1933 Act File No. 33-20673
1940 Act File No. 811-5514
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
---
Pre-Effective Amendment No. ....................
Post-Effective Amendment No. 33 ........................ X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 34 ....................................... X
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VISION GROUP OF FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
___immediately upon filing pursuant to paragraph (b)
X_on August 31, 1998, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i)
___75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
_ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Copy to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, D.C. 20037
<PAGE>
CROSS-REFERENCE SHEET
This amendment to the Registration Statement of Vision Group of Funds, Inc.,
which is comprised of eight portfolios: (1) Vision Money Market Fund, (a) Class
A Shares and (b) Class S Shares, (2) Vision Treasury Money Market Fund, (a)
Class A Shares and (b) Class S Shares, (3) Vision New York Tax-Free Money Market
Fund, (4) Vision New York Municipal Income Fund (formerly, Vision New York
Tax-Free Fund), (5) Vision U.S. Government Securities Fund, (6) Vision Growth
and Income Fund, (7) Vision Capital Appreciation Fund, and (8) Vision Equity
Income Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page....................(1-8) Cover Page.
Item 2. Synopsis......................(1-8) Summary of Fund Expenses.
Item 3. Condensed Financial
Information...................(1-7) Financial Highlights; (1-7)
How the Funds Show Performance.
Item 4. General Description of
Registrant....................(1-8) Synopsis; (1-7) How the Funds
Invest; (8) How the Fund Invests;
(1-7) Investment Objective; (1-8)
Investment Policies; (1-8) Acceptable
Investments; (1) Risk Factors
Associated with Foreign Investments;
(3,4) Investment Risks of New York
Municipal Securities; (3)
Concentration of Investments; (3)
Types of Municipal Securities; (3,4)
Temporary Investments; (1-3) Common
Fund Investment Techniques, Features
and Limitations; (4-8) Investment
Techniques, Features, and Limitations.
Item 5. Management of the Fund........(1-8)
Fund Management, Distribution, and
Administration; (1-8) Board of
Directors; (1-8) Investment Adviser;
(1-8) Distribution of Fund Shares;
(1-8) Administration of the Funds.
Item 6. Capital Stock and Other
Securities....................(1-8) Description of Fund Shares;
(1-8) Voting Rights and Other
Information; (1-8) Tax Information.
Item 7. Purchase of Securities Being
Offered.......................(1-7) How the Funds Value Their
Shares; (8) How the Fund Values its
Shares; (1-8) How to Buy
Shares; (1-8) How to Exchange Shares.
Item 8. Redemption or Repurchase......(1-8) How to Redeem Shares.
Item 9. Pending Legal Proceedings None.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page....................(1-8) Cover Page.
Item 11. Table of Contents.............(1-8) Table of Contents.
Item 12. General Information and
History.......................(1-8) General Information About the
Funds;
Item 13. Investment Objectives and
Policies......................(1-7) Investment Objectives and
Policies; (8) Investment Objective;
(8) Investment Policies; (1-8)
Investment Limitations.
Item 14. Management of the Fund........(1-8) Vision Group of Funds, Inc.
Management.
----------------------
Item 15. Control Persons and Principal
Holders of Securities Not Applicable
Item 16. Investment Advisory and Other
Services......................(1-8) Investment Advisory Services;
(1-8) Other Services;
Item 17. Brokerage Allocation..........(1-8) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities (1-8) Description of Fund Shares.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered ......................(1-8) How To Buy Shares; (1-8)
Determining Net Asset Value; (1-8)
Redeeming Shares; (1-8)
Redeeming Fund Shares.
Item 20. Tax Status....................(1-8) Tax Status.
Item 21. Underwriters Not applicable.
Item 22. Calculation of Performance
Data..........................(1-8) Performance Comparisons; (1-8)
Total Return; (1-6, 8) Yield; (3,4)
Tax-Equivalent Yield;
(3,4) Tax-Equivalency Table; (4-7)
Appendix.
Item 23. Financial Statements (1-8) Incorporated by reference to the
Registrant's Annual Reports dated
April 30, 1998.
--------------------
LOGO
VISION
GROUP OF FUNDS, INC.
PROSPECTUS
VISION GROUP OF FUNDS, INC.
PROSPECTUS DATED AUGUST 31, 1998
Vision Group of Funds, Inc. is an open-end management investment company (a
mutual fund) that offers you a choice of eight separate investment portfolios
with distinct investment objectives and policies. This prospectus relates to
five of the eight portfolios ("Funds"). The Funds are:
VISION U.S. GOVERNMENT SECURITIES FUND
VISION NEW YORK MUNICIPAL INCOME FUND
(FORMERLY, VISION NEW YORK TAX-FREE FUND)
VISION GROWTH AND INCOME FUND
VISION CAPITAL APPRECIATION FUND
VISION EQUITY INCOME 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 August 31, 1998, 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 to 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) 635-9368
TABLE OF CONTENTS
<TABLE>
<S> <C>
Synopsis 3
Summary of Fund Expenses 5
Financial Highlights 6
How the Funds Invest 8
Fund Objective and Policies 8
Investment Techniques, Features, and Limitations 15
Fund Management, Distribution and Administration 26
Board of Directors 26
Investment Adviser 26
</TABLE>
<TABLE>
<S> <C>
Distribution of Fund Shares 27
Administration of the Funds 29
Your Guide to Using the Funds 30
How the Funds Value Their Shares 30
What Fund Shares Cost 30
How to Buy Shares 33
How to Exchange Shares 34
How to Redeem Shares 35
Tax Information 38
Description of Fund Shares 39
Voting Rights and Other Information 39
How the Funds Show Performance 40
</TABLE>
SYNOPSIS
INVESTMENT OBJECTIVES AND POLICIES
Vision Group of Funds, Inc. (the "Corporation") offers you a convenient,
affordable way to participate in eight separate, professionally managed
portfolios. This prospectus describes five of the portfolios: the Vision U.S.
Government Securities Fund, Vision New York Municipal Income Fund, Vision Growth
and Income Fund, Vision Capital Appreciation Fund, and Vision Equity Income
Fund. The three other money market 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.
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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. GOVERNMENT, ITS AGENCIES
OR INSTRUMENTALITIES. CAPITAL
APPRECIATION IS A SECONDARY
INVESTMENT CONSIDERATION. (SEE
"HOW THE FUNDS INVEST.")
VISION NEW YORK
MUNICIPAL INCOME FUND
(FORMERLY, VISION NEW YORK TAX- FREE FUND) ("NEW YORK MUNICIPAL INCOME FUND")
SEEKS CURRENT INCOME WHICH IS EXEMPT FROM FEDERAL REGULAR 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.")
VISION EQUITY INCOME FUND
("EQUITY INCOME FUND") IS A
DIVERSIFIED PORTFOLIO WHICH
SEEKS TO PROVIDE CURRENT
INCOME. CAPITAL APPRECIATION IS
A SECONDARY, NON-FUNDAMENTAL
CONSIDERATION. THE EQUITY
INCOME FUND PURSUES ITS
INVESTMENT OBJECTIVE BY
INVESTING IN A DIVERSIFIED
PORTFOLIO CONSISTING PRIMARILY
OF INCOME-PRODUCING EQUITY
SECURITIES OF DOMESTIC
COMPANIES (E.G., COMMON AND
PREFERRED STOCKS, CONVERTIBLE
SECURITIES). THE EQUITY INCOME
FUND ALSO MAY INVEST IN FOREIGN
EQUITY SECURITIES AND DEBT
OBLIGATIONS. (SEE "HOW THE
FUNDS INVEST.")
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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 M&T Bank Corporation (formerly, 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 635-9368).
RISK FACTORS
An investment in the Funds involves certain risks that are explained more fully
in the sections of the prospectus discussing each Fund's investment techniques.
YEAR 2000 STATEMENT. Some software programs and, to a lesser extent,
the computer hardware in use today cannot distinguish the year 2000 from the
year 1900 and cannot properly process date-related information from and after
Janu- ary 1, 2000. Such a design flaw could have a negative impact in the
handling of securities trades, pricing and accounting services. The Fund and its
service providers are actively working on necessary changes to their computer
systems to deal with the Year 2000 issue and believe that systems will be Year
2000 compliant when required. Analysis continues regarding the financial impact
of instituting a Year 2000 compliant program on the Fund's operations.
SUMMARY OF FUND 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. NEW YORK
GOVERNMENT MUNICIPAL GROWTH CAPITAL EQUITY
SHAREHOLDER TRANSACTION SECURITIES INCOME & INCOME APPRECIATION INCOME
EXPENSES FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C>
Maximum Sales Charge Imposed
on Purchases
(as a percentage of
offering price) 4.50% 4.50% 5.50% 5.50% 5.50%
Maximum Sales Charge Imposed
on Reinvested Dividends (as
a percentage of offering
price) None None None None None
Contingent Deferred Sales
Charge (as a percentage
of original purchase price
or redemption proceeds,
as applicable) None None None None None
Redemption Fees (as a
percentage of amount
redeemed, if applicable) None None None None None
Exchange Fee None None None None None
ANNUAL OPERATING EXPENSES
(as a percentage of average
net assets)
Management Fees (after
waivers) (1) 0.65% 0.50% 0.70% 0.85% 0.70%
12b-1 Fees(2) 0.00% 0.00% 0.00% 0.00% 0.00%
Other Expenses (after
waivers) (3) 0.27% 0.32% 0.51% 0.65% 0.31%
Shareholder Servicing Fees
(4) 0.00% 0.00% 0.25% 0.25% 0.00%
Total Fund Operating
Expenses (after waivers)(5) 0.92% 0.82% 1.21% 1.50% 1.01%
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...................... $ 54 $ 53 $ 67 $ 70 $65
3 Years..................... $ 73 $ 70 $ 91 $100 $85
5 Years..................... $ 94 $ 88 $118 $133 N/A
10 Years.................... $153 $142 $194 $226 N/A
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
(1) The management fees of U.S. Government Securities Fund and New York
Municipal Income Fund have been reduced to reflect the voluntary waivers of
portions of the management fees by the investment adviser. The 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
Municipal Income Fund are 0.70% and 0.70%, respectively.
