, and on the basis of a
company's undervaluation relative to other companies in the same
industry. These companies may be categorized as "seasoned" or
"well-established" companies, although companies with less-established
operating histories may be chosen for investment if they have growth
elements and present opportunities for income.
Under normal market conditions, at least 65% of the value of the
Fund's total assets will be invested in equity and debt securities
that are expected to produce growth of capital and/or income. However,
as a matter of operating policy, the Adviser intends to invest at
least 65% of the Fund's total assets in equity securities that are
expected to produce growth of capital and/ or income.
In selecting investments, the Adviser intends to focus on mid-size
(mid-cap) companies that are regarded as "undervalued," although when
consistent with the Fund's investment objective of long-term growth of
capital and income, the Adviser also may invest in large-cap companies
and, to a lesser extent, small-cap companies. Investors should be
aware that since the major portion of the Fund's portfolio will
normally be invested in common stocks, the Fund's net asset value may
be subject to greater fluctuation than a portfolio containing a
substantial amount of fixed income securities. There can be no
assurance that the objective of the Fund will be realized, that any
income will be earned, or that the Fund's portfolio will not decline
in value.
The Adviser will focus on mid-cap companies because they offer the
potential for greater growth than more conservative, large company
stocks, with generally less volatility than more aggressive,
smaller-company stocks. Mid-cap companies are often beyond the new or
emerging phase of their life cycles, yet still are dynamic enough to
be more responsive and adaptive to changing needs than larger-cap
companies. As a result, mid-cap companies can offer greater potential
for growth than larger-cap companies, yet tend to have less risk than
smaller-cap companies because of their greater resources, more
established organizational structures and more experienced management.
The Adviser also will focus on companies that are undervalued. A value
approach seeks companies whose stock prices do not appear to reflect
their underlying value as measured by assets, earnings, cash flow,
business franchises, or other quantitative or qualitative
measurements. Value stocks may be out of favor with or misunderstood
by investors for a variety of reasons, but are considered to have
inherent value or future prospects that are not currently reflected in
their stock price. Accordingly, value stocks may have a lower
price/earnings ratio and a higher dividend yield than competitors, and
thereby offer greater income and growth potential. The Adviser may
also invest in growth stocks because they can offer greater potential
for price appreciation than value stocks due to favorable market
conditions or new products and services. For a description of these
securities and the following list of Acceptable Investments, see the
"Investment Techniques, Features, and Limitations" section.
ACCEPTABLE INVESTMENTS
The securities in which the Fund invests include:
common or preferred stocks of U.S. companies which are either listed on the
New York or American Stock Exchange or traded in the over-the-counter
markets and are considered by the Adviser to have an established market;
convertible securities;
investments in American Depository Receipts ("ADRs") of foreign
companies traded on the New York Stock Exchange or in the
over-the-counter market. The Fund may not invest more than 25% of
its total assets in ADRs. In addition, the Fund may invest up to
20% of its total assets in other securities of foreign issuers
("Non-ADRs");
domestic issues of corporate debt obligations (including
convertible bonds and debentures) rated, at the time of purchase,
investment grade by a nationally recognized statistical rating
organization ("NRSRO") (e.g., Baa or higher by Moody's, or BBB or
higher by S&P or Fitch) or, if unrated, of comparable quality as
determined by the Adviser;
U.S. Government Securities;
securities of other investment companies;
mortgage-backed securities;
asset-backed securities;
money market instruments, including commercial paper that, at the
time of purchase, are rated not less than P-1, A-1 or F-1, by
Moody's, S&P or Fitch, respectively, or, if unrated, are of
comparable quality as determined by the Adviser, time and savings
deposits (including certificates of deposit) in commercial or
savings banks, and bankers' acceptances; and
warrants.
Vision
Capital Appreciation Fund
INVESTMENT OBJECTIVE
The investment objective of the Capital Appreciation Fund (referred to
in this section as the "Fund") is to produce long-term capital
appreciation.
INVESTMENT POLICIES
The Fund pursues its investment objective of long-term capital
appreciation by investing in a diversified portfolio comprised
primarily of common stocks or other securities that have some of the
characteristics of common stocks, such as convertible preferred
stocks, convertible bonds, and warrants. The principal factor in
selecting convertible securities will be the potential opportunity to
benefit from movement in stock price. Current income is a secondary,
non-fundamental investment consideration. The Adviser will generally
select common stocks of well-financed issuers (e.g., issuers that
generate sufficient cash flow to support their growth needs or have
sufficient credit quality to obtain financing to support their growth)
which have demonstrated profitability in the past or have the
potential for profitability in the future, and have been in business a
minimum of three years. It is anticipated that the Fund's portfolio
securities in the aggregate will have an average weighted market
capitalization of $1 billion to $10 billion, which could be considered
the mid- capitalization sector of the market. The Adviser, may,
however, select for purchase common stocks of well-known companies
with individual market capitalizations of over $10 billion, as well as
companies that have individual market capitalizations as low as $250
million, if it believes such common stocks offer particular
opportunities for long-term capital appreciation.
In selecting investments, the Adviser will consider various financial
characteristics of the issuer, including historical sales and net
income, debt/equity and price/earnings ratios and growth rates.
Certain qualitative factors such as product dominance, management
experience, and research and development commitment will be evaluated.
Investors should be aware that since the major portion of the Fund's
portfolio will normally be invested in common stocks, the Fund's net
asset value may be subject to greater fluctuation than a portfolio
containing a substantial amount of fixed income securities. There can
be no assurance that the objective of the Fund will be realized, that
any income will be earned, or that the Fund's portfolio will not
decline in value.
Under normal market conditions, the Fund intends to have at least 75%
of its total assets invested in securities which the Adviser believes
offer opportunity for capital appreciation. For a description of these
securities and the following list of Acceptable Investments, see the
"Investment Techniques, Features, and Limitations" section.
ACCEPTABLE INVESTMENTS
The securities in which the Fund invests include:
common or preferred stocks of U.S. companies which are either
listed on the New York or American Stock Exchange, or other
domestic stock exchange, or traded in the over-the-counter markets
and are considered by the Adviser to have an established market;
convertible securities;
investments in ADRs of foreign companies traded on the New York or
American Stock Exchange, or other domestic stock exchanges, or in
the over-the-counter market. The Fund may not invest more than 25%
of its total assets in ADRs and not more than 5% of its total
assets in foreign securities directly (other than ADRs);
domestic issues of corporate debt obligations (including
convertible bonds and debentures) rated, at the time of purchase,
investment grade by an NRSRO (e.g., Baa or higher by Moody's, or
BBB or higher by S&P or Fitch), or, if unrated, of comparable
quality as determined by the Adviser;
U.S. Government Securities;
securities of other investment companies;
for temporary defensive purposes, the Fund may invest up to 25% of
its total assets in money market instruments, including commercial
paper that, at the time of purchase, are rated not less than P-1,
A-1 or F-1, by Moody's, S&P or Fitch, respectively, or, if unrated,
are of comparable quality as determined by the Adviser, time and
savings deposits (including certificates of deposit) in domestic
and foreign commercial or savings banks, and bankers' acceptances;
and
warrants.
INVESTMENT TECHNIQUES,
FEATURES, AND LIMITATIONS
CONVERTIBLE SECURITIES
The Growth and Income Fund and Capital Appreciation Fund may invest in
convertible securities. The Funds will exchange or convert the
convertible securities held in their respective portfolio into shares
of the underlying common stock when, in the opinion of the Adviser,
the investment characteristics of the underlying common shares will
assist the Fund in achieving its investment objectives. Otherwise the
Funds may hold or trade convertible securities. In selecting
convertible securities for the Funds, the Adviser evaluates the
investment characteristics of the convertible security as a fixed
income instrument, and the investment potential of the underlying
equity security for capital appreciation. In evaluating these matters
with respect to a particular convertible security, the Adviser
considers numerous factors, including the economic and political
outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and
the issuer's management capability and practices.
CORPORATE DEBT OBLIGATIONS
The Funds may invest in corporate debt obligations, including
corporate bonds, notes, and debentures, which may have floating or
fixed rates of interest. These obligations will be rated by an NRSRO
at the time of purchase in the top three rating categories for the
U.S. Government Securities Fund and in the top four rating categories
(investment grade) for the other Funds. If the obligations are
unrated, they will be of comparable quality as determined by the
Adviser. If any security purchased by a Fund is subsequently
downgraded, securities will be evaluated on a case by case basis by
the Adviser. The Adviser will determine whether or not the security
continues to be an acceptable investment. If not, the security will be
sold. The lowest category of investment grade securities (e.g., Baa or
BBB) has speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to pay principal and interest payments on such
obligations than higher rated obligations. A description of the rating
categories is contained in the Appendix to the Statement of Additional
Information.
FIXED RATE CORPORATE DEBT OBLIGATIONS. The Funds may invest in fixed
rate securities, including fixed rate securities with short-term
characteristics. Fixed rate securities with short-term characteristics
are long-term debt obligations, but are treated in the market as
having short maturities because call features of the securities may
make them callable within a short period of time. A fixed rate
security with short-term characteristics would include a fixed income
security priced close to call or redemption price or a fixed income
security approaching maturity, where the expectation of call or
redemption is high.
Fixed rate securities tend to exhibit more price volatility during
times of rising or falling interest rates than securities with
floating rates of interest. This is because floating rate securities,
as described below, behave like short-term instruments in that the
rate of interest they pay is subject to periodic adjustments based on
a designated interest rate index. Fixed rate securities pay a fixed
rate of interest and are more sensitive to fluctuating interest rates.
In periods of rising interest rates, the value of a fixed rate
security is likely to fall. Fixed rate securities with short-term
characteristics are not subject to the same price volatility as fixed
rate securities without such characteristics. Therefore, they behave
more like floating rate securities with respect to price volatility.
FLOATING RATE CORPORATE DEBT OBLIGATIONS. The Funds may invest in
floating rate corporate debt obligations, including increasing rate
securities. Floating rate securities are generally offered at an
initial interest rate which is at or above prevailing market rates.
The interest rate paid on these securities is then reset periodically
(commonly every 90 days) to an increment over some predetermined
interest rate index. Commonly utilized indices include the three-month
Treasury bill rate, the 180-day Treasury bill rate, the one-month or
three-month London Interbank Offered Rate (LIBOR), the prime rate of a
bank, the commercial paper rates, or the longer-term rates on U.S.
Treasury securities.
VARIABLE RATE DEMAND NOTES
All of the Funds except Capital Appreciation Fund may purchase
variable rate demand notes, which are long-term corporate debt
instruments that have variable or floating interest rates and provide
the Funds with the right to tender the security for repurchase at its
stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Many
variable rate demand notes allow the Funds to demand the repurchase of
the security on not more than seven days' prior notice. Other notes
only permit the Funds to tender the security at the time of each
interest rate adjustment or at other fixed intervals.
ZERO COUPON BONDS
The U.S. Government Securities Fund, New York Tax-Free Fund, and
Growth and Income Fund may invest in zero coupon bonds, which are debt
securities issued at a discount to their face amount and do not
entitle the holder to any periodic payments of interest prior to
maturity.
U.S. GOVERNMENT SECURITIES
The Funds may invest in U.S. government securities which include:
direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes,
and bonds;
notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;
notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
notes, bonds, and discount notes of other U.S. government instrumentalities
supported by the credit of the instrumentalities.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:
the issuer's right to borrow an amount limited to a specific line of credit
from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
the credit of the agency or instrumentality.
MORTGAGE-BACKED SECURITIES
The U.S. Government Securities Fund and Growth and Income Fund may
invest in mortgage-backed securities which are securities that
directly or indirectly represent a participation in, or are secured by
and payable from, mortgage loans on real property. There are currently
three basic types of mortgage-backed securities that the Fund may
purchase: (i) those issued or guaranteed by the U.S. government or one
of its agencies or instrumentalities, such as Government National
Mortgage Association ("Ginnie Mae"), Federal National Mortgage
Association ("Fannie Mae"), and Federal Home Loan Mortgage Corporation
("Freddie Mac"); (ii) those issued by private issuers that represent
an interest in or are collateralized by mortgage-backed securities
issued or guaranteed by the U.S. government or one of its agencies or
instrumentalities; and (iii) those issued by private issuers that
represent an interest in or are collateralized by whole loans or
mortgage-backed securities without a government guarantee but usually
having some form of private credit enhancement. The U.S. Government
Securities Fund may also purchase privately issued securities which
are collateralized by pools of mortgages in which each mortgage is
guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government.
The privately issued mortgage-backed securities provide for a periodic
payment consisting of both interest and/or principal. The interest
portion of these payments will be distributed by the Funds as income,
and the capital portion will be reinvested. See "Asset-Backed
Securities" below for a description of risks.
ADJUSTABLE RATE MORTGAGE SECURITIES ("ARMS"). ARMS are pass-through
mortgage securities representing interests in adjustable rather than
fixed interest rate mortgages. The ARMS in which the U.S. Government
Securities Fund and Growth and Income Fund invest are issued by Ginnie
Mae, Fannie Mae, or Freddie Mac, and are actively traded. The
underlying mortgages which collateralize ARMS issued by Ginnie Mae are
fully guaranteed by the Federal Housing Administration or Veterans
Administration, while those collateralizing ARMS issued by Fannie Mae
or Freddie Mac are typically conventional residential mortgages
conforming to strict underwriting size and maturity constraints. ARMS
may also be collateralized by whole loans or private pass-through
securities.
Unlike conventional bonds, ARMS pay back principal over the life of
the ARMS rather than at maturity. Thus a holder of the ARMS, such as
the Funds, would receive monthly scheduled payments of principal
and/or interest and may receive unscheduled principal payments
representing payments on the underlying mortgages. At the time that a
holder of the ARMS reinvests the payments and any unscheduled
prepayments of principal that it receives, the holder may receive a
rate of interest which is actually lower than the rate of interest
paid on the existing ARMS. As a consequence, ARMS may be a less
effective means of "locking in" long-term interest rates than other
types of fixed-income securities.
Not unlike other fixed-income securities, the market value of ARMS
will generally vary inversely with changes in market interest rates.
Thus, the market value of ARMS generally declines when interest rates
rise and generally rises when interest rates decline.
While ARMS generally entail less risk of a decline during periods of
rapidly rising rates, ARMS may also have less potential for capital
appreciation than other similar investments (e.g., investments with
comparable maturities) because, as interest rates decline, the
likelihood increases that mortgages will be prepaid.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by Ginnie Mae, Fannie
Mae or Freddie Mac certificates, but may be collateralized by whole
loans or private pass-through securities.
The U.S. Government Securities Fund and Growth and Income Fund will
only invest in CMOs which, at the time of purchase, are rated AAA by
an NRSRO or are of comparable quality as determined by the Adviser,
and which may be: (i) collateralized by pools of mortgages in which
each mortgage is guaranteed as to payment of principal and interest by
an agency or instrumentality of the U.S. government; (ii)
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is
collateralized by U.S. government securities; or (iii) collateralized
by pools of mortgages without a U.S. government guarantee as to
payment of principal and interest, but which have some form of credit
enhancement.
REAL ESTATE MORTGAGE INVESTMENT CONDUITS ("REMICS"). The U.S.
Government Securities Fund and Growth and Income Fund may invest in
REMICs. REMICs are offerings of multiple class real estate
mortgage-backed securities which qualify and elect treatment as such
under provisions of the Internal Revenue Code. Issuers of REMICs may
take several forms, such as trusts, partnerships, corporations,
associations, or segregated pools of mortgages. Once REMIC status is
elected and obtained, the entity is not subject to federal income
taxation. Instead, income is passed through the entity and is taxed to
the person or persons who hold interests in the REMIC. A REMIC
interest must consist of one or more classes of "regular interest." To
qualify as a REMIC, substantially all the assets of the entity must be
in assets directly or indirectly secured principally by real property.
The mortgage-related securities provide for a periodic payment
consisting of both interest and principal. The interest portion of
these payments will be distributed by the Funds as income, and the
capital portion will be reinvested.
RISKS OF MORTGAGE-BACKED SECURITIES. Mortgage-backed securities
(including ARMS, CMOs, and REMICs) and asset-backed securities
(described below) generally pay back principal and interest over the
life of the security. At the time the Funds reinvest the payments and
any unscheduled prepayments of principal received, the Funds may
receive a rate of interest which is actually lower than the rate of
interest paid on these securities ("prepayment risks").
Mortgage-backed and asset-backed securities are subject to higher
prepayment risks than most other types of debt instruments with
prepayment risks because the underlying mortgage loans or the
collateral supporting asset-backed securities may be prepaid without
penalty or premium. Prepayment risks on mortgage-backed securities
tend to increase during periods of declining mortgage interest rates
because many borrowers refinance their mortgages to take advantage of
the more favorable rates. Prepayments on mortgage-backed securities
are also affected by other factors, such as the frequency with which
people sell their homes or elect to make unscheduled payments on their
mortgages. Although asset-backed securities generally are less likely
to experience substantial prepayments than are mortgage-backed
securities, certain of the factors that affect the rate of prepayments
on mortgage-backed securities also affect the rate of prepayments on
asset-backed securities. Furthermore, if mortgage-backed securities
are purchased at a premium, mortgage foreclosures and unscheduled
principal payments may result in some loss of a holder's principal
investment to the extent of the premium paid. Conversely, if
mortgage-backed securities are purchased at a discount, both a
scheduled payment of principal and an unscheduled prepayment of
principal would increase current and total returns and would
accelerate the recognition of income, which would be taxed as ordinary
income when distributed to shareholders.
ASSET-BACKED SECURITIES
The U.S. Government Securities Fund and Growth and Income Fund may
invest in asset-backed securities which have structural
characteristics similar to mortgage-backed securities but have
underlying assets that are not mortgage loans or interests in mortgage
loans. The U.S. Government Securities Fund may invest in asset-backed
securities which, at the time of purchase, are rated in the top three
rating categories by an NRSRO, and the Growth and Income Fund may
invest in asset-backed securities which, at the time of purchase, are
rated in the top four rating categories (investment grade) by an
NRSRO, including, but not limited to, interests in pools of
receivables, such as motor vehicle installment purchase obligations
and credit card receivables. These securities may be in the form of
pass-through instruments or asset-backed bonds. The securities are
issued by non-governmental entities and carry no direct or indirect
government guarantee.
RISKS OF ASSET-BACKED SECURITIES. Asset-backed securities present
certain risks that are not presented by mortgage-backed securities.
Primarily, these securities do not have the benefit of the same
security interest in the related collateral. Credit card receivables
are generally unsecured and the debtors are entitled to the protection
of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by motor vehicle installment purchase
obligations permit the servicer of such receivables to retain
possession of the underlying obligations. If the servicer sells these
obligations to another party there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related
asset-backed securities. Further, if a vehicle is registered in one
state and is then reregistered because the owner and obligor moves to
another state, such reregistration could defeat the original security
interest in the vehicle in certain cases. In addition, because of the
large number of vehicles involved in a typical issuance and technical
requirements under state laws, the trustee for the holders of
asset-backed securities backed by automobile receivables may not have
a proper security interest in all of the obligations backing such
receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.
MUNICIPAL SECURITIES
The U.S. Government Securities Fund may invest in taxable municipal
securities and the New York Tax-Free Fund will purchase New York
municipal securities. Both types of municipal securities are generally
issued to finance public works such as airports, bridges, highways,
housing, hospitals, mass transportation projects, schools, streets,
and water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Municipal securities include industrial development bonds issued by or
on behalf of public authorities to provide financing aid to acquire
sites or construct and equip facilities for privately or publicly
owned corporations. The availability of this financing encourages
these corporations to locate within the sponsoring communities and
thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power
for the payment of principal and interest. Interest on and principal
of revenue bonds, however, are payable only from the revenue generated
by the facility financed by the bond or other specified sources of
revenue. Revenue bonds do not represent a pledge of credit or create
any debt of or charge against the general revenues of a municipality
or public authority. Industrial development bonds are typically
classified as revenue bonds.
Yields on taxable municipal securities depend on a variety of factors,
including: the general conditions of the short-term municipal note
market and of the municipal bond market; the size of the particular
offering; the maturity of the obligations; and the rating of the
issue. The ability of the Funds to achieve their respective investment
objectives also may depend on the continuing ability of the issuers of
municipal securities and demand features, or the credit enhancers of
either, to meet their obligations for the payment of interest and
principal when due.
MORAL OBLIGATION BONDS. Moral obligation bonds are normally issued by
special purpose authorities. If an issuer of a moral obligation bond
is unable to meet its interest and principal payments from current
revenues, it may draw on a reserve fund. The state or municipality
that created the issuer has given a moral pledge to appropriate funds
to replenish the reserve fund. But that pledge is only a moral
commitment, not a legal obligation of the state or municipality.
PARTICIPATION INTERESTS. The New York Tax-Free Fund may purchase
participation interests from financial institutions such as commercial
banks, savings and loan associations, and insurance companies. These
participation interests give the Fund an undivided interest in New
York municipal securities. The financial institutions from which the
Fund purchases participation interests frequently provide or secure
irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Directors of the
Corporation or, pursuant to delegated authority, the Adviser, will
determine whether participation interests meet the prescribed quality
standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the municipal securities
which the New York Tax-Free Fund purchases may have variable interest
rates. Variable interest rates are ordinarily based on a published
interest rate, interest rate index or a similar standard, such as the
91-day U.S. Treasury bill rate. Many variable rate municipal
securities are subject to payment of principal on demand by the Fund
in not more than seven days. All variable rate municipal securities
will meet the quality standards described above. The Adviser has been
instructed by the Corporation's Directors to monitor the pricing,
quality, and liquidity of the variable rate municipal securities,
including participation interests held by the Fund, on the basis of
published financial information and reports of the rating agencies and
other analytical services.
MUNICIPAL LEASES. The New York Tax-Free Fund may purchase municipal
leases, which are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities
and, in some cases, may be illiquid. They may take the form of a
lease, an installment purchase contract, a conditional sales contract
or a participation certificate on any of the above.
VARIABLE AMOUNT DEMAND MASTER NOTES. The New York Tax-Free Fund is
able to purchase variable amount demand master notes. Variable amount
demand master notes represent a borrowing arrangement between an
issuer (borrower) and an institutional lender such as the Fund
(lender). These notes are payable upon demand. The lender typically
has the right to increase the amount under the note at any time up to
the full amount provided by the note agreement. Both the lender and
the borrower have the right to reduce the amount of outstanding
indebtedness at any time. In some instances, however, the lender and
the borrower may agree that the amount of outstanding indebtedness
remain fixed. Variable amount demand master notes provide that the
interest rate on the amount outstanding varies depending upon a stated
short-term interest rate index.
MUNICIPAL BOND INSURANCE. The New York Tax-Free Fund may purchase
municipal securities covered by insurance which guarantees the timely
payment of principal at maturity and interest on such securities.
These insured municipal securities are either (1) covered by an
insurance policy applicable to a particular security, whether obtained
by the issuer of the security or by a third party ("Issuer-Obtained
Insurance") or (2) insured under master insurance policies issued by
municipal bond insurers, which may be purchased by the Fund (the
"Policies").
The Fund will obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also obtain municipal bond insurance when, in
the opinion of the Adviser, such insurance would benefit the Fund, for
example, through improvement of portfolio quality or increased
liquidity of certain securities. The Adviser anticipates that not more
than 50% of the Fund's net assets will be invested in municipal
securities which are insured.
Issuer-Obtained Insurance Policies are noncancellable and continue in
force as long as the municipal securities are outstanding and their
respective insurers remain in business. If a municipal security is
covered by Issuer-Obtained Insurance, then such security need not be
insured by the Policies purchased by the Fund.
The Fund may purchase two types of Policies issued by municipal bond
insurers. One type of Policy covers certain municipal securities only
during the period in which they are in the Fund's portfolio. In the
event that a municipal security covered by such a Policy is sold from
the Fund, the insurer of the relevant Policy will be liable only for
those payments of interest and principal which are then due and owing
at the time of sale.
The other type of Policy covers municipal securities not only while
they remain in the Fund's portfolio but also until their final
maturity even if they are sold out of the Fund's portfolio, so that
the coverage may benefit all subsequent holders of those municipal
securities. The Fund will obtain insurance which covers municipal
securities until final maturity even after they are sold out of the
Fund's portfolio only if, in the judgment of the Adviser, the Fund
would expect to receive net proceeds from the sale of those
securities, after deducting the cost of such permanent insurance and
related fees, significantly in excess of the proceeds it would expect
to receive if such municipal securities were sold without insurance.
Payments received from municipal bond insurers may not be tax-exempt
income to shareholders of the Fund.
SECURITIES OF FOREIGN ISSUERS
The Growth and Income Fund and Capital Appreciation Fund may invest in
U.S. dollar-denominated and foreign currency denominated securities of
foreign issuers. There may be certain risks associated with investing
in foreign securities. These include risks of adverse political and
economic developments (including possible governmental seizure or
nationalization of assets), the possible imposition of exchange
controls or other governmental restrictions, currency fluctuations,
less uniformity in accounting and reporting requirements, higher
transaction costs and the possibility that there will be less
information on such securities and their issuers available to the
public. In addition, there are restrictions on foreign investments in
other jurisdictions and there tends to be difficulty in obtaining
judgments from abroad and affecting repatriation of capital invested
abroad. Delays could occur in settlement of foreign transactions,
which could adversely affect shareholder equity. Foreign securities
may be subject to foreign taxes, which reduce yield, and may be less
marketable than comparable United States securities. To the extent
that securities purchased by the Funds are denominated in currencies
other than the U.S. dollar, changes in foreign currency exchange rates
will affect a Fund's net asset value; the value of any interest
earned, gains and losses realized on the sale of securities; and net
investment income and capital gain, if any, to be distributed to
shareholders by a Fund. If the value of a foreign currency rises
against the U.S. dollar, the value of a Fund's assets denominated in
that currency will increase; correspondingly, if the value of a
foreign currency declines against the U.S. dollar, the value of a
Fund's assets in that currency will decrease. As a matter of practice,
the Funds will not invest in the securities of a foreign issuer if any
risk identified above appears to be substantial to the Adviser.
REPURCHASE AGREEMENTS
Each of the Funds may engage in repurchase agreements, which are
arrangements in which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities or other high
quality, liquid securities to the Funds and agree at the time of sale
to repurchase them at a mutually agreed upon time and price. To the
extent that the original seller does not repurchase the securities
from a Fund, the Fund could receive less than the repurchase price on
any sale of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
Each of the Funds may purchase securities on a when-issued or delayed
delivery basis. These transactions are arrangements in which a Fund
purchases securities with payment and delivery scheduled for a future
time. The seller's failure to complete these transactions may cause a
Fund to miss a price or yield considered to be advantageous.
Settlement dates may be a month or more after entering into these
transactions, and the market values of the securities purchased may
vary from the purchase prices.
The Funds may dispose of a commitment prior to settlement if the
Adviser deems it appropriate to do so. In addition, the Funds may
enter into transactions to sell its purchase commitments to third
parties at current market values and simultaneously acquire other
commitments to purchase similar securities at later dates. The Funds
may realize short-term profits or losses upon the sale of such
commitments.
ILLIQUID AND RESTRICTED SECURITIES
Each of the Funds may invest up to 15% of its net assets in illiquid
securities, which may include restricted securities. Restricted
securities are any securities in which a Fund may otherwise invest
pursuant to its investment objectives and policies, but which are
subject to restriction on resale under federal securities laws. To the
extent these securities are deemed to be illiquid, a Fund will limit
its purchases, together with other securities not determined by the
Directors to be liquid, to 15% of its net assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Each of the Funds may invest in the securities of other investment
companies. Generally, a Fund will limit its investment in other
investment companies to not more than 3% of the total outstanding
voting stock of any investment company, will invest no more than 5% of
its total assets in any one investment company, and will invest no
more than 10% of its total assets in investment companies in general,
unless permitted to exceed these limitations by an exemptive order of
the SEC or otherwise permitted by the Investment Company Act of 1940.
It should be noted that investment companies incur certain expenses
such as advisory, custodian and transfer agency fees and, therefore,
any investment by a Fund in shares of another investment company would
be subject to such duplicate expenses.
LENDING OF PORTFOLIO SECURITIES
In order to generate additional income, each of the Funds may lend
portfolio securities on a short-term or long-term basis or both up to
one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. The Funds will only
enter into loan arrangements with broker/dealers, banks, or other
institutions which the Adviser has determined are creditworthy under
guidelines established by the Directors and will receive collateral in
the form of cash, U.S. government securities or other liquid
securities equal to at least 100% of the value of the securities
loaned.
There is the risk that, when lending portfolio securities, the
securities may not be available to a Fund on a timely basis and a Fund
may, therefore, lose the opportunity to sell the securities at a
desirable price. In addition, in the event that a borrower of
securities would file for bankruptcy or become insolvent, disposition
of the securities may be delayed pending court action.
REVERSE REPURCHASE AGREEMENTS
Each of the Funds may also enter into reverse repurchase agreements.
This transaction is similar to borrowing cash.
DIVERSIFICATION
Each of the Funds except the New York Tax-Free Fund is a "diversified"
investment company. Under the Investment Company Act of 1940 and
Internal Revenue Code of 1986, this means that with respect to 75% of
its total assets, a diversified fund may not invest more than 5% of
its total assets in the securities of any one issuer (except U.S.
government obligations). The balance of a diversified fund's assets is
not subject to this limitation. However, a diversified fund may invest
up to 25% of its total assets in the securities of any one issuer.
The New York Tax-Free Fund is a "non-diversified" investment company
under the Investment Company Act of 1940 and intends to qualify as a
regulated investment company under the Internal Revenue Code of 1986.
In order to do so, with respect to 50% of its total assets, the Fund
may not invest more than 5% of its total assets in the securities of
any one issuer (except U.S. government obligations). The balance of
the Fund's assets is not subject to this limitation. However, under
the Internal Revenue Code of 1986, as amended, a regulated investment
company at the close of each quarter of the taxable year may not hold
more than 25% of its assets in securities of any one issuer (other
than U.S. government securities or the securities of other regulated
investment companies). Thus, the New York Tax-Free Fund may invest up
to 25% of its total assets in the securities of any two issuers. An
investment in the Fund, therefore, will entail greater risk than would
exist in a diversified portfolio of securities because the higher
percentage of investments among fewer issuers may result in greater
fluctuation in the total market values of the Fund's portfolio. Any
economic, political, or regulatory developments affecting the value of
the securities in the Fund's portfolio will have a greater impact on
the total value of the portfolio than would be the case if the
portfolio were diversified among more issuers.
SHORT SALES
The Funds may sell securities short from time to time, subject to
certain restrictions. A short sale occurs when a security which a Fund
does not own is sold in anticipation of a decline in its price. If the
decline occurs, shares equal in number to those sold short can be
purchased at the lower price. If the price increases, the higher price
must be paid. The purchased shares are then returned to the original
lender. Risk arises because no loss limit can be placed on the
transaction. When a Fund enters into a short sale, assets that are
equal to the market price of the securities sold short or any lesser
price at which the Fund can obtain such securities, are segregated on
the Fund's records and maintained until the Fund meets its obligations
under the short sale.
No Fund will sell securities short unless (1) it owns, or has a right
to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other liquid assets equal to the lesser of
the market value of the securities sold short or the amount required
to acquire such securities. While in a short position, the Fund will
retain the securities, rights, or segregated assets.
PUT AND CALL OPTIONS
Each of the Funds may purchase put options on its portfolio
securities. These options will be used as a hedge to attempt to
protect securities which the Fund holds against fluctuations in value.
Each of the Funds may also write put and call options on all or any
portion of its portfolio securities to generate income. A Fund will
write put and call options on securities either held in its portfolio
or which it has the right to obtain without payment of further
consideration or which it has segregated cash in the amount of any
additional consideration. Each of the Funds also may purchase call
options on securities to protect against price movements in particular
securities which a Fund intends to purchase. A call option gives a
Fund, in return for a premium, the right (but not the obligation) to
buy the underlying security from the seller at a pre-determined price.
A Fund may generally purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the buyers or
writers of the options since options on certain portfolio securities
held by a Fund are not traded on an exchange. A Fund purchases and
writes options only with investment dealers and other financial
institutions (such as commercial banks or broker/dealers) deemed
creditworthy by the Adviser.
Over-the-counter options are two-party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded
options are third party contracts with standardized strike prices and
expiration dates and are purchased from a clearing corporation.
Exchange-traded options have a continuous liquid market while
over-the-counter options may not.
If a Fund does not exercise an option it has purchased, then the Fund
loses in value the price it paid for the option premium. If the Fund
writes (sells) an option which is subsequently exercised, the premium
received by the Fund from the option purchaser may not exceed the
increase (in the case of a call option) or decrease (in the case of a
put option ) in the value of the securities underlying the option, in
which case the difference represents a loss for the Fund. However, if
the option expires without being exercised, the Fund realizes a gain
in the amount of the premium it received.
FUTURES AND OPTIONS ON FUTURES
Each of the Funds may purchase and sell financial futures, and the
Growth and Income Fund and Capital Appreciation Fund may purchase and
sell stock index futures contracts to attempt to hedge all or a
portion of its portfolio against changes in interest rates or economic
market conditions. Financial futures contracts generally require the
delivery of particular debt instruments at a certain time in the
future. The seller of the contract agrees to make delivery of the type
of instrument called for in the contract, and the buyer agrees to take
delivery of the instrument at the specified future time. Stock index
futures contracts generally involve cash settlement rather than
delivery of the stocks comprising the index.
Each of the Funds may also write call options and purchase put options
on financial or stock index futures contracts (as permitted) as a
hedge to attempt to protect securities in its portfolio against
decreases in value. When a Fund writes a call option on a futures
contract, it is undertaking the obligation of selling a futures
contract at a fixed price at any time during a specified period if the
option is exercised. Conversely, as purchaser of a put option on a
futures contract, a Fund is entitled (but not obligated) to sell a
futures contract at the fixed price during the life of the option.
Generally, a Fund may not purchase or sell futures contracts or
related options for other than bona fide hedging purposes, if
immediately thereafter the sum of the amount of margin deposits on the
Fund's existing futures positions and premiums paid for related
options would exceed 5% of the market value of the Fund's total
assets, after taking into account the unrealized profits and losses on
those contracts it has entered into; and, provided further, that in
the case of an option that is in-the-money at the time of purchase,
the in-the-money amount may be excluded in computing such 5%. When a
Fund purchases futures contracts, an amount of cash and cash
equivalents equal to the underlying commodity value of the futures
contracts (less any related margin deposits) will be deposited in a
segregated account with the Fund's custodian (or the broker, if
legally permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged.
RISKS OF FUTURES AND OPTIONS. When a Fund uses futures and options on
futures as hedging devices, there is a risk that the prices of the
securities subject to the futures contracts may not correlate with the
prices of the securities in the Fund's portfolio. This may cause the
futures contract and any related options to react differently than the
portfolio securities to market changes. In addition, the Adviser could
be incorrect in its expectations about the direction or extent of
market factors such as interest rate movements. In these events, the
Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in futures
contracts or for options will exist at all times. Although the Adviser
will consider liquidity before entering into options transactions,
there is no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or option at
any particular time. A Fund's ability to establish and close out
futures and options positions depends on this secondary market.
WARRANTS
Each of the Growth and Income Fund and Capital Appreciation Fund may
purchase warrants, but has no present intent to invest more than 5% of
its net assets in warrants.
DEBT RISKS
In the debt market, prices move inversely to interest rates. A decline
in market interest rates results in a rise in the market prices of
outstanding debt obligations. Conversely, an increase in market
interest rates results in a decline in market prices of outstanding
debt obligations. In either case, the amount of change in market
prices of debt obligations in response to changes in market interest
rates generally depends on the maturity of the debt obligations: the
debt obligations with the longest maturities will experience the
greatest market price changes.
The market value of debt obligations, and therefore a Fund's net asset
value, will fluctuate due to changes in economic conditions and other
market factors such as interest rates which are beyond the control of
the Adviser. The Adviser could be incorrect in its expectations about
the direction or extent of these market factors. Although debt
obligations with longer maturities offer potentially greater returns,
they have greater exposure to market price fluctuation. Consequently,
to the extent a Fund is significantly invested in debt obligations
with longer maturities, there is a greater possibility of fluctuation
in the Fund's net asset value. However, the Adviser will attempt to
minimize the fluctuation of the Fund's net asset value by anticipating
the direction of interest rates and modifying investments accordingly.
EQUITY RISKS
As with other mutual funds that invest in equity securities, the
Growth and Income Fund and Capital Appreciation Fund are subject to
market risks. That is, the possibility exists that common stocks will
decline over short or even extended periods of time, and the United
States equity market tends to be cyclical, experiencing both periods
when stock prices generally increase and periods when stock prices
generally decrease.
Because the Growth and Income Fund and Capital Appreciation Fund may
invest in small-to-medium capitalization stocks, there are some
additional risk factors associated with investments in the Funds. In
particular, although their potential for growth may be greater, stocks
in the small-to-medium capitalization sector of the United States
equity market tend to be slightly more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's
500 Index ("S&P 500 Index"). This is because, among other things,
small-to-medium-sized companies have less certain growth prospects
than larger companies, have a lower degree of liquidity in the equity
market, and tend to have a greater sensitivity to changing market
conditions. Further, in addition to exhibiting slightly higher
volatility, the stocks of small-to-medium-sized companies may, to some
degree though not necessarily, fluctuate independently of the stocks
of larger companies. That is, the stocks of small-to-medium-sized
companies may decline in price as the price of large company stocks
rises or vice versa. Therefore, the Funds could be slightly more
volatile than, and may fluctuate independently of, broad stock market
indices such as the S&P 500 Index.
PORTFOLIO TURNOVER
Although none of the Funds intends to invest for the purpose of
seeking short-term profits, securities will be sold whenever the
Funds' Adviser believes it is appropriate to do so in light of a
Fund's investment objective, without regard to the length of time a
particular security may have been held. A higher rate of portfolio
turnover involves correspondingly greater transaction expenses which
must be borne directly by a Fund and, thus, indirectly by its
shareholders. In addition, a high rate of portfolio turnover may
result in the realization of larger amounts of capital gains which,
when distributed to a Fund's shareholders, are taxable to them.
Nevertheless, transactions for a Fund's portfolio will be based upon
investment considerations and will not be limited by any other
considerations when the Adviser deems it appropriate to make changes
to a Fund's portfolio.
INVESTMENT LIMITATIONS
All of the Funds have the following common investment limitation. The
Funds will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which a Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a
set date) or pledge securities except, under certain circumstances,
a Fund may borrow up to one-third of the value of its total assets
and pledge up to 15% of the value of its total assets to secure
such borrowings.
The U.S. Government Securities Fund, Growth and Income Fund, and Capital
Appreciation Fund will not:
with respect to 75% of the value of that Fund's total assets,
invest more than 5% of its total assets in securities of one issuer
other than cash, cash items, or securities issued or guaranteed by
the government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities, or acquire more than 10% of the voting securities of
any one issuer.
The above investment limitations cannot be changed without shareholder
approval.
FUND MANAGEMENT,
DISTRIBUTION AND
ADMINISTRATION
BOARD OF DIRECTORS
THE FUNDS ARE MANAGED BY A BOARD OF DIRECTORS
The Directors are responsible for managing the business affairs of the
Funds and for exercising all the Funds' powers, except those reserved
for the shareholders.
INVESTMENT ADVISER
INVESTMENT DECISIONS FOR THE FUNDS ARE MADE BY M&T BANK, SUBJECT TO
THE DIRECTION BY THE DIRECTORS.
The Adviser continually conducts investment research and supervision
for the Funds and is responsible for all purchases and sales of
portfolio instruments. The Adviser receives an annual fee from each of
the Funds for its services.
Both the Corporation and the Adviser have adopted strict codes of
ethics governing the conduct of all employees who manage the Funds and
their portfolio securities. These codes recognize that such persons
owe a fiduciary duty to the Funds' shareholders and must place the
interests of shareholders ahead of the employees' own interest. Among
other things, the codes: require preclearance and periodic reporting
of personal securities transactions; prohibit personal transactions in
securities being purchased or sold, or being considered for purchase
or sale, by the Funds; prohibit purchasing securities in initial
public offerings; and prohibit taking profits on securities held for
less than sixty days. Violations of the codes are subject to review by
the Directors, and could result in severe penalties.
ADVISORY FEES
For the services M&T Bank provides and the expenses it assumes as
investment adviser, M&T Bank is entitled to receive a fee equal to a
percentage of each Fund's average daily net assets as follows: 0.70%
for the U.S. Government Securities Fund, New York Tax-Free Fund, and
Growth and Income Fund; and 0.85% for the Capital Appreciation Fund.
These fees are computed daily and paid monthly. M&T Bank has agreed to
pay all expenses it incurs in connection with its advisory activities,
other than the cost of securities (including any brokerage
commissions) purchased for a Fund. From time to time, M&T Bank may
voluntarily waive all or a portion of its advisory fees in order to
help a Fund maintain a competitive expense ratio.
ADVISER'S BACKGROUND
M&T Bank is the principal banking subsidiary of First Empire State
Corporation, a $13 billion bank holding company, as of December 31,
1996, headquartered in Buffalo, New York. M&T Bank has 174 offices
throughout New York State and an office in Nassau, The Bahamas as of
May 31, 1997.
M&T Bank was founded in 1856 and provides comprehensive banking and
financial services to individuals, governmental entities and
businesses throughout New York State. The Funds' investments are
managed through the Trust & Investment Services Division of M&T Bank.
As of December 31, 1996, M&T Bank had $3.1 billion in assets under
management for which it has investment discretion (which includes
employee benefits, personal trusts, estates, agencies and other
accounts). M&T Bank has served as investment adviser to various funds
of the Corporation since 1988. As of December 31, 1996, M&T Bank
managed over $1.2 billion in net assets of the Corporation's money
market funds. As part of its regular banking operations, M&T Bank may
make loans to public companies. Thus, it may be possible, from time to
time, for the Funds to hold or acquire the securities of issuers which
are also lending clients of M&T Bank. The lending relationship will
not be a factor in the selection of securities.
PORTFOLIO MANAGEMENT TEAM
The U.S. Government Securities Fund and New York Tax-Free Fund is managed by
Thomas R. Pierce. Mr. Pierce has been the Funds' portfolio manager since March
1995. Mr. Pierce joined M&T Bank in January 1995 as Vice President from Merit
Investment Advisors where he acted as Director of Fixed Income Product and
Trading since 1993. For the period from 1987 to 1993, Mr. Pierce served as Fixed
Income Manager at ANB Investment Management Company, where he directed the
management of $3.5 billion of active and passive fixed income portfolios. Mr.
Pierce holds and a B.A. in Economics from Washington University, and is an
M.B.A. candidate at the University of Chicago.
Robert J. Truesdell served as the portfolio manager for the U.S. Government
Securities Fund and New York Tax-Free Fund from August 1994 through February
1995. Since the inception of the Funds, Mr. Truesdell was also responsible for
overseeing the Funds' investment management, and has supervised the Funds'
investment decisions. Mr. Truesdell oversees investment activities of M&T Bank's
money market and fixed income products, and the money market funds in the Vision
Group of Funds, Inc. Mr. Truesdell joined M&T Bank as Vice President and Fixed
Income Manager in 1988. In addition to the Vision money market funds, he also
manages individual investment management accounts. Mr. Truesdell holds an M.B.A.
in accounting from S.U.N.Y. at Buffalo.
The Growth and Income Fund is co-managed by John F. Moore and Nicholas A.
Celentano. Mr. Moore joined M&T Bank in October 1995 as Senior Vice President
and Chief Investment Officer. His 19 years of investment experience most
recently includes five years (1991-1995) with Value Line Asset Management in New
York, where he most recently was the Director of Asset Management and Senior
Portfolio Manager. Mr. Moore obtained his B.A. and M.B.A. from the University of
North Carolina.
Mr. Celantano joined M&T Bank in July 1996. Prior to this time, he served as an
Analyst with Oppenheimer Capital from 1994 to 1995. From 1993 to 1994, he served
as a Senior Associate with Donaldson, Lufkin & Jennrette Securities Corp. and
from 1991 to 1993 he worked in Client Services at J & W Seligman & Co.
The Capital Appreciation Fund has been managed since its inception by John
Moore, assisted by William Mlynarick. Mr. Moore joined M&T Bank in October 1995
as Senior Vice President and Chief Investment Officer. His 19 years of
investment experience most recently includes five years (1991-1995) with Value
Line Asset Management in New York, where he most recently was the Director of
Asset Management and Senior Portfolio Manager. Mr. Moore obtained his B.A. and
M.B.A. from the University of North Carolina.
Mr. Mlynarick came to M&T Bank in June 1996 after two years
(1994-1996) as an Equity Analyst at Value Line Asset Management in New
York. He holds degrees in Finance and Business Law from Temple
University, and has assisted in The Fund's management since June 1996.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, M&T Bank looks for prompt execution of the
order at a favorable price. In working with dealers, M&T Bank will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. In selecting among firms believed to meet these
criteria, M&T Bank may give consideration to those firms which have
sold or are selling shares of the Funds and other funds distributed by
Federated Securities Corp. M&T Bank makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the
Directors and M&T Bank.
DISTRIBUTION OF FUND SHARES
FEDERATED SECURITIES CORP. IS THE PRINCIPAL
DISTRIBUTOR FOR SHARES OF THE FUNDS.
Shares of the Funds are sold on a continuous basis by Federated Securities
Corp. It is a Pennsylvania corporation organized on November 14, 1969, and is
also the principal distributor for a number of other investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors, Pittsburgh,
Pennsylvania.
DISTRIBUTION PLAN
Under a distribution plan (referred to as the "Plan") adopted in
accordance with Rule 12b-1 promulgated under the Investment Company
Act of 1940, the Funds may pay to the distributor an amount computed
at an annual rate of 0.25% of each of the Fund's average daily net
assets to finance any activity which is principally intended to result
in the sale of shares subject to the Plan. The distributor may from
time to time and for such periods as it deems appropriate, voluntarily
reduce its 12b-1 compensation under the Plan to the extent the
expenses attributable to shares of the Funds exceed such lower expense
limitation as the distributor may, by notice to the Corporation,
voluntarily declare to be effective. The Funds have no present
intention of paying or accruing 12b-1 fees during the fiscal year
ending April 30, 1998.
Financial institutions will receive fees from the distributor based
upon shares owned by their clients or customers. The schedules of such
fees and the basis upon which such fees will be paid will be
determined from time to time by the distributor.
The Funds' Plan is a compensation type plan. As such, the Funds make
no payments to the distributor except as described above. Therefore,
the Funds do not pay for unreimbursed expenses of the distributor,
including amounts expended by the distributor in excess of amounts
received by it from the Funds, interest, carrying or other financing
charges in connection with excess amounts expended, or the
distributor's overhead expenses. However, the distributor may be able
to recover such amounts or may earn a profit from future payments made
by the Funds under the Plan.
The distributor may select certain entities to provide sales and/or
administrative services as agents for holders of shares of the Funds.
For a description of administrative services, see "Administrative
Arrangements" below.
SHAREHOLDER SERVICING ARRANGEMENTS
The Funds have adopted a Shareholder Services Plan, which is
administered by Federated Administrative Services. Under the Plan, M&T
Bank acts as a shareholder servicing agent (the "Shareholder Servicing
Agent") for the Funds. The Funds may pay the Shareholder Servicing
Agent a fee based on the average daily net asset value of shares for
which it provides shareholder services. These shareholder services
include, but are not limited to, distributing prospectuses and other
information, providing shareholder assistance and communicating or
facilitating purchases and redemptions of shares. This fee will be
equal to 0.25% of each Fund's average daily net assets for which the
Shareholder Servicing Agent provides services. The U.S. Government
Securities Fund and New York Tax Free Fund will not accrue or pay any
shareholder servicing agent fees until a separate class of shares has
been created for the Funds or the prospectus is amended to reflect the
imposition of fees.
ADMINISTRATIVE ARRANGEMENTS
The distributor may select brokers and dealers to provide distribution
and administrative services. The distributor may also select
administrators (including depository institutions such as commercial
banks and savings banks) to provide administrative services that are
not provided by Federated Administrative Services (see below). These
administrative services include distributing prospectuses and other
information, providing accounting assistance and shareholder
communications, or otherwise facilitating shareholder purchases and
redemptions (sales) of any Fund shares. The administrators appointed
could include affiliates of the advisers. Brokers, dealers, and
administrators will receive fees from the distributor based upon
shares owned by their clients or customers. The fees are calculated as
a percentage of the average aggregate net asset value of shareholder
accounts during the period for which the brokers, dealers, and
administrators provide services. If the distributor pays any fees for
these services, the fees will be reimbursed by one of the advisers and
not the Funds.
ADMINISTRATION OF THE FUNDS
FEDERATED ADMINISTRATIVE SERVICES, A SUBSIDIARY OF
FEDERATED INVESTORS, PROVIDES THE FUNDS WITH CERTAIN
ADMINISTRATIVE PERSONNEL AND SERVICES NECESSARY TO
OPERATE THE FUNDS.
ADMINISTRATIVE SERVICES
Such services include certain legal and accounting services. Federated
Administrative Services provides these services for an annual fee as
specified below:
<TABLE>
<CAPTION>
MAXIMUM
ADMINISTRATIVE AGGREGATE DAILY NET ASSETS OF
FEE VISION GROUP OF FUNDS, INC.
<C> <S>
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on excess of $750 million
</TABLE>
The administrative fee received during any year shall be at least
$50,000 per Fund. Federated Administrative Services may choose
voluntarily to waive a portion of its fee at any time.
YOUR GUIDE
TO USING
THE FUNDS
HOW THE FUNDS VALUE
THEIR SHARES
EACH FUND'S NET ASSET VALUE PER SHARE FLUCTUATES.
The net asset value for a Fund's shares is determined by adding the
market value of all securities and other assets of the Fund,
subtracting the liabilities of the Fund and dividing the remainder by
the total number of the Fund's shares outstanding.
MINIMUM INITIAL INVESTMENT
The minimum initial investment in each Fund is $500, unless the
investment is in a retirement plan or an IRA account, in which case
the minimum initial investment is $250. Subsequent investments must be
in amounts of at least $25. The minimum initial and subsequent
investment amounts may be waived or lowered from time to time, such as
for customers participating in the automatic investment services
described below.
WHAT FUND SHARES COST
Shares of U.S. Government Securities Fund and New York Tax-Free Fund
are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
DEALER CONCES-
SALES CHARGE SALES CHARGE SION AS A PER-
AS A PERCENT- AS A PERCENT- CENTAGE OF PUB-
AMOUNT OF AGE OF PUBLIC AGE OF NET LIC OFFERING
TRANSACTION OFFERING PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than
$100,000........... 4.50% 4.71% 4.00%
$100,000 but less
than $250,000...... 3.75% 3.90% 3.25%
$250,000 but less
than $500,000...... 3.00% 3.09% 2.75%
$500,000 but less
than $1 million.... 2.00% 2.04% 1.75%
$1 million or
more............... 0.00% 0.00% 0.00%
</TABLE>
Shares of Growth and Income Fund and Capital Appreciation Fund are
sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
DEALER CONCES-
SALES CHARGE SALES CHARGE SION AS A PER-
AS A PERCENT- AS A PERCENT- CENTAGE OF PUB-
AMOUNT OF AGE OF PUBLIC AGE OF NET LIC OFFERING
TRANSACTION OFFERING PRICE INVESTED PRICE
<S> <C> <C> <C>
Less than
$50,000............ 5.50% 5.82% 5.00%
$50,000 but less
than $100,000...... 4.25% 4.44% 3.75%
$100,000 but less
than $250,000...... 3.25% 3.36% 2.75%
$250,000 but less
than $500,000...... 2.25% 2.30% 2.00%
$500,000 but less
than $1 million.... 2.00% 2.04% 1.75%
$1 million or
more............... 0.00% 0.00% 0.00%
</TABLE>
The net asset value is determined as of the close of trading (normally
4:00 p.m., Eastern time) on the New York Stock Exchange, Monday
through Friday, except on:
(i) days on which there are not sufficient
changes in the value of a Fund's portfolio securities that its net asset
value might be materially affected;
(ii) days during which no shares are tendered
for redemption and no orders to purchase shares are received; or
(iii)the following holidays: New Year's Day,
Martin Luther King Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
In connection with the sale of Fund shares, Federated Securities Corp.
may from time to time offer certain items of nominal value to any
shareholder or investor.
SALES CHARGE REALLOWANCE
For sales of shares of the Funds, a broker/dealer will normally
receive up to 90% of the applicable sales charge. Any portion of the
sales charge which is not paid to a broker/dealer will be retained by
the distributor. However, the distributor will uniformly and
periodically offer to pay broker/dealers up to 100% of the sales
charge retained by it. Such payments may take the form of cash, items
of material value, or promotional incentives, such as payment of
certain expenses of qualified employees and their spouses to attend
informational meetings about the Funds or other special events at
recreational-type facilities. In some instances, these incentives will
be made available only to broker/dealers whose employees have sold or
may sell significant amounts of shares.
The distributor may pay fees to financial institutions out of the
sales charge in exchange for sales and/or administrative services
performed on behalf of their customers in connection with the
initiation of customer accounts and purchases of shares of the Funds.
In addition, the distributor will offer to pay broker/dealers an
amount of up to 1.00% of the net asset value of shares purchased for
an account of their client or customer in an amount of $1 million or
more.
The distributor and the Adviser, or affiliates thereof, at their own
expense and out of their own assets, may also provide other
compensation to financial institutions in connection with sales of
shares of the Funds or as financial assistance for providing
substantial marketing, sales and operational support. Compensation may
include, but is not limited to, financial assistance to financial
institutions in connection with conferences, sales, or training
programs for their employees, seminars for the public, advertising or
sales campaigns, or other special events. In some instances, this
compensation may be predicated upon the amount of shares sold and/or
upon the type and nature of sales or operational support they furnish.
Dealers may not use sales of the Corporation's shares to qualify for
this compensation to the extent such may be prohibited by the laws of
any state or any self-regulatory agency, such as the National
Association of Securities Dealers, Inc. None of the aforementioned
other compensation shall be paid for by the Corporation, the Funds, or
a Fund's shareholders, nor will it change the price paid by investors
for the purchase of Fund shares.
PURCHASES AT NET ASSET VALUE
Shares of each of the Funds may be purchased, subject to applicable
law and regulation from time to time, at net asset value, without a
sales charge, by the following investors, their spouses and their
immediate relatives: (i) current and retired employees and directors
of M&T Bank, First Empire State Corporation and their subsidiaries;
(ii) current and former Directors of the Corporation; (iii) clients of
the Trust & Investment Services Division of M&T Bank; (iv) employees
(including registered representatives) of a dealer which has a selling
group agreement with the Funds' distributor and consents to such
purchases; (v) current and retired employees of any sub-adviser to the
Vision Group of Funds, Inc.; and (vi) investors referred by any
sub-adviser to the Vision Group of Funds, Inc. Immediate relatives
include grandparents, parents, siblings, children, and grandchildren
of a qualified investor, and the spouse of any immediate relative.
The distributor will uniformly and periodically offer to pay cash
payments as incentives to broker/dealers whose customers or clients
purchase shares of a Fund under this "no-load" purchase provision.
This payment will be made out of the distributor's assets and not by
the Corporation, the Funds, or a Fund's shareholders.
A special application form which is available from the Shareholder
Servicing Agent, must be submitted with the initial purchase.
PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF MUTUAL FUND SHARES OR ANNUITIES
Investors may purchase shares of each of the Funds at net asset value,
without a sales charge, with the proceeds from either: (i) the
redemption of shares of a mutual fund which was sold with a sales
charge or commission; or (ii) fixed or variable rate annuities. The
purchase must be made within 60 days of the redemption, and M&T Bank's
Mutual Fund Services must be notified by the investor in writing, or
by the investor's financial institution, at the time the purchase is
made, and must present satisfactory evidence of the redemption.
Redemptions of mutual fund shares that are subject to a contingent
deferred sales charge are not eligible to purchase Fund shares under
this method. The distributor will uniformly and periodically offer to
pay cash payments as incentives to broker/dealers whose customers or
clients purchase shares of a Fund under this "no-load" purchase
provision. This payment will be made out of the distributor's assets
and not by the Corporation, the Funds or a Fund's shareholders.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of shares of the Fund
through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES
As shown in the tables under "What Fund Shares Cost," larger purchases
reduce the sales charge paid. The Funds will combine purchases made on
the same day by the investor, the investor's spouse, and the
investor's children under age 21 when it calculates the sales charge.
If an additional purchase of shares of any of the Funds is made, the
Funds will consider the previous purchases still invested in the Funds
in calculating the applicable sales charge rate. For example, if a
shareholder already owns shares which were purchased at the public
offering price of $70,000 and then purchases $40,000 more at the
current public offering price, the sales charge of the additional
purchase would be the rate imposed on a $110,000 investment, not the
rate imposed on a $40,000 investment.
To receive the sales charge reduction, M&T Bank's Mutual Fund Services
or the distributor must be notified by the shareholder in writing at
the time the purchase is made that Fund shares are already owned or
that purchases are being combined. The Fund will reduce the sales
charge after it confirms the purchase.
LETTER OF INTENT
If a shareholder intends to purchase shares of the U.S. Government
Securities Fund and New York Tax-Free Fund equal in value to at least
$100,000 over the next 13 months, or shares of the Growth and Income
Fund and Capital Appreciation Fund equal in value to at least $50,000
over the next 13 months, the sales charge may be reduced by signing a
letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount
actually purchased within the 13-month period and a provision for the
Custodian to hold 4.50% of the total price of the shares of the U.S.
Government Securities Fund and New York Tax-Free Fund, or 5.50% of the
total price of the shares of the Growth and Income Fund and Capital
Appreciation Fund, as the case may be, intended to be purchased in
escrow (in shares) until such purchase is completed.
The amount held in escrow will be applied to the shareholder's account
at the end of the 13-month period, unless the amount specified in the
letter of intent is not purchased. In this event, an appropriate
number of escrowed shares may be redeemed in order to realize the
difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase
shares, but if the shareholder does, each purchase during the period
will be at the sales charge applicable to the total amount intended to
be purchased. This letter may be dated as of a prior date to include
any purchases made within the past 90 days; however, these previous
purchases will not receive the reduced sales charge.
REINVESTMENT PRIVILEGE
If shares in the Funds have been redeemed, the shareholder has a
one-time right to reinvest, within 90 days, the redemption proceeds in
the Funds at the next-determined net asset value without any sales
charge. M&T Bank's Mutual Fund Services or the distributor must be
notified by the shareholder in writing or by the shareholder's
financial institution of the reinvestment in order to eliminate the
sales charge. If the shareholder redeems his or her shares in the
Funds, there may be tax consequences.
CONCURRENT PURCHASES
For purposes of qualifying for a sales charge reduction, a shareholder
has the privilege of combining concurrent purchases of two or more
funds in the Vision Group of Funds, Inc., the purchase price of which
includes a sales charge. For example, if a shareholder concurrently
invested $70,000 in one of the funds with a sales charge, and $40,000
in another fund with a sales charge, the sales charge imposed on each
purchase would be reduced to the sales charge rate in effect for a
$110,000 investment in the respective fund.
To receive this sales charge reduction, M&T Bank's Mutual Fund
Services or the distributor must be notified by the agent placing the
order at the time the concurrent purchases are made. The sales charge
will be reduced after the purchase is confirmed.
HOW TO BUY SHARES
YOU CAN BUY SHARES OF THE FUNDS ON ANY BUSINESS DAY, EXCEPT ON DAYS
WHICH THE NEW YORK STOCK EXCHANGE OR M&T BANK IS CLOSED OR ON
HOLIDAYS WHEN WIRE TRANSFERS ARE RESTRICTED (COLUMBUS DAY,
VETERANS' DAY AND MARTIN LUTHER KING DAY).
Shares may be purchased either by wire, mail or transfer. The Funds
reserve the right to reject any purchase request.
Texas residents must purchase shares through Federated Securities Corp. at
1-800-618-8573.
THROUGH THE BANK
You may purchase shares through M&T Bank. To do so, contact an account
representative at M&T Bank or those affiliates of M&T Bank which make
shares available, or M&T Bank's Mutual Fund Services at (800) 836-2211
(in the Buffalo area, phone 842-4488).
THROUGH M&T SECURITIES, INC.
You may purchase shares of the Funds through any representative of M&T
Securities, Inc. ("M&T Securities") at M&T Bank as well as at separate
M&T Securities locations, or by calling 1-800-724-5445. M&T Securities
(member NASD and SIPC) is a wholly-owned registered broker-dealer
subsidiary of M&T Bank.
THROUGH AUTHORIZED BROKER/DEALERS
An investor may place an order through authorized brokers and dealers
to purchase shares of the Funds. For additional details, contact your
broker.