(2) The Funds have no present intention of paying or accruing 12b-1 fees. If the
Funds were paying or accruing 12b-1 fees they would be able to pay up to
0.25% of each Funds' average daily net assets for 12b-1 fees. See "Fund
Management, Distribution and Administration."
(3) Other Expenses for Capital Appreciation Fund were 0.66% absent the voluntary
waivers of portions of the administrative fees by the administrator. The
administrator can terminate these voluntary waivers at any time at its sole
discretion.
(4) U.S. Government Securities Fund, New York Municipal Income Fund and Equity
Income Fund have no present intention of paying or accruing shareholder
servicing fees. If the Funds were paying or accruing shareholder servicing
fees they would be able to pay up to 0.25% of each Funds' average daily net
assets for shareholder servicing fees. See "Fund Management, Distribution
and Administration."
(5) The Total Fund Operating Expenses for Capital Appreciation Fund would have
been 1.51%, absent the voluntary waiver of the administrative fee. The Total
Fund Operating Expenses for U.S. Government Securities Fund, New York
Municipal Income Fund and Equity Income Fund in the table above are based on
expenses expected during the fiscal year ending April 30, 1999. The Total
Fund Operating Expenses were 1.03%, 0.96% and 1.08%, respectively, for the
fiscal year ended April 30, 1998, and would have been 1.12%, 1.27% and
1.60%, respectively, absent the voluntary waivers of portions of the
management fee and administrative fee.
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Ernst & Young LLP, the Funds'
independent auditors. Their report dated June 17, 1998, on the Funds' financial
statements for the year ended April 30, 1998, and on the following table for the
periods presented, is included in the Annual Report, which is incorporated by
reference. This table should be read in conjunction with the Funds' financial
statements and notes thereto, which may be obtained from the Funds.
<TABLE>
<CAPTION>
NET DISTRIBUTIONS
NET ASSET INVESTMENT NET REALIZED DISTRIBUTIONS IN EXCESS OF DISTRIBUTIONS
YEAR VALUE, INCOME AND UNREALIZED TOTAL FROM FROM NET NET FROM NET
ENDED BEGINNING (OPERATING GAIN (LOSS) ON INVESTMENT INVESTMENT INVESTMENT REALIZED TOTAL
APRIL 30, OF PERIOD LOSS) INVESTMENTS OPERATIONS INCOME INCOME GAINS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. GOVERNMENT SECURITIES FUND
1994(a) $10.00 0.34 (0.75) (0.41) (0.34) -- -- (0.34)
1995 $9.25 0.56 (0.16) 0.40 (0.56) -- -- (0.56)
1996 $9.09 0.52 0.22 0.74 (0.52) -- -- (0.52)
1997 $9.31 0.58 (0.03) 0.55 (0.58) -- -- (0.58)
1998 $9.28 0.60 0.34 0.94 (0.60) (0.01)(i) -- (0.61)
NEW YORK MUNICIPAL INCOME FUND (FORMERLY, NEW YORK TAX-FREE FUND)
1994(a) $10.00 0.20 (0.39) (0.19) (0.20) -- -- (0.20)
1995 $9.61 0.46 0.06 0.52 (0.46) -- -- (0.46)
1996 $9.67 0.46 0.23 0.69 (0.46) -- -- (0.46)
1997 $9.90 0.48 0.18 0.66 (0.48) -- -- (0.48)
1998 $10.08 0.46 0.38 0.84 (0.46) -- (0.04) (0.50)
GROWTH AND INCOME FUND
1994(e) $10.00 0.07 (0.08) (0.01) (0.06) -- -- (0.06)
1995 $9.93 0.21 0.43 0.64 (0.22) -- -- (0.22)
1996 $10.35 0.13 2.98 3.11 (0.11) -- -- (0.11)
1997 $13.35 0.13 2.35 2.48 (0.13) -- (0.59) (0.72)
1998 $15.11 0.11 4.34 4.45 (0.09) -- (3.34) (3.43)
CAPITAL APPRECIATION FUND
1997(f) $10.00 0.02(h) 1.35 1.37 (0.02) (0.03)(i) (0.06) (0.11)
1998 $11.26 (0.07) 4.44 4.37 -- -- (0.86) (0.86)
EQUITY INCOME FUND
1998(j) $9.99 0.08 1.47 1.55 (0.07) -- -- (0.07)
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</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.
(j) Reflects operations for the period from September 26, 1997 (date of initial
public investment) to April 30, 1998.
Further information about the Funds' performance is contained in the Funds'
Annual Report for the fiscal year ended April 30, 1998, which can be obtained
free of charge.
FINANCIAL HIGHLIGHTS--CONTINUED
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<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------
NET NET ASSETS,
NET ASSET INVESTMENT EXPENSE END AVERAGE
VALUE, END TOTAL INCOME WAIVER/ OF PERIOD COMMISSION PORTFOLIO
OF PERIOD RETURN(B) EXPENSES (OPERATING LOSS) REIMBURSEMENT(D) (000 OMITTED) RATE PAID(G) TURNOVER
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$9.25 (4.23%) 0.00%(c) 6.11%(c) 1.86%(c) $24,468 -- 320%
$9.09 4.59% 0.43% 6.20% 1.01% $29,573 -- 78%
$9.31 8.10% 1.16% 5.41% 0.17% $34,492 -- 132%
$9.28 6.05% 1.11% 6.23% 0.20% $44,485 -- 121%
$9.61 10.42% 1.03% 6.30% 0.09% $53,922 -- 70%
$9.61 (1.22%) 0.00%(c) 4.79%(c) 1.78%(c) $25,225 -- 21%
$9.67 5.58% 0.40% 4.80% 1.12% $27,346 -- 51%
$9.90 7.18% 1.04% 4.60% 0.34% $32,621 -- 113%
$10.08 6.76% 1.01% 4.74% 0.38% $35,480 -- 79%
$10.42 8.37% 0.96% 4.35% 0.31% $43,456 -- 45%
$9.93 (0.12%) 0.00%(c) 2.24%(c) 2.15%(c) $22,944 -- 27%
$10.35 6.61% 0.47% 2.16% 0.96% $39,358 -- 79%
$13.35 30.18% 1.16% 1.09% -- $65,119 -- 77%
$15.11 18.61% 1.14% 0.87% -- $114,090 $0.0549 134%
$16.13 31.40% 1.21% 0.65% -- $143,404 $0.0542 88%
$11.26 13.97% 0.88%(c) 0.18%(c) 0.96%(c) $33,440 $0.0628 41%
$14.77 40.07% 1.50% (0.64%) 0.01% $75,095 $0.0547 86%
$11.47 15.51% 1.08%(c) 1.41%(c) 0.52%(c) $37,403 $0.0707 11%
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</TABLE>
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. Capital
appreciation is a secondary, non-fundamental 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 Adjustable Rate Mortgage Securities ("ARMS") and Collater- alized
Mortgage Obligations ("CMOs"), 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 partici-
pation in, or are secured by and payable from, mortgage loans on real prop-
erty;
. 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 ("S&P") or
by Fitch IBCA, Inc. ("Fitch"), or, if unrated, of comparable quality as de-
termined 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; and
. money market instruments, including time and savings deposits (including
certificates of deposit) in commercial or savings banks, bankers'
acceptances, and repurchase agreements collateralized by high quality, liquid
investments.
VISION NEW YORK MUNICIPAL
INCOME FUND
INVESTMENT OBJECTIVE
The investment objective of the New York Municipal Income Fund (referred to in
this section as the "Fund") is to provide current income which is exempt from
federal regular 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 regular 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 the interest on which is exempt from
federal regular income tax. However, the interest on these securities may be
subject to the federal alternative minimum tax or "AMT." 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 taxes 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 (more than 10 years),
intermediate (3 to 10 years), or short-term (less than 3 years). 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
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, in pursuing its investment objectives and policies, may invest more
than 20% of its assets in such AMT obligations.
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 regular 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 regular 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 com-
panies' earnings and dividend growth prospects, sound management techniques,
ability to finance expected growth, and on the basis of a company's undervalu-
ation 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." The Adviser also may invest in
large-cap companies and, to a lesser extent, small-cap companies when consistent
with the Fund's investment objective of long-term growth of capital and income.
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 large-cap companies. As a result,
mid-cap companies can offer greater potential for growth than large-cap
companies, yet tend to have less risk than small-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.
Although the Adviser may focus on a "value" approach in selecting investments,
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 ("NYSE") or American Stock Exchange ("AMEX"), or other domestic
stock exchange, or are traded in the over-the-counter markets and are con-
sidered by the Adviser to have an established market;
. convertible securities;
. investments in American Depository Receipts ("ADRs") of foreign companies
traded on the NYSE or in the over-the-counter market. The Fund may not in-
vest 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 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. 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
NYSE or AMEX, or other domestic stock exchange, or are traded in the over-
the-counter markets and are considered by the Adviser to have an estab-
lished 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
may not invest more than 5% of its total assets in foreign securities 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.