PAYMENT
Payment may be made by either check or federal funds or by debiting a
customer's account at M&T Bank or any of its affiliate banks. Purchase
orders must be received by 4:00 p.m. (Eastern time) in order to be
credited that same day. For settlement of an order to occur, payment
must be received on the next business day following the order.
BUYING SHARES BY WIRE
You can purchase shares of the Funds by Federal Reserve wire. This is
referred to as wiring federal funds, and it simply means that your
bank sends money to the Funds' bank through the Federal Reserve
System. To purchase shares by Federal Reserve wire, call M&T Bank's
Mutual Fund Services or any representative of M&T Securities before
4:00 p.m. (Eastern time) to place your order. The order is considered
immediately received, provided payment by federal funds is received
before 3:00 p.m. (Eastern time) the next business day.
BUYING SHARES BY MAIL
To buy shares of the Funds for the first time by mail, complete and
sign an account application form and mail it, together with a check
made payable to (Name of the Fund) in an amount of $500 or more, to
the address below:
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York, 14240-4556
Current shareholders can purchase shares by mail by sending a check to
the same address. Orders by mail are considered received after payment
by check has been converted into federal funds. This is normally the
next business day after the check has been received.
BUYING SHARES BY TRANSFER
To purchase shares of the Funds by transferring money from a bank
account, you must maintain a checking or NOW deposit account at M&T
Bank or any of its affiliate banks. To place an order, call M&T Bank's
Mutual Fund Services or any representative of M&T Securities before
4:00 p.m. (Eastern time). The money will be transferred from your
checking or NOW deposit account to your Fund account by the next
business day and your purchase of shares will be effected on the day
the order is placed.
CUSTOMER AGREEMENTS
Shareholders normally purchase shares through different types of
customer accounts at M&T Bank and its affiliates. You should read this
prospectus together with any agreements between you and the
institution to learn about the services provided, the fees charged for
those services, and any restrictions and limitations imposed.
SYSTEMATIC INVESTMENT PROGRAM
Once you have opened a Fund account, you can add to your investment on
a regular basis in amounts of $25 or more through automatic deductions
from your checking or NOW deposit account. The money may be withdrawn
periodically and invested in Fund shares at the next net asset value
calculated after your order is received plus any applicable sales
charge. To sign up for this program, please call M&T Bank's Mutual
Fund Services for an application. DIVIDENDS AND CAPITAL GAINS
The U.S. Government Fund and New York Tax-Free Fund declare dividends
daily and pay them monthly. The Growth and Income Fund and Capital
Appreciation Fund declare and pay dividends quarterly. Capital gains
realized by the Funds, if any, will be distributed at least once every
12 months. Dividends and capital gains will be automatically
reinvested in additional shares of the Funds on payment dates at the
ex-dividend date's net asset value without a sales charge, unless
payments are requested by writing to the Funds or M&T Bank's Mutual
Fund Services. Dividends and capital gains can also be reinvested in
shares of any other fund comprising the Vision Group of Funds, Inc.,
subject to any applicable investment requirements.
RETIREMENT PLANS
Shares of the U.S. Government Securities Fund, Growth and Income Fund,
and Capital Appreciation Fund can be purchased as an investment for
retirement plans or IRA accounts. For further details, contact the
Funds and consult a tax adviser.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Shareholder Services
Company maintains a share account for each shareholder. The Funds will
not issue certificates for your shares unless you make a written
request to the Funds. Federated Shareholder Services Company is a
subsidiary of Federated Investors.
Detailed confirmations of each purchase or redemption are sent to each
shareholder. Confirmations are sent to shareholders of the Funds to
report dividends paid during the month.
HOW TO EXCHANGE SHARES
ALL SHAREHOLDERS IN ANY OF THE FUNDS ARE SHAREHOLDERS OF VISION
GROUP OF FUNDS, INC. AND HAVE ACCESS TO THE OTHER FUNDS IN THE
CORPORATION (REFERRED TO AS "PARTICIPATING FUNDS") THROUGH AN
EXCHANGE PROGRAM. YOU MAY EXCHANGE SHARES OF ANY OF THE FUNDS FOR
SHARES OF OTHER PARTICIPATING FUNDS AT NET ASSET VALUE, PLUS ANY
APPLICABLE SALES CHARGE.
When exchanging into and out of Participating Funds with a sales
charge and Participating Funds without a sales charge, shareholders
who have paid a sales charge once upon purchasing shares of any
Participating Fund, including those shares acquired by the
reinvestment of dividends, will not have to pay a sales charge again
on an exchange. When exchanging into and out of Participating Funds
with different sales charges, exchanges are made at net asset value.
Shares of Participating Funds with no sales charge acquired by direct
purchase may be exchanged for shares of other Participating Funds with
a sales charge at net asset value plus the applicable sales charge.
However, shares of Participating Funds with no sales charge that were
acquired by the reinvestment of dividends will not be subject to a
sales charge upon an exchange into shares of a Participating Fund with
a sales charge. Instead, such exchanges will be made at net asset
value.
To be eligible for this exchange privilege, you must exchange shares
with a net asset value of at least the minimum initial investment
required by the Participating Fund into which you are exchanging if it
is a new account. You may exchange your shares only for shares of
Participating Funds that may legally be sold in your state of
residence. Prior to any exchange, the shareholder must receive a copy
of the current prospectus of the Participating Fund into which an
exchange is to be made.
Once the transfer agent has received proper instructions and all
necessary supporting documents, shares submitted for exchange will be
redeemed at the next net asset value calculated. If you do not have an
account in the Participating Fund whose shares you want to acquire,
you must establish a new account. Unless you specify otherwise, this
account will be registered in the same name and have the same dividend
and capital gains payment options as you selected with your existing
account. If the new account registration (name, address, and taxpayer
identification number) is not identical to your existing account, you
must provide a signature guarantee to verify your signature. Please
see the "Signature Guarantees" section later in this prospectus for
more information about signature guarantees.
Each exchange is considered a sale of shares of one fund and a
purchase of shares of another fund, and depending on the
circumstances, may generate a short or long-term capital gain or loss
for federal income tax purposes.
The Funds reserve the right to modify or terminate the exchange
privilege at any time. Shareholders will be notified prior to any
modification or termination.
To find out more about the exchange privilege, call M&T Bank's Mutual
Fund Services at the number listed below.
EXCHANGING SHARES BY TELEPHONE
You may exchange shares between Participating Funds by calling M&T
Bank's Mutual Fund Services at (800) 836-2211 (in the Buffalo area,
phone 842-4488). To sign up for telephone exchanges, you must select
the telephone exchange option on the new account application. It is
recommended that you request this privilege on your initial
application. If you do not and later wish to take advantage of
telephone exchanges, you may call M&T Bank's Mutual Fund Services for
authorization forms.
You can only exchange shares by telephone between fund accounts with
identical shareholder registrations (names, addresses, and taxpayer
identification numbers).
Telephone exchange instructions must be received by M&T Bank's Mutual
Fund Services by 4:00 p.m. (Eastern time) and transmitted to Federated
Shareholder Services Company before 4:00 p.m. (Eastern time) for
shares to be exchanged that same day. You will not receive a dividend
from the fund into which you are exchanging on the date of the
exchange.
You may have difficulty making exchanges by telephone in times of
unusual economic or market changes when the volume of telephone
requests may be exceptionally high. If you cannot contact M&T Bank's
Mutual Fund Services by telephone, please send a written exchange
request by mail for next day delivery to the Vision Group of Funds,
Inc. at the address shown below.
If you have certificates for the shares you want to exchange, you
cannot make a telephone exchange. Instead, the certificates must be
properly endorsed and should be sent by registered or certified mail,
along with your written exchange request, to the Vision Group of
Funds, Inc. at the address shown below. M&T Bank's Mutual Fund
Services will then forward the certificate to the transfer agent,
Federated Shareholder Services Company, and the shares will be
deposited into your account before the exchange is made.
Shareholders requesting the telephone exchange service authorize the
Corporation and its agents to act upon their telephonic instructions
to exchange shares from any account for which they have authorized
such services. Exchange instructions given by telephone may be
electronically recorded for your protection. If reasonable procedures
are not followed by the Funds, the Funds may be liable for losses due
to unauthorized or fraudulent telephone instructions.
EXCHANGING SHARES BY MAIL
You may exchange shares by mail by sending your written request to:
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
HOW TO REDEEM SHARES
THE FUNDS REDEEM YOUR SHARES AT THE NET ASSET VALUE PER SHARE NEXT
DETERMINED AFTER THE FUNDS RECEIVE YOUR REDEMPTION REQUEST. WHEN
FUND SHARES ARE REDEEMED, THEY MAY BE WORTH MORE OR LESS THAN THE
ORIGINAL COST.
You may redeem shares only on days when a Fund computes its net asset
value. You cannot redeem shares on days when the New York Stock
Exchange or M&T Bank are closed, or on holidays when wire transfers
are restricted (e.g., Columbus Day, Veterans' Day and Martin Luther
King Day). While you may redeem various amounts by telephone or
written request, you can close your account only by written request.
TELEPHONE REDEMPTIONS
You may redeem your Fund shares by calling M&T Bank's Mutual Fund
Services at (800) 836-2211 (in the Buffalo area, phone 842-4488)
before 4:00 p.m. (Eastern time). The proceeds will be wired the next
business day directly to your account at M&T Bank or an affiliate or
to another account you previously designated at a domestic commercial
bank that is a member of the Federal Reserve System. M&T Bank reserves
the right to charge a fee for a wire transfer from a customer checking
account, which may contain redemption proceeds, to another commercial
bank.
You will be automatically eligible for telephone redemptions, unless
you check the box on the new account application form to decline this
privilege. It is recommended that you provide the necessary
information for the telephone/ wire redemption option on your initial
application. If you do not do this and later wish to take advantage of
telephone redemptions, you must call M&T Bank's Mutual Fund Services
for authorization forms.
You may have difficulty redeeming shares by telephone in times of
unusual economic or market changes when the volume of telephone
requests may be exceptionally high. If you cannot contact M&T Bank's
Mutual Fund Services by telephone, please send a written redemption
request by mail for next day delivery to the Vision Group of Funds,
Inc. at the address shown below.
The Funds reserve the right to modify or terminate the telephone
redemption privilege at any time. Shareholders will be notified prior
to any modification or termination.
If you hold shares in certificate form or hold Fund shares through an
IRA account, you cannot redeem those shares by phone, but instead must
redeem them in writing as explained below.
Shareholders who accept the telephone redemption service authorize the
Corporation and its agents to act upon their telephonic instructions
to redeem shares from any account for which they have authorized such
services. Redemption instructions given by telephone may be
electronically recorded for your protection. If reasonable procedures
are not followed by the Funds, they may be liable for losses due to
unauthorized or fraudulent telephone instructions.
REDEEMING SHARES BY MAIL
You may redeem shares by sending your written request to:
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
Please call M&T Bank's Mutual Fund Services for specific instructions
before redeeming by letter. Your written request must include your
name, the Fund's name, your account number, and the share or dollar
amount you want to redeem. If share certificates have been issued to
you, those certificates must be properly endorsed and should be sent
by registered or certified mail along with your redemption request.
SIGNATURE GUARANTEES
A signature guarantee verifies the authenticity of your signature. For
your protection, you must have your signature guaranteed on written
redemption requests in the following instances:
if you are redeeming shares worth $50,000 or more;
if you want a redemption of any amount sent to an address other than your
address on record with a Fund;
if you want a redemption of any amount payable to someone other than yourself
as the shareholder of record; or
if you want to transfer the registration of Fund shares.
The signature guarantee must be provided by:
a trust company or commercial bank whose deposits are insured by
the Bank Insurance Fund ("BIF"), which is administered by the
Federal Deposit Insurance Corporation ("FDIC");
a savings bank or savings association whose deposits are insured by
the Savings Association Insurance Fund ("SAIF"), which also is
administered by the FDIC;
a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchange; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Funds do not accept signatures guaranteed by a notary public.
The Funds and their transfer agent have adopted standards for
accepting signature guarantees from the above institutions. The Funds
may elect in the future to limit eligible signature guarantors to
institutions that are members of a signature guarantee program. The
Funds and their transfer agent reserve the right to amend these
standards at any time without notice.
RECEIVING PAYMENT
Normally, a check for the proceeds is mailed within one business day,
but in no event more than seven days, after receipt of a proper
written redemption request, provided the Funds or their agents have
received payment for shares from the shareholder.
SYSTEMATIC WITHDRAWAL PROGRAM
If you own Fund shares worth $10,000 or more, you can have regular
payments of $50 or more sent from your Fund account to you, another
person you designate or your checking or NOW deposit account. Fund
shares are redeemed to provide periodic payments in the amount you
specify.
Depending on the amount you are withdrawing, the amount of dividends
or any capital gains distributions paid on Fund shares, and any
possible fluctuations in a Fund's net asset value per share, these
redemptions may reduce and eventually exhaust your investment in a
Fund. For this reason, you should not consider systematic withdrawal
payments as yield or income received from your investment in a Fund.
Due to the fact that shares are sold subject to a sales charge, it may
not be advisable for shareholders to be purchasing shares while
participating in this program.
For more information and an application form for the Systematic
Withdrawal Program, call M&T Bank's Mutual Fund Services.
INVOLUNTARY REDEMPTIONS
Because of the high cost of maintaining accounts with low balances,
the Funds may redeem your shares and send you the proceeds if your
account balance falls below a minimum value of $250 due to shareholder
redemptions. Shareholders who make large or frequent withdrawals may
be particularly vulnerable to this involuntary redemption process.
However, before shares are redeemed to close an account, the
shareholder will be notified in writing and given 30 days to purchase
additional shares to meet the minimum balance requirement.
Further, each Fund reserves the right to redeem shares involuntarily
or make payment for redemptions in the form of securities if it
appears appropriate to do so in light of a Fund's responsibilities
under the Investment Company Act of 1940.
TAX
INFORMATION
BELOW IS A GENERAL DISCUSSION OF TAX CONSIDERATIONS FOR THE FUNDS.
NO ATTEMPT HAS BEEN MADE TO PRESENT A DETAILED EXPLANATION OF THE
INCOME TAX TREATMENT OF THE FUNDS OR THEIR SHAREHOLDERS, AND THIS
DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX
PLANNING.
The tax consequences discussed here apply whether you receive
dividends in cash or reinvest them in additional shares. The Funds
will send you tax information annually regarding the federal income
tax consequences of distributions made during the year. You should
definitely consult your own tax adviser about any state or local taxes
that may apply.
Each Fund will be treated as a separate entity for federal income tax
purposes. Income earned by a Fund, including any capital gains or
losses realized, is not combined with income earned on the
Corporation's other portfolios.
Each Fund intends to qualify each year as a regulated investment
company under the Internal Revenue Code so that it is not required to
pay federal income taxes on the income and capital gains distributed
to shareholders.
NEW YORK TAX-FREE FUND
FEDERAL TAXES
Shareholders are not required to pay federal income tax on any
dividends received from the New York Tax-Free Fund that represent net
interest received from tax-exempt municipal securities
(exempt-interest dividends). The Fund intends to invest its assets so
that most of the dividends it pays will be considered exempt-interest
dividends. Shareholders will be required to pay federal income tax on
dividends received from the Fund attributable to capital gains and net
interest received from taxable temporary investments, although the
Fund anticipates that such amounts will be limited.
However, exempt-interest dividends on certain private activity
municipal securities may be included in calculating the federal
alternative minimum tax ("AMT") for individuals and corporations
(previously discussed in the "AMT Obligations" section). The AMT is a
special federal tax that applies to taxpayers who claim certain large
income tax deductions, which are referred to as tax preference items.
To the extent the Fund invests in AMT obligations, a portion of the
Fund's dividends will be treated as a tax preference item for
shareholders potentially affected by the AMT. But this is only
meaningful if you yourself are subject to the AMT. Ask your own tax
adviser for more information.
NEW YORK TAXES
Under existing New York laws, shareholders of the New York Tax-Free
Fund will not be subject to New York State or New York City personal
income taxes on dividends to the extent that such dividends qualify as
"exempt interest dividends" under the Internal Revenue Code of 1986,
as amended, and represent interest income attributable to obligations
of the State of New York and its political subdivisions, as well as
certain other obligations, the interest on which is exempt from New
York State and New York City personal income taxes, such as, for
example, certain obligations of the Commonwealth of Puerto Rico. To
the extent that distributions are derived from other income, such
distributions will be subject to New York State or New York City
personal income tax.
The New York Tax-Free Fund cannot predict in advance the exact portion
of its dividends that will be exempt from New York State and New York
City personal income taxes. However, the Fund will report to
shareholders at least annually what percentage of the dividends it
actually paid is exempt from such taxes.
Dividends paid by the New York Tax-Free Fund are exempt from the New
York City unincorporated business tax to the same extent that they are
exempt from the New York City personal income tax. Dividends paid by
the Fund are not excluded from net income in determining New York
State or New York City franchise taxes on corporations or financial
institutions.
CORPORATE SHAREHOLDER INFORMATION
In the case of a corporate shareholder, all exempt-interest dividends
paid by the New York Tax-Free Fund are included in computing the
shareholder's adjusted current earnings, upon which is based a
separate corporate preference item that may be subject to the AMT. The
corporate AMT tax rate is 20%.
No portion of any income dividend paid by the Fund is eligible for the
dividends received deduction available to corporations. Dividends paid
by the Fund are not exempt from the New York State franchise tax on
corporations or the New York City general corporation tax.
THE TAX TREATMENT OF TEMPORARY INVESTMENTS
Dividends paid by the New York Tax-Free Fund that are attributable to
the net interest earned on some temporary investments (previously
discussed in the "Temporary Investments" section) and any realized net
short-term capital gains are taxed as ordinary income.
U.S. GOVERNMENT SECURITIES FUND, GROWTH AND INCOME FUND, AND CAPITAL
APPRECIATION FUND
FEDERAL INCOME TAXES
Unless shareholders are otherwise exempt from taxes, they are required
to pay federal income taxes on Fund dividends and other distributions
received (including capital gains distributions, if any).
DESCRIPTION OF FUND SHARES
Vision Group of Funds, Inc. was organized as a Maryland corporation on
February 23, 1988, and consists of seven investment portfolios: Vision
Money Market Fund, Vision Treasury Money Market Fund, Vision New York
Tax-Free Money Market Fund, Vision U.S. Government Securities Fund,
Vision New York Tax Free Fund, Vision Growth & Income Fund, and Vision
Capital Appreciation Fund. The Corporation's Articles of Incorporation
permit the Corporation to offer separate series of shares in these
funds or other future portfolios.
Each share of a Fund represents an equal proportionate interest in
that Fund with other shares and participates equally in the dividends
and any other distributions from that Fund that are declared at the
discretion of the Directors.
VOTING RIGHTS AND OTHER INFORMATION
SHAREHOLDERS OF THE FUNDS ARE ENTITLED TO ONE VOTE
FOR EACH FULL SHARE THEY HOLD AND TO FRACTIONAL VOTES
FOR ANY FRACTIONAL SHARES THEY HOLD.
Shareholders in each Fund generally vote in the aggregate and not by
class, unless the law expressly requires otherwise or the Directors
determine that the matter to be voted upon affects only the interests
of shareholders of a particular class. (See the "Description of Fund
Shares" in the Statement of Additional Information for examples of
when the Investment Company Act of 1940 requires that shareholders
vote by class.) As of June 9, 1997, Tice & Co., Buffalo, New York,
acting in various capacities for numerous accounts, was the owner of
record of 1,598,018 shares (32.62%) of the U.S. Government Securities
Fund, and, therefore, may for certain purposes be deemed to control
the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders. As of June 9, 1997, Reho & Co.,
Buffalo, New York, acting in various capacities for numerous accounts,
was the owner of record of 1,729,655 shares (35.3%) of the U.S.
Government Securities Fund; 2,688,183 shares (34.75%) of the Growth
and Income Fund; and 1,819,443 shares (59.73%) of the Capital
Appreciation Fund, and, therefore, may for certain purposes be deemed
to control these Funds and be able to affect the outcome of certain
matters presented for a vote of shareholders.
The Funds are not required to hold annual shareholder meetings, unless
matters arise that require a vote of the shareholders under the
Investment Company Act of 1940. That law requires a vote of the
shareholders to approve changes in the Funds' investment advisory
agreement, to replace the Funds' independent certified public
accountants and, under certain circumstances, to elect members to the
Directors.
Directors may be removed by the Directors or by a vote of shareholders
at a special meeting. The Directors will promptly call a special
meeting of shareholders upon the written request of shareholders
owning at least 10% of any Fund's outstanding shares.
As used in this prospectus, "assets belonging to a Fund" means the
money received by the Corporation upon the issuance or sale of shares
in a Fund, together with all income, earnings, profits, and proceeds
derived from the investment of that money. This includes any proceeds
from the sale, exchange, or liquidation of these investments, any
funds or payments derived from the reinvestment of these proceeds, and
a portion of the general assets of the Corporation that do not
otherwise belong to a Fund.
Assets belonging to a Fund are charged with the direct expenses and
liabilities of that Fund and with a share of the general expenses and
liabilities of the Corporation. The general expenses and liabilities
of the Corporation are allocated in proportion to the relative asset
values of all the Corporation's portfolios at the time the expense or
liability is incurred.
The management of the Corporation determines a Fund's direct and
allocable liabilities at the time the expense or liability is incurred
as well as a Fund's allocable share of any general assets at the time
the asset is acquired. These determinations are reviewed and approved
annually by the Directors and are conclusive.
HOW THE FUNDS SHOW PERFORMANCE
From time to time, advertisements for the Funds may refer to ratings,
rankings, and other information in certain financial publications
and/or compare the Funds' performance to certain indices. The Funds
may advertise their performance in terms of total return, yield, and
tax-equivalent yield (New York Tax-Free Fund only), as defined below.
Of course, total return, yield, and tax-equivalent yield figures are
based on past results and are not an indication of future performance.
TOTAL RETURN
The average annual total return of a Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of
shares owned at the end of the period by the maximum offering price
per share at the end of the period. The number of shares owned at the
end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, less any applicable sales charge,
adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.
YIELD
The yield of a Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the maximum
offering price per share of the Fund on the last day of the period.
This number is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect
income actually earned by a Fund because of certain adjustments
required by the SEC and, therefore, may not correlate to the dividends
or other distributions paid to shareholders.
TAX-EQUIVALENT YIELD
(NEW YORK TAX-FREE FUND ONLY)
The tax-equivalent yield of the New York Tax-Free Fund is calculated
similarly to the yield. However, it is adjusted to show the taxable
yield that the New York Tax-Free Fund would have had to earn to equal
its actual yield, assuming a specific tax rate, and assuming that
income is 100% tax exempt. The tax-equivalent yield is computed by
dividing the tax-free yield by the result of one minus the combined
federal and state tax rate. For example, if an investor is in the 31%
federal income tax bracket, and the rate for state taxes is 6.85%,
assuming the tax-free yield is 5.0%, the investor would have to
receive 8.04% from a taxable investment to equal that tax-free yield
(5.0% divided by 1-- (.31 + .0685) = 8.04%).
VISION U.S. GOVERNMENT SECURITIES FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ----------------------------------------------------------------------------------------- -------------
LONG-TERM OBLIGATIONS--97.2%
- -------------------------------------------------------------------------------------------------------
ASSET-BACKED SECURITIES--2.9%
- -------------------------------------------------------------------------------------------------------
$ 1,000,000 Green Tree Financial Corp., 1995-D, Class A2, 6.25%, 9/15/2025 $ 1,000,310
-----------------------------------------------------------------------------------------
50,662 OSCC Home Equity Loan Trust, Series 1992, Class A2, 6.95%, 5/15/2007 50,234
-----------------------------------------------------------------------------------------
250,538 TMS Home Equity Loan Trust, Series 1992-C, Class A1, 6.20%, 10/15/2007 245,802
----------------------------------------------------------------------------------------- -------------
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $1,292,499) 1,296,346
----------------------------------------------------------------------------------------- -------------
COLLATERALIZED MORTGAGE OBLIGATIONS--10.3%
- -------------------------------------------------------------------------------------------------------
30,000 FHLMC Series 1697, Class PG, REMIC, 5.80%, 4/15/2006 29,297
-----------------------------------------------------------------------------------------
360,000 FHLMC Series 1534, Class H, REMIC, 6.00%, 1/15/2023 322,960
-----------------------------------------------------------------------------------------
105,000 FHLMC Series 1637, Class GA, 5.80%, 6/15/2023 97,295
-----------------------------------------------------------------------------------------
58,000 FHLMC Series 33, Class H, 7.50%, 6/25/2023 58,031
-----------------------------------------------------------------------------------------
218,000 FHLMC Series 1577, Class PK, REMIC, 6.50%, 9/15/2023 199,937
-----------------------------------------------------------------------------------------
389,000 FHLMC Series 23, Class PK, REMIC, 6.00%, 11/25/2023 335,026
-----------------------------------------------------------------------------------------
235,000 FHLMC Series 1686, Class PJ, 5.00%, 2/15/2024 193,374
-----------------------------------------------------------------------------------------
250,000 FHLMC Series 1455, Class H, REMIC, 7.00%, 6/15/2021 245,677
-----------------------------------------------------------------------------------------
539,000 FHLMC Series 42, Class I, 8.00%, 10/17/2024 566,807
-----------------------------------------------------------------------------------------
50,000 FNMA Series 1993-G1, Class HA, REMIC, 7.50%, 2/25/2021 50,031
-----------------------------------------------------------------------------------------
608,000 FNMA Series 1993-G16, Class J, REMIC, 5.00%, 12/25/2021 505,236
-----------------------------------------------------------------------------------------
185,000 FNMA Series 1992-131, Class KA, REMIC, 8.00%, 1/25/2022 187,055
-----------------------------------------------------------------------------------------
161,562 FNMA Series 1994-22, Class A, REMIC, 5.00%, 3/25/2022 155,380
-----------------------------------------------------------------------------------------
193,000 FNMA Series 1993-147, Class J, REMIC, 6.50%, 7/25/2022 179,862
-----------------------------------------------------------------------------------------
22,000 FNMA Series 1993-38, Class L, REMIC, 5.00%, 8/25/2022 18,247
-----------------------------------------------------------------------------------------
308,000 FNMA Series 1993-204, Class C, REMIC, 6.20%, 2/25/2023 283,508
-----------------------------------------------------------------------------------------
259,000 FNMA Series 1993-G36, Class J, REMIC, 6.50%, 2/25/2023 241,582
-----------------------------------------------------------------------------------------
175,000 FNMA Series 1993-223, Class C, REMIC, 6.50%, 5/25/2023 162,596
-----------------------------------------------------------------------------------------
222,000 FNMA Series 1993-127, Class H, REMIC, 6.50%, 7/25/2023 196,692
-----------------------------------------------------------------------------------------
300,000 FNMA Series 1993-183, Class K, REMIC, 6.50%, 7/25/2023 274,509
-----------------------------------------------------------------------------------------
152,000 FNMA Series 1994-3, Class PL, 5.50%, 1/25/2024 122,836
-----------------------------------------------------------------------------------------
171,000 FNMA Series 1994-55, Class H, REMIC, 7.00%, 3/25/2024 159,760
----------------------------------------------------------------------------------------- -------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (IDENTIFIED COST $4,517,295) 4,585,698
----------------------------------------------------------------------------------------- -------------
CORPORATE BONDS--1.6%
- -------------------------------------------------------------------------------------------------------
100,000 Baltimore Gas & Electric Co., 5.50%, 7/15/2000 96,492
-----------------------------------------------------------------------------------------
</TABLE>
VISION U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ------------ ----------------------------------------------------------------------------------------- -------------
LONG-TERM OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------------------------------
CORPORATE BONDS--CONTINUED
- -------------------------------------------------------------------------------------------------------
$ 100,000 General Electric Capital Corp., 8.30%, 9/20/2009 $ 109,142
-----------------------------------------------------------------------------------------
500,000 New Plan Realty Trust, 6.80%, 5/15/2002 493,725
----------------------------------------------------------------------------------------- -------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $695,866) 699,359
----------------------------------------------------------------------------------------- -------------
PASS-THROUGH MORTGAGE-BACKED SECURITIES--23.8%
- -------------------------------------------------------------------------------------------------------
30,323 FHLMC, 8.00%, 5/1/2006 30,541
-----------------------------------------------------------------------------------------
99,380 FHLMC, 8.00%, 9/1/2007 101,554
-----------------------------------------------------------------------------------------
71,773 FHLMC, 8.25%, 12/1/2007 73,679
-----------------------------------------------------------------------------------------
405,579 FHLMC, 7.00%, 11/1/2010 402,918
-----------------------------------------------------------------------------------------
354,437 FHLMC, 7.00%, 11/1/2017 350,673
-----------------------------------------------------------------------------------------
18,050 FHLMC, 9.00%, 9/1/2019 18,998
-----------------------------------------------------------------------------------------
1,407,758 FHLMC, 6.00%, 3/1/2026 1,295,433
-----------------------------------------------------------------------------------------
1,511,051 FHLMC, 6.00%, 3/1/2026 1,390,484
-----------------------------------------------------------------------------------------
181,775 FNMA, 8.50%, 10/1/2002 187,626
-----------------------------------------------------------------------------------------
67,552 FNMA, 9.00%, 12/1/2002 70,065
-----------------------------------------------------------------------------------------
363,570 FNMA, 8.00%, 1/1/2006 366,184
-----------------------------------------------------------------------------------------
758,883 FNMA, 6.00%, 5/1/2009 727,997
-----------------------------------------------------------------------------------------
179,166 FNMA, 8.75%, 5/1/2010 187,392
-----------------------------------------------------------------------------------------
129,428 FNMA, 9.75%, 9/1/2017 140,976
-----------------------------------------------------------------------------------------
1,940,571 FNMA, 6.00%, 1/1/2026 1,782,706
-----------------------------------------------------------------------------------------
168,459 GNMA, 9.00%, 4/15/2001 175,250
-----------------------------------------------------------------------------------------
100,375 GNMA, 8.750%, 2/15/2002 103,700
-----------------------------------------------------------------------------------------
285,025 GNMA, 8.00%, 10/15/2007 294,112
-----------------------------------------------------------------------------------------
501,022 GNMA, 8.50%, 10/20/2009 517,932
-----------------------------------------------------------------------------------------
157,492 GNMA, 8.00%, 12/15/2009 161,281
-----------------------------------------------------------------------------------------
273,446 GNMA, 8.00%, 2/15/2010 281,734
-----------------------------------------------------------------------------------------
148,719 GNMA, 8.375%, 4/15/2010 153,994
-----------------------------------------------------------------------------------------
238,083 GNMA, 8.00%, 12/15/2016 245,152
-----------------------------------------------------------------------------------------
756,125 GNMA, 9.00%, 4/20/2023 793,220
-----------------------------------------------------------------------------------------
107,629 GNMA, 8.00%, 7/15/2024 109,614
-----------------------------------------------------------------------------------------
579,850 GNMA, 9.00%, 10/20/2024 606,123
----------------------------------------------------------------------------------------- -------------
TOTAL PASS-THROUGH MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $10,641,036) 10,569,338
----------------------------------------------------------------------------------------- -------------
</TABLE>
VISION U.S. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------ ----------------------------------------------------------------------------------------- -------------
LONG-TERM OBLIGATIONS--CONTINUED
- -------------------------------------------------------------------------------------------------------
U.S. AGENCY BONDS--34.3%
- -------------------------------------------------------------------------------------------------------
$ 5,000,000 Private Export Funding Corp., 9.50%, 3/31/1999 $ 5,285,600
-----------------------------------------------------------------------------------------
150,241 Small Business Administration, Series 1991, Class 20H, 8.85%, 8/1/2011 160,187
-----------------------------------------------------------------------------------------
5,000,000 Small Business Administration, Series 1996, Class 20K, 6.95%, 11/1/2016 4,907,750
-----------------------------------------------------------------------------------------
2,000,000 Small Business Administration, Series 1996, Class 20L, 6.70%, 12/1/2016 1,933,660
-----------------------------------------------------------------------------------------
3,000,000 U.S. Dept. Housing and Urban Development, Series 1996, Class A, 6.83%, 8/1/2003 2,990,490
----------------------------------------------------------------------------------------- -------------
TOTAL U.S. AGENCY BONDS (IDENTIFIED COST $15,543,692) 15,277,687
----------------------------------------------------------------------------------------- -------------
U.S. TREASURY BONDS--24.3%
- -------------------------------------------------------------------------------------------------------
6,250,000 14.00%, 11/15/2011 9,354,187
-----------------------------------------------------------------------------------------
1,000,000 12.50%, 8/15/2014 1,454,950
----------------------------------------------------------------------------------------- -------------
TOTAL U.S. TREASURY BONDS (IDENTIFIED COST $10,852,578) 10,809,137
----------------------------------------------------------------------------------------- -------------
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST $43,542,966) 43,237,565
----------------------------------------------------------------------------------------- -------------
MUTUAL FUND SHARES--1.0%
- -------------------------------------------------------------------------------------------------------
446,694 Seven Seas Money Market Fund (AT NET ASSET VALUE) 446,694
----------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $43,989,660)(A) $ 43,684,259
----------------------------------------------------------------------------------------- -------------
</TABLE>
(a) The cost of investments for federal tax purposes amounts to
$43,989,660. The net unrealized depreciation of investments on a
federal tax basis amounts to $305,401 which is comprised of
$121,243 appreciation and $426,644 depreciation at April 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($44,485,041) at
April 30, 1997.
The following acronyms are used throughout this portfolio:
FHLMC--Federal Home Loan Mortgage Corporation
FNMA--Federal National Mortgage Association
GNMA--Government National Mortgage Association
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
VISION NEW YORK TAX-FREE FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--97.8%
- -----------------------------------------------------------------------------------------
$ 25,000 Alden Central School District, NY, GO UT, 6.25%
(AMBAC Insured)/(Original Issue Yield: 6.40%), 6/15/2009 AAA $ 27,420
---------------------------------------------------------------------------
1,275,000 Allegany County, NY IDA, Revenue Bonds, 6.625%
(Atlantic Richfield Co.), 9/1/2016 A 1,349,077
---------------------------------------------------------------------------
25,000 Amherst, NY, GO UT, 6.20% (FGIC Insured)/
(Original Issue Yield: 6.00%), 4/1/2002 AAA 26,499
---------------------------------------------------------------------------
530,000 Battery Park, NY City Authority, Series A, 5.70%, 11/1/2020 AA 509,139
---------------------------------------------------------------------------
25,000 Beacon, NY City School District, GO UT, 5.10%
(Original Issue Yield: 5.25%), 7/15/2006 AAA 25,043
---------------------------------------------------------------------------
100,000 Brighton, NY Central School District, GO UT, 5.40%
(Original Issue Yield: 5.55%), 6/1/2011 AAA 99,673
---------------------------------------------------------------------------
10,000 Brighton, NY, 8.00% (MBIA Insured), 10/15/2002 AAA 11,487
---------------------------------------------------------------------------
50,000 Brockport, NY Central School District, GO UT, 5.40%
(Original Issue Yield: 5.55%), 6/15/2011 AAA 49,835
---------------------------------------------------------------------------
50,000 Broome County, NY, Certificate of Participation, 5.25%
(MBIA Insured)/(Original Issue Yield: 5.578%), 4/1/2022 NR 45,996
---------------------------------------------------------------------------
70,000 Buffalo & Fort Erie, NY Public Bridge Authority, 6.00%
(MBIA Insured)/(Original Issue Yield: 5.05%), 1/1/2004 AAA 73,902
---------------------------------------------------------------------------
25,000 Canandaigua, NY City School District, GO UT, 5.00%
(AMBAC Insured), 6/1/2009 AAA 24,477
---------------------------------------------------------------------------
10,000 Canandaigua, NY, GO UT, 8.80% (Original Issue Yield: 9.30%), 3/1/2005 A 12,295
---------------------------------------------------------------------------
30,000 Carmel, NY, 6.30%, 11/15/2011 A1 32,490
---------------------------------------------------------------------------
50,000 Chautauqua County, NY, GO UT, 6.40% (FGIC Insured)/ (Original Issue Yield:
6.30%), 9/15/2004 AAA 54,382
---------------------------------------------------------------------------
100,000 Cheektowaga, NY Central School District, GO UT, 5.875% (FGIC
Insured)/(Original Issue Yield: 5.95%), 6/1/2014 Aaa 102,284
---------------------------------------------------------------------------
25,000 Cheektowaga, NY, GO UT, 5.65% (Original Issue Yield: 6.25%), 8/15/2005 A 25,915
---------------------------------------------------------------------------
50,000 Cheektowaga, NY, GO UT, 6.55%, 10/15/2008 A 55,379
---------------------------------------------------------------------------
50,000 Cheektowaga-Maryvale, NY Union Free School District,
GO UT, 6.625% (FGIC Insured)/(Original Issue Yield: 6.75%),
6/15/2008 AAA 56,386
---------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------
$ 50,000 Chemung County, NY, GO UT, 6.80% (AMBAC Insured),
7/15/2006 AAA $ 56,183
---------------------------------------------------------------------------
25,000 Chenango County, NY, 6.40%, 12/15/2008 A 27,534
---------------------------------------------------------------------------
25,000 Churchville Chili, NY Central School District, GO UT,
5.50% (FGIC Insured), 6/15/2009 AAA 25,610
---------------------------------------------------------------------------
25,000 Clarence, NY Central School District, GO UT, 5.30%
(FGIC Insured)/(Original Issue Yield: 4.90%), 6/1/2006 Aaa 25,404
---------------------------------------------------------------------------
25,000 Dutchess County, NY, GO UT, 8.50%, 7/15/2007 Aa1 31,525
---------------------------------------------------------------------------
25,000 East Aurora, NY Union Free School District, GO UT, 5.20% (FGIC
Insured)/(Original Issue Yield: 4.80%), 6/15/2006 Aaa 25,407
---------------------------------------------------------------------------
25,000 East Bloomfield, NY Central School District, 7.125%
(MBIA Insured), 6/15/2004 AAA 28,181
---------------------------------------------------------------------------
25,000 East Rochester, NY Union Free School District, GO UT,
6.30% (AMBAC Insured), 6/15/2003 AAA 26,810
---------------------------------------------------------------------------
50,000 Endwell, NY, GO UT Fire District Bonds, 7.00%
(Original Issue Yield: 7.35%), 3/1/2014 A 55,700
---------------------------------------------------------------------------
50,000 Erie County, NY Water Authority, Series A, 6.00%
(AMBAC Insured)/(Original Issue Yield: 7.25%), 12/1/2008 AAA 53,132
---------------------------------------------------------------------------
25,000 Erie County, NY, GO UT General Improvement Bonds, 9.60% (MBIA
Insured)/(Original Issue Yield: 9.55%), 10/15/2000 AAA 28,864
---------------------------------------------------------------------------
1,000,000 Essex Cnty, NY IDA, Solid Waste Disposal Revenue Bonds (Series A), 5.80%
(International Paper Co.), 12/1/2019 A- 976,340
---------------------------------------------------------------------------
55,000 Evans & Brant, NY Central School District, GO UT, 6.85% (MBIA
Insured)/(Original Issue Yield: 6.90%), 6/15/2009 AAA 62,906
---------------------------------------------------------------------------
20,000 Frontier Central School District, NY, Hamburg Township, GO UT, 9.50% (MBIA
Insured)/(Original Issue Yield: 9.50%),
6/1/2002 AAA 24,056
---------------------------------------------------------------------------
70,000 General Brown Central School District, NY, Brownville & Dexter, GO UT,
5.70% (MBIA Insured)/(Original Issue Yield: 5.80%), 6/15/2014 AAA 70,624
---------------------------------------------------------------------------
25,000 Genesee County, NY, GO UT, 5.30% (FGIC Insured)/
(Original Issue Yield: 5.20%), 8/15/2009 Aaa 25,114
---------------------------------------------------------------------------
25,000 Greece, NY Central School District, GO UT, 6.00%
(FGIC Insured)/(Original Issue Yield: 5.55%), 6/15/2004 AAA 26,535
---------------------------------------------------------------------------
30,000 Greece, NY, GO UT, 6.25% (AMBAC Insured), 12/1/2007 AAA 32,627
---------------------------------------------------------------------------
50,000 Guilderland, NY, GO UT, 6.40% (FGIC Insured)/
(Original Issue Yield: 6.65%), 9/15/2015 AAA 55,374
---------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------
$ 25,000 Hamburg Town, NY, GO UT, 6.30% (MBIA Insured)/
(Original Issue Yield: 6.45%), 11/15/2010 AAA $ 27,483
---------------------------------------------------------------------------
100,000 Hamburg, NY Central School District, GO UT, 6.10%
(AMBAC Insured), 5/15/2004 AAA 106,857
---------------------------------------------------------------------------
50,000 Hanover Town, NY, GO UT, 9.80% (MBIA Insured), 9/1/2004 AAA 65,195
---------------------------------------------------------------------------
130,000 Holiday Square Housing Development Corp., NY, Section 8
Assisted Project, 5.80% (Holiday Square Management Co.)/
(FNMA COL)/(Original Issue Yield:
5.943%), 1/15/2024 Aaa 126,884
---------------------------------------------------------------------------
20,000 Holland, NY Central School District, GO UT, 6.00%
(FGIC Insured)/(Original Issue Yield: 5.50%), 6/15/2003 AAA 21,232
---------------------------------------------------------------------------
100,000 Housing NY Corp., Revenue Bonds, 5.00%
(Original Issue Yield: 5.65%), 11/1/2018 AA 89,338
---------------------------------------------------------------------------
1,025,000 (a)Housing NY Corp., Revenue Refunding Bonds,
5.00% (Original Issue Yield: 5.60%), 11/1/2013 AA 943,759
---------------------------------------------------------------------------
15,000 Irondequoit, NY, 6.80% (Original Issue Yield: 7.20%), 3/1/2011 A 16,825
---------------------------------------------------------------------------
50,000 Ithaca, NY, 6.80%, 5/15/2003 Aa 54,890
---------------------------------------------------------------------------
25,000 Ithaca, NY, GO UT, 6.40% (Original Issue Yield: 6.80%),
4/1/2009 Aa3 27,418
---------------------------------------------------------------------------
30,000 Ithaca, NY, GO UT, 6.625% (Original Issue Yield: 6.70%),
7/15/2005 Aa 33,236
---------------------------------------------------------------------------
1,345,000 Jamestown, NY Housing Authority, Mortgage Revenue Bonds, 6.125% (Bradmar
Village Project)/(HUD Section 8 LOC),
7/1/2010 A- 1,353,178
---------------------------------------------------------------------------
30,000 Kenmore, NY, GO UT, 5.20% (AMBAC Insured)/
(Original Issue Yield: 5.60%), 2/15/2010 AAA 29,631
---------------------------------------------------------------------------
25,000 La Grange, NY, GO UT Public Improvement Bonds, 7.70% (AMBAC
Insured)/(Original Issue Yield: 7.75%), 4/15/2006 AAA 29,450
---------------------------------------------------------------------------
50,000 Lakewood, NY, GO UT Public Improvement Bonds, 5.50% (Original Issue Yield:
5.70%), 4/1/2012 Baa1 49,447
---------------------------------------------------------------------------
100,000 Lancaster Town, NY, GO UT Bonds, 5.70% (MBIA Insured)/ (Original Issue
Yield: 5.80%), 6/1/2009 AAA 104,139
---------------------------------------------------------------------------
25,000 Lewiston Town, NY, GO UT Refunding Bonds, 5.50%
(FSA Insured)/(Original Issue Yield: 5.55%), 5/1/2014 AAA 25,041
---------------------------------------------------------------------------
25,000 Lockport Town, NY, GO UT, 5.45% (FGIC Insured)/
(Original Issue Yield: 5.05%), 9/15/2006 Aaa 25,880
---------------------------------------------------------------------------
25,000 Monroe County, NY IDA, Revenue Bonds, 5.80% (Nazareth College)/(MBIA
Insured)/(Original Issue Yield: 5.799%), 6/1/2010 AAA 25,532
---------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------
$ 50,000 Monroe County, NY, GO UT (Series A), 8.50%
(Original Issue Yield: 8.75%), 5/1/2000 Aa $ 55,370
---------------------------------------------------------------------------
1,000,000 Monroe County, NY, GO UT Public Improvement Bonds,
6.00% (Original Issue Yield: 5.34%), 3/1/2016 AA- 1,045,500
---------------------------------------------------------------------------
25,000 Monroe County, NY, GO UT Public Improvement Bonds, 6.05%
(AMBAC Insured)/(United States Treasury PRF)/
(Original Issue Yield: 6.049%), 6/1/2004 (@102) AAA 27,065
---------------------------------------------------------------------------
170,000 Municipal Assistance Corp of New York, Series 61,
6.875% (Original Issue Yield: 6.967%), 7/1/2007 AA 174,269
---------------------------------------------------------------------------
25,000 Municipal Assistance Corp of New York, Series 63,
7.70% (MBIA Insured), 7/1/2008 AAA 26,399
---------------------------------------------------------------------------
50,000 New Paltz, NY Central School District, GO UT, 6.00%
(AMBAC Insured), 6/15/2008 AAA 53,891
---------------------------------------------------------------------------
100,000 New York, NY Housing Development Corp., Series A,
7.35% (FHA Insured), 6/1/2019 AAA 105,832
---------------------------------------------------------------------------
1,725,000 New York, NY IDA, 5.85% (Nightingale-Bamford School Project), 1/15/2020 A 1,709,854
---------------------------------------------------------------------------
1,500,000 New York , NY IDA, Special Facilities Revenue Bonds,
6.90% (American Airlines), 8/1/2024 BAA2 1,602,075
---------------------------------------------------------------------------
500,000 New York, NY, GO UT (Series B), 5.875% (Connie Lee LOC)/ (Original Issue
Yield: 6.21%), 8/15/2016 AAA 496,810
---------------------------------------------------------------------------
50,000 New York State Dormitory Authority, Revenue Refunding Bonds, 6.50%
(University of Rochester)/(Original Issue Yield: 6.585%), 7/1/2009 A+ 51,148
---------------------------------------------------------------------------
20,000 New York State Dormitory Authority, Revenue Bonds, 5.00% (Rochester
University-Strong Memorial Hospital), 7/1/2005 AAA 20,139
---------------------------------------------------------------------------
100,000 New York State Dormitory Authority, Revenue Bonds, 6.00% (Colgate
University)/(MBIA Insured)/(Original Issue Yield: 5.25%), 7/1/2016 AAA 104,836
---------------------------------------------------------------------------
1,000,000 New York State Dormitory Authority, Revenue Bonds, 6.05% (Lutheran Center
at Poughkeepsie)/(Key Bank of New York LOC)/(Original Issue Yield: 6.08%),
7/1/2026 Aa3 1,000,330
---------------------------------------------------------------------------
1,200,000 New York State Dormitory Authority, Series F, 5.00%
(Original Issue Yield: 5.70%), 7/1/2020 BBB 1,029,996
---------------------------------------------------------------------------
1,625,000 New York State Environmental Facilities Corp., Solid
Waste Disposal Revenue Bonds (Series A), 5.70%
(Occidental Petroleum Corp.)/(Original Issue Yield:
5.75%), 9/1/2028 BBB 1,530,198
---------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------
$ 250,000 New York State HFA, Hospital & Nursing Home Project,
5.90% (Original Issue Yield: 5.934%), 11/1/2006 BBB $ 252,583
---------------------------------------------------------------------------
1,150,000 New York State HFA, Series C, 6.00% (ECH Housing, Inc.),
8/15/2016 Aa 1,158,832
---------------------------------------------------------------------------
1,000,000 New York State HFA, Service Contract Obligation Revenue Bonds (Series A),
6.25% (Original Issue Yield: 6.35%), 9/15/2010 BBB 1,023,670
---------------------------------------------------------------------------
300,000 New York State Local Government Assistance Corp.,
Series B, 6.00% (Original Issue Yield: 6.28%), 4/1/2018 A 301,077
---------------------------------------------------------------------------
995,000 New York State Medical Care Facilities Finance Agency,
Hospital & Nursing Home Revenue Bonds (Series B), 6.00%
(FHA Insured)/(Original Issue Yield:
6.219%), 8/15/2014 AAA 1,002,283
---------------------------------------------------------------------------
1,000,000 New York State Medical Care Facilities Finance Agency,
Series A, 6.375% (FHA Insured)/(Original Issue Yield: 6.394%),
8/15/2024 AA 1,034,580
---------------------------------------------------------------------------
690,000 New York State Medical Care Facilities Finance Agency,
Series D, 5.40% (MBIA Insured), 8/15/2033 AAA 632,323
---------------------------------------------------------------------------
15,000 New York State Power Authority, Series V, 7.80%
(Original Issue Yield: 7.853%), 1/1/2006 AA- 15,658
---------------------------------------------------------------------------
25,000 New York State Power Authority, Series V, 7.875%
(Original Issue Yield: 7.901%), 1/1/2007 AA- 26,109
---------------------------------------------------------------------------
200,000 New York State, GO UT Refunding Bonds, 9.875%
(Original Issue Yield: 7.30%), 11/15/2005 A- 263,984
---------------------------------------------------------------------------
1,000,000 New York State, GO UT, 12.00% (Original Issue Yield: 7.60%), 11/15/2003 A- 1,380,350
---------------------------------------------------------------------------
340,000 New York State, GO UT, 6.30% (Original Issue Yield: 6.35%),
9/15/2012 A- 360,828
---------------------------------------------------------------------------
450,000 New York State, GO UT, 9.875% (Original Issue Yield: 7.60%), 11/15/2004 A- 581,810
---------------------------------------------------------------------------
75,000 Newburgh, NY, GO UT, 6.40%, 4/15/2008 A1 82,412
---------------------------------------------------------------------------
175,000 Niagara County, NY, GO UT, 7.10% (MBIA Insured)/
(Original Issue Yield: 7.125%), 2/15/2010 AAA 202,734
---------------------------------------------------------------------------
25,000 Niagara Falls, NY Toll Bridge System, Series B, 5.25%
(FGIC Insured)/(Original Issue Yield: 5.35%), 10/1/2015 AAA 24,015
---------------------------------------------------------------------------
50,000 North Tonawanda, NY, GO UT, 6.05% (FGIC Insured),
10/1/2006 AAA 53,806
---------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------
$ 1,105,000 Oneonta, NY Housing Development Fund Corp., Refunding Revenue Bonds (Series
A), 5.45% (MBIA Insured)/(Original Issue Yield: 5.467%), 7/1/2022 AAA $ 1,034,634
---------------------------------------------------------------------------
175,000 Onondaga County, NY IDA, Revenue Bonds, 6.625%
(Anheuser-Busch Co., Inc.)/(Original Issue Yield: 6.70%),
8/1/2006 AA- 192,211
---------------------------------------------------------------------------
1,000,000 Onondaga County, NY IDA, Sewer Facilities Revenue Bonds, 5.75%
(Bristol-Myers Squibb Co.)/(Original Issue Yield: 5.95%), 3/1/2024 AAA 999,230
---------------------------------------------------------------------------
50,000 Ontario County, NY, GO UT, 5.50% (Original Issue Yield: 5.65%), 5/15/2011 Aa 50,560
---------------------------------------------------------------------------
25,000 Orchard Park, NY Central School District, GO UT, 6.50%
(FGIC Insured)/(Original Issue Yield: 6.25%), 6/1/2002 NR 26,972
---------------------------------------------------------------------------
25,000 Ossining Village, NY, 8.10% (FGIC Insured), 7/15/2001 AAA 28,099
---------------------------------------------------------------------------
40,000 Otsego County, NY, GO UT, 6.625% (AMBAC Insured),
12/1/2005 AAA 44,476
---------------------------------------------------------------------------
50,000 Penfield, NY Central School District, GO UT, 5.20%
(Original Issue Yield: 5.40%), 6/15/2010 AAA 49,654
---------------------------------------------------------------------------
165,000 Puerto Rico Industrial, Medical & Environmental PCA,
Revenue Bonds, 6.50% (Abbott Laboratories), 7/1/2009 Aa1 165,713
---------------------------------------------------------------------------
1,025,000 Puerto Rico Industrial, Medical & Environmental PCA, Revenue Bonds, 5.10%
(American Home Products Corp.)/(Original Issue Yield: 5.30%), 12/1/2018 A2 936,655
---------------------------------------------------------------------------
1,200,000 (b)Puerto Rico Industrial, Medical & Environmental PCA,
Series A, 6.75% (Motorola, Inc.), 1/1/2014 AA- 1,291,332
---------------------------------------------------------------------------
25,000 Putnam County, NY, 7.10%, 8/15/2002 Aa 27,599
---------------------------------------------------------------------------
15,000 Rochester, NY, GO UT, 6.00% (Original Issue Yield: 6.40%),
8/1/2001 AA 15,710
---------------------------------------------------------------------------
250,000 Rockland County, NY Solid Waste Management Authority, Series B, 5.55%
(AMBAC Insured)/(Original Issue Yield: 5.75%), 12/15/2016 AAA 246,312
---------------------------------------------------------------------------
50,000 Rockland County, NY, GO UT, 7.00% (MBIA Insured)/
(Original Issue Yield: 7.10%), 4/1/2008 AAA 57,267
---------------------------------------------------------------------------
20,000 Saugerties, NY, GO UT, 5.375% (FSA Insured)/
(Original Issue Yield: 5.70%), 6/15/2015 Aaa 19,501
---------------------------------------------------------------------------
660,000 Schenectady, NY Municipal Housing Authority, Revenue Bonds, 6.40% (Annie
Schaffer Senior Center, Inc.), 5/1/2014 Aa 681,397
---------------------------------------------------------------------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P* VALUE
<C> <S> <C> <C>
- ------------ --------------------------------------------------------------------------- ---------- -------------
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------------------
$ 40,000 Silver Creek, NY Central School District, GO UT,
6.60% (AMBAC Insured), 5/15/2005 AAA $ 44,404
---------------------------------------------------------------------------
25,000 Spencerport, NY Central School District, GO UT, 6.00%
(MBIA Insured)/(Original Issue Yield: 6.05%), 6/15/2006 AAA 26,765
---------------------------------------------------------------------------
100,000 Spring Valley, NY, GO UT, 5.70% (FSA Insured), 4/1/2012 AAA 102,371
---------------------------------------------------------------------------
70,000 Sweet Home Central School District NY, GO UT, 5.60% (AMBAC
Insured)/(Original Issue Yield: 5.70%), 1/15/2008 AAA 72,544
---------------------------------------------------------------------------
1,400,000 Syracuse, NY Senior Citizens Housing Corp., Series A,
6.125% (East Hill Village Apartments), 11/1/2010 A- 1,435,560
---------------------------------------------------------------------------
1,445,000 Thirty Fourth Street Partnership, Inc., NY, 5.50%
(Original Issue Yield: 5.613%), 1/1/2023 A1 1,355,338
---------------------------------------------------------------------------
65,000 Tompkins County, NY, GO UT (Series B), 5.625%
(Original Issue Yield: 5.80%), 9/15/2013 Aa2 65,211
---------------------------------------------------------------------------
275,000 Tompkins, NY Health Care Corp., 10.80% (FHA Insured),
2/1/2028 A 358,941
---------------------------------------------------------------------------
150,000 Triborough Bridge & Tunnel Authority, NY, Special Obligation Revenue Bonds
(Series A), 6.625% (MBIA Insured)/(Original Issue Yield: 6.86%), 1/1/2017 AAA 160,386
---------------------------------------------------------------------------
50,000 Union Endicott, NY Central School District, GO UT (Series A), 5.50% (FSA
Insured)/(Original Issue Yield: 5.55%), 7/15/2010 AAA 50,445
---------------------------------------------------------------------------
50,000 Victor, NY Central Schol District, GO UT, 6.40% (FGIC Insured)/(Original
Issue Yield: 6.55%), 11/15/2006 AAA 55,087
---------------------------------------------------------------------------
50,000 Victor, NY, 7.20%, 12/15/2005 A 56,431
---------------------------------------------------------------------------
35,000 Wallkill, NY Central School District, GO UT, 5.75%, 7/15/2014 A 35,244
---------------------------------------------------------------------------
15,000 Warwick Valley, NY Central School District, GO UT, 6.55% (FGIC
Insured)/(Original Issue Yield: 6.70%), 6/1/2008 AAA 16,736
---------------------------------------------------------------------------
30,000 Webster, NY Central School District, GO UT, 6.25% (AMBAC Insured)/(Original
Issue Yield: 6.20%), 6/15/2003 AAA 32,094
---------------------------------------------------------------------------
50,000 West Seneca, NY Central School District, GO UT, 5.625%
(FGIC Insured)/(Original Issue Yield: 5.70%), 6/15/2011 AAA 50,924
---------------------------------------------------------------------------
25,000 West Seneca, NY, GO UT, 6.65% (MBIA Insured)/(Original Issue Yield: 6.80%),
6/1/2005 AAA 27,811
---------------------------------------------------------------------------
65,000 Williamsville, NY Central School District, GO UT, 6.50%
(MBIA Insured)/(Original Issue Yield: 6.80%), 12/1/2010 AAA 72,516
--------------------------------------------------------------------------- -------------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST $34,516,191)(C) $ 34,711,916
--------------------------------------------------------------------------- -------------
</TABLE>
VISION NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Credit ratings are unaudited.
At April 30, 1997 18.19% of the total investments at market value
were subject to alternative minimum tax.
(a) Denotes a private placement security. At April 30, 1997, these
securities amounted to $943,759 which represents 2.7% of total
net assets.
(b) Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At April 30, 1997, these
securities amounted to $1,291,332 which represents 3.6% of net
assets.
(c) The cost of investments for federal tax purposes amounts to
$34,516,191. The net unrealized appreciation of investments on a
federal tax basis amounts to $195,725 which is comprised of
$345,362 appreciation and $149,637 depreciation at April 30,
1997.