VISION EQUITY INCOME FUND
INVESTMENT OBJECTIVE
The investment objective of the Equity Income Fund (referred to in this section
as the "Fund") is to provide current income. Capital appreciation is a
secondary, non-fundamental consideration.
INVESTMENT POLICIES
The Fund pursues its investment objective by maintaining a diversified portfolio
consisting primarily of income-producing equity securities of domestic companies
(e.g., common and preferred stocks, convertible securities). The Fund will
attempt to provide a yield greater than the average yield offered by the stocks
of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index")
and a lower level of price volatility, although there is no assurance that it
will be able to do so. The Adviser will invest in companies on the basis of
traditional research techniques, including assessment of a company's earnings
and dividend growth prospects, risk/volatility of the company's industry, 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 present opportunities for income and capital appreciation.
Under normal market conditions, the Fund intends to invest at least 65%
of the value of its total assets in equity securities that are expected to
produce current income. The Fund will also consider to a lesser extent whether
the securities offer the opportunity for capital appreciation. In selecting
investments, the Adviser intends to focus on large capitalization ("large-cap")
companies which are those companies with a market capitalization of at least $10
billion or more at the time of investment. The Adviser also may invest, to a
lesser extent, in medium capitalization ("mid-cap") or small-capitalization
("small-cap") companies which are generally companies with a market
capitalization under $10 billion. 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.
While equity securities of large-cap companies are generally less volatile than
those of more aggressive mid-to-small cap companies, they may also offer less
potential for high growth. However, large-cap companies generally offer more
potential for income than mid-cap and small-cap stocks because they provide a
history of dividends that may help reduce the effects of broader stock price
changes. Furthermore, large-cap companies are often beyond the new or emerging
phase of their life cycles, yet still may be dynamic enough to be responsive and
adaptive to changing needs. Large-cap companies can also offer potential for
growth yet tend to have less risk than small-cap companies because of their
greater resources, more established organizational structures and more
experienced management. The Adviser also will focus on stocks of
companies with unrecognized or undervalued assets. Such 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 price/ earnings ratio
less than the S&P 500 Index, lower than average price to book value, and higher
than average dividend yields than competitors, and thereby offer greater income
and growth potential.
The Fund may also seek income by investing up to 35% of the value of its total
assets in debt obligations.
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
NYSE or AMEX or other domestic stock exchange or are traded in the over-
the-counter markets;
. convertible securities;
. investments in ADRs of foreign companies traded on the NYSE or AMEX or other
domestic 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,
which may include securities traded on the NYSE, AMEX or other domestic stock
exchanges ("Non-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;
. mortgage-backed securities;
. asset-backed securities;
. for temporary defensive purposes, the Fund may invest up to 35% 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 or foreign commercial or savings banks, and bankers' acceptances;
. warrants;
. futures contracts; and
. options.
INVESTMENT TECHNIQUES,
FEATURES, AND
LIMITATIONS
CONVERTIBLE SECURITIES
The Growth and Income Fund, Capital Appreciation Fund and Equity Income Fund may
invest in convertible securities. A Fund will exchange or convert the
convertible securities held in its 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 conditions that affect 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. In
the case of an investment by the U.S. Government Securities Fund, these
obligations will be rated by an NRSRO at the time of purchase in the top three
rating categories. In the case of an investment by any of the other Funds, these
investments will be 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, the Adviser will evaluate the security and determine,
on a case by case basis, 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.
Changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to pay principal and interest payments on these obligations
compared to higher rated obligations. A description of the rating categories is
contained in the Appendix to the Statement of Additional Information.
The interest rate paid by an outstanding debt obligation affects its value to
investors. If market rates of interest rise after a debt obligation is issued,
that outstanding debt obligation will not be as attractive to investors as a
newly issued, higher-paying security, and an investor may only be willing to buy
the outstanding obligation if it is sold at a discount. Conversely, if market
rates of interest fall, the market price of that outstanding debt obligation may
rise. Generally, the amount of change in the market price of debt obligations in
response to changes in market rates of interest depends on the maturity of the
debt obligation; debt obligations with the longest maturities generally
experience the greatest market price changes. 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 of the expectation that they will
be called or redeemed within a short period of time. A fixed rate security with
short-term characteristics would include a fixed income security priced close to
the price at which it may be called by the issuer for redemption or a fixed
income security approaching maturity. 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 the rate of
interest paid by floating rate securities is subject to periodic adjustments
based on a designated interest rate index. 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) by or based on a specified interest rate
index 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, 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 Municipal Income 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 instrumen-
talities 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 ob-
ligations of an agency or instrumentality; or
. the credit of the agency or instrumentality.
MORTGAGE-BACKED SECURITIES
The U.S. Government Securities Fund, Growth and Income Fund and Equity 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 instrumen- talities,
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 in- strumentalities;
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 "Risks of Mortgage-Backed Securities"
below for a description of risks. 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. 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, Growth and Income Fund and Equity 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.
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 col-
lateralized 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, Growth and Income Fund and Equity 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)
collater- alized 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, Growth and Income Fund and Equity Income Fund may invest in
REMICs. REMICs are offerings of multiple class real estate mortgage-backed
securities which qualify and elect REMIC 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. RISKS OF
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities (including ARMS, CMOs,
and REMICs) and asset-backed securities generally pay back principal and
interest over the life of the security. At times when market rates of interest
are falling, debt obligations underlying mortgage-backed and asset- backed
securities may be prepaid by borrowers who are refinancing their debts at the
lower current rate. Prepayments of debt obligations underlying mort- gage-backed
and asset-backed securities in which the Fund has invested results in a
sooner-than anticipated
return of principal to the Fund. There is a risk that, when the Fund reinvests
these prepayments of principal, the new investments may not pay as high a rate
of interest as the Fund had been earning on the original investment before it
was prepaid. This is referred to as "prepayment risk." Mortgage-backed and as-
set-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 unsched- uled 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.
As a consequence, mortgage-backed securities may be a less effective means of
"locking in" long-term interest rates than other types of fixed-income
securities.
ASSET-BACKED SECURITIES
The U.S. Government Securities Fund, Growth and Income Fund and Equity 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 and Equity Income 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
(e.g., automobile loans) permit the entity servicing the obligations to retain
possession of the underlying notes. If the servicer sells these notes 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 reregis- tered because the owner
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 asset- backed security issue 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
Municipal Income 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 is-
suer'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 Municipal Income 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 Municipal Income 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 Municipal Income 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
in any of the above.
VARIABLE AMOUNT DEMAND MASTER NOTES. The New York Municipal Income 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 Municipal Income 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, which is either 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 noncan- cellable 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-Ob- tained 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, Capital Appreciation
Fund and Equity Income 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 effecting 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 in comparison to 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 in comparison to 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 the Adviser to be substantial.
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, a Fund 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 in restricted securities. Restricted securities are
any securities in which the Fund may invest pursuant to its investment objective
and policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Directors, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, each Fund will limit its purchase, together
with other illiquid securities including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days after
notice, to 15% of its net assets.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
Each of the Funds may invest its assets in securities of other investment
companies as an efficient means of carrying out its investment policies. It
should be noted that investment companies incur certain expenses, such as
management fees, and, therefore, any investment by a Fund in shares of other
investment companies may 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. A Fund 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 the Fund on a timely basis and the Fund may, therefore, lose
the opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities files for bankruptcy or becomes 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 Municipal Income 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, 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. The Fund may invest up to 25% of its total
assets in the securities of any one issuer. The New York Municipal
Income 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
Municipal Income 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 any 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 the Fund sells a security it does not own
in anticipation of a decline in the price of that security. If the decline
occurs, the Fund can purchase at a lower price shares equal in number to those
sold short. If the price increases, the Fund must pay the higher price. 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. The segregated amount will not exceed 25% of each Fund's net assets.
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. The Fund pays a premium to acquire a call option which gives the Fund,
the right (but not the obligation) to buy the underlying security from the
seller at a pre-determined price. The Funds 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 the Fund are not traded on an
exchange. The Funds purchase and write 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. 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, Capital Appreciation Fund and Equity Income Fund may each purchase
and sell stock index futures contracts. These transactions are used by a Fund 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 to sell 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 net assets, after taking into account the unrealized profits and losses
on those contracts it has entered into. 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
The Growth and Income Fund, Capital Appreciation Fund and Equity Income Fund
may each
purchase warrants, but none of these Funds has a 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 changes. 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 changes and modifying investments
accordingly. EQUITY RISKS
As with other mutual funds that invest in equity securities, the Growth and
Income Fund, Capital Appreciation Fund and Equity Income 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, Capital Appreciation Fund and Equity Income
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, Capital
Appreciation Fund and Equity Income 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
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THE FUNDS ARE MANAGED BY A
BOARD OF DIRECTORS.
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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
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INVESTMENT DECISIONS FOR THE
FUNDS ARE MADE BY M&T BANK,
SUBJECT TO THE DIRECTION OF THE
DIRECTORS.
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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 Municipal Income Fund, Growth and Income Fund and
Equity 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 M&T Bank Corporation, a $20.1
billion bank holding company, as of June 30, 1998, headquartered in Buffalo, New
York. M&T Bank has 235 offices throughout New York State, 19 offices throughout
northeastern Pennsylvania, and an office in Nassau, The Bahamas as of June 30,
1998. Prior to May 29, 1998, M&T Bank Corporation was known as First Empire
State Corporation. 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 June
30, 1998, M&T Bank had over $4 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 June 30, 1998, M&T Bank
managed $1.29 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 Municipal Income Fund are
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 has a B.A. in Economics from Washington University, and
is an M.B.A. candidate at the University of Chicago.
Robert J. Truesdell has supervised the investment management of the U.S. Gov-
ernment Securities Fund and New York Municipal Income Fund since their incep-
tion. From August 1994 through February 1995, he also served as the portfolio
manager of these Funds. In addition to his responsibilities with respect to
these Funds, Mr. Truesdell manages individual investment accounts and oversees
the investment activities of M&T Bank's money market and fixed income products
as well as 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 in-
vestment management accounts. Mr. Truesdell holds an M.B.A. in Accounting from
the State University of New York at Buffalo.
The Growth and Income Fund has been managed by John J. Clark, III since Sep-
tember, 1998. Mr. Clark joined M&T Bank as Vice President and Senior Portfolio
Manager of M&T Capital Advisors Group in April 1998. Most of his 15-plus years
of investment experience took place at Cornell University where he was part of
the in-house investment organization where he helped to manage the
University's endowment. Immediately prior to joining M&T Bank, Mr. Clark was
with Marine Midland Bank as a Senior Portfolio Manager. Mr. Clark obtained his
B.S. from Cornell University and M.B.A. from Virginia Commonwealth University
and is also a Chartered Financial Analyst.
The Capital Appreciation Fund has been managed since its inception by John F.
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 includes five years (1991-1995) with Value Line Asset
Management in New York, where he was the Director of Asset Management and Se-
nior Portfolio Manager. Mr. Moore obtained his B.A. and M.B.A. from the Uni-
versity 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
(1994), and has assisted in the Fund's management since June 1996.
The Equity Income Fund has been managed since its inception by John E. Leslie
III. Mr. Leslie joined M&T Bank in February 1996 as Vice President and Senior
Portfolio Manager. His investment experience includes two years with Value
Line Asset Management, New York where he was a Senior Portfolio Manager (1994-
1996). From 1992 to 1994, Mr. Leslie was an independent consultant designing
quantitative equity valuation models and structured investment products. Mr.
Leslie obtained his B.A. in Finance from Suffolk University, his M.B.A. from
Babson College and is a Chartered Financial Analyst.
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 an indirect, wholly owned subsidiary of Federated Investors,
Inc., 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, each of the
Funds may pay to the distributor an amount computed at an annual rate of 0.25%
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.
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 Municipal Income 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. The Equity
Income Fund has no present intention of paying or accruing shareholder servicing
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 the Adviser and not the
Funds.
ADMINISTRATION OF THE FUNDS
- --------------------------------------------------------------------------------
FEDERATED ADMINISTRATIVE
SERVICES ("FAS"), PROVIDES THE
FUNDS WITH CERTAIN
ADMINISTRATIVE PERSONNEL AND
SERVICES NECESSARY TO OPERATE
THE FUNDS. FEDERATED SERVICES
COMPANY ("FEDERATED SERVICES")
PROVIDES THE FUNDS WITH CERTAIN
FINANCIAL, ADMINISTRATIVE,
TRANSFER AGENCY AND FUND
ACCOUNTING SERVICES. FAS AND
FEDERATED SERVICES ARE INDIRECT
WHOLLY OWNED SUBSIDIARIES OF
FEDERATED INVESTORS, INC. THESE
SERVICES ARE PROVIDED FOR AN
AGGREGATE ANNUAL FEE AS
SPECIFIED BELOW:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE DAILY NET ASSETS OF
MAXIMUM FEE VISION GROUP OF FUNDS, INC.
----------- ------------------------------------
<C> <S>
.140% on the first $1.4 billion
.100% on the next $750 million
.07% on assets in excess of $2.15 billion
</TABLE>
YOUR GUIDE
TO USING
THE FUNDS
HOW THE FUNDS VALUE THEIR SHARES
- -------------------------------------------------------------------------------
A 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 Municipal Income Fund are
sold at their net asset value next determined after an order is received, plus a
sales charge as follows:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE CONCESSION
AS A SALES CHARGE AS A
PERCENTAGE AS A PERCENTAGE
OF PUBLIC PERCENTAGE OF PUBLIC
OFFERING OF NET OFFERING
AMOUNT OF TRANSACTION 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, Capital Appreciation Fund and Equity Income
Fund are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE CONCESSION
AS A SALES CHARGE AS A
PERCENTAGE AS A PERCENTAGE
OF PUBLIC PERCENTAGE OF PUBLIC
OFFERING OF NET OFFERING
AMOUNT OF TRANSACTION 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, Jr. Day,
Presidents' 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, M&T Bank 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 FUNDSHARES 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 be presented 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 Fund will consider the previous purchases still
invested in the Fund 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 or New York Municipal Income Fund equal in value to at least $100,000 over
the next 13 months, or shares of the Growth and Income Fund, Capital
Appreciation Fund or Equity Income 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 in escrow (in shares)
4.50% of the total price of the shares of the U.S. Government Securities Fund
and New York Municipal Income Fund, or 5.50% of the total price of the shares of
the Growth and Income Fund, Capital Appreciation Fund, or Equity Income Fund, as
the case may be, intended to be purchased 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,
JR.
DAY).
- -------------------------------------------------------------------------------
Shares may be purchased either by wire, mail or transfer. The Funds reserve the
right to reject any purchase request.
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 635-9368). For purchases through Automated Clearing House
("ACH"), the purchase order must be received by 3:00 p.m. (Eastern time).
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 custom-
er'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 Municipal Income Fund declare dividends
daily and pay them monthly. The Growth and Income Fund and Equity Income Fund
declare and pay dividends quarterly. The Capital Appreciation Fund declares and
pays dividends annually. 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, Capital
Appreciation Fund, and Equity Income 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
Shareholders will receive detailed confirmations of transactions (except for
systematic program transactions). In addition, shareholders will receive
periodic statements reporting all account activity, including dividends paid.
The Funds no longer issue share certificates.
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
the exchange will result in the establishment of 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 for 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 635-9368). 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.
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
SYSTEMATIC EXCHANGE PROGRAM
If you desire to automatically exchange shares of a predetermined amount from
one Fund into another Fund on a monthly, quarterly or annual basis, you may take
advantage of a systematic exchange privilege. Exchanges are subject to
investment minimums and any applicable sales charges. The minimum amount that
may be exchanged is $25. Shareholders interested in participating in this
program should contact M&T Bank's Mutual Fund Services for more information.
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 is
closed, or on holidays when wire transfers are restricted (e.g., Columbus Day,
Veterans' Day and Martin Luther King, Jr. 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 TELEPHONE, UNLESS YOU
DECLINE THE PRIVILEGE ON YOUR
ACCOUNT APPLICATION.
- -------------------------------------------------------------------------------
You may redeem your Fund shares by calling M&T Bank's Mutual Fund Services at
(800) 836-2211 (in the Buffalo area, phone 635-9368) 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 of M&T Bank 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 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.
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 your-
self 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 Insur-
ance 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 MUNICIPAL INCOME FUND--
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-ex- empt
municipal bonds, although tax-exempt interest will increase the taxable income
of certain recipients of social security benefits. However, under the Tax Reform
Act of 1986, dividends representing net interest income earned on some municipal
bonds may be included in calculating the federal alternative minimum tax for
individuals and corporations. The alternative minimum tax, up to 28% of
alternative minimum taxable income for individuals, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
NEW YORK TAXES
Under existing New York laws, shareholders of the New York Municipal Income 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 Municipal Income 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 Municipal Income 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.
STATE AND LOCAL TAXES
Income from the New York Municipal Income Fund is not necessarily free from
taxes in states other than New York. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.
THE TAX TREATMENT OF TEMPORARY INVESTMENTS
Dividends paid by the New York Municipal Income 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,CAPITAL APPRECIATION
FUND, AND EQUITY INCOME 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).
STATE AND LOCAL TAXES
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
DESCRIPTION OF FUND SHARES
Vision Group of Funds, Inc. was organized as a Maryland corporation on Febru-
ary 23, 1988, and consists of eight 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 Municipal Income
Fund, Vision Growth & Income Fund, Vision Capital Appreciation Fund, and Vision
Equity Income Fund. The Corporation's Articles of Incorporation permit the
Corporation to offer separate series of shares in these funds or other future
portfolios. The Vision Money Market Fund and Vision Treasury Money Market Fund
offer two classes of shares, Class A Shares and Class S Shares.
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 August 7, 1998, Krauss &
Company, Buffalo, New York, acting in various capacities for numerous accounts,
was the owner of record of 1,355,653 shares (40.76%) of the Equity Income 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 August 7, 1998, Reho & Co., Buffalo, New York, acting in
various capacities for numerous accounts, was the owner of record of 2,248,302
shares (36.74%) of the U.S. Government Securities Fund; 2,800,836 shares
(32.79%) of the Growth and Income Fund; 879,452 shares (26.44%) of the Equity
Income Fund; and 1,986,395 shares (45.68%) 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 Board of
Directors. Directors may be removed 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 rein-
vestment 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 Municipal
Income 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 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 MUNICIPAL INCOME FUND ONLY)
The tax-equivalent yield of the New York Municipal Income Fund is calculated
similarly to the yield. However, it is adjusted to show the taxable yield that
the New York Municipal Income 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%).