Note: The categories of investments are shown as a percentage of net assets
($35,479,785) at April 30, 1997.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
COL--Collateralized FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration FNMA--Federal National Mortgage
Association FSA--Financial Security Assurance GO--General Obligation
HFA--Housing Finance Authority HUD--Housing Urban Development
IDA--Industrial Development Authority LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance PCA--Pollution Control
Authority PRF--Prerefunded UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
VISION GROWTH AND INCOME FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ --------------------------------------------------------------------------------------- --------------
COMMON STOCKS--96.4%
- -----------------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT & SERVICES--7.5%
---------------------------------------------------------------------------------------
134,400 Cincinnati Milacron, Inc. $ 2,721,600
---------------------------------------------------------------------------------------
58,400 Deere & Co. 2,686,400
---------------------------------------------------------------------------------------
37,400 Northrop Corp. 3,122,900
--------------------------------------------------------------------------------------- --------------
Total 8,530,900
--------------------------------------------------------------------------------------- --------------
CONSUMER CYCLICAL--13.1%
---------------------------------------------------------------------------------------
85,700 Carnival Corp., Class A 3,160,187
---------------------------------------------------------------------------------------
240,200 Clayton Homes, Inc. 3,362,800
---------------------------------------------------------------------------------------
44,800 Home Depot, Inc. 2,598,400
---------------------------------------------------------------------------------------
61,700 Springs Industries, Inc., Class A 2,884,475
---------------------------------------------------------------------------------------
55,200 Tandy Corp. 2,891,100
--------------------------------------------------------------------------------------- --------------
Total 14,896,962
--------------------------------------------------------------------------------------- --------------
CONSUMER NON-CYCLICAL--13.5%
---------------------------------------------------------------------------------------
155,300 (a)Apria Healthcare Group, Inc. 2,620,687
---------------------------------------------------------------------------------------
93,000 Bergen Brunswig Corp., Class A 3,173,625
---------------------------------------------------------------------------------------
114,700 Breed Technologies, Inc. 2,078,938
---------------------------------------------------------------------------------------
64,900 First Brands Corp. 1,646,837
---------------------------------------------------------------------------------------
216,864 (a)Horizon/CMS Healthcare Corp. 3,442,716
---------------------------------------------------------------------------------------
25,000 Pfizer, Inc. 2,400,000
--------------------------------------------------------------------------------------- --------------
Total 15,362,803
--------------------------------------------------------------------------------------- --------------
ENERGY--12.6%
---------------------------------------------------------------------------------------
95,900 Apache Corp. 3,260,600
---------------------------------------------------------------------------------------
46,200 Louisiana Land & Exploration Co. 2,310,000
---------------------------------------------------------------------------------------
127,600 (a)Nabors Industries, Inc. 2,392,500
---------------------------------------------------------------------------------------
30,400 Schlumberger Ltd. 3,366,800
---------------------------------------------------------------------------------------
78,600 Unocal Corp. 2,996,625
--------------------------------------------------------------------------------------- --------------
Total 14,326,525
--------------------------------------------------------------------------------------- --------------
FINANCIAL SERVICES--22.0%
---------------------------------------------------------------------------------------
77,100 Federal National Mortgage Association 3,170,737
---------------------------------------------------------------------------------------
73,000 First Commerce Corp. 2,983,875
---------------------------------------------------------------------------------------
17,800 General RE Corp. 2,977,050
---------------------------------------------------------------------------------------
98,500 Great Western Financial Corp. 4,137,000
---------------------------------------------------------------------------------------
30,400 ITT Hartford Group, Inc. 2,264,800
---------------------------------------------------------------------------------------
</TABLE>
VISION GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ --------------------------------------------------------------------------------------- --------------
COMMON STOCKS--CONTINUED
- -----------------------------------------------------------------------------------------------------
FINANCIAL SERVICES--CONTINUED
---------------------------------------------------------------------------------------
24,300 J.P. Morgan & Co., Inc. $ 2,475,562
---------------------------------------------------------------------------------------
256,100 Reliance Group Holdings, Inc. 2,849,113
---------------------------------------------------------------------------------------
70,000 Reliastar Financial Corp. 4,235,000
--------------------------------------------------------------------------------------- --------------
Total 25,093,137
--------------------------------------------------------------------------------------- --------------
NATURAL RESOURCES--3.0%
---------------------------------------------------------------------------------------
45,200 Potash Corporation of Saskatchewan, Inc. 3,474,750
--------------------------------------------------------------------------------------- --------------
TECHNOLOGY--17.2%
---------------------------------------------------------------------------------------
40,800 AMP, Inc. 1,463,700
---------------------------------------------------------------------------------------
62,900 Adobe System, Inc. 2,460,963
---------------------------------------------------------------------------------------
35,300 Avnet, Inc. 2,148,888
---------------------------------------------------------------------------------------
52,400 (a)Cisco Systems, Inc. 2,711,700
---------------------------------------------------------------------------------------
42,300 First Data Corp., Class 1,459,350
---------------------------------------------------------------------------------------
16,000 Intel Corp. 2,450,000
---------------------------------------------------------------------------------------
92,900 (a)Read-Rite Corp. 2,403,788
---------------------------------------------------------------------------------------
181,100 (a)S3, Inc. 1,731,769
---------------------------------------------------------------------------------------
61,200 (a)Seagate Technology, Inc. 2,807,550
--------------------------------------------------------------------------------------- --------------
Total 19,637,708
--------------------------------------------------------------------------------------- --------------
UTILITIES--7.5%
---------------------------------------------------------------------------------------
10,000 BellSouth Corp. 445,000
---------------------------------------------------------------------------------------
86,700 Public Service Co. Colo 3,359,625
---------------------------------------------------------------------------------------
37,000 SBC Communications, Inc. 2,053,500
---------------------------------------------------------------------------------------
77,800 WICOR, Inc. 2,732,725
--------------------------------------------------------------------------------------- --------------
Total 8,590,850
--------------------------------------------------------------------------------------- --------------
TOTAL COMMON STOCKS (IDENTIFIED COST $106,359,662) 109,913,635
--------------------------------------------------------------------------------------- --------------
MUTUAL FUND SHARES--2.0%
- -----------------------------------------------------------------------------------------------------
2,296,929 Seven Seas Money Market Fund (AT NET ASSET VALUE) 2,296,929
--------------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $108,656,591)(B) $ 112,210,564
--------------------------------------------------------------------------------------- --------------
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to
$108,692,078. The net unrealized appreciation of investments on a
federal tax basis amounts to 3,518,486 which is comprised of
$8,488,355 appreciation and $4,969,869 depreciation at April 30,
1997.
Note: The categories of investments are shown as a percentage of net assets
($114,090,307) at
April 30, 1997.
(See Notes which are an integral part of the Financial Statements)
VISION CAPITAL APPRECIATION FUND
PORTFOLIO OF INVESTMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ---------------------------------------------------------------------------------------- -------------
COMMON STOCKS--91.3%
- ------------------------------------------------------------------------------------------------------
CAPITAL EQUIPMENT & SERVICES--5.9%
----------------------------------------------------------------------------------------
16,900 Harnischfeger Industries, Inc. $ 703,462
----------------------------------------------------------------------------------------
20,600 Tyco International, Ltd. 1,256,600
---------------------------------------------------------------------------------------- -------------
Total 1,960,062
---------------------------------------------------------------------------------------- -------------
CONSUMER CYCLICAL--4.7%
----------------------------------------------------------------------------------------
18,900 (a)AccuStaff, Inc. 344,925
----------------------------------------------------------------------------------------
11,975 (a)Consolidated Stores Corp. 479,000
----------------------------------------------------------------------------------------
37,500 Mirage Resorts, Inc. 754,687
---------------------------------------------------------------------------------------- -------------
Total 1,578,612
---------------------------------------------------------------------------------------- -------------
CONSUMER DURABLES--2.4%
----------------------------------------------------------------------------------------
44,300 (a)Gentex Corp. 797,400
---------------------------------------------------------------------------------------- -------------
CONSUMER NON-CYCLICAL--16.0%
----------------------------------------------------------------------------------------
41,200 (a)Apria Healthcare Group, Inc. 695,250
----------------------------------------------------------------------------------------
38,100 Flowers Industries, Inc. 928,687
----------------------------------------------------------------------------------------
68,000 Food Lion, Inc., Class A 454,750
----------------------------------------------------------------------------------------
23,900 (a)Gtech Holdings Corp. 734,925
----------------------------------------------------------------------------------------
19,100 (a)HealthCare COMPARE Corp. 828,462
----------------------------------------------------------------------------------------
39,200 (a)Staples, Inc. 705,600
----------------------------------------------------------------------------------------
28,000 (a)Watson Pharmaceuticals, Inc. 1,001,000
---------------------------------------------------------------------------------------- -------------
Total 5,348,674
---------------------------------------------------------------------------------------- -------------
ENERGY--13.0%
----------------------------------------------------------------------------------------
27,800 (a)Calenergy Co., Inc. 1,087,675
----------------------------------------------------------------------------------------
43,900 (a)Global Marine, Inc. 883,487
----------------------------------------------------------------------------------------
50,200 Tosco Corp. 1,487,175
----------------------------------------------------------------------------------------
15,000 Transocean Offshore, Inc. 909,375
---------------------------------------------------------------------------------------- -------------
Total 4,367,712
---------------------------------------------------------------------------------------- -------------
FINANCIAL SERVICES--14.2%
----------------------------------------------------------------------------------------
24,800 Aames Financial Corp 381,300
----------------------------------------------------------------------------------------
9,300 Beneficial Corp. 595,200
----------------------------------------------------------------------------------------
34,100 Schwab (Charles) Corp. 1,248,913
----------------------------------------------------------------------------------------
15,700 Star Banc Corp. 667,250
----------------------------------------------------------------------------------------
51,350 Synovus Financial Corp. 1,245,238
----------------------------------------------------------------------------------------
22,400 TIG Holdings, Inc. 621,600
---------------------------------------------------------------------------------------- -------------
Total 4,759,501
---------------------------------------------------------------------------------------- -------------
</TABLE>
VISION CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------ ---------------------------------------------------------------------------------------- -------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------------
NATURAL RESOURCES--8.5%
----------------------------------------------------------------------------------------
18,900 IMC Global, Inc. $ 696,937
----------------------------------------------------------------------------------------
21,300 Medusa Corp. 806,688
----------------------------------------------------------------------------------------
26,600 Oakwood Homes Corp. 538,650
----------------------------------------------------------------------------------------
10,500 Potash Corporation of Saskatchewan, Inc. 807,187
---------------------------------------------------------------------------------------- -------------
Total 2,849,462
---------------------------------------------------------------------------------------- -------------
OFFICE EQUIPMENT--5.9%
----------------------------------------------------------------------------------------
35,700 (a)EMC Corp. Mass 1,298,588
----------------------------------------------------------------------------------------
27,600 (a)Tech Data Corp. 676,200
---------------------------------------------------------------------------------------- -------------
Total 1,974,788
---------------------------------------------------------------------------------------- -------------
TECHNOLOGY--16.9%
----------------------------------------------------------------------------------------
14,500 (a)Cisco Systems, Inc. 750,375
----------------------------------------------------------------------------------------
99,800 (a)Informix Corp. 729,788
----------------------------------------------------------------------------------------
38,800 Innovex, Inc. 1,241,600
----------------------------------------------------------------------------------------
32,500 (a)Newbridge Networks Corp. 1,031,875
----------------------------------------------------------------------------------------
33,200 (a)Quantum Corp. 1,384,025
----------------------------------------------------------------------------------------
52,600 (a)S3, Inc. 502,988
---------------------------------------------------------------------------------------- -------------
Total 5,640,651
---------------------------------------------------------------------------------------- -------------
UTILITIES--3.8%
----------------------------------------------------------------------------------------
17,100 Valero Energy Corp. 600,638
----------------------------------------------------------------------------------------
27,940 (a)WorldCom, Inc. 670,560
---------------------------------------------------------------------------------------- -------------
Total 1,271,198
---------------------------------------------------------------------------------------- -------------
TOTAL COMMON STOCKS (IDENTIFIED COST $30,222,336) 30,548,060
---------------------------------------------------------------------------------------- -------------
MUTUAL FUND SHARES--8.6%
- ------------------------------------------------------------------------------------------------------
1,363,424 SSGA US Government Money Market Fund, Series A 1,363,424
----------------------------------------------------------------------------------------
1,511,112 SSGA Money Market Fund 1,511,112
---------------------------------------------------------------------------------------- -------------
TOTAL MUTUAL FUND SHARES (AT NET ASSET VALUE) 2,874,536
---------------------------------------------------------------------------------------- -------------
TOTAL INVESTMENTS (IDENTIFIED COST $33,096,872)(B) $ 33,422,596
---------------------------------------------------------------------------------------- -------------
</TABLE>
(a) Non-income producing security.
(b) The cost of investments for federal tax purposes amounts to
$33,105,960. The net unrealized appreciation of investments on a
federal tax basis amounts to $316,636 which is comprised of
$2,965,446 appreciation and $2,648,810 depreciation at April 30,
1997.
Note: The categories of investments are shown as a percentage of net assets
($33,440,516) at
April 30, 1997.
(See Notes which are an integral part of the Financial Statements)
VISION EQUITY AND INCOME FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT NEW YORK GROWTH AND CAPITAL
SECURITIES TAX-FREE INCOME APPRECIATION
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
ASSETS:
- ----------------------------------------------------
Investments in securities, at value $ 43,684,259 $ 34,711,916 $112,210,564 $ 33,422,596
- ----------------------------------------------------
Cash 51,379 50,706 213,727 250,709
- ----------------------------------------------------
Income receivable 860,247 667,913 154,191 26,724
- ----------------------------------------------------
Receivable for shares sold 14,913 88,546 151,794 148,588
- ----------------------------------------------------
Receivable for investments sold 219 5,050 1,446,147 --
- ----------------------------------------------------
Deferred Expenses 3,480 3,576 3,310 --
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
Total assets 44,614,497 35,527,707 114,179,733 33,848,617
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
LIABILITIES:
- ----------------------------------------------------
Income distribution payable 106,481 36,405 -- --
- ----------------------------------------------------
Payable for investments purchased -- -- -- 364,645
- ----------------------------------------------------
Payable for shares redeemed 2,415 -- 27,675 24
- ----------------------------------------------------
Accrued expenses 20,560 11,517 61,751 43,432
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
Total liabilities 129,456 47,922 89,426 408,101
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
NET ASSETS $ 44,485,041 $ 35,479,785 $114,090,307 $ 33,440,516
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
NET ASSETS CONSISTS OF:
- ----------------------------------------------------
Paid in capital $ 45,788,073 $ 35,451,690 $91,796,916 $ 32,509,935
- ----------------------------------------------------
Net unrealized appreciation (depreciation) of
investments (305,401) 195,725 3,553,973 325,724
- ----------------------------------------------------
Accumulated net realized gain (loss) on investments (1,021,945) (170,270) 18,630,024 604,857
- ----------------------------------------------------
Accumulated undistributed net investment income 24,314 2,640 109,394 --
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
TOTAL NET ASSETS $ 44,485,041 $ 35,479,785 $114,090,307 $ 33,440,516
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
- ----------------------------------------------------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER SHARE $9.28 $10.08 $15.11 $11.26
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
Offering Price Per Share* $9.72 ** $10.55** $15.99 *** $11.92 ***
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
SHARES OUTSTANDING: 4,791,270 3,518,501 7,548,395 2,970,646
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
Investments, at identified cost $ 43,989,660 $ 34,516,191 $108,656,591 $ 33,096,872
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
Investments, at tax cost $ 43,989,660 $ 34,516,191 $108,692,078 $ 33,105,960
- ---------------------------------------------------- ------------------- ------------ ------------- --------------
</TABLE>
* See "What Shares Cost" in the Prospectus.
** Computation of offering price per share 100/95.5 of net asset value.
*** Computation of offering price per share 100/94.5 of net asset value.
(See Notes which are an integral part of the Financial Statements)
VISION EQUITY AND INCOME FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED APRIL 30, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT NEW YORK GROWTH AND CAPITAL
SECURITIES TAX-FREE INCOME APPRECIATION
FUND FUND FUND FUND*
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------
Dividends $ -- $ -- $ 1,567,456 $ 99,219
- -------------------------------------------------------
Interest 2,712,917 1,926,225 175,882 71,431
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
Total investment income 2,712,917 1,926,225 1,743,338 170,650
- -------------------------------------------------------
EXPENSES:
- -------------------------------------------------------
Investment advisory fee 258,550 234,511 606,729 137,485
- -------------------------------------------------------
Administrative personnel and services fee 50,000 50,000 90,371 41,371
- -------------------------------------------------------
Custodian fees 25,140 20,440 32,163 22,026
- -------------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 49,868 57,183 110,288 25,278
- -------------------------------------------------------
Directors' fees 2,449 5,148 4,638 475
- -------------------------------------------------------
Auditing fees 11,719 12,324 14,370 --
- -------------------------------------------------------
Legal fees 5,281 4,853 8,338 5,446
- -------------------------------------------------------
Portfolio accounting fees 34,210 43,804 41,767 35,150
- -------------------------------------------------------
Capital stock registration costs 15,275 14,136 33,288 17,183
- -------------------------------------------------------
Printing and postage 17,385 8,798 24,474 5,936
- -------------------------------------------------------
Taxes -- 316 -- 444
- -------------------------------------------------------
Insurance premiums 2,384 2,958 5,059 2,590
- -------------------------------------------------------
Miscellaneous 11,596 12,467 16,737 3,037
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
TOTAL EXPENSES 483,857 466,938 988,222 296,421
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
WAIVERS AND REIMBURSEMENTS--
- -------------------------------------------------------
Waiver of investment advisory fee (61,752) (115,657) -- (63,215)
- -------------------------------------------------------
Waiver of administrative personnel and services fees (11,168) (14,660) -- (24,932)
- -------------------------------------------------------
Reimbursement of other operating expenses by Adviser -- -- -- (67,000)
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
TOTAL WAIVERS AND REIMBURSEMENTS (72,920) (130,317) -- (155,147)
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
NET EXPENSES 410,937 336,621 988,222 141,274
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
NET INVESTMENT INCOME $ 2,301,980 $ 1,589,604 $ 755,116 $ 29,376
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------
Net realized gain (loss) on investments (710,450) 222,949 20,391,748 772,135
- -------------------------------------------------------
Net change in unrealized appreciation (depreciation) of
investments 508,343 323,016 (7,859,091) 325,724
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
Net realized and unrealized gain (loss) on
investments (202,107) 545,965 12,532,657 1,097,859
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
Change in net assets resulting from operations $ 2,099,873 $ 2,135,569 $13,287,773 $ 1,127,235
- ------------------------------------------------------- ------------------- ------------ ------------- --------------
</TABLE>
* For the period from July 3, 1996 (date of initial public investment)
to April 30, 1997.
(See Notes which are an integral part of the Financial Statements)
VISION EQUITY AND INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. GOVERNMENT NEW YORK GROWTH AND CAPITAL
SECURITIES TAX-FREE INCOME APPRECIATION
FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
APRIL 30, APRIL 30, APRIL 30, APRIL 30,
<CAPTION>
1997 1996 1997 1996 1997 1996 1997*
<S> <C> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
- ------------------------------
OPERATIONS--
Net investment income $2,301,980 $1,755,128 $1,589,604 $1,376,221 $ 755,116 $ 555,866 $ 29,376
- ------------------------------
Net realized gain (loss) in
investments (710,450) 354,242 222,949 143,963 20,391,748 3,963,102 772,135
- ------------------------------
Net change in unrealized
appreciation (depreciation)
of investments 508,343 238,052 323,016 445,203 (7,859,091) 8,253,407 325,724
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
Change in net assets
resulting from operations 2,099,873 2,347,422 2,135,569 1,965,387 13,287,773 12,772,375 1,127,235
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
DISTRIBUTIONS TO
SHAREHOLDERS--
- ------------------------------
Distributions from net
investment income (2,302,079) (1,755,128) (1,586,964) (1,379,433) (732,162) (473,581) (29,376)
- ------------------------------
Distributions in excess of
net investment income -- -- -- -- -- -- (41,266)**
- ------------------------------
Distributions from net
realized gains -- -- -- -- (3,306,559) -- (126,012)
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
Change in net assets
resulting from
distributions to
shareholders (2,302,079) (1,755,128) (1,586,964) (1,379,433) (4,038,721) (473,581) (196,654)
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
SHARE TRANSACTIONS--
- ------------------------------
Proceeds from sales of
shares 15,979,092 7,520,520 8,656,290 10,446,768 53,236,024 17,414,577 32,772,622
- ------------------------------
Net asset value of shares
issued to shareholders in
payment of distributions
declared 1,169,547 926,773 1,194,289 1,072,509 2,340,952 243,366 192,580
- ------------------------------
Cost of shares redeemed (6,753,091) (4,321,294) (7,540,206) (6,830,896) (15,854,389) (4,195,783) (455,267)
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
Change in net assets
resulting from share
transactions 10,395,548 4,125,999 2,310,373 4,688,381 39,722,587 13,462,160 32,509,935
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
Change in net assets 10,193,342 4,718,293 2,858,978 5,274,335 48,971,639 25,760,954 33,440,516
- ------------------------------
NET ASSETS:
- ------------------------------
Beginning of period 34,291,699 29,573,406 32,620,807 27,346,472 65,118,668 39,357,714 --
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
End of period $44,485,041 $34,291,699 $35,479,785 $32,620,807 $114,090,307 $65,118,668 $33,440,516
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
Undistributed net investment
income included in net
assets at end of period $ 24,314 $ 24,413 $ 2,640 -- $ 109,394 $ 86,505 --
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
Net gain (loss) as computed
for federal tax purposes $ (662,897) $ -- $ 222,949 $ (3,553) $20,210,516 $1,761,551 $ 781,236
- ------------------------------ ---------- ---------- ---------- ---------- ----------- ---------- ------------
</TABLE>
* For the period from July 3, 1996 (date of inital public investment)
to April 30, 1997.
** Distributions are in accordance with income tax regulations which
may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal tax
purposes.
(See Notes which are an integral part of the Financial Statements)
VISION EQUITY AND INCOME FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1997
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Vision Group of Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an open-end
management investment company. The Corporation consists of seven portfolios
(individually referred to as the "Fund", or collectively as the "Funds"). The
following Funds are presented herein:
<TABLE>
<CAPTION>
PORTFOLIO NAME INVESTMENT OBJECTIVE
<S> <C>
Vision U.S. Government Securities Fund ("U.S. Government Current income by investing primarily in securities
Securities Fund")(d) that are guaranteed as to payment of principal and
interest by the U.S. Government, its agencies or
instrumentalities. Capital appreciation is a secondary
investment consideration.
Vision New York Tax-Free Fund ("New York Tax-Free Current income which
is exempt from federal regular Fund")(n) income tax and the personal
income taxes imposed by
the State
of New York
and New
York
Municipalities
and is
consistent
with
preservation
of capital.
Vision Growth and Income Fund ("Growth and Income Long-term growth of
capital and income. Fund")(d) Vision Capital Appreciation Fund
("Capital Appreciation Long-term capital appreciation by investing in
a Fund")(d) diversified portfolio consisting primarily of common
stocks that the adviser believes offer opportunity for
growth of capital.
</TABLE>
(d) Diversified
(n) Non-diversified
The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are
held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of their
financial statements. These policies are in conformity with generally
accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the
last sale price reported on a national securities exchange. U.S.
Government securities are generally valued at the mean of the
latest bid and asked price as furnished by an independent pricing
service. Listed corporate bonds, and other fixed income and
asset-backed securities, unlisted securities and short-term
securities are valued at the prices provided by an independent
pricing service. However, short-term securities with remaining
maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.
Municipal bonds are valued by an independent pricing service,
taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity,
VISION EQUITY AND INCOME FUNDS
- --------------------------------------------------------------------------------
type of issue, and any other factors or market data the pricing
service deems relevant. Investments in other open-end regulated
investment companies are valued at net asset value.
REPURCHASE AGREEMENTS--It is the policy of the Funds to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Funds to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.
The Funds will only enter into repurchase agreements with banks
and other recognized financial institutions, such as
broker/dealers, which are deemed by the Funds' adviser to be
creditworthy pursuant to the guidelines and/or standards reviewed
or established by the Board of Directors (the "Directors"). Risks
may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Funds
could receive less than the repurchase price on the sale of
collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
Distributions in excess of net investment income were a result of
certain book and tax timing differences. These distributions do
not represent a return of capital for federal income tax
purposes.
Income and capital gain distributions are determined in
accordance with income tax regulations which may differ from
generally accepted accounting principals. These differences are
primarily due to differing treatments for short-term capital gain
distributions. The following reclassification has been made to
the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
<S> <C> <C>
ACCUMULATED NET UNDISTRIBUTED NET
FUND NAME REALIZED GAIN (LOSS) INVESTMENT INCOME
Growth and Income Fund $ 65 $ (65)
Capital Appreciation Fund (41,266) 41,266
</TABLE>
FEDERAL TAXES--It is the Funds' policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of their income. Accordingly, no provisions for
federal tax are necessary.
At April 30, 1997 the following funds had capital loss
carryforwards for federal tax purposes, which will reduce each
Fund's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Code, and
thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve each Fund of any
liability for federal tax. Pursuant to the Code, such capital
loss carryforwards will expire as listed below:
VISION EQUITY AND INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL LOSS CAPITAL LOSS TOTAL CAPITAL
CARRYFORWARD TO CARRYFORWARD TO LOSS
FUND EXPIRE IN 2003 EXPIRE IN 2004 CARRYFORWARDS
<S> <C> <C> <C>
U.S. Government Securities Fund $ 311,493 $ 662,897 $ 974,390
New York Tax-Free Fund 166,717 3,555 170,272
</TABLE>
Net realized capital losses on U.S. Government Securities Fund of
$47,552 attributable to security transactions incurred after
October 31, 1996, are treated as arising on the first day of the
Fund's next taxable year (May 1, 1997).
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may
engage in when-issued or delayed delivery transactions. The Funds
record when-issued securities on the trade date and maintain
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Funds with respect
to registration of their shares in their first fiscal year,
excluding the initial expense of registering their shares, have
been deferred and are being amortized over a period not to exceed
five years from the Funds' commencement date.
OPTION CONTRACTS WRITTEN--The Funds may purchase put options on
their portfolio securities. These options will be used as a hedge
to attempt to protect securities which the Funds hold against
fluctuations in value. The Funds may also write put and call
options on all or any portion of their portfolio securities to
generate income for the Funds. The Funds will write put and call
options on securities either held in their portfolios or for
which the Funds have the right to obtain without payment of
future consideration or for which they have segregated cash in
the amount of any additional consideration. The Funds may also
purchase call options on securities to protect against price
movements in particular securities which the Funds intend to
purchase. A written option obligates the Funds to deliver (a
call) or to receive (a put), the contract amount upon exercise by
the holder of the option. By writing call options, the Funds may
forego potential gains on the underlying security. By writing a
put option, the Funds risk becoming obligated to purchase the
underlying security for more than its current market price upon
exercise. Premiums received from writing options are recorded as
a liability and an unrealized gain or loss is measured by the
difference between the current value and the premium received.
For the period ended April 30, 1997, U.S. Government Securities
Fund, New York Tax-Free Fund, Growth and Income Fund and Capital
Appreciation Fund realized gains(losses) on option contracts of
$0, $0, $(69,348), and $0, respectively.
The following is a summary of Growth and Income Fund's written
option activity:
<TABLE>
<CAPTION>
NUMBER OF
CONTRACTS PROCEEDS
<S> <C> <C>
Outstanding at May 1, 1996 0 $ 0
Contracts opened 240 $ 318,852
Contracts expired 0 $ 0
Contracts exercised 240 $ 388,200
Contracts closed 0 $ 0
Outstanding at April 30, 1997 0 $ 0
</TABLE>
VISION EQUITY AND INCOME FUNDS
- --------------------------------------------------------------------------------
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
RESTRICTED SECURITIES--Restricted securities are securities that
may only be resold upon registration under federal securities
laws or in transactions exempt from such registration. In some
cases, the issuer of restricted securities has agreed to register
such securities for resale, at the issuer's expense either upon
demand by the Funds' or in connection with another registered
offering of the securities. Many restricted securities may be
resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be
liquid under criteria established by the Directors. The Fund will
not incur any registration costs upon such resales. The Funds'
restricted securities are valued at the price provided by dealers
in the secondary market or, if no market prices are available, at
the fair value as determined by the Fund's pricing committee.
Additional information on each restricted security held at April
30, 1997 is as follows:
<TABLE>
<CAPTION>
NEW YORK TAX-FREE FUND
<S> <C> <C>
ACQUISITION ACQUISITION
SECURITY DATES COST
Puerto Rico Industrial, Medical & Environment PCA 1/24/1997 $ 1,294,045
</TABLE>
OTHER--Investment transactions are accounted for on the trade
date.
(3) CAPITAL STOCK
At April 30, 1997, there were 1,000,000,000 shares of $0.001 par value
capital stock authorized with respect to each Fund. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
NEW YORK
U.S. GOVERNMENT TAX-FREE
SECURITIES FUND FUND
<S> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED
APRIL 30, APRIL 30,
<CAPTION>
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Shares sold 1,710,458 788,355 858,336 1,040,591
- ------------------------------------------
Shares issued to shareholders in payment
of distributions declared 125,662 97,196 118,381 106,562
- ------------------------------------------
Shares redeemed (727,517) (455,199) (751,725) (681,796)
- ------------------------------------------ ---------- --------- --------- ----------
Net change resulting from share
transactions 1,108,603 430,352 224,992 465,357
- ------------------------------------------ ---------- --------- --------- ----------
</TABLE>
VISION EQUITY AND INCOME FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH AND CAPITAL
INCOME FUND APPRECIATION FUND
<S> <C> <C> <C>
YEAR ENDED PERIOD ENDED
APRIL 30, APRIL 30,
<CAPTION>
1997 1996 1997 (A)
<S> <C> <C> <C>
Shares sold 3,564,637 1,412,452 2,993,059
- -------------------------------------------
Shares issued to shareholders in payment of
distributions declared 154,932 19,938 17,066
- -------------------------------------------
Shares redeemed (1,050,710) (353,723) (39,479)
- ------------------------------------------- ----------- ---------- ------------
Net change resulting from share
transactions 2,668,859 1,078,667 2,970,646
- ------------------------------------------- ----------- ---------- ------------
</TABLE>
(a) For the period from July 3, 1996 (date of initial public
investment) to April 30, 1997.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Manufacturers and Traders Trust Company, the
Funds' investment adviser (the "Adviser"), receives for its services
an annual investment advisory fee based on a percentage of each Fund's
average daily net assets (see below). The Adviser may voluntarily
choose to waive any portion of its fee or reimburse other operating
expenses. The Adviser can modify or terminate this voluntary waiver or
reimbursement at any time at its sole discretion.
<TABLE>
<CAPTION>
ANNUAL
FUND RATE
<S> <C>
U.S. Government Securities Fund 0.70%
New York Tax-Free Fund 0.70%
Growth and Income Fund 0.70%
Capital Appreciation Fund 0.85%
</TABLE>
With respect to Growth and Income Fund, the Adviser had entered into a
sub-advisory contract with Harbor Capital Management Company, Inc.
(the "Sub-Adviser"), which terminated December 31, 1996. The Adviser
had agreed to pay Sub-Adviser up to 0.50% of the Fund's average daily
net assets up to $100 million and 0.40% of such assets in excess
thereof.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides
the Funds with certain administrative personnel and services. The fee
paid to FAS is based on the level of average aggregate net assets of
the Corporation for the period. FAS may voluntarily choose to waive a
portion of its fee. FAS can modify or terminate this voluntary waiver
at any time at its sole discretion.
DISTRIBUTION FEE--The Corporation has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, each Fund will reimburse Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of the Funds to finance
activities intended to result in the sale of the Funds' shares. The
Plan provides that the Funds may incur distribution expenses up to
0.25% of the average daily net assets of the Fund, annually, to
reimburse FSC. The Funds did not pay or accrue Distribution Fees
during the fiscal year ended April 30, 1997.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Manufacturers and Traders Trust Company, the Funds can
pay Manufacturers and Traders Trust Company up to 0.25% of average
daily net assets of the Funds for the period. The fee paid to
Manufacturers and Traders
VISION EQUITY AND INCOME FUNDS
- --------------------------------------------------------------------------------
Trust Company is used to finance certain services for shareholders and
to maintain shareholder accounts. The Funds did not pay or accrue
Shareholder Services Fees during the fiscal year ended April 30, 1997.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder
Services Company ("FSSC") serves as transfer and dividend disbursing
agent for the Funds. The fee paid to FSSC is based on the size, type,
and number of accounts and transactions made by shareholders.
ORGANIZATIONAL EXPENSES--Organizational expenses were borne initially
by FAS. The Funds have agreed to reimburse FAS for the organizational
expenses during the five year period following each Fund's effective
date. For the year ended April 30, 1997, the following amounts were
paid pursuant to this agreement:
<TABLE>
<CAPTION>
AMOUNT REIMBURSED TO FAS
EXPENSES OF FOR THE YEAR ENDED
ORGANIZING THE FUND APRIL 30, 1997
<S> <C> <C>
U.S. Government Securities Fund $ 21,313 $ 6,031
New York Tax-Free Fund $ 27,242 $ 7,776
Growth and Income Fund $ 18,626 $ 5,447
Capital Appreciation Fund $ 19,915 $ 1,413
</TABLE>
GENERAL--Certain of the Officers of the Corporation are Officers and
Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities,
for the year ended April 30, 1997, were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
<S> <C> <C>
U.S. Government Securities Fund $ 54,238,040 $ 44,003,537
New York Tax-Free Fund $ 28,421,617 $ 26,177,280
Growth and Income Fund $ 146,120,008 $ 112,586,894
Capital Appreciation Fund $ 37,260,626 $ 7,810,433
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since New York Tax-Free Fund invests a substantial portion of its
assets in issuers located in one state, it will be more susceptible to
factors adversely affecting issuers of that state than would be a
comparable tax-exempt mutual fund that invests nationally. In order to
reduce the credit risk associated with such factors, at April 30,
1997, 20.9% of the securities in the portfolio of investments are
backed by letters of credit or bond insurance of various financial
institutions and financial guaranty assurance agencies. The value of
investments insured by or supported (backed) by a letter of credit
from any one institution or agency did not exceed 8.4% of total
investments.
(7) SUBSEQUENT EVENT
Effective May 1, 1997, State Street Bank and Trust Company ("SSB") was
succeeded by FServ as portfolio accountant to the Funds. FServ will
maintain the Funds' accounting records for which it will receive a
fee. The fee will be based on the level of the Funds' average daily
net assets for the period, plus out-of-pocket expenses. All portfolio
accounting fees for the period ended April 30, 1997 were paid to SSB.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of VISION GROUP OF FUNDS,
INC.:
We have audited the accompanying statement of assets and liabilities
of Vision U.S. Government Securities Fund, Vision New York Tax Free
Fund, Vision Growth and Income Fund, and Vision Capital Appreciation
Fund (four of the portfolios of Vision Group of Funds, Inc.),
including the portfolios of investments, as of April 30, 1997, and the
related statements of operations for the year or period then ended,
the statements of changes in net assets for each of the periods
presented and financial highlights for each of the periods presented.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of April 30, 1997, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of each of the respective portfolios of Vision
Group of Funds, Inc., as identified above, at April 30, 1997, the
results of their operations for the year or period then ended, the
changes in their net assets for each of the periods presented, and
financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 19, 1997
ADDRESSES
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 842-4488
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14203
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
ADMINISTRATOR
Federated Administrative Services
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219
Vision
U.S. Government
Securities Fund
---------------------------------------------
Vision
New York Tax-Free
Fund
---------------------------------------------
Vision
Growth and Income
Fund
---------------------------------------------
Vision
Capital Appreciation
Fund
---------------------------------------------
Prospectus dated
June 30, 1997
[LOGO OF VISION]
MANUFACTURERS AND TRADERS
TRUST COMPANY
---------------------------------------
Investment Adviser
A subsidiary of First Empire State
Corporation
[LOGO OF FEDERATED INVESTORS]
Federated Securities Corp., Distributor
92830F406
92830F505
92830F604
92830F703
TRG00157-01 (6/97)
G00157-01 (6/97)
VISION U.S. GOVERNMENT SECURITIES FUND
VISION NEW YORK TAX-FREE FUND
VISION GROWTH AND INCOME FUND
VISION CAPITAL APPRECIATION FUND
(PORTFOLIOS OF VISION GROUP OF FUNDS, INC.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information relates to the
prospectus of four portfolios of the Vision Group of Funds,
Inc., referred to as the Vision U.S. Government Securities Fund,
Vision New York Tax-Free Fund, Vision Growth and Income Fund,
and Vision Capital Appreciation Fund (collectively, the "Funds"
or individually, a "Fund") dated June 30, 1997.
This Statement of Additional Information is not a prospectus
itself, but should be read in conjunction with the Funds'
current prospectus dated June 30, 1997. This Statement of
Additional Information is incorporated into the Funds'
prospectus by reference. To receive a copy of the prospectus for
the Funds, or a paper copy of this Statement of Additional
Information, if you have received it electronically, write to
Vision Group of Funds, Inc., P.O. Box 4556, Buffalo, NY
14240-4556, or call (800) 836-2211 or (716) 842-4488. Please
retain this Statement of Additional Information for future
reference.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement of Additional Information dated June 30, 1997
MANUFACTURERS AND TRADERS
TRUST COMPANY
Investment Adviser
A subsidiary of First Empire State Corporation
Federated Securities Corp. is distributor for the Funds.
<PAGE>
- ----------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------------------------------
I
GENERAL INFORMATION ABOUT THE FUNDS 1
- ----------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES 1
- ----------------------------------------------------------------------------
Types of Acceptable Investments and Techniques 1
Municipal Security Issues 1
Illiquid and Restricted Securities 3
Corporate Debt Securities 4
Ratings 4
Zero Coupon Bonds 4
Mortgage-Related Securities 4
Lending of Portfolio Securities 5
Insurance on Municipal Securities 5
Futures and Options Transactions 7
Securities of Foreign Issuers 10
Short Sales 10
Warrants 10
Duration 10
Temporary Investments 11
Money Market Instruments 11
When-Issued And Delayed Delivery
Transactions 11
Repurchase Agreements 11
Reverse Repurchase Agreements 11
Portfolio Turnover 12
INVESTMENT LIMITATIONS 12
- ----------------------------------------------------------------------------
New York Investment Risks 14
VISION GROUP OF FUNDS, INC. MANAGEMENT 15
- ----------------------------------------------------------------------------
Fund Ownership 16
Directors' Compensation 17
Director Liability 17
INVESTMENT ADVISORY SERVICES 17
- ----------------------------------------------------------------------------
Adviser to the Funds 17
Advisory Fees 18
OTHER SERVICES 18
- ----------------------------------------------------------------------------
Administrative Services 18
Custodian and Portfolio Accountant 18
Transfer Agent and Dividend Disbursing
Agent 18
Independent Auditors 18
BROKERAGE TRANSACTIONS 18
- ----------------------------------------------------------------------------
DESCRIPTION OF FUND SHARES 19
- ----------------------------------------------------------------------------
HOW TO BUY SHARES 20
- ----------------------------------------------------------------------------
Conversion to Federal Funds 20
DETERMINING MARKET VALUE OF SECURITIES 20
- ----------------------------------------------------------------------------
REDEEMING FUND SHARES 20
- ----------------------------------------------------------------------------
Redemption in Kind 21
Exchanging Securities For Fund Shares 21
DETERMINING NET ASSET VALUE 21
- ----------------------------------------------------------------------------
BANKING LAWS 21
- ----------------------------------------------------------------------------
TAX STATUS 22
- ----------------------------------------------------------------------------
The Funds' Tax Status 22
Shareholders' Tax Status 22
TOTAL RETURN 22
- ----------------------------------------------------------------------------
YIELD 23
- ----------------------------------------------------------------------------
TAX-EQUIVALENT YIELD 23
- ----------------------------------------------------------------------------
Tax-Equivalency Table 23
PERFORMANCE COMPARISONS 25
- ----------------------------------------------------------------------------
Economic and Market Information 27
APPENDIX 28
- ----------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
- ----------------------------------------------------------------------------
I
GENERAL INFORMATION ABOUT THE FUNDS
- ----------------------------------------------------------------------------
The Funds are portfolios in the Vision Group of Funds, Inc. (the "Corporation").
The Corporation was established as a Maryland Corporation under Articles of
Incorporation dated February 23, 1988.
INVESTMENT OBJECTIVES AND POLICIES
- -----------------------------------------
The investment objective of each of the Funds cannot be changed
without approval of its shareholders.
The investment objective of Vision U.S. Government Securities Fund
(the "Government Fund") is to provide current income. Capital
appreciation is a secondary investment consideration of the Government
Fund. Current income includes, in general, discount earned on U.S.
Treasury bills and agency discount notes, interest earned on all other
U.S. government securities, and short-term capital gains.
The investment objective of Vision New York Tax-Free Fund (the
"Tax-Free Fund") is to provide current income which is exempt from
federal income tax and personal income taxes imposed by the state of
New York and New York municipalities and is consistent with the
preservation of capital.
The investment objective of Vision Growth and Income Fund (the "Growth
and Income Fund") is to provide long-term growth of capital and
income.
The investment objective of Vision Capital Appreciation Fund (the
"Capital Appreciation Fund") is to provide long-term capital
appreciation.
TYPES OF ACCEPTABLE INVESTMENTS AND TECHNIQUES
MUNICIPAL SECURITY ISSUES
As described in the prospectus, the Government Fund and the Tax-Free
Fund may invest in municipal securities. Municipal securities include
debt obligations issued by governmental entities to obtain funds for
various public purposes, including the construction of a wide range of
public facilities, the refunding of outstanding obligations, the
payment of general operating expenses and the extension of loans to
public institutions and facilities. Additionally, industrial
development bonds, another type of municipal security, are issued by
or on behalf of public authorities to finance various
privately-operated facilities. The Tax-Free Fund may purchase
industrial development bonds if the interest paid thereon is exempt
from federal income tax.
There are, of course, variations in the quality of municipal
securities both within a particular classification and between
classifications, and the yields on municipal securities depend upon a
variety of factors, including general money market conditions, the
financial condition of the issuer, general conditions of the municipal
bond market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's
Investors Service Inc. ("Moody's"), Fitch Investors Service, Inc.
("Fitch"), and Standard & Poor's Ratings Group ("S&P") described in
the prospectus and the Appendix to this Statement of Additional
Information represent their opinions as the quality of municipal
securities. It should be emphasized, however, that ratings are general
and are not absolute standards of quality, and municipal securities
with the same maturity, interest rate and rating may have different
yields while municipal securities of the same maturity and interest
rate with different ratings may have the same yield. Subsequent to its
purchase by the Funds, an issue of municipal securities may cease to
be rated or its rating may be reduced below the minimum rating
required for purchase by the Funds. Manufacturers and Traders Trust
Company ("M&T Bank"), the investment adviser to the Funds, will
consider such an event in determining whether the Funds should
continue to hold the obligations.
The payment of principal and interest on most municipal securities
purchased by the Funds will depend upon the ability of the issuers to
meet their obligations. An issuer's obligations under its municipal
securities are subject to the provisions of bankruptcy, insolvency and
other laws affecting the rights and remedies of creditors, such as the
Federal Bankruptcy Code, and laws, if any, which may be enacted by
federal or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon
enforcement of such obligations or upon the ability of municipalities
to levy taxes. The power or ability of an issuer to meet its
obligations for the payment of interest on and principal of its
municipal securities may be materially adversely affected by
litigation or other conditions. For purposes of this Statement of
Additional Information and the Government and the Tax-Free Fund's
prospectus, the District of Columbia, each state, each of their
political subdivisions, agencies, instrumentalities and authorities
and each multi-state agency of which a state is a member is considered
to be an "issuer." Further, the nongovernmental user of facilities
financed by industrial development bonds is considered to be an
"issuer." With respect to those municipal securities that are
supported by a bank guarantee, insurance policy or other credit
facility, the bank or other institution (or governmental agency)
providing the guarantee, insurance or credit facility may also be
considered to be an "issuer" in connection with the guarantee,
insurance or facility.
Among other types of municipal securities, the Funds may purchase
short-term general obligation notes, tax anticipation notes, bond
anticipation notes, revenue anticipation notes, tax-exempt commercial
paper, construction loan notes and other forms of short-term loans.
Such instruments are issued with a short-term maturity in anticipation
of the receipt of tax funds, the proceeds of bond placements or other
revenues. In addition, the Funds may invest in other types of
tax-exempt instruments (taxable with respect to the Government Fund),
such as municipal bonds and industrial development bonds.
Examples of municipal securities which the Government Fund and the
Tax-Free Fund (limited to New York municipal securities) may purchase
include:
o governmental lease certificates of participation issued by
state or municipal authorities where payment is secured by
installment payments for equipment, buildings, or other
facilities being leased by the state or municipality.
Government lease certificates purchased by the Funds will
not contain nonappropriation clauses;
o municipal notes and tax-exempt commercial paper;
o serial bonds sold with a series of maturity dates;
o tax anticipation notes sold to finance working capital needs of
municipalities in anticipation of receiving taxes;
o bond anticipation notes sold in anticipation of the issuance of
long-term bonds;
o revenue anticipation notes sold in expectation of receipt
of federal income available under the Federal Revenue
Sharing Program;
o pre-refunded municipal bonds whose timely payment of interest and
principal is ensured by an escrow of U.S. government
obligations; and
o general obligation bonds.
VARIABLE-RATE MUNICIPAL SECURITIES
The Tax-Free Fund may purchase variable-rate municipal
securities. Variable-interest rates generally reduce changes
in the market value of municipal securities from their
original purchase prices. Accordingly, as interest rates
decrease or increase, the potential for capital appreciation
or depreciation is less for variable-rate municipal
securities than for fixed-income obligations. Many municipal
securities with variable-interest rates purchased by the
Tax-Free Fund are subject to repayment of principal (usually
within seven days) on the Tax-Free Fund's demand. The terms
of these variable-rate demand instruments require payment of
principal and accrued interest from the issuer of the
municipal obligations, the issuer of the participation
interests, or a guarantor of either issuer.
PARTICIPATION INTERESTS
The Tax-Free Fund may purchase municipal securities in the
form of participation interests. The financial institutions
from which the Tax-Free Fund purchases participation
interests frequently provide or secure from another financial
institution irrevocable letters of credit or guarantees and
give the Tax-Free Fund the right to demand payment of the
principal amounts of the participation interests plus accrued
interest on short notice (usually within seven days).
MUNICIPAL LEASES
The Tax-Free Fund may purchase municipal securities in the
form of participation interests which represent undivided
proportional interests in lease payments by a governmental or
non-profit entity. The lease payments and other rights under
the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal
charter or the nature of the appropriation for the lease. In
particular, lease obligations may be subject to periodic
appropriation. If the entity does not appropriate funds for
future lease payments, the entity cannot be compelled to make
such payments. Furthermore, a lease may provide that the
certificate trustee cannot accelerate lease obligations upon
default. The trustee would only be able to enforce lease
payments as they became due. In the event of a default or
failure of appropriation, it is unlikely that the trustee
would be able to obtain an acceptable substitute source of
payment.
When determining whether municipal leases purchased by the
Tax-Free Fund will be classified as a liquid or an illiquid
security, the Board of Directors ("Directors") has directed
the Tax-Free Fund's adviser to consider certain factors such
as: the frequency of trades and quotes for the security; the
volatility of quotations and trade prices for the security;
the number of dealers willing to purchase or sell the
security and the number of potential purchasers; dealer
undertaking to make a market in the security; the nature of
the security and the nature of the marketplace trades (e.g.,
the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer); the rating
of the security and the financial condition and prospects of
the issuer of the security; whether the lease can be
terminated by the lessee; the potential recovery, if any,
from a sale of the leased property upon termination of the
lease; the lessee's general credit strength (e.g., its debt,
administrative, economic and financial characteristics and
prospects); the likelihood that the lessee will discontinue
appropriating funding for the lease property because the
property is no longer deemed essential to its operations
(e.g., the potential for an "event of nonappropriation"); any
credit enhancement or legal recourse provided upon an event
of nonappropriation or other termination of the lease; and
such other factors as may be relevant to the Tax-Free Fund's
ability to dispose of the security.
ILLIQUID AND RESTRICTED SECURITIES
Each of the Funds may invest in illiquid and restricted securities.
The ability of the Directors to determine the liquidity of certain
restricted securities is permitted under a Securities and Exchange
Commission staff position set forth in the adopting release for Rule
144A under the Securities Act of 1933 (the "Rule"). The Rule is a
non-exclusive, safe-harbor for certain secondary market transactions
involving securities subject to restrictions on resale under federal
securities laws. The Rule provides an exemption from registration for
resales of otherwise restricted securities to qualified institutional
buyers. The Rule was expected to further enhance the liquidity of the
secondary market for securities eligible for resale under the Rule.
The Funds believe that the staff of the Securities and Exchange
Commission has left the question of determining the liquidity of all
restricted securities (eligible for resale under the Rule) to the
Corporation's Board.
Under the criteria currently established by the Directors, the Funds'
investment adviser must consider the following factors in determining
the liquidity of restricted securities and, with respect to the
Tax-Free Fund, municipal lease securities; (1) the frequency of trades
and quotes for the security; (2) the volatility of quotations and
trade prices for the security; (3) the number of dealers willing to
purchase or sell the security and the number of potential purchasers;
(4) dealer undertakings to make a market in the security; (5) the
nature of the security and the nature of the marketplace trades; (6)
the rating of the security and the financial condition and prospects
of the issuer of the security; and (7) such other factors as may be
relevant to a Fund's ability to dispose of the security. In the case
of a municipal lease security, the Tax-Free Fund's adviser must also
consider the following additional factors: (a) whether the lease can
be terminated by the lessee; (b) the potential recovery, if any, from
a sale of the leased property upon termination of the lease; (c) the
lessee's general credit strength; (d) the likelihood that the lessee
will discontinue appropriating funding for the leased property because
the property is no longer deemed essential to its operations; and (e)
any credit enhancement or legal recourse provided upon an event of
nonappropriation or other termination of the lease.
The Funds may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities
Act of 1933. Section 4(2) commercial paper is restricted as to
disposition under federal securities law, and is generally sold to
institutional investors, such as the Funds, who agree that they are
purchasing the paper for investment purposes and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) commercial paper is normally resold to other
institutional investors like the Funds through or with the assistance
of the issuer or investment dealers who make a market in Section 4(2)
commercial paper, thus providing liquidity. The Funds believe that
Section 4(2) commercial paper and possibly certain other restricted
securities which meet the criteria for liquidity established by the
Directors are quite liquid. The Funds intend, therefore, to treat the
restricted securities which meet the criteria for liquidity
established by the Directors, including Section 4(2) commercial paper,
as determined by a Fund's investment adviser, as liquid and not
subject to the investment limitation applicable to illiquid
securities. In addition, because Section 4(2) commercial paper is
liquid, the Funds intend to not subject such paper to the limitation
applicable to restricted securities.
<PAGE>
CORPORATE DEBT SECURITIES
Each of the Funds may invest in corporate debt securities. Corporate
debt securities may bear fixed, fixed and contingent, or variable
rates of interest. They may involve equity features such as conversion
or exchange rights, warrants for the acquisition of common stock of
the same or a different issuer, participations based on revenues,
sales, or profits, or the purchase of common stock in a unit
transaction (where corporate debt securities and common stock are
offered as a unit).
Increasing rate securities, which currently do not make up a
significant share of the market in corporate debt securities, are
generally offered at an initial interest rate which is at or above
prevailing market rates. Interest rates are reset periodically (most
commonly every 90 days) at different levels on a predetermined scale.
These levels of interest are ordinarily set at progressively higher
increments over time. Some increasing rate securities may, by
agreement, revert to a fixed rate status. These securities may also
contain features which allow the issuer the option to convert the
increasing rate of interest to a fixed rate under such terms,
conditions, and limitations as are described in each issuer's
prospectus.
RATINGS
The corporate debt obligations in which the Government Fund may invest
will be rated at the time of purchase in the top three rating
categories of a nationally recognized statistical rating organization
and top four categories (investment grade) for the other Funds, or if
unrated, of comparable quality as determined by the Fund's adviser. If
any security purchased by a Fund is subsequently downgraded,
securities will be evaluated on a case by case basis by the Fund's
adviser. The Fund's adviser will determine whether or not the security
continues to be an acceptable investment. If not, the security will be
sold. The lowest category of investment grade securities (e.g., Baa or
BBB) have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a
weakened capacity to pay principal and interest payments on such
obligations than higher rated obligations. A description of the rating
categories is contained in this Statement of Additional Information.
(See "Appendix").
ZERO COUPON BONDS
The Government Fund, Tax-Free Fund, and Growth and Income Fund may
invest in zero coupon bonds, which are debt securities issued at a
discount to their face amount that do not entitle the holder to any
periodic payments of interest prior to maturity. Rather, interest
earned on zero coupon bonds accretes at a stated yield until the
security reaches its face amount at maturity. Generally, the prices of
zero coupon bonds may be more sensitive to market interest rate
fluctuations than conventional debt securities.
Federal income tax law requires the holder of a zero coupon bond to
recognize income from the security prior to the receipt of cash
payments. To maintain their qualification as regulated investment
companies and avoid liability of federal income taxes, the Funds will
be required to distribute income accrued from zero coupon bonds which
each Fund owns, and may have to sell portfolio securities (perhaps at
disadvantageous times) in order to generate cash to satisfy these
distribution requirements.
MORTGAGE-RELATED SECURITIES
Privately issued mortgage-related securities which the Government Fund
and Growth and Income Fund may purchase generally represent an
ownership interest in federal agency mortgage pass-through securities
such as those issued by Government National Mortgage Association. The
terms and characteristics of the mortgage instruments may vary among
pass-through mortgage loan pools. The market for such mortgage-related
securities has expanded considerably since its inception. The size of
the primary issuance market and the active participation in the
secondary market by securities dealers and other investors makes
government-related pools highly liquid.
RESETS OF INTEREST
The interest rates paid on the ARMS, CMOs, and REMICs in
which the Government Fund and Growth and Income Fund may
invest generally are readjusted at intervals of one year or
less to an increment over some predetermined interest rate
index. There are two main categories of indices: those based
on U.S. Treasury securities and those derived from a
calculated measure, such as a cost of funds index or a moving
average of mortgage rates. Commonly utilized indices include
the one-year and five-year constant maturity Treasury Note
rates, the three-month Treasury Bill rate, the 180-day
Treasury Bill rate, rates on longer-term Treasury securities,
the National Median Cost of Funds, the one-month or
three-month London Interbank Offered Rate (LIBOR), the prime
rate of a specific bank, or commercial paper rates. Some
indices, such as the one-year constant maturity Treasury Note
rate, closely mirror changes in market interest rate levels.
Others tend to lag changes in market rate levels and tend to
be somewhat less volatile.
To the extent that the adjusted interest rate on the mortgage
security reflects current market rates, the market value of
an adjustable rate mortgage security will tend to be less
sensitive to interest rate changes than a fixed rate debt
security of the same stated maturity. Hence, adjustable rate
mortgage securities which use indices that lag changes in
market rates should experience greater price volatility than
adjustable rate mortgage securities that closely mirror the
market. Certain residual interest tranches of CMOs may have
adjustable interest rates that deviate significantly from
prevailing market rates, even after the interest rate is
reset, and are subject to correspondingly increased price
volatility. In the event the Government Fund purchases such
residual interest mortgage securities, it will factor in the
increased interest and price volatility of such securities
when determining its dollar-weighted average duration.
CAPS AND FLOORS
The underlying mortgages which collateralize the ARMS, CMOs,
and REMICs in which the Government Fund and Growth and Income
Fund invest will frequently have caps and floors which limit
the maximum amount by which the loan rate to the residential
borrower may change up or down: (1) per reset or adjustment
interval, and (2) over the life of the loan. Some residential
mortgage loans restrict periodic adjustments by limiting
changes in the borrower's monthly principal and interest
payments rather than limiting interest rate changes. These
payment caps may result in negative amortization.
The value of mortgage securities in which the Government Fund
invests may be affected if market interest rates rise or fall
faster and farther than the allowable caps or floors on the
underlying residential mortgage loans. Additionally, even
though the interest rates on the underlying residential
mortgages are adjustable, amortization and prepayments may
occur, thereby causing the effective maturities of the
mortgage securities in which the Government Fund and Growth
and Income Fund invest to be shorter than the maturities
stated in the underlying mortgages.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Funds lend portfolio securities must
be valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to a Fund.
During the time portfolio securities are on loan, the borrower pays
the Fund any interest paid on such securities. Loans are subject to
termination at the option of the Fund or the borrower. The Funds may
pay reasonable administrative and custodial fees in connection with a
loan and may pay a negotiated portion of the interest earned on the
cash or equivalent collateral to the borrower or placing broker. The
Funds do not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were
considered important with respect to the investment.
INSURANCE ON MUNICIPAL SECURITIES
The Tax-Free Fund may purchase Policies from MBIA Corp. ("MBIA"),
AMBAC Indemnity Corporation ("AMBAC"), and Financial Guaranty
Insurance Company ("FGIC"), or any other municipal bond insurer which
is rated Aaa by Moody's or AAA by S&P. Each Policy guarantees the
timely payment of principal and interest on those municipal securities
it insures. The Policies will have the same general characteristics
and features. A municipal security will be eligible for coverage if it
meets certain requirements set forth in a Policy. In the event
interest or principal on an insured municipal security is not paid
when due, the insurer covering the security will be obligated under
its Policy to make such payment not later than 30 days after it has
been notified by the Tax-Free Fund that such non-payment has occurred.
The insurance feature reduces financial risk, but the cost thereof and
the restrictions on investments imposed by the guidelines in the
insurance policies reduce the yield to shareholders.
MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on
securities insured by their Policies so long as such securities remain
in the Fund's portfolio, nor may MBIA, AMBAC, or FGIC cancel their
Policies for any reason except failure to pay premiums when due. MBIA,
AMBAC, and FGIC will reserve the right at any time upon 90 days'
written notice to the Tax-Free Fund to refuse to insure any additional
municipal securities purchased by the Tax-Free Fund after the
effective date of such notice. The Board of Directors will reserve the
right to terminate any of the Policies if it determines that the
benefits to the Tax-Free Fund of having its portfolio insured under
such Policy are not justified by the expense involved.
Additionally, the Directors reserve the right to enter into contracts
with insurance carriers other than MBIA, AMBAC, or FGIC if such
carriers are rated AAA by S & P or Aaa by Moody's.
Under the Policies, municipal bond insurers unconditionally guarantee
to the Tax-Free Fund the timely payment of principal and interest on
the insured municipal securities when and as such payments shall
become due but shall not be paid by the issuer, except that in the
event of any acceleration of the due date of the principal by reason
of mandatory or optional redemption (other than acceleration by reason
of mandatory sinking fund payments), default or otherwise, the
payments guaranteed will be made in such amounts and at such times as
payments of principal would have been due had there not been such
acceleration. The municipal bond insurers will be responsible for such
payments less any amounts received by the Tax-Free Fund from any
trustee for the municipal bond issuers or from any other source. The
Policies do not guarantee payment on an accelerated basis, the payment
of any redemption premium, the value for the shares of the Tax-Free
Fund, or payments of any tender purchase price upon the tender of the
municipal securities. The Policies also do not insure against
nonpayment of principal of or interest on the securities resulting
from the insolvency, negligence or any other act or omission of the
trustee or other paying agent for the securities. However, with
respect to small issue industrial development municipal bonds and
pollution control revenue municipal bonds covered by the Policies, the
municipal bond insurers guarantee the full and complete payments
required to be made by or on behalf of an issuer of such municipal
securities if there occurs any change in the tax-exempt status of
interest on such municipal securities, including principal, interest
or premium payments, if any, as and when required to be made by or on
behalf of the issuer pursuant to the terms of such municipal
securities. A "when-issued" municipal security will be covered under
the Policies upon the settlement date of the issuer of such
"when-issued" municipal security. In determining whether to insure
municipal securities held by the Tax-Free Fund, each municipal bond
insurer has applied its own standard, which corresponds generally to
the standards it has established for determining the insurability of
new issues of municipal securities. This insurance is intended to
reduce financial risk, but the cost thereof and compliance with
investment restrictions imposed under the Policies will reduce the
yield to shareholders of the Tax-Free Fund.
If a Policy terminates as to municipal securities sold by the Tax-Free
Fund on the date of sale, in which event municipal bond insurers will
be liable only for those payments of principal and interest that are
then due and owing, the provision for insurance will not enhance the
marketability of securities held by the Tax-Free Fund, whether or not
the securities are in default or subject to significant risk of
default, unless the option to obtain permanent insurance is exercised.
On the other hand, since Issuer-Obtained Insurance will remain in
effect as long as the insured municipal securities are outstanding,
such insurance may enhance the marketability of municipal securities
covered thereby, but the exact effect, if any, on marketability cannot
be estimated. The Tax-Free Fund generally intends to retain any
securities that are in default or subject to significant risk of
default and to place a value on the insurance, which ordinarily will
be the difference between the market value of the defaulted security
and the market value of similar securities of minimum investment grade
(i.e., rated "Baa" by Moody's or "BBB" by S&P) that are not in
default. To the extent that the Tax-Free Fund holds defaulted
securities, it may be limited in its ability to manage its investment
and to purchase other municipal securities. Except as described above
with respect to securities that are in default or subject to
significant risk of default, the Tax-Free Fund will not place any
value on the insurance in valuing the municipal securities that it
holds.
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
Municipal Bond Investors Assurance Corp. ("MBIA") is a wholly-owned
subsidiary of MBIA, Inc. MBIA insures municipal bonds. The address
of MBIA is 113 King Street, Armonk, New York, 10504, and its telephone
number is (914) 273-4545.
As of June 30, 1997, S&P has rated the claims-paying ability of MBIA "AAA."
AMBAC INDEMNITY CORPORATION.
AMBAC Indemnity Corporation ("AMBAC") is a wholly-owned
subsidiary of AMBAC, Inc., a financial holding company which
is owned by the public. AMBAC provides financial guarantee
insurance, investment and financial products and health care
information services. The Company provides services to both
public and private customers throughout the United States.
The address of AMBAC's administrative offices is One State
Street Plaza, New York, New York 10004, and its telephone
number is (212) 668-0340. As of June 30, 1997, S&P has rated
the claims-paying ability of AMBAC "AAA."
FINANCIAL GUARANTY INSURANCE COMPANY.
Financial Guaranty Insurance Company ("Financial Guaranty")
is a wholly-owned subsidiary of FGIC Corporation, a Delaware
holding company. FGIC Corporation is wholly-owned by General
Electric Capital Corporation. Financial Guaranty insures
municipal bonds and certain non-municipal structured debt
obligations. The address of Financial Guaranty is 175 Water
St., New York, New York 10038-4972, and its telephone number
is (800) 352-0001. As of June 30, 1997, S&P has rated the
claims-paying ability of Financial Guaranty "AAA."
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares
of the Funds, each of the Funds may attempt to hedge all or a portion
of its portfolios by buying and selling futures contracts, buying put
options on portfolio securities and listed put options on futures
contracts, and writing call options on futures contracts. The Funds
may also write covered call options on portfolio securities to attempt
to increase current income.
Each Fund will maintain its position in securities, options and
segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position of futures
transactions may be closed out over-the-counter or on a nationally
recognized exchange which provides a secondary market for options of
the same series. Each Fund currently does not intend to invest more
than 5% of its total assets in options transactions.
FUTURES CONTRACTS
The Funds may purchase and sell financial futures contracts
to hedge against the effects of changes in the value of
portfolio securities due to anticipated changes in interest
rates and market conditions without necessarily buying or
selling the securities. The Funds will not engage in futures
transactions for speculative purposes. A futures contract is
a firm commitment by two parties: the seller who agrees to
make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take
delivery of the security ("going long") at a certain time in
the future.