ADDRESSES
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
(800) 836-2211 (716) 635-9368
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty 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
1001 Liberty Avenue
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
[This Page Intentionally Left Blank]
Vision
U.S. Government
Securities Fund
------------------------------------
Vision
New York Municipal
Income Fund
------------------------------------
Vision
Growth and Income Fund
------------------------------------
Vision
Capital Appreciation Fund
------------------------------------
Vision
Equity Income Fund
------------------------------------
Prospectus dated
August 31, 1998
LOGO
VISION
GROUP OF FUNDS, INC.
Federated Securities Corp.
Distributor Manufacturers And Traders
Federated Investors Tower Trust Company
Pittsburgh, PA 15222-3779 -----------------------------------
92830F406 Investment Adviser
92830F505 A subsidiary of M&T Bank Corporation
92830F604
92830F703
92830F802
3100401A (8/98) TR3100401A (8/98)
[RECYCLED LOGO APPEARS HERE]
Vision U.S. Government Securities Fund
Vision New York Municipal Income Fund
Vision Growth and Income Fund
Vision Capital Appreciation Fund
Vision Equity Income Fund
(Portfolios of Vision Group of Funds, Inc.)
Statement of Additional Information
This Statement of Additional Information relates to the prospectus of five
portfolios of the Vision Group of Funds, Inc., referred to as the Vision
U.S. Government Securities Fund, Vision New York Municipal Income Fund,
Vision Growth and Income Fund, Vision Capital Appreciation Fund, and Vision
Equity Income Fund (collectively, the "Funds" or individually, a "Fund").
This Statement of Additional Information is not a prospectus itself, but
should be read in conjunction with the Funds' current prospectus dated
August 31, 1998. 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)
635-9368. Please retain this Statement of Additional Information for future
reference.
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 1420-4556
Statement of Additional Information dated August 31, 1998
MANUFACTURERS AND TRADERS
TRUST COMPANY
Investment Adviser
A subsidiary of M&T Bank Corporation
Federated Securities Corp. is distributor for the Funds.
25
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
I
General Information About the Funds 1
Investment Objectives and Policies 1
Types of Acceptable Investments and Techniques1
Municipal Securities 1
Illiquid and Restricted Securities 3
Investing in Securities of Other Investment Companies 3
Corporate Debt Securities 3
Ratings 3
Zero Coupon Bonds 4
Mortgage-Related Securities 4
Lending of Portfolio Securities 5
Insurance on Municipal Securities 5
Futures and Options Transactions 6
Securities of Foreign Issuers 9
Short Sales 10
Warrants 10
Duration 10
Temporary Investments 10
Money Market Instruments 10
When-Issued And Delayed Delivery Transactions 11
Repurchase Agreements 11
Reverse Repurchase Agreements 11
Portfolio Turnover 11
Investment Limitations 12
New York Investment Risks 13
Vision Group of Funds, Inc. Management15
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 19
Transfer Agent and Dividend Disbursing Agent 19
Independent Auditors 19
Brokerage Transactions 19
Description of Fund Shares 20
How To Buy Shares 21
Conversion to Federal Funds 21
Determining Market Value Of Securities21
Redeeming Fund Shares 21
Redemption in Kind 21
Exchanging Securities For Fund Shares22
Determining Net Asset Value 22
Banking Laws 22
Tax Status 22
The Funds' Tax Status 22
Corporate Shareholder Information 22
Shareholders' Tax Status 23
Total Return 23
Yield 23
Tax-Equivalent Yield 24
Tax-Equivalency Table 24
Performance Comparisons 25
Economic and Market Information 27
Financial Statements 28
Appendix 29
<PAGE>
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 Municipal Income Fund (the "NY
Municipal Income 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.
The investment objective of Vision Equity Income Fund (the "Equity Income Fund")
is to provide current income. Capital appreciation is a secondary,
non-fundamental consideration.
Types of Acceptable Investments and Techniques
Municipal Securities
As described in the prospectus, the Government Fund and the NY Municipal Income
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 NY Municipal Income 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 IBCA, Inc. ("Fitch"), and Standard &
Poor's ("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 NY Municipal
Income 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 NY Municipal
Income 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 NY Municipal Income 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 NY Municipal Income Fund are
subject to repayment of principal (usually within seven days) on the NY
Municipal Income 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 NY Municipal Income Fund may purchase municipal securities in the form
of participation interests. The financial institutions from which the NY
Municipal Income Fund purchases participation interests frequently provide
or secure from another financial institution irrevocable letters of credit
or guarantees and give the NY Municipal Income 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 NY Municipal Income 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 NY Municipal
Income Fund will be classified as a liquid or an illiquid security, the
Board of Directors ("Directors") has directed the NY Municipal Income
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 NY Municipal Income Fund's ability
to dispose of the security.
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 Directors consider the following criteria in determining the
liquidity of certain restricted securities: o the frequency of trades and quotes
for the security; o the number of dealers willing to purchase or sell the
security and the number of other potential buyers; o dealer undertakings to make
a market in the security; and o the nature of the security and the nature of the
marketplace trades. Investing in Securities of Other Investment Companies
Each of the Funds may invest in the securities of affiliated and unaffiliated
money market funds as an efficient means of managing the Funds' uninvested cash.
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, NY Municipal Income Fund, Growth and Income Fund and Equity
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, Growth
and Income Fund and Equity 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, Growth and Income Fund and Equity 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, Growth and Income Fund and Equity 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, Growth and Income Fund and Equity 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 NY Municipal Income 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 NY Municipal
Income 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 NY Municipal Income Fund
to refuse to insure any additional municipal securities purchased by the NY
Municipal Income 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 NY Municipal Income 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 NY
Municipal Income 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 NY Municipal Income 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 NY Municipal Income 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 NY
Municipal Income 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 NY Municipal Income Fund.
<PAGE>
If a Policy terminates as to municipal securities sold by the NY Municipal
Income 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 NY Municipal Income 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 NY Municipal Income 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 NY
Municipal Income 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 NY Municipal Income 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 August 3, 1998, 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 August 3, 1998, 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 August 3, 1998, 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.
<PAGE>
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, Capital Appreciation Fund and
Equity Income 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.
<PAGE>
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, Capital Appreciation
Fund and Equity Income 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.
<PAGE>
Stock Index Options
The Growth and Income Fund, Capital Appreciation Fund and Equity Income
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, Capital Appreciation Fund and Equity Income 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, Capital Appreciation Fund and Equity Income 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, Capital Appreciation Fund and Equity
Income 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, Capital Appreciation Fund and Equity Income 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 NY Municipal Income 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 NY Municipal Income Fund may invest include instruments within the
listed classes. Although the NY Municipal Income 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 NY Municipal Income 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, 1998 and 1997,
the Government Fund's, NY Municipal Income Fund's, and Growth and Income Fund's
portfolio turnover rates were 70% and 121%, 45% and 79%, and 88% and 134%,
respectively. For the fiscal year ended April 30, 1998, and the period from July
3, 1996 (date of initial public investment) to April 30, 1997, the portfolio
turnover rates of the Capital Appreciation Fund were 86% and 41%. For the period
from September 25, 1997 (date of initial public investment) to April 30, 1998,
the portfolio turnover rate of the Equity Income Fund was 11%.
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.
<PAGE>
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, Capital Appreciation Fund, and Equity Income Fund, and, for
temporary defensive purposes, the NY Municipal Income 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 NY Municipal Income 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 NY Municipal Income 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 Funds will not acquire more than 10% of the outstanding
voting securities of any one issuer.
Investing in Exempt-Interest Obligations
The NY Municipal Income 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.
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 Restricted and Illiquid Securities
The Funds will not invest more than 15% of the value of their respective
net assets in illiquid securities including certain restricted securities
not determined to be liquid under criteria established by the Directors
non-negotiable time deposits and repurchase agreements providing for
settlement in more than seven days after notice.
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 NY Municipal Income Fund invests in obligations of New York (the "State")
issuers which result in the NY Municipal Income 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.
<PAGE>
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.
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 current ratings on New York State general obligation debt are A-2 by Moody's
and A by S&P.
The NY Municipal Income 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.
<PAGE>
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
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.; Sevenson Environmental Services,
Inc.; Blue Cross & Blue Shield of Western 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
President, Brand Name Sales, Inc.; President, Hambleton & Carr, Inc.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
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.; Vice Chairman, Federated Investors, Inc.; 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.
Beth S. Broderick
Federated Investors Tower
Pittsburgh, PA
Birthdate: August 2, 1965
Vice President and Assistant Treasurer
Assistant Vice President & Client Services Officer, Mutual Fund Services
Division, Federated Services Company.
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
Senior Corporate Counsel and Vice President, Federated Administrative Services;
formerly Attorney, Morrison & Foerster (law firm).
Fund Ownership
As of August 7, 1998, Officers and Directors own less than 1% of the Fund's
outstanding shares.
As of August 7, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Government Fund: Tice & Co., Buffalo, New York,
owned approximately 757,449 shares (12.38%);Krauss & Company, Buffalo, New York,
owned approximately 1,479,272 shares (24.17%); and Reho & Co., Buffalo, New
York, owned approximately 2,248,302 shares (36.74%).
As of August 7, 1998, the following shareholder of record owned 5% or more of
the outstanding shares of the NY Municipal Income Fund: Tice & Co., Buffalo, New
York, owned approximately 532,839 shares (12.17%).