For example, in the fixed income securities market, price
moves inversely to interest rates. A rise in rates means a
drop in price. Conversely, a drop in rates means a rise in
price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, a Fund
could enter into contracts to deliver securities at a
predetermined price (i.e., "go short") to protect itself
against the possibility that the prices of its fixed income
securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase
securities in the future at a predetermined price) to hedge
against a decline in market interest rates.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, a Fund does not
pay or receive money upon the purchase or sale of a futures
contract. Rather, the Fund is required to deposit an amount
of "initial margin" in cash or U.S. Treasury bills with its
custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from
that of margin in securities transactions in that futures
contract initial margin does not involve the borrowing of
funds by the Fund to finance the transactions. Initial margin
is in the nature of a performance bond or good faith deposit
on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual
obligations have been satisfied.
A futures contract held by a Fund is valued daily at the
official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund
and the broker of the amount one would owe the other if the
futures contract expired. In computing its daily net asset
value, the Fund will mark-to-market its open futures
positions. The Funds are also required to deposit and
maintain margin when they write call options on futures
contracts.
Each Fund will comply with the following restrictions when
purchasing and selling futures contracts. To the extent
required to comply with Commodity Futures Trading Commission
("CFTC") Regulation 4.5 and thereby avoid status as a
"commodity pool operator," each Fund will not enter into a
futures contract for other than bona fide hedging purposes,
or purchase an option thereon, if immediately thereafter the
initial margin deposits for futures contracts held by it,
plus premiums paid by it for open options on futures
contracts, would exceed 5% of the market value of a Fund's
net assets, after taking into account the unrealized profits
and losses on those contracts it has entered into; and,
provided further, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount
may be excluded in computing such 5%. Second, since a Fund
does not constitute a commodity pool, it will not market
itself as such, nor serve as a vehicle for trading in the
commodities futures or commodity options markets. Finally,
because each Fund will submit to the CFTC special calls for
information, none of the Funds will register as a commodities
pool operator.
<PAGE>
PUT OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may purchase listed put options on
financial futures contracts. The Growth and Income Fund and
Capital Appreciation Fund may also purchase listed put
options on stock index futures contracts. The Funds would
purchase put options on futures contracts to protect
portfolio securities against decreases in value resulting
from an anticipated increase in market interest rates or
changes in stock prices. Unlike entering directly into a
futures contract, which requires the purchaser to buy a
financial instrument on a set date at a specified price, the
purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a
future date whether to assume a short position at the
specified price.
Generally, if the hedged portfolio securities decrease in
value during the term of an option, the related futures
contracts will also decrease in value and the option will
increase in value. In such an event, the Funds will normally
close out its option by selling an identical option. If the
hedge is successful, the proceeds received by the Funds upon
the sale of the second option will be large enough to offset
both the premium paid by the Funds for the original option
plus the decrease in value of the hedged securities.
Alternatively, a Fund may exercise its put option to close
out the position. To do so, it would simultaneously enter
into a futures contract of the type underlying the option
(for a price less than the strike price of the option) and
exercise the option. The Fund would then deliver the futures
contract in return for payment of the strike price. If the
Fund neither closes out nor exercises an option, the option
will expire on the date provided in the option contract, and
the premium paid for the contract will be lost.
CALL OPTIONS ON FINANCIAL AND STOCK INDEX FUTURES CONTRACTS
In addition to purchasing put options on futures, each Fund
may write listed call options on financial futures contracts
(and stock index futures contracts for the Growth and Income
Fund and Capital Appreciation Fund) to hedge its portfolio
against an increase in market interest rates or changes in
stock market conditions. When a Fund writes a call option on
a futures contract, it is undertaking the obligation of
assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during the
life of the option if the option is exercised. As market
interest rates rise, causing the prices of futures to go
down, the Fund's obligation under a call option on a future
(to sell a futures contract) costs less to fulfill, causing
the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down
below the strike price, the buyer of the option has no reason
to exercise the call, so that the Fund keeps the premium
received for the option. This premium can offset the drop in
value of the Fund's fixed income portfolio which is occurring
as interest rates rise.
Prior to the expiration of a call written by one of the
Funds, or exercise of it by the buyer, the Fund may close out
the option by buying an identical option. If the hedge is
successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The
net premium income of the Fund will then offset the decrease
in value of the hedged securities.
A Fund will not maintain open positions in futures contracts
it has sold or call options it has written on futures
contracts if, in the aggregate, the value of the open
positions (marked to market) exceeds the current market value
of its securities portfolio plus or minus the unrealized gain
or loss on those open positions, adjusted for the correlation
of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the
Fund will take prompt action to close out a sufficient number
of open contracts to bring its open futures and options
positions within this limitation.
PURCHASING PUT OPTIONS ON PORTFOLIO SECURITIES
The Funds may purchase put options on portfolio securities to
protect against price movements in particular securities in
their portfolios. A put option gives a Fund, in return for a
premium, the right to sell the underlying security to the
writer (seller) at a specified price during the term of the
option. The Funds may purchase these put options as long as
they are listed on a recognized options exchange and the
underlying stocks are held in its portfolio.
WRITING COVERED CALL OPTIONS ON PORTFOLIO SECURITIES
A Fund may also write covered call options on securities
either held in its portfolio or which it has the right to
obtain without payment of further consideration or for which
it has segregated cash in the amount of any additional
consideration. As the writer of a call option, a Fund has the
obligation upon exercise of the option during the option
period to deliver the underlying security upon payment of the
exercise price. Covered call options generally do not present
investment risks different from those associated with a
security purchase. For example, a security may be sold before
it reaches its maximum potential value, or it may be retained
even though its current market price has dropped below its
purchase price. Similarly, a covered call option presents
these risks. For example, when the option purchaser acquires
the security at the predetermined exercise price, a Fund
could be giving up any capital appreciation above the
exercise price that is not offset by the option premium paid
by the option purchaser to a Fund. Conversely, if the
underlying security decreases in price and the option
purchaser decides not to carry out the transaction, a Fund
keeps the premium and a Fund can sell the security or hold
onto it for future price appreciation. A Fund may only sell
call options either on securities held in its portfolio or on
securities which it has the right to obtain without payment
of further consideration or for which it has segregated cash
in the amount of any additional consideration. The call
options which a Fund writes and sells must be listed on a
recognized options exchange. Writing of call options by a
Fund is intended to generate income for the Fund and thereby
protect against price movements in particular securities in
the Fund's portfolio.
OVER-THE-COUNTER OPTIONS
The Funds may purchase and write over-the-counter options on
portfolio securities in negotiated transactions with the
buyer or writers of the options for those options on
portfolio securities held by the Funds and not traded on an
exchange.
STOCK INDEX OPTIONS
The Growth and Income Fund and Capital Appreciation Fund may
purchase put options on stock indices listed on national
securities exchanges or traded in the over-the-counter
market. A stock index fluctuates with changes in the market
values of the stock included in the index.
The effectiveness of purchasing stock index options will
depend upon the extent to which price movements in a Fund's
portfolio correlate with price movements of the stock index
selected. Because the value of an index option depends upon
movements in the level of the index rather than the price of
a particular stock, whether the Fund will realize a gain or
loss from the purchase of options of an index depends upon
movements in the level of stock prices in the stock market
generally or, in the case of certain indices, in an industry
or market segment, rather than movements in the price of a
particular stock. Accordingly, successful use by the Growth
and Income Fund and Capital Appreciation Fund of options on
stock indices will be subject to the ability of M&T Bank to
predict correctly movements in the direction of the stock
market generally or of a particular industry. This requires
different skills and techniques than predicting changes in
the price of individual stocks.
RISKS
When the Funds use futures and options on futures as hedging
devices, there is a risk that the prices of the securities
subject to the futures contracts may not correlate perfectly
with the prices of the securities in a Fund's portfolio. This
may cause the futures contract and any related options to
react differently than the portfolio securities to market
changes. In addition, the Fund's investment adviser could be
incorrect in its expectations about the direction or extent
of market factors such as price movements. In these events,
the Fund may lose money on the futures contract or option.
It is not certain that a secondary market for positions in
futures contracts or for options will exist at all times.
Although the Fund's investment adviser will consider
liquidity before entering into these transactions, there is
no assurance that a liquid secondary market on an exchange or
otherwise will exist for any particular futures contract or
option at any particular time. A Fund's ability to establish
and close out futures and options positions depends on this
secondary market. The inability to close out these positions
could have an adverse effect on a Fund's ability to
effectively hedge its portfolio.
To minimize risks, each Fund may not purchase or sell futures
contracts or related options, for other than bona fide
hedging purposes, if immediately thereafter the sum the
amount of margin deposits on the Fund's existing futures
positions and premiums paid for related options would exceed
5% of the market value of the Fund's net assets after taking
into account the unrealized profits and losses on those
contracts it has entered into; and, provided further, that in
the case of an option that is in-the-money at the time of
purchase, the in-the-money amount may be excluded in
computing such 5%. When the Fund purchases futures contracts,
an amount of cash and cash equivalents, equal to the
underlying commodity value of the futures contracts (less any
related margin deposits), will be deposited in a segregated
account with the Fund's custodian (or the broker, if legally
permitted) to collateralize the position and thereby insure
that the use of such futures contract is unleveraged. When a
Fund sells futures contracts, it will either own or have the
right to receive the underlying future or security, or will
make deposits to collateralize the position as discussed
above.
SECURITIES OF FOREIGN ISSUERS
The Growth and Income Fund and Capital Appreciation Fund may invest in
securities of foreign issuers. Securities of foreign issuers may
include debt obligations of supranational entities, which include
international organizations designed or supported by governmental
entities to promote economic reconstruction or development, and
international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International
Bank for Reconstruction and Development (World Bank), European
Investment Bank and InterAmerican Development Bank.
Securities of a foreign issuer may present greater risks than
investments in U.S. securities, including higher transaction costs as
well as the imposition of additional taxes by foreign governments. In
addition, investments in foreign issuers may include additional risks
associated with less complete financial information about the issuers,
less market liquidity, and political instability. Future political and
economic developments, the possible imposition of withholding taxes on
interest income, the possible seizure or nationalization of foreign
holdings, the possible establishment of exchange controls, or the
adoption of other governmental restrictions, might adversely affect
the payment of principal and interest on securities of foreign
issuers. As a matter of practice, the Growth and Income Fund and
Capital Appreciation Fund will not invest in the securities of a
foreign issuer if any risk appears to either Fund's investment adviser
to be substantial.
SHORT SALES
The Funds may sell securities short from time to time, subject to
certain restrictions. A short sale occurs when a security which a Fund
does not own is sold in anticipation of a decline in its price. If the
decline occurs, shares equal in number to those sold short can be
purchased at the lower price. If the price increases, the higher price
must be paid. The purchased shares are then returned to the original
lender. Risk arises because no loss limit can be placed on the
transaction. When a Fund enters into a short sale, assets that are
equal to the market price of the securities sold short or any lesser
price at which a Fund can obtain such securities, are segregated on a
Fund's records and maintained until a Fund meets its obligations under
the short sale.
No Fund will sell securities short unless (1) it owns, or has a right
to acquire, an equal amount of such securities, or (2) it has
segregated an amount of its other liquid assets equal to the lesser of
the market value of the securities sold short or the amount required
to acquire such securities. While in a short position, the Funds will
retain the securities, rights, or segregated assets.
WARRANTS
The Growth and Income Fund and Capital Appreciation Fund may invest in
warrants. Warrants are basically options to purchase common stock at a
specific price (usually at a premium above the market value of the
optioned common stock at issuance) valid for a specific period of
time. Warrants may have a life ranging from less than a year to twenty
years or may be perpetual. However, most warrants have expiration
dates after which they are worthless. In addition, if the market price
of the common stock does not exceed the warrant's exercise price
during the life of the warrant, the warrant will expire as worthless.
Warrants have no voting rights, pay no dividends, and have no rights
with respect to the assets of the corporation issuing them. The
percentage increase or decrease in the market price of the warrant may
tend to be greater than the percentage increase or decrease in the
market price of the optioned common stock.
DURATION
Duration is a commonly used measure of the potential volatility in the
price of a bond, or other fixed income security, or in a portfolio of
fixed income securities, prior to maturity. Volatility is the
magnitude of the change in the price of a bond relative to a given
change in the market rate of interest. A bond's price volatility
depends on three primary variables: the bond's coupon rate; maturity
date; and the level of market yields of similar fixed income
securities. Generally, bonds with lower coupons or longer maturities
will be more volatile than bonds with higher coupons or shorter
maturities. Duration combines these variables into a single measure.
Duration is calculated by dividing the sum of the time-weighted values
of the cash flows of a bond or bonds, including interest and principal
payments, by the sum the present values of the cash flows. When a Fund
invests in mortgage pass-through securities, its duration will be
calculated in a manner which requires assumptions to be made regarding
future principal prepayments. A more complete description of this
calculation is available upon request.
<PAGE>
TEMPORARY INVESTMENTS
As stated in the prospectus, the Tax-Free Fund may invest a portion of
its assets on a temporary basis for temporary purposes in short-term
taxable money market instruments ("Temporary Investments"). Temporary
Investments in which the Tax-Free Fund may invest include instruments
within the listed classes. Although the Tax-Free Fund has retained the
flexibility of investing up to 20% of its total assets in these
Temporary Investments during non-defensive periods (and greater
amounts during temporary defensive periods), the Tax-Free Fund
anticipates that it would not invest more than 5% of its net assets in
any one of the classes of temporary investments.
MONEY MARKET INSTRUMENTS
The Funds may invest in money market instruments such as:
o instruments of domestic and foreign banks and savings and
loans if they have capital, surplus, and undivided profits
of over $100,000,000, or if the principal amount of the
instrument is federally insured;
o commercial paper rated, at the time of purchase, not less
than A-2 by S&P, Prime-2 by Moody's, or F-2 by Fitch, or
if not rated are determined to be of comparable quality by
the Funds' investment adviser (see Appendix for a
description of the basis of those ratings);
o time and savings deposits (including certificates of
deposit) in commercial or savings banks whose accounts are
insured by the Bank Insurance Fund ("BIF"), or
institutions whose accounts are insured by the Savings
Association Insurance Fund ("SAIF"), including
certificates of deposit issued by, and other time deposits
in, foreign branches of BIF-insured banks which, if
negotiable, mature in six months or less or if not
negotiable, either mature in ninety days or less, or are
withdrawable upon notice not exceeding ninety days; and
o bankers' acceptances.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Funds. No fees or other expenses,
other than normal transaction costs, are incurred. However, liquid
assets of the Funds sufficient to make payment for the securities to
be purchased are segregated on the Funds' records at the trade date.
These assets are marked to market daily and are maintained until the
transaction has been settled. The Funds do not intend to engage in
when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of the
Funds' assets.
REPURCHASE AGREEMENTS
The Funds may enter into repurchase agreements. Repurchase agreements
are arrangements in which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities or certificates
of deposit to the Funds and agree at the time of sale to repurchase
them at a mutually agreed upon time and price within one year from the
date of acquisition. The Funds or their custodian will take possession
of the securities subject to repurchase agreements and these
securities will be marked to market daily. To the extent that the
original seller does not repurchase the securities from a Fund, the
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for
bankruptcy or became insolvent, disposition of such securities by the
Fund might be delayed pending court action. The Funds believe that
under the regular procedures normally in effect for custody of the
Funds' portfolio securities subject to repurchase agreements, a court
of competent jurisdiction would rule in favor of the Funds and allow
retention or disposition of such securities. The Funds may only enter
into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are found by a Fund's
adviser to be creditworthy pursuant to guidelines established by the
Board of Directors.
REVERSE REPURCHASE AGREEMENTS
The Funds may also enter into reverse repurchase agreements. This
transaction is similar to borrowing cash. In a reverse repurchase
agreement, a Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker, or dealer, in
return for a percentage of the instrument's market value in cash, and
agrees that on a stipulated date in the future the Fund will
repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Funds to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous,
but the ability to enter into reverse repurchase agreements does not
ensure that the Funds will be able to avoid selling portfolio
instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of a Fund,
in a dollar amount sufficient to make payment for the obligations to
be purchased, are segregated on the Fund's records at the trade date.
These assets are marked to market daily and are maintained until the
transaction is settled.
PORTFOLIO TURNOVER
The Funds will not attempt to set or meet a portfolio turnover rate
since any turnover would be incidental to transactions undertaken in
an attempt to achieve a Fund's investment objective. Securities in its
portfolio will be sold whenever a Fund's investment adviser believes
it is appropriate to do so in light of a Fund's investment objectives,
without regard to the length of time a particular security may have
been held. For the fiscal years ended April 30, 1997 and 1996, the
Government Fund's, Tax-Free Fund's, and Growth and Income Fund's
portfolio turnover rates were 122% and 132%; 79% and 113%; and 134%
and 77%, respectively.For the period from July 3, 1996 (date of
initial public investment) to April 30, 1997, the portfolio turnover
rate of the Capital Appreciation Fund was 41%.
The Growth and Income Fund's higher rate of portfolio turnover during
the last fiscal year is the direct result of the repositioning of the
portfolio in companies with better future growth prospects. It is
anticipated that the current turnover rate will moderate.
INVESTMENT LIMITATIONS
- ------------------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Funds will not sell any securities short nor purchase any
securities on margin, except as described below and other
than in connection with buying financial futures contracts,
put options on financial futures, put options on portfolio
securities, and writing covered call options, but may obtain
such short-term credits as are necessary for clearance of
purchases and sales of securities.
The deposit or payment by the Funds of initial or variation
margin in connection with financial futures contracts or
related options transactions is not considered the purchase
of a security on margin.
No Fund will sell securities short unless the Fund (1) owns,
or has a right to acquire, an equal amount of such
securities, or (2) has segregated an amount of its other
assets equal to the lesser of the market value of the
securities sold short or the amount required to acquire such
securities. The segregated amount will not exceed 25% of the
respective Fund's net assets. While in a short position, each
Fund will retain the securities, rights, or segregated
assets.
Each Fund may purchase and dispose of U.S. government
securities and CMOs before they are issued and may also
purchase and dispose of them on a delayed delivery basis.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Funds will not issue senior securities except that the
Funds may borrow money and engage in reverse repurchase
agreements in amounts up to one-third of the value of their
net assets, including the amounts borrowed. The Funds will
not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary,
extraordinary, or emergency measure to facilitate management
of the portfolio by enabling the Funds to meet redemption
requests when the liquidation of portfolio securities is
deemed to be inconvenient or disadvantageous. The Funds will
not purchase any securities while borrowings (including
reverse repurchase agreements) in excess of 5% of their
respective total assets are outstanding.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any
assets except to secure permitted borrowings. In those cases,
the Funds may mortgage, pledge, or hypothecate assets having
a market value not exceeding the lesser of the dollar amounts
borrowed or 15% of the value of total assets at the time of
the borrowing. For purposes of this limitation, the following
are not deemed to be pledges: margin deposits for the
purchase and sale of futures contracts and related options
and segregation or collateral arrangements made in connection
with options activities or the purchase of securities on a
when-issued basis.
UNDERWRITING
The Funds will not underwrite any issue of securities except
as they may be deemed to be an underwriter under the
Securities Act of 1933 in connection with the sale of
securities in accordance with their investment objectives,
policies, and limitations.
<PAGE>
INVESTING IN REAL ESTATE
The Funds will not purchase or sell real estate including
limited partnership interests although they may invest in
securities of companies whose business involves the purchase
or sale of real estate or in securities which are secured by
real estate or interests in real estate.
LENDING CASH OR SECURITIES
The Funds will not lend any of their assets except portfolio
securities, the market value of which does not exceed
one-third of the value of the Funds' respective total assets.
This shall not prevent the Funds from purchasing or holding
U.S. government obligations, money market instruments,
variable rate demand notes, bonds, debentures, notes,
certificates of indebtedness, or other debt securities,
entering into repurchase agreements, or engaging in other
transactions where permitted by the Funds' respective
investment objectives, policies, and limitations.
INVESTING IN COMMODITIES
The Funds will not purchase or sell commodities, commodity
contracts, or commodity futures contracts except that the
Funds may purchase and sell futures contracts and related
options.
CONCENTRATION OF INVESTMENTS
The Funds will not invest 25% or more of the value of their
total assets in any one industry, except that the Government
Fund, Growth and Income Fund, and Capital Appreciation Fund,
and, for temporary defensive purposes, the Tax-Free Fund, may
invest 25% or more of the value of its total assets in cash
or cash items (including instruments issued by a U.S. branch
of a domestic bank or savings and loan association and
bankers' acceptances), securities issued or guaranteed by the
U.S. government, its agencies, or instrumentalities, and
repurchase agreements collateralized by such securities.
In addition, the Tax-Free Fund may invest more than 25% of
the value of its total assets in obligations issued by any
state, territory, or possession of the United States, the
District of Columbia or any of their authorities, agencies,
instrumentalities or political subdivisions.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its
total assets, the Funds (other than the Tax-Free Fund) will
not purchase securities issued by any one issuer (other than
cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by
such securities) if as a result more than 5% of the value of
its total assets would be invested in the securities of that
issuer. Also, the Fund will not acquire more than 10% of the
outstanding voting securities of any one issuer.
INVESTING IN EXEMPT-INTEREST OBLIGATIONS
The Tax-Free Fund will not invest less than 80% of its net
assets in securities the interest on which is exempt from
federal income tax, except during temporary defensive
periods. AMT obligations are not counted as securities the
interest on which is exempt from federal income tax.
The above investment limitations cannot be changed without shareholder
approval. The following limitation, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Funds will not invest more than 15% of their respective
net assets in illiquid securities, including repurchase
agreements providing for settlement in more than seven days
after notice, over-the-counter options, certain restricted
securities not determined by the Directors to be liquid, and
non-negotiable time deposits with maturities over seven days.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction. None of the Funds has any
present intent to borrow money in excess of 5% of the value of its net
assets during the coming fiscal year.
For purposes of its policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items."
NEW YORK INVESTMENT RISKS
The Tax-Free Fund invests in obligations of New York (the "State")
issuers which result in the Tax-Free Fund's performance being subject
to risks associated with the overall conditions present within the
State. The following information is a general summary of the State's
financial condition and a brief summary of the prevailing economic
conditions. This information is based on various sources that are
believed to be reliable but should not be considered as a complete
description of all relevant information.
The State has achieved fiscal balance for the last few years after
large deficits in the middle and late 1980's. Growing social service
needs, education and Medicare expenditures have been the areas of
largest growth while prudent program cuts and increases in revenues
through service fees has enabled the State's budget to remain within
balance for the last few years. The State also benefits from a high
level of per capita income that is well above the national average and
from significant amounts of international trade. While the State still
has a large accumulated deficit as a percentage of its overall budget,
the fiscal performance in recent years has demonstrated a changed
political environment that has resulted in realistic revenue and
expenditure projections to achieve financially favorable results. The
recent budgets have included personal income tax cuts and emphasized
cost control. Budgets in recent years have been delayed due to
disagreements between the Governor and the New York State legislature.
Last year's budget was not passed until July, four months late.
Failure to pass a budget in a timely manner can have a negative impact
on New York municipalities dependent upon state aid.
New York's economy is large and diverse. While several upstate
counties benefit from agriculture, manufacturing and high technology
industries, New York City nonetheless still dominates the State's
economy through its international importance in economic sectors such
as advertising, finance, and banking. The State's economy has been
slow to recover after the late 1980's recession that resulted in the
loss of over 400,000 jobs in the New York City metropolitan area
alone. Any major changes to the financial condition of New York City
would ultimately have an affect on the State.
Obligations of issuers within the State are subject to the provisions
of bankruptcy, insolvency, and other laws affecting the rights of and
remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by the U.S. Congress,
state legislators, or referenda extending the time for payment of
principal and/or interest, or imposing other constraints upon
enforcement of such obligations, or upon the ability of the State or
its political subdivisions to levy taxes. There is also the
possibility that, as a result of litigation or other conditions
(including delays in adopting budgets), the power or ability of any
issuer to pay, when due, the principal of and interest on its
municipal securities may be materially affected.
A substantial principal amount of bonds issued by various State
agencies and authorities are either guaranteed by the State or
supported by the State through lease-purchase arrangements, or other
contractual or moral obligation provisions. Moral obligation
commitments by the State impose no immediate financial obligations on
the State and require appropriations by the legislature before any
payments can be made. Failure of the State to appropriate necessary
amounts or to take other action to permit the authorities and agencies
to meet their obligations could result in defaults on such
obligations. If a default were to occur, it would likely have a
significant adverse impact on the market price of obligations of the
State and its authorities and agencies. In recent years, the State has
had to appropriate large amounts of funds to enable State agencies to
meet their financial obligations and, in some cases, prevent default.
Additional assistance is expected to be required in current and future
fiscal years since certain localities and authorities continue to
experience financial difficulties.
To the extent State agencies and local governments require State
assistance to meet their financial obligations, the ability of the
state of New York to meet its own obligations as they become due or to
obtain additional financing could be adversely affected. This
financial situation could result not only in defaults of State and
agency obligations but also impairment of the marketability of
securities issued by the State, its agencies and local governments.
The overall financial condition of the state can also be illustrated
by changes to its debt ratings. During the period in which the state
experienced financial difficulties, its general obligation long-term
debt ratings as determined by Moody's and S&P decreased from A1 and A,
respectively, to A and A-, which are the current ratings as of April
1997.
The Tax-Free Fund's concentration in municipal securities issued by
the state and its political subdivisions provides a greater level of
risk than a fund which is diversified across numerous states and
municipal entities. The ability of the state or its municipalities to
meet their obligations will depend on the availability of tax and
other revenues; economic, political, and demographic conditions within
the state; and the underlying fiscal condition of the state, its
counties, and its municipalities.
VISION GROUP OF FUNDS, INC. MANAGEMENT
- -----------------------------------------------------------
Officers and Directors are listed with their addresses, birthdates,
present positions with Vision Group of Funds, Inc., and principal
occupations.
- ------------------------------------------------------------
Randall I. Benderson
570 Delaware Avenue
Buffalo, NY
Birthdate: January 12, 1955
Director
Senior Vice President and Chief Operating Officer, Benderson Development
Company, Inc.
Joseph J. Castiglia
Roycroft Campus
21 South Grove Street, Suite 291
East Aurora, NY 14052
Birthdate: July 20, 1934
Director
Director, New York State Electric & Gas Corp.; Secewsow Environmental
Services, Inc.; Blue Cross & Blue Shield of Western New York; Buffalo
Branch, Federal Reserve Bank of New York; and Former President, Chief
Executive Officer and Vice Chairman, Pratt & Lambert United, Inc.
- ----------------------------------------------------------
Daniel R. Gernatt, Jr.
Richardson & Taylor Hollow Roads
Collins, NY
Birthdate: July 14, 1940
Director
President and CFO of Gernatt Asphalt Products, Inc.; Executive Vice
President, Dan Gernatt Gravel Products, Inc.; Vice President,
Countryside Sand & Gravel, Inc.
- ---------------------------------------------------------------
George K. Hambleton, Jr.
670 Young Street
Tonawanda, NY
Birthdate: February 8, 1933
Director
Former President, Brand Name Sales, Inc.; President, Hambleton & Carr, Inc.
- ----------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research Corp.,
and Passport Research, Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated Shareholder Services
Company; Trustee or Director of other funds distributed by Federated
Securities Corp.; President, Executive Vice President and Treasurer of
other funds distributed by Federated Securities Corp.
- -----------------------------------------------------------------------------
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and
Assistant Treasurer of other funds distributed by Federated Securities
Corp.
- ----------------------------------------------------------------
Victor R. Siclari
Federated Investors Tower
Pittsburgh, PA
Birthdate: November 17, 1961
Secretary
Corporate Counsel and Vice President, Federated Administrative
Services; formerly Attorney, Morrison & Foerster (law firm).
- ---------------------------------------------------------------------
FUND OWNERSHIP
As of June 9, 1997, Officers and Directors own less than 1% of the
Fund's outstanding shares.
As of June 9, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Government Fund: Tice & Co.,
Buffalo, New York, owned approximately 1,598,018 shares (32.62%) and
Reho & Co., Buffalo, New York, owned approximately 1,729,655 shares
(35.3%).
As of June 9, 1997, the following shareholder of record owned 5% or
more of the outstanding shares of the Tax-Free Fund: Tice & Co.,
Buffalo, New York, owned approximately 421,147 shares (11.86%).
As of June 9, 1997, the following shareholder of record owned 5% or
more of the outstanding shares of the Growth and Income Fund: Tice &
Co., Buffalo, New York, owned approximately 1,875,462 shares (24.24%)
and Reho & Co., Buffalo, New York, owned approximately 2,688,183
shares (34.75%).
As of June 9, 1997, the following shareholders of record owned 5% or
more of the outstanding shares of the Capital Appreciation Fund: Tice
& Co., Buffalo, New York, owned approximately 558,603 shares (18.34%)
and Reho & Co., Buffalo, New York, owned approximately 1,819,443
shares (59.73%).
<PAGE>
DIRECTORS' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION*#
- ---------------------------------------------------------------------------
Randall I. Benderson,
Director $8,500
Joseph J. Castiglia,
Director $8,000
Daniel R. Gernatt, Jr.,
Director $8,500
George K. Hambleton, Jr.,
Director $8,000
*Information is furnished for the fiscal year ended April 30, 1997.
The Corporation is the only investment company in the Fund Complex.
#The aggregate compensation is provided for the Corporation which is comprised
of seven portfolios.
DIRECTOR LIABILITY
With respect to the removal of a Director of the Corporation, the
Corporation's By-Laws provide, in accordance with applicable law, that
a Director may be removed from the Board at a meeting of shareholders
called for that purpose upon the majority vote of the shareholders of
the Corporation entitled to vote at such meeting. Such a meeting shall
be called by the President or the Board of Directors or at the request
in writing of shareholders entitled to cast at least ten percent (10%)
of the votes entitled to be cast at such meeting. Such shareholders'
request shall state the purpose of the proposed meeting, and the
Corporation shall inform those shareholders of the reasonably
estimated cost of preparing and mailing a notice of the meeting to the
other shareholders and, on payment of these costs, shall notify each
shareholder entitled to notice of the meeting.
INVESTMENT ADVISORY SERVICES
- ------------------------------------------------------
ADVISER TO THE FUNDS
Investment advisory services are provided to the Funds by
Manufacturers and Traders Trust Company ("M&T Bank"). The advisory
services provided and the expenses assumed by M&T Bank, as well as the
advisory fees payable to it, are described in the Funds' prospectus.