As of August 7, 1998, 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 620,076 shares (7.25%); Krauss & Company, Buffalo, New
York, owned approximately 750,792 shares (8.79%); and Reho & Co., Buffalo, New
York, owned approximately 2,800,836 shares (32.79%).
As of August 7, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Capital Appreciation Fund: Krauss & Company,
Buffalo, New York, owned approximately 570,905 shares (13.13%); and Reho & Co.,
Buffalo, New York, owned approximately 1,986,395 shares (45.68%).
As of August 7, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Equity Income Fund: Reho & Co., Buffalo, New York,
owned approximately 879,452 shares (26.44%); and Krauss & Company., Buffalo, New
York, owned approximately 1,355,653 shares (40.76%).
<PAGE>
Directors' Compensation
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION*#
Randall I. Benderson,
Director $7,500
Joseph J. Castiglia,
Director $8,500
Daniel R. Gernatt, Jr.,
Director $8,500
George K. Hambleton, Jr.,
Director $8,500
*Information is furnished for the fiscal year ended April 30, 1998. The
Corporation is the only investment company in the Fund Complex.
#The aggregate compensation is provided for the Corporation which is comprised
of eight 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, 1998, 1997, and 1996, for the Government
Fund, NY Municipal Income Fund and Growth and Income Fund, M&T Bank earned
advisory fees of $378,409, $258,550, and $227,041; $279,035, $234,511, and
$209,254; and $968,660, $308,825, and $102,300 respectively, of which $45,997,
$61,752, and $48,652; $117,123, $115,657, and $91,153; and $0, $0, and $541,
respectively, were voluntarily waived.
In addition, for the fiscal years ended April 30, 1998, 1997, and 1996, for the
Government Fund, NY Municipal Income Fund, and Growth and Income Fund, M&T Bank
reimbursed $0, $0, and $0; $0, $0, and $0; and $0, $0, and $0, respectively, of
other operating expenses.
For the fiscal year ended April 30, 1998, and 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 $453,674 and $137,485, of which $0 and
$63,215 were voluntarily waived. In addition, for the fiscal year ended April
30, 1998, and the period from July 3, 1996 (date of initial public investment)
to April 30, 1997, for the Capital Appreciation Fund, M&T Bank reimbursed $0 and
$67,000 of other operating expenses.
For the period from September 25, 1997 (date of initial public investment) to
April 30, 1998, for the Equity Income Fund, M&T Bank earned advisory fees of
$83,847, of which $53,453 was voluntarily waived. In addition, for the period
from September 25, 1997 (date of initial public investment) to April 30, 1998,
for the Equity Income Fund, M&T Bank reimbursed $0 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 year ended April 30, 1996,
Harbor earned $255,750. For the period from April 30, 1996 to December 31, 1996,
Harbor earned $297,904.
Other Services
Administrative Services
Federated Administrative Services ("FAS"), a subsidiary of Federated Investors,
Inc., provides administrative personnel and services to the Funds. Federated
Services Company provides the Funds with certain financial, administrative,
transfer agency and Fund accounting services. These services are provided for an
aggregate annual fee as described in the Prospectus. For the period from
December 1, 1997 to April 30, 1998, the Government Fund, NY Municipal Income
Fund, Growth and Income Fund, Capital Appreciation Fund and Equity Income Fund
incurred costs for administrative services of $33,699; $23,384; $78,952;
$35,341; and $12,991, respectively.
Prior to December 1, 1997, FAS was paid by the Funds based on the following fee
schedule:
Maximum Administrative Fee Aggregate Daily Net Assets of the Corporation
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on asset in excess of $750 million
The minimum administrative fee received during any year was $50,000 per Fund.
For the period from May 1, 1997 to November 30, 1997, and the fiscal years ended
April 30, 1997, and 1996, the Government Fund, NY Municipal Income Fund, and
Growth and Income Fund incurred costs for administrative services of $30,378,
$50,000, and $49,999; $29,317, $50,000, and $50,001; $81,883, $90,371, and
$58,037;, respectively, of which $571, $11,168, and $9,295; $6,213, $14,660, and
$10,672; and $0, $0, and $0, respectively, were voluntarily waived.
For the period from May 1, 1997 to November 30, 1997, and 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 $30,516, and
$41,371, of which $2,685 and $24,932, were voluntarily waived. For the period
from September 25, 1997 (date of initial public investment) to November 30,
1997, the Equity Income Fund incurred costs for administrative services of
$8,630, of which $8,630, was voluntarily waived.
<PAGE>
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, 1998, 1997, and 1996, the Government Fund
and NY Municipal Income Fund paid no brokerage commissions on brokerage
transactions.
For the fiscal years ended April 30, 1998, 1997, and 1996, the Growth and Income
Fund paid $259,177, $304,622, and $128,098, respectively, in commissions on
brokerage transactions.
For the fiscal year ended April 30, 1998, and 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 $113,127 and $62,973, respectively.
For the period from September 25, 1997 (date of initial public investment) to
April 30, 1998, the Equity Income Fund paid brokerage commissions in the amount
of $46,309.
Description of Fund Shares
The Corporation's Articles of Incorporation authorize the Board of Directors to
issue up to twenty billion full and fractional shares of Common Stock, of which
fourteen billion shares have been classified into eight classes. Six billion
shares remain unclassified at this time. Authorized classes of shares for each
Fund and amounts are as follows:
<TABLE>
<CAPTION>
<S> <C>
Fund Name Authorized Class and Amount
Vision Money Market Fund 2 billion Class A Common Stock, Series A (Class A Shares)
2 billion Class A Common Stock, Series S (Class S Shares)
Vision Treasury Money Market Fund 2 billion Class B Common Stock, Series A (Class A Shares)
2 billion Class B Common Stock, Series S (Class S Shares)
Vision New York Tax-Free Money Market Fund 1 billion Class C Common Stock, Series A
Vision U.S. Government Securities Fund 1 billion Class D Common Stock, Series A
Vision New York Municipal Income Fund 1 billion Class E Common Stock, Series A
Vision Growth and Income Fund 1 billion Class F Common Stock, Series A
Vision Capital Appreciation Fund 1 billion Class G Common Stock, Series A
Vision Equity Income Fund 1 billion Class H Common Stock, Series A
</TABLE>
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
Fund are entitled to receive the assets available for distribution belonging to
the respective shares of a Fund 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 or class of shares
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. All shares of all classes of each Fund in the Corporation have equal
voting rights, except in matters affecting only a particular Fund or class of
shares, only shares of that Fund or class of shares are entitled to vote.
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 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.
<PAGE>
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 invest in securities within certain
statutory limits; and o distribute to its shareholders at least 90% of its
net income earned during the year.
Corporate Shareholder Information
In the case of a corporate shareholder, dividends of the Fund which represent
interest on municipal bonds will become subject to the 20% corporate alternative
minimum tax because the dividends are included in a corporation's "adjusted
current earnings." The corporate alternative minimum tax treats 75% of the
excess of a taxpayer's pre-tax "adjusted current earnings" over the taxpayer's
alternative minimum taxable income as a tax preference item. "Adjusted current
earnings" is based upon the concept of a corporation's "earnings and profits."
Since "earnings and profits" generally includes the full amount of any Fund
dividend, and alternative minimum taxable income does not include the portion of
the Fund's dividend attributable to municipal obligation bonds, which are not
private activity bonds, the difference will be included in the calculation of
the corporation's alternative minimum tax. 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, 1998, and for the period from September 22, 1993 (date of initial
public investment) to April 30, 1998, were 5.42% and 4.24%, respectively.
The NY Municipal Income Fund's average annual total returns for the one-year
period ended April 30, 1998, and for the period from September 22, 1993 (date of
initial public investment) to April 30, 1998, were 3.54% and 4.69%,
respectively.
The Growth and Income Fund's average annual total returns for the one-year
period ended April 30, 1998 and for the period from November 29, 1993 (date of
initial public investment) to April 30, 1998, were 24.17% and 17.52%,
respectively.
The Capital Appreciation Fund's average annual total return for the one-year
period ended April 30, 1998 and for the period from July 3, 1996 (date of
initial public investment) to April 30, 1998, were 32.31% and 25.22%,
respectively.
The Equity Income Fund's cumulative total return for the period from September
25, 1997 (date of initial public investment) to April 30, 1998, was 9.17%.
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 Equity Income Fund's total return is representative of
only seven 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, NY Municipal Income Fund, Growth and Income
Fund, Capital Appreciation Fund, and Equity Income Fund for the thirty-day
period ended April 30, 1998, were 5.22%, 4.00%, 0.60%, 0.00%, and 1.55%,
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 NY Municipal Income Fund for the thirty-day
period ended April 30, 1998, was 6.14%. The tax-equivalent yield of the NY
Municipal Income 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 NY Municipal Income Fund may also use a tax-equivalency table in advertising
and sales literature. The interest earned by the municipal obligations in the NY
Municipal Income 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.
TAXABLE YIELD EQUIVALENT FOR 1998
STATE OF NEW YORK
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%
3,351- $1- $4$102,301-$155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
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%
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 NY Municipal Income Fund.
*Some portion of the NY Municipal Income 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 NY Municipal Income 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)
<PAGE>
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. (NY Municipal Income 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 $4.4 trillion to the more than 6,700 funds available.
<PAGE>
Financial Statements
The financial statements for the fiscal year ended April 30, 1998 are
incorporated herein by reference to the Funds' Annual Report dated April 30,
1998 (File Nos. 33-20673 and 811-5514). A copy of the Annual Report accompanies
this Statement of Additional Information. In addition, the Annual Report may be
obtained without charge by contacting the Funds at the address located on the
back cover of the prospectus or by calling the Funds at 1-800-836-2211 or in the
Buffalo area, telephone 635-9368.
<PAGE>
Appendix
Standard & Poor's 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 IBCA, 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 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 IBCA, 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 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
92830F802
G01716-07 (8/98)
VISION
LOGO
GROUP OF FUNDS, INC.
PROSPECTUS
VISION GROUP OF FUNDS, INC.
PROSPECTUS DATED AUGUST 31, 1998
Vision Group of Funds, Inc. is an open-end management investment company (a
mutual fund) that offers you a choice of eight separate investment portfolios
with distinct investment objectives and policies. This prospectus relates to
three diversified money market 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 (CLASS A SHARES)
VISION TREASURY MONEY MARKET FUND (CLASS A SHARES)
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 August 31, 1998, 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 any 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) 635-9368
TABLE OF CONTENTS
<TABLE>
<S> <C>
Synopsis 3
Summary of Fund Expenses 4
Financial Highlights 6
Some Basic Facts About the Money Market and Money Market Mutual Funds 9
How the Funds Invest 11
Risk Factors Associated With
Foreign Investments 12
Common Fund Investment Techniques, Features and Limitations 18
Fund Management, Distribution and Administration 21
Board of Directors 21
Investment Adviser and Sub-Adviser 21
</TABLE>
<TABLE>
<S> <C>
Distribution of Fund Shares 22
Administration of the Funds 23
Your Guide to Using the Funds 24
How the Funds Value their Shares 24
What Fund Shares Cost 24
How to Buy Shares 24
How to Exchange Shares 26
How to Redeem Shares 27
Tax Information 30
Description of Fund Shares 31
Voting Rights and Other Information 31
Other Classes of Shares 32
</TABLE>
SYNOPSIS
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. The Vision Money
Market Fund and Vision Treasury Money Market Fund offer two classes of shares,
Class A Shares and Class S Shares. This prospectus relates to Class A Shares of
the Vision Money Market Fund and Vision Treasury Money Market Fund, and the
Vision New York Tax-Free Money Market Fund, which does not presently offer
separate classes of shares.
INVESTMENT OBJECTIVE
- -------------------------------------------------------------------------------
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.
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.
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.
- -------------------------------------------------------------------------------
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 Manufacturers and Traders Trust Company ("M&T
Bank" or "Adviser"), which makes investment decisions for the Funds. M&T Bank is
the principal banking subsidiary of M&T Bank Corporation (formerly, First Empire
State Corporation). Federated Investment Counseling, a subsidiary of Federated
Investors, Inc., is sub-adviser to the Tax-Free Fund. References to the
sub-adviser in the "Common Fund Investment Techniques, Features and Limitations"
section apply to the Tax-Free Fund only.
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 635-9368).
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. YEAR 2000 STATEMENT. Some
software programs and, to a lesser extent, the computer hardware in use today
cannot distinguish the year 2000 from the year 1900 and cannot properly process
date-related information from and after Janu- ary 1, 2000. Such a design flaw
could have a negative impact in the handling of securities trades, pricing and
accounting services. The Fund and its service providers are actively working on
necessary changes to their computer systems to deal with the Year 2000 issue and
believe that systems will be Year 2000 compliant when required. Analysis
continues regarding the financial impact of instituting a Year 2000 compliant
program on the Fund's operations.
SUMMARY OF FUND EXPENSES
Every money market 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>
TREASURY NEW YORK
MONEY MARKET MONEY MARKET TAX-FREE
ANNUAL OPERATING EXPENSES FUND FUND MONEY MARKET
(as a percentage of average net assets) CLASS A SHARES CLASS A SHARES FUND
<S> <C> <C> <C>
Management Fees (after waivers) (1) 0.45% 0.42% 0.41%
12b-1 Fees None None None
Other Expenses 0.19% 0.17% 0.24%
Shareholder Servicing Fees (2) 0.00% 0.00% 0.00%
Total Fund Operating Expenses (after
waiver) (3) 0.64% 0.59% 0.65%
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".
<CAPTION>
EXAMPLE:
<S> <C> <C> <C>
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................................ $ 7 $ 6 $ 7
3 Years............................... $20 $19 $21
5 Years............................... $36 $33 $36
10 Years.............................. $80 $74 $81
</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 Funds have been reduced to reflect the voluntary
waivers of portions of the management fees by the adviser. The adviser may
terminate these voluntary waivers at any time at its sole discrection. The
maximum management fee for each of the Funds is 0.50%. (2) The Funds
have no present intention of accruing or paying shareholder servicing fees. 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 and Treasury Money Market Fund would have been 0.69% and
0.67%, respectively, for the year ended April 30, 1998, absent the voluntary
waiver of the Management Fee. Total Fund Operating Expenses for New York
Tax-Free Money Market Fund in the table above are based on expenses expected
during the fiscal year ending April 30, 1999. The Total Fund Operating Expenses
for New York Tax-Free Money Market Fund for the fiscal year ended April 30, 1998
were 0.50% and would have been 0.78%, absent the voluntary waiver of the
Management Fee.
[This Page Intentionally Left Blank]
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following table has been audited by Ernst & Young LLP, the Funds'
independent auditors. Their report dated June 17, 1998 on the Funds' financial
statements for the year ended April 30, 1998, and on the following table for the
periods presented, is included in the Annual Report, which is incorporated by
reference. This table should be read in conjunction with the Funds' financial
statements and notes thereto, which may be obtained from the Funds.
<TABLE>
<CAPTION>
YEAR NET ASSET VALUE, NET DISTRIBUTIONS TO NET ASSET
ENDED BEGINNING INVESTMENT SHAREHOLDERS FROM NET VALUE, END
APRIL 30, OF PERIOD INCOME INVESTMENT INCOME OF PERIOD
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MONEY MARKET FUND--CLASS A SHARES
1989(a) $1.00 0.07 (0.07) $1.00
1990 $1.00 0.08 (0.08) $1.00
1991 $1.00 0.07 (0.07) $1.00
1992 $1.00 0.05 (0.05) $1.00
1993 $1.00 0.03 (0.03) $1.00
1994 $1.00 0.03 (0.03) $1.00
1995 $1.00 0.05 (0.05) $1.00
1996 $1.00 0.05 (0.05) $1.00
1997 $1.00 0.05 (0.05) $1.00
1998 $1.00 0.05 (0.05) $1.00
TREASURY MONEY MARKET FUND--CLASS A
SHARES
1989(a) $1.00 0.07 (0.07) $1.00
1990 $1.00 0.08 (0.08) $1.00
1991 $1.00 0.07 (0.07) $1.00
1992 $1.00 0.04 (0.04) $1.00
1993 $1.00 0.03 (0.03) $1.00
1994 $1.00 0.03 (0.03) $1.00
1995 $1.00 0.04 (0.04) $1.00
1996 $1.00 0.05 (0.05) $1.00
1997 $1.00 0.05 (0.05) $1.00
1998 $1.00 0.05 (0.05) $1.00
NEW YORK TAX-FREE MONEY MARKET FUND
1989(a) $1.00 0.04 (0.04) $1.00
1990 $1.00 0.05 (0.05) $1.00
1991 $1.00 0.05 (0.05) $1.00
1992 $1.00 0.03 (0.03) $1.00
1993 $1.00 0.02 (0.02) $1.00
1994 $1.00 0.02 (0.02) $1.00
1995 $1.00 0.03 (0.03) $1.00
1996 $1.00 0.03 (0.03) $1.00
1997 $1.00 0.03 (0.03) $1.00
1998 $1.00 0.03 (0.03) $1.00
- ------------------------------------------------------------------------------
</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.
Further information about the Funds' performance is contained in the Funds'
Annual Report for the fiscal year ended April 30, 1998, which can be obtained
free of charge.
FINANCIAL HIGHLIGHTS--CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
------------------------------------------------------
NET EXPENSE NET ASSETS,
TOTAL INVESTMENT WAIVER/ END OF PERIOD
RETURN(B) EXPENSES INCOME REIMBURSEMENT(D) (000 OMITTED)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7.52% 0.74%(c) 8.00%(c) 0.29%(c) $ 84,668
8.58% 0.72% 8.19% 0.25% $121,227
7.21% 0.81% 6.99% 0.09% $ 86,973
4.60% 0.75% 4.40% 0.06% $143,670
3.21% 0.36% 3.13% 0.39% $226,298
3.01% 0.28% 2.98% 0.42% $266,626
4.77% 0.51% 4.80% 0.19% $431,316
5.33% 0.58% 5.19% 0.11% $489,229
4.93% 0.61% 4.77% 0.10% $599,817
5.11% 0.64% 5.00% 0.05% $686,259
7.08% 0.68%(c) 7.48%(c) 0.34%(c) $ 31,388
8.17% 0.86% 7.88% 0.25% $ 32,986
6.96% 0.75% 6.52% 0.06% $ 91,682
4.54% 0.75% 4.38% 0.04% $100,373
3.05% 0.40% 2.98% 0.39% $128,825
2.88% 0.31% 2.86% 0.43% $197,521
4.57% 0.51% 4.53% 0.19% $210,526
5.25% 0.57% 5.10% 0.09% $372,884
4.82% 0.58% 4.75% 0.10% $373,485
4.98% 0.59% 4.96% 0.08% $441,422
4.55% 0.68%(c) 4.83%(c) 0.45%(c) $ 8,309
5.24% 0.83% 5.11% 0.65% $ 8,494
4.73% 0.69% 4.66% 0.87% $ 9,445
2.99% 0.95% 2.92% 0.65% $ 7,028
1.68% 0.71% 1.67% 0.63% $ 17,899
1.88% 0.41% 1.88% 0.58% $ 40,180
2.84% 0.40% 2.76% 0.52% $ 41,238
3.20% 0.48% 3.14% 0.38% $ 65,763
2.96% 0.50% 2.95% 0.35% $ 56,618
3.14% 0.50% 3.09% 0.28% $ 73,345
- -------------------------------------------------------------------------------------
</TABLE>
[This Page Intentionally Left Blank]
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 ex-
porters;
. 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 princi-
pal--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 8.05% from a taxable investment to equal that tax-free yield (5.0%
divided by 1 - (.31 + .0685) = 8.05%).