The investment advisory agreement provides that M&T Bank shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by the Funds in connection with its performance under the
advisory agreement, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or gross negligence
on the part of M&T Bank in the performance of its duties, or from
reckless disregard by it of its duties and obligations thereunder.
Because of internal controls maintained by M&T Bank to restrict the
flow of non-public information, Fund investments are typically made
without any knowledge of M&T Bank's or its affiliates' lending
relationships with an issuer.
Unless sooner terminated, the advisory agreement between a Fund and
M&T Bank will continue in effect from year to year if such continuance
is approved at least annually by the Corporation's Board of Directors,
or by vote of a majority of the outstanding shares of a Fund (as
defined in the prospectus), and by a majority of the Directors who are
not parties to the advisory agreement or interested persons (as
defined in the Investment Company Act of 1940) of any party to the
advisory agreement, by vote cast in person at a meeting called for
such purpose. The advisory agreement is terminable at any time on
sixty days' written notice without penalty by the Directors, by vote
of a majority of the outstanding shares of a Fund, or by M&T Bank. The
advisory agreement also terminates automatically in the event of its
assignment, as defined in the Investment Company Act of 1940.
<PAGE>
ADVISORY FEES
For its advisory services, M&T Bank receives an annual investment
advisory fee as described in the Prospectus.
For the fiscal years ended April 30, 1997, 1996, and 1995, for the
Government Fund, Tax-Free Fund and Growth and Income Fund, M&T Bank
earned advisory fees of $258,550, $227,041, and $192,549; $234,511,
$209,254, and $179,621; and $308,825, $102,300, and $61,445
respectively, of which $61,752, $48,652, and $166,425; $115,657,
$91,153, and $161,296; and $0, $541, and $49,196, respectively, were
voluntarily waived.
In addition, for the fiscal years ended April 30, 1997, 1996, and
1995, for the Government Fund, Tax-Free Fund, and Growth and Income
Fund, M&T Bank reimbursed $0, $0, and $97,631; $0, $0, and $109,458;
and $0, $0, and $112,828, respectively, of other operating expenses.
For the period from July 3, 1996 (date of initial public investment)
to April 30, 1997, for the Capital Appreciation Fund, M&T Bank earned
advisory fees of $137,485, of which $63,215 was voluntarily waived. In
addition, M&T Bank reimbursed $67,000 of other operating expenses.
Prior to January 1, 1997, Harbor Capital Management ("Harbor") served
as the Growth and Income Fund's sub-adviser. For the fiscal years
ended April 30, 1996, 1995, and 1994, Harbor earned $255,750,
$153,612, and $18,659, respectively, of which $0, $122,991, and
$18,659, respectively, were voluntarily waived. For the period from
April 30, 1996 to December 31, 1996, Harbor earned $297,904, of which
$0 was voluntarily waived.
OTHER SERVICES
- --------------------------------------------------------------------------
ADMINISTRATIVE SERVICES
Federated Administrative Services, a subsidiary of Federated
Investors, provides administrative personnel and services to the Funds
for a fee as described in the Prospectus. For the fiscal years ended
April 30, 1997, 1996, and 1995, the Government Fund, Tax-Free Fund,
and Growth and Income Fund incurred costs for administrative services
of $50,000, $49,999, and $50,000; $50,000, $50,001, and $50,000; and
$90,371, $58,037, and $50,000, respectively, of which $11,168, $9,295,
and $14,920; $14,660, $10,672, and $17,273; and $0, $0, and $10,958,
respectively, were voluntarily waived. For the period from July 3,
1996 (date of initial public investment) to April 30, 1997, the
Capital Appreciation Fund incurred costs for administrative services
of $41,371, of which $24,932, was voluntarily waived.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Funds.
Federated Services Company , Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 provides certain accounting and recordkeeping
services with respect to the Funds' portfolio investments.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company, Pittsburgh, Pennsylvania, the
Funds' registered transfer agent, maintains all necessary shareholder
records.
INDEPENDENT AUDITORS
The independent auditors for the Funds are Ernst & Young LLP,
Pittsburgh, Pennsylvania.
BROKERAGE TRANSACTIONS
- ---------------------------------------------------------------------------
Pursuant to the Funds' advisory agreement, M&T Bank determines which
securities are to be sold and purchased by the Fund and which brokers
are to be eligible to execute its portfolio transactions. Portfolio
securities of the Funds are normally purchased directly from the
issuer or from an underwriter or market maker for the securities.
Purchases from dealers serving as market makers may include the spread
between the bid and asking price. While M&T Bank generally seeks
competitive spreads or commissions, a Fund may not necessarily pay the
lowest spread or commission available on each transaction for reasons
discussed below.
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. The adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to guidelines
established by the Directors. The adviser may select brokers and
dealers who offer brokerage and research services. These services may
be furnished directly to the Funds or to the adviser and may include:
advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research
services provided by brokers and dealers may be used by the adviser or
its affiliates in advising the Fund and other accounts. To the extent
that receipt of these services may supplant services for which the
adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage
and research services to execute securities transactions. They
determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided.
The Funds will not execute portfolio transactions through, acquire
portfolio securities issued by, make savings deposits in, or enter
into repurchase or reverse repurchase agreements with M&T Bank, or its
affiliates, and will not give preference to M&T Bank's correspondents
with respect to such transactions, securities, savings deposits,
repurchase agreements and reverse repurchase agreements. While serving
as investment adviser to the Funds, M&T Bank has agreed to maintain
its policy and practice of conducting its Trust and Investment
Services Division independently of its Commercial Department.
The Funds' advisory agreement provides that, in making investment
recommendations for the Funds, Trust and Investment Services Division
personnel will not inquire or take into consideration whether the
issuer of securities proposed for purchase or sale by the Funds is a
customer of the Commercial Department and, in dealing with its
commercial customers, the Commercial Department will not inquire or
take into consideration whether securities of such customers are held
by the Funds.
Although investment decisions for the Funds are made independently
from those of the other accounts managed by M&T Bank, investments of
the type the Funds may make may also be made by those other accounts.
When the Funds and one or more other accounts managed by M&T Bank are
prepared to invest in, or desire to dispose of, the same security,
available investments or opportunities for sales will be allocated in
a manner believed by M&T Bank to be equitable to each. In some cases,
this procedure may adversely affect the price paid or received by the
Funds or the size of the position obtained or disposed of by the
Funds. In other cases, however, it is believed that coordination and
the ability to participate in volume transactions will be to the
benefit of the Funds.
For the fiscal years ended April 30, 1997, 1996, and 1995, the
Government Fund and Tax-Free Fund paid no brokerage commissions on
brokerage transactions.
For the fiscal years ended April 30, 1997, 1996, and 1995, the Growth
and Income Fund paid $304,622, $128,098, and $95,432, respectively, in
commissions on brokerage transactions.
For the period from July 3, 1996 (date of initial public investment)
to April 30, 1997, the Capital Appreciation Fund paid brokerage
commissions in the amount of $62,973.
DESCRIPTION OF FUND SHARES
- ---------------------------------------------------------------------------
The Corporation's Articles of Incorporation authorize the Board of
Directors to issue up to 10 billion full and fractional shares of
Common Stock, of which seven billion shares have been classified into
seven classes of one billion shares each. Three billion shares remain
unclassified at this time. Shares of Classes A, B, C, D, E, F, and G
Common Stock represent interests in Vision Money Market Fund, Vision
Treasury Money Market Fund, Vision New York Tax-Free Money Market
Fund, Vision U.S. Government Securities Fund, Vision New York Tax-Free
Fund, Vision Growth and Income Fund, and Vision Capital Appreciation
Fund, respectively.
The Board of Directors may classify or reclassify any unissued shares
of the Corporation into one or more additional classes by setting or
changing in any one or more respects their respective preferences,
conversion or other rights, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of
redemption. Shares have no subscription or pre-emptive rights and only
such conversion or exchange rights as the Board may grant in its
discretion. When issued for payment as described in the Funds'
Prospectus and this Statement of Additional Information, the Funds'
shares will be fully paid and non-assessable. In the event of a
liquidation or dissolution of the Corporation, shares of the Funds are
entitled to receive the assets available for distribution belonging to
the respective Funds, and a proportionate distribution, based upon the
relative asset values of that Fund and the Corporation's other
portfolios, of any general assets not belonging to any particular
portfolio which are available for distribution.
Rule 18f-2 under the Investment Company Act of 1940 provides that any
matter required to be submitted to the holders of the outstanding
voting securities of an investment company such as the Corporation
shall not be deemed to have been effectively acted upon unless
approved by the holders of a majority of the outstanding shares of
each portfolio affected by the matter. A portfolio is not affected by
a matter unless it is clear that the interests of each portfolio in
the matter are identical, or that the matter does not affect any
interest of the portfolio. Under Rule 18f-2, the approval of an
investment advisory agreement or any change in a fundamental
investment policy would be effectively acted upon with respect to a
portfolio only if approved by a majority of the outstanding shares of
such portfolio. However, Rule 18f-2 provides that the ratification of
independent certified public accountants, the approval of principal
underwriting contracts and the election of Directors may be
effectively acted upon by shareholders of the Corporation voting
without regard to class.
Notwithstanding any provision of Maryland law requiring a greater vote
of the Corporation shares (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law
(for example, by Rule 18f-2) or by the Corporation's Articles of
Incorporation, the Corporation may take or authorize such action upon
the favorable vote of the holders of more than 50% of the outstanding
Common Stock of the Funds and the Corporation's other portfolios
(voting together without regard to class).
HOW TO BUY SHARES
- -----------------------------------------------------------------------
Shares of the Funds are sold at net asset value plus an applicable
sales charge on days on which the New York Stock Exchange and the
Federal Reserve wire system are open for business. The procedures for
purchasing shares of the Funds are explained in the Funds' prospectus
under "How to Buy Shares."
CONVERSION TO FEDERAL FUNDS
It is the Funds' policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal
funds. M&T Bank and State Street Bank act as the shareholders' agents
in depositing checks and converting them to federal funds.
DETERMINING MARKET VALUE OF SECURITIES
The market value of the Funds' portfolio securities are determined as
follows:
o for bond and other fixed income securities, as determined by an
independent pricing service; or
o for equity securities, according to the last sales price on a
national securities exchange, if applicable; or
o in the absence of recorded sales for equity securities, according
to the mean between the last closing bid and asked prices; or
o for bond and other fixed income securities, as determined by an
independent pricing service; or
o for short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service or
for short-term obligations with remaining maturities of 60 days
or less at the time of purchase, at amortized cost; or
o for all other securities, at fair value as determined in good
faith by the Directors.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may reflect:
institutional trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and
other market data.
The Funds will value futures contracts, options and put options on
financial futures at their market values established by the exchanges
at the close of option trading on such exchanges, unless the Directors
determine in good faith that another method of valuing option
positions is necessary.
REDEEMING FUND SHARES
- ------------------------------------------------
The Funds redeem shares at the next computed net asset value after a
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares." Although State
Street Bank does not charge for telephone redemptions, it reserves the
right to charge a fee for the cost of wire-transferred redemptions of
less than $5,000.
REDEMPTION IN KIND
Although the Funds intend to redeem shares in cash, they reserve the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from a Fund's portfolio. To
the extent available, such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable
Securities and Exchange Commission rules, taking such securities at
the same value employed in determining net asset value and selecting
the securities in a manner the Directors determine to be fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders receiving their securities
and selling them before their maturity could receive less than the
redemption value of their securities and could incur transaction
costs.
EXCHANGING SECURITIES FOR FUND SHARES
The Funds may accept securities in exchange for Fund shares. The Funds
will allow such exchanges only upon prior approval of the Fund and a
determination by the Fund and the Adviser that the securities to be
exchanged are acceptable. Any securities exchanged must meet the
investment objective and policies of a Fund and must have a readily
ascertainable market value. The market value of any securities
exchanged in an initial investment, plus any cash, must be at least
equal to the minimum investment in the Funds. The Funds acquire the
exchanged securities for investment and not for resale. Any interest
accrued or dividends declared but not paid on the securities prior to
the exchange will be considered in valuing the securities. All
interest, dividends, subscription or other rights attached to the
securities become the property of the Funds, along with the
securities. If an exchange is permitted, it will be treated as a sale
for federal income tax purposes. Depending upon the cost basis of the
securities exchanged for Fund shares, a gain or loss may be realized
by the investor.
DETERMINING NET ASSET VALUE
- ------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net
asset value is calculated for shares of the Funds are described in the
prospectus.
BANKING LAWS
- ----------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations
presently prohibit a bank holding company registered under the
Bank Holding Company Act of 1956 or any affiliate thereof from
sponsoring, organizing or controlling a registered, open-end
investment company continuously engaged in the issuance of its shares, and from
issuing, underwriting, selling or distributing
securities in general. Such laws and regulations do not prohibit such a holding
company or affiliate from acting as investment
adviser, transfer agent, or custodian to such an investment company or
from purchasing shares of such company as agent for and upon the order
of their customers. Some entities providing services to the Fund are
subject to such banking laws and regulations. They believe that they
may perform those services for the Fund contemplated by any agreement
entered into with the Fund without violating those laws or
regulations. Changes in either federal or state statutes and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of present or future
statutes and regulations, could prevent these entities from continuing
to perform all or a part of the above services. If this happens, the
Corporation's Board of Directors would consider alternative means of
continuing available services. It is not expected that shareholders
would suffer any adverse financial consequences as a result of any of
these occurrences. TAX STATUS
- ----------------------------------------------------------------
THE FUNDS' TAX STATUS
The Funds will pay no federal income tax because they expect to meet
the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the
special tax treatment afforded to such companies. To qualify for this
treatment, a Fund must, among other requirements:
o derive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
o derive less than 30% of its gross income from the sale of
securities held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income
earned during the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Funds is eligible for
the dividends received deduction available to corporations. These
dividends (to the extent taxable), and any short-term capital gains,
are taxable as ordinary income.
Net income for dividend purposes includes (1) interest and dividends
accrued and discount earned on a Fund's assets (including both
original issue and market discount), less (2) amortization of any
premium and accrued expenses directly attributable to such Fund, and
the general expenses (e.g. legal, accounting and directors' fees) of
the Corporation prorated to each Fund on the basis of its relative net
assets.
CAPITAL GAINS
Capital gains experienced by a Fund could result in an
increase in dividends. Capital losses could result in a
decrease in dividends. If for some extraordinary reason a
Fund realizes net long-term capital gains, it will distribute
them at least once every 12 months.
TOTAL RETURN
- -----------------------------------------------------
The Government Fund's average annual total returns for the one-year
period ended April 30, 1997, and for the period from September 22,
1993 (date of initial public investment) to April 30, 1997, were 1.26%
and 2.59%, respectively.
The Tax-Free Fund's average annual total returns for the one-year
period ended April 30, 1997, and for the period from September 22,
1993 (date of initial public investment) to April 30, 1997, were 1.92%
and 3.69%, respectively.
The Growth and Income Fund's average annual total returns for the
one-year period ended April 30, 1997 and for the period from November
29, 1993 (date of initial public investment) to April 30, 1997, were
12.07% and 13.75%, respectively.
The Capital Appreciation Fund's cumulative total return for the period
from July 3, 1996 (date of initial public investment) to April 30,
1997, was 7.72%.
Cumulative total return reflects the Fund's total performance over a
specific period of time. This total return assumes and is reduced by
the payment of the maximum sales charge. The Capital Appreciation
Fund's total return is representative of only nine months of
investment activity since the Fund's effective date.
The average annual total return for the shares is the average
compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of shares owned at the end of the period by the offering price
per share at the end of the period. The number of shares owned at the
end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends
and distributions.
<PAGE>
YIELD
- --------------------------------------------------------------------------
The yields for the Government Fund, Tax-Free Fund, and Growth and
Income Fund for the thirty-day period ended April 30, 1997, were
5.79%, 4.60%, and 0.63%, respectively.
The yield for the Funds is determined by dividing the net investment
income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the maximum
offering price per share of the Fund on the last day of the period.
This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may
not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge
fees in connection with services provided in conjunction with an
investment in a Fund, the performance will be reduced for those
shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------
The tax-equivalent yield for the Tax-Free Fund for the thirty-day
period ended April 30, 1997, was 2.95%. The tax-equivalent yield of
the Tax-Free Fund is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that the Fund would have had to
earn to equal its actual yield, assuming a combined federal and state
marginal tax rate of 34.850%.
TAX-EQUIVALENCY TABLE
The Tax-Free Fund may also use a tax-equivalency table in advertising
and sales literature. The interest earned by the municipal obligations
in the Tax-Free Fund's portfolio generally remains free from federal
income tax,* and often is free from state and local taxes as well. As
the table on the next page indicates, a "tax-free" investment is an
attractive choice for investors, particularly in times of narrow
spreads between tax-free and taxable yields.
<PAGE>
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1997
STATE OF NEW YORK
- ------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL
AND STATE 21.850% 34.850% 37.850% 42.850% 46.450%
- ---------------------------------------------------------------------------------------------------------------------------------
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
- ---------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
- ---------------------------------------------------------------------------------------------------------------------------------
1.50% 1.92% 2.30% 2.41% 2.62% 2.80%
2.00% 2.56% 3.07% 3.22% 3.50% 3.73%
2.50% 3.20% 3.84% 4.02% 4.37% 4.67%
3.00% 3.84% 4.60% 4.83% 5.25% 5.60%
3.50% 4.48% 5.37% 5.63% 6.12% 6.54%
4.00% 5.12% 6.14% 6.44% 7.00% 7.47%
4.50% 5.76% 6.91% 7.24% 7.87% 8.40%
5.00% 6.40% 7.67% 8.05% 8.75% 9.34%
5.50% 7.04% 8.44% 8.85% 9.62% 10.27%
6.00% 7.68% 9.21% 9.65% 10.50% 11.20%
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of the Tax-Free Fund.
*Some portion of the Tax-Free Fund's income may be subject to the
federal alternative minimum tax and state and local income taxes.
<PAGE>
PERFORMANCE COMPARISONS
- ------------------------------------------------
The performance of shares of the Funds depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in a Fund's expenses; and
o various other factors.
The Funds' performances fluctuate on a daily basis largely because net
earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation
of yield and total return as described above.
Investors may use financial publications and/or indices to obtain a
more complete view of each Fund's performance. When comparing
performance, investors should consider all relevant factors such as
the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial
publications and/or indices which the Funds use in advertising may
include:
o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any
change in net asset value over a specific period of time. From
time to time, the Government Fund and the Tax-Free Fund will
quote their Lipper rankings in the "General U.S. Government
Funds" and the "New York Municipal Bond Funds" categories,
respectively, in advertising and sales literature. (All Funds)
o DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of
selected blue chip industrial corporations. The DJIA indicates
daily changes in the average price of stock of these
corporations. Because it represents the top corporations of
America, the DJIA index is a leading economic indicator for the
stock market as a whole. (Growth and Income Fund and Capital
Appreciation Fund)
o LEHMAN BROTHERS GOVERNMENT (LT) INDEX is an index composed of
bonds issued by the U.S. government or its agencies which have at
least $1 million outstanding in principal and which have
maturities of ten years or longer. Index figures are total return
figures calculated monthly. (Government Fund)
o LEHMAN BROTHERS GOVERNMENT/CORPORATE TOTAL INDEX is comprised of
approximately 5,000 issues which include non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed-rate, non-convertible
domestic bonds of companies in industry, public utilities, and
finance. Tracked by Lehman Brothers, the index has an average
maturity of nine years. It calculates total returns for one
month, three months, twelve months, and ten year periods, and
year-to-date. (Government Fund and Growth and Income Fund)
o LEHMAN BROTHERS AGGREGATE BOND INDEX is a total return index
measuring both the capital price changes and income provided by
the underlying universe of securities, weighted by market value
outstanding. The Aggregate Bond Index is comprised of the Lehman
Brothers Government Bond Index, Corporate Bond Index,
Mortgage-Backed Securities Index and the Yankee Bond Index. These
indices include: U.S. Treasury obligations, including bonds and
notes; U.S. agency obligations, including those of the Farm
Credit System, including the National Bank for Cooperatives and
Banks for Cooperatives; foreign obligations, U.S.
investment-grade corporate debt and mortgage-backed obligations.
All corporate debt included in the Aggregate Bond Index has a
minimum rating of BBB by S&P or Fitch, or a minimum rating of Baa
by Moody's. (Government Fund and Growth and Income Fund)
o MERRILL LYNCH CORPORATE AND GOVERNMENT INDEX includes issues
which must be in the form of publicly placed, nonconvertible,
coupon-bearing domestic debt and must carry a term of maturity of
at least one year. Par amounts outstanding must be no less than
$10 million at the start and at the close of the performance
measurement period. Corporate instruments must be rated by S&P or
by Moody's as investment grade issues (i.e., BBB/Baa or better).
(Government Fund and Growth and Income Fund)
o MERRILL LYNCH DOMESTIC MASTER INDEX includes issues which must be
in the form of publicly placed, nonconvertible, coupon-bearing
domestic debt and must carry a term to maturity of at least one
year. Par amounts outstanding must be no less than $10 million at
the start and at the close of the performance measurement period.
The Domestic Master Index is a broader index than the Merrill
Lynch Corporate and Government Index and includes, for example,
mortgage related securities. The mortgage market is divided by
agency, type of mortgage and coupon and the amount outstanding in
each agency/type/coupon subdivision must be no less than $200
million at the start and at the close of the performance
measurement period. Corporate instruments must be rated by S&P or
by Moody's as investment grade issues (i.e., BBB/Baa or better).
(Government Fund and Growth and Income Fund)
o SALOMON BROTHERS AAA-AA CORPORATE INDEX calculates total returns
of approximately 775 issues which include long-term, high grade
domestic corporate taxable bonds, rated AAA-AA with maturities of
twelve years or more and companies in industry, public utilities,
and finance. (Government Fund and Growth and Income Fund)
o SALOMON BROTHERS LONG-TERM HIGH GRADE CORPORATE BOND INDEX is an
unmanaged index of long-term high grade corporate bonds issued by
U.S. corporations with maturities ranging from 10 to 20 years.
(Growth and Income Fund)
o LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is
an unmanaged index comprised of all the bonds issued by the
Lehman Brothers Government/Corporate Bond Index with maturities
between 1 and 9.99 years. Total return is based on price
appreciation/depreciation and income as a percentage of the
original investment. Indices are rebalanced monthly by market
capitalization. (Government Fund and Growth and Income Fund)
o THE SALOMON BROTHERS TOTAL RATE-OF-RETURN INDEX for mortgage
pass-through securities reflects the entire mortgage pass-through
market and reflects their special characteristics. The index
represents data aggregated by mortgage pool and coupon within a
given sector. A market-weighted portfolio is constructed
considering all newly created pools and coupons. (Government
Fund)
o THE MERRILL LYNCH TAXABLE BOND INDICES include U.S. Treasury and
agency issues and were designed to keep pace with structural
changes in the fixed income market. The performance indicators
capture all rating changes, new issues, and any structural
changes of the entire market. (Government Fund)
o LEHMAN BROTHERS GOVERNMENT INDEX is an unmanaged index comprised
of all publicly issued, non-convertible domestic debt of the U.S.
government, or any agency thereof, or any quasi-federal
corporation and of corporate debt guaranteed by the U.S.
government. Only notes and bonds with a minimum outstanding
principal of $1 million and a minimum maturity of one year are
included. (Government Fund and Growth and Income Fund)
o STANDARD & POOR'S DAILY STOCK PRICE INDICES OF 500 AND 400 COMMON
STOCKS are composite indices of common stocks in industry,
transportation, and financial and public utility companies that
can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition,
the Standard & Poor's indices assume reinvestment of all
dividends paid by stocks listed on its indices. Taxes due on any
of these distributions are not included, nor are brokerage or
other fees calculated in the Standard & Poor's figures.
(Growth and Income Fund and Capital Appreciation Fund)
o Russell 1000 Growth Index consists of those Russell 1000
securities with a greater-than-average growth orientation.
Securities in this index tend to exhibit higher price-to-book and
price-earnings ratios, lower dividend yields and higher
forecasted growth values. (Capital Appreciation Fund)
o RUSSELL 2000 SMALL STOCK INDEX is a broadly diversified index
consisting of approximately 2,000 small capitalization common
stocks that can be used to compare to the total returns of funds
whose portfolios are invested primarily in small capitalization
common stocks. (Growth and Income Fund and Capital Appreciation
Fund)
o WILSHIRE 5000 EQUITY INDEX consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily
pricing is available, and can be used to compare to the total
returns of funds whose portfolios are invested primarily in
common stocks. (Growth and Income Fund and Capital Appreciation
Fund)
o CONSUMER PRICE INDEX is generally considered to be a measure of
inflation. (Growth and Income Fund and Capital Appreciation Fund)
o NEW YORK STOCK EXCHANGE COMPOSITE INDEX is a market value
weighted index which relates all NYSE stocks to an aggregate
market value as of December 31, 1965, adjusted for capitalization
changes. (Growth and Income Fund and Capital Appreciation Fund)
o VALUE LINE COMPOSITE INDEX consists of approximately 1,700 common
equity securities. It is based on a geometric average of relative
price changes of the component stocks and does not include
income. (Growth and Income Fund and Capital Appreciation Fund)
o NASDAQ OVER-THE-COUNTER COMPOSITE INDEX covers 4,500 stocks
traded over the counter. It represents many small company stocks
but is heavily influenced by about 100 of the largest NASDAQ
stocks. It is a value-weighted index calculated on price change
only and does not include income. (Growth and Income Fund and
Capital Appreciation Fund)
o AMEX MARKET VALUE INDEX covers approximately 850 American Stock
Exchange stocks and represents less than 5% of the market value
of all US stocks. The AMEX is a value-weighted index calculated
on price change only and does not include income. (Growth and
Income Fund and Capital Appreciation Fund)
o LEHMAN BROTHERS NEW YORK TAX-EXEMPT INDEX is a total return
performance benchmark for the New York long-term, investment
grade, tax-exempt bond market. Returns and attributes for this
index are calculated semi-monthly using approximately 22,000
municipal bonds classified as general obligation bonds (state and
local), revenue bonds (excluding insured revenue bonds), insured
bonds (includes all bond insurers with Aaa/AAA ratings), and
prerefunded bonds. (Tax-Free Fund)
o MORNINGSTAR, INC., an independent rating service, is the
publisher of the bi-weekly MUTUAL FUND VALUES. MUTUAL FUND VALUES
rates more than l,000 NASDAQ-listed mutual funds of all types,
according to their risk-adjusted returns. The maximum rating is
five stars, and ratings are effective for two weeks. (All Fund)
Advertising and other promotional literature may include charts,
graphs and other illustrations using the Funds' returns, or returns in
general, that demonstrate basic investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment. In addition, the Funds can compare their performance, or
performance for the types of securities in which it invests, to a
variety of other investments, such as federally insured bank products,
including time deposits, bank savings accounts, certificates of
deposit, and Treasury bills, and to money market funds using the
Lipper Analytical Services money market instruments average. Unlike
federally insured bank products, the shares of the Funds are not
insured. Unlike money market funds, which attempt to maintain a stable
net asset value, the net asset value of the Funds' shares fluctuates.
Advertisements may quote performance information which does not
reflect the effect of the sales load.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Funds may include discussions
of economic, financial and political developments and their effect on
the securities market. Such discussions may take the form of
commentary on these developments by the Funds' portfolio managers and
their views and analysis on how such developments could affect the
Funds. In addition, advertising and sales literature may quote
statistics and give general information about the mutual fund
industry, including the growth of the industry, from sources such as
the Investment Company Institute ("ICI"). For example, according to
the ICI, thirty-seven percent of American households are pursuing
their financial goals through mutual funds. These investors, as well
as businesses and institutions, have entrusted over $3.5 trillion to
the more than 6,000 funds available.
<PAGE>
APPENDIX
- -----------------------------------------------------------------
Standard & Poor's Ratings Group Bond Ratings
AAA-Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA-Debt rated "AA" has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A-Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible o the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB-Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
NR-Indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does
not rate a particular type of obligation as a matter of policy.
Plus (+) or minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Investors Service, Inc. Bond Ratings
AAA-Bonds which are rated AAA are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA-Bonds which are rated AA are judged to be of high quality by all
standards. Together with the AAA group, they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in AAA
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in AAA securities.
A-Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
BAA-Bonds which are rated BAA are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal 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.
NR-Not rated by Moody's.
Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through Baa in 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.
Fitch Investors Service, Inc. Long-Term Debt Ratings
AAA-Bonds 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 considered to be investment grade and of very high 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 issuers is generally rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is
considered strong, but may be more vulnerable to adverse changes in
economic conditions and circumstances than bonds with higher ratings.
BBB-Bonds 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 impact 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.
NR-NR indicates that Fitch does not rate the specific issue.
Plus (+) or Minus (-): Plus and minus signs are used with a rating
symbol to indicate the relative position of a credit within the rating
category. Plus and minus signs, however, are not used in the AAA
category.
Standard & Poor's Ratings Group Municipal Note Ratings
SP-1-Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics
will be given a plus sign (+) designation.
SP-2-Satisfactory capacity to pay principal and interest.
Moody's Investors Service, Inc. Short-Term Loan Ratings
MIG1/VMIG1-This designation denotes best quality. There is a present
strong protection by established cash flows, superior liquidity
support or demonstrated broad based access to the market for
refinancing.
MIG2/VMIG2-This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
Fitch Investors Service, Inc. Short-Term Debt Ratings
F-1+-EXCEPTIONALLY STRONG CREDIT QUALITY. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1-VERY STRONG CREDIT QUALITY. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues
rated F-1+.
F-2-GOOD CREDIT QUALITY. Issues carrying this rating have a
satisfactory degree of assurance for timely payment, but the margin of
safety is not as great as the F-1+ and F-1 ratings.
Standard & Poor's Ratings Group Commercial Paper Ratings
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.
Moody's Investors Service, Inc. Commercial Paper Ratings
PRIME-1-Issuers rated PRIME-1 (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. Prime-1 repayment capacity will normally be evidenced by
the following characteristics: leading market positions in well
established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earning 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 rated PRIME-2 (or related supporting institutions)
have a strong capacity for repayment of short-term promissory
obligations. This will normally be evidenced by many of the
characteristics cited above, but to a lesser degree. Earnings trends
and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is
maintained.
92830F406
92830F505
92830F604
92830F703
G01716-07 (6/97)