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 ("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 ("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-bear-
ing 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. dol-
lar-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. Repurchase
agreements are agreements by an organization selling U.S. government
securities to the Fund to repurchase the securities at a mutually agreed
upon price and time (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
Adviser consider 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 in-
terest 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, AND WHO ALSO WANT
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 80%
investment policy described above cannot be changed without shareholder
approval. The investment policies described below may be changed by the
Directors without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.
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 will only purchase securities (primarily New York municipal securities)
that qualify as "Eligible Securities" as defined by Rule 2a-7 under the
Investment Company Act of 1940. Eligible Securities include securities rated by
a nationally-recognized statistical rating organization ("NRSRO") in one of the
two highest rating categories, securities of issuers that have received such
rating with respect to other short-term debt securities and comparable unrated
securities.
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 and the sub- adviser intend 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 and the sub-adviser 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
and the sub-adviser do 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, except that it may invest more than 25% of the value of its total
assets in (1) obligations issued by any state (i.e., New York), territory, or
possession of the United States, the District of Columbia or any of their
authorities, agencies, instrumentalities or political subdivisions, (2) in cash
or cash items (including instruments issued by a U.S. branch of a domestic bank
or savings association and bankers' acceptances), (3) securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities, (4)
instruments secured by these money market instruments (i.e., repurchase
agreements), or (5) in securities of other investment companies.
- -------------------------------------------------------------------------------
TO THE EXTENT THE FUND
CONCENTRATES ITS INVESTMENTS IN
A SINGLE STATE, IT IS SUBJECT
TO GREATER RISKS THAT AFFECT
THE MUNICIPAL SECURITIES ISSUED
BY THAT STATE.
- -------------------------------------------------------------------------------
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 and sub-adviser, 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 adviser and
sub-adviser have 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 AMT obligations as 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 and the sub-adviser determine 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 pur-
chased 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 opinions of M&T Bank and the sub- adviser, 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.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate management of
the portfolio by enabling the Fund to meet redemption requests when the
liquidation of portfolio assets is deemed to be inconvenient or disadvantageous.
The Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies as an
efficient means of carrying out its investment policies. It should be noted that
investment companies incur certain expenses, such as management fees, and,
therefore, any investment by the Fund in shares of other investment companies
may be subject to such duplicate expenses.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. Under criteria established by the Directors, certain restricted
securities are determined to be liquid. To the extent that restricted securities
are not determined to be liquid, the Fund will limit their purchase together
with other illiquid securities (including repurchase agreements providing for
settlement in more than seven days after notice) to 10% of its net assets.
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. 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. Under normal market conditions, no
Fund will enter into commitments to purchase securities on a when-issued basis
that exceed 25% of the value of its total assets. As an operating
policy, each Fund reserves the right to dispose of a commitment prior to
settlement if the Adviser and, if applicable, sub-adviser deem it appropriate to
do so. In addition, each Fund 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 Fund 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 the Fund, the
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 and, if
applicable, sub-adviser consider creditworthy under guidelines approved by the
Corporation's Board of Directors.
VARIABLE RATE DEMAND NOTES
Each Fund may purchase variable rate demand notes, which are long-term debt
instruments that have variable or floating interest rates and provide the Fund
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 Fund to demand the repurchase of the
security on not more than seven days' prior notice. Other notes only permit the
Fund to 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 each may purchase variable amount
demand master notes. Variable amount demand master notes represent a borrowing
arrangement between an 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 each may have more than 25% of its total
assets invested in securities credit-enhanced by banks.
DEMAND FEATURES
The Tax-Free Fund and the Money Market Fund each 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 Fund. 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.
- -------------------------------------------------------------------------------
Some 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."
The Tax-Free Fund may not:
. issue senior securities except that the Fund may borrow money in amounts up
to one-third of the value of its total assets, including the amounts bor-
rowed;
. invest more than 25% of the value of its total assets in issuers of the same
industry, except that it 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
association and bankers' acceptances), securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, instruments secured by
these money market instruments (i.e., repurchase agreements), or in
securities of other investment companies; 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 defen-
sive periods. AMT obligations
are not considered securities the interest on which is exempt from federal
regular income tax.
The Treasury Fund may not:
. borrow money or issue senior securities, except, under certain circumstances,
the 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;
. purchase securities other than direct obligations of the U.S. Treasury,
such as Treasury bills and notes, some of which may be subject to repur-
chase agreements; 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 the Fund, exceeds 10% the Fund's total assets.
The Money Market Fund may not:
. borrow money or issue senior securities, except, under certain circumstances,
the 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;
. 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
in- strumentalities, 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; 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 the Fund, exceeds 10% the Fund's total assets.
The above investment limitations cannot be changed without shareholder approval.
The following limitation for the Tax-Free Fund, however, may be changed by the
Directors without shareholder approval. Shareholders will be notified before any
material change in this limitation becomes effective.
. enter into repurchase agreements providing for settlement more than seven
days after notice, if such an investment, together with any illiquid
securities in the 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 is 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
AND SUB-ADVISER
- -------------------------------------------------------------------------------
THE FUNDS ARE MANAGED BY M&T BANK, PURSUANT TO AN INVESTMENT ADVISORY CONTRACT
WITH THE CORPORATION. THE TAX-FREE FUND AND M&T BANK HAVE ENTERED INTO A
SUB-ADVISORY AGREEMENT WITH FEDERATED INVESTMENT COUNSELING ("FIC" OR
"SUB-ADVISER"). M&T BANK (AND FIC FOR THE TAX-FREE FUND ONLY) MAKE INVESTMENT
DECISIONS FOR THE FUNDS, ACTING UNDER THE DIRECTION OF THE BOARD OF DIRECTORS.
- -------------------------------------------------------------------------------
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. M&T Bank pays FIC for its
services as sub-adviser directly from the advisory fee M&T Bank receives from
the Tax-Free Fund. (See "Sub-Advisory Fees" below.) 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 M&T Bank Corporation, a $20.1
billion bank holding company, as of June 30, 1998, headquartered in Buffalo, New
York. M&T Bank has 235 offices throughout New York state, 19 offices throughout
northeastern Pennsylvania, and an office in Nassau, The Bahamas. Prior to May
29, 1998, M&T Bank Corporation was formerly known as First Empire State
Corporation. 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 June 30, 1998, M&T
Bank had over $4 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 June 30, 1998, M&T Bank managed $1.29
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.
SUB-ADVISER
Federated Investment Counseling (the "Sub- Adviser") is the sub-adviser to the
Tax-Free Fund. Under the terms of the Sub-Advisory Agreement
among the Tax-Free Fund, the Adviser and the Sub-Adviser, the Sub-Adviser will
provide the Adviser such investment advice, statistical and other factual
information as may, from time to time, be reasonably requested by the Adviser.
M&T Bank is responsible for monitoring FIC's activities through quantitative and
qualitative analysis, as well as periodic consultations. FIC has complete
discretion to manage portfolio securities of the Tax-Free Fund, subject to the
Fund's investment objective, policies and limitations.
SUB-ADVISORY FEES
For its services under the Sub-Advisory Agreement, the Sub-Adviser receives an
allocable portion of the advisory fee the Adviser receives from the Tax-Free
Fund. Such allocation is based on the amount of securities which the Sub-Ad-
viser manages for the Fund. This fee is paid by the Adviser out of the fees it
receives and is not an incremental Fund expense. The Sub-Adviser is paid by the
Adviser as follows:
<TABLE>
<CAPTION>
SUB-ADVISORY FEE
----------------
<C> <S>
.20% on the first $100 million average daily net assets .18% on the next
$100 million average daily net assets; and .15% on average daily net
assets over $200 million.
</TABLE>
SUB-ADVISER'S BACKGROUND
Federated Investment Counseling, incorporated in Delaware on April 11, 1989,
is a registered investment adviser under the Investment Advisers Act of 1940.
The Sub-Adviser is a subsidiary of Federated Investors, Inc. All of the Class
A (voting) shares of Federated Investors, Inc. are owned by a trust, the
trustees of which are John F. Donahue, Chairman and Director of Federated
Investors, Inc., Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President, Director and Chief Executive Officer of Federated
Investors, Inc.
Federated Investment Counseling and other subsidiaries of Federated Investors,
Inc. serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $120 billion invested
across more than 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1997, Federated Investors, Inc. is one of the
largest mutual fund investment managers in the United States. With more than
2,000 employees, Federated continues to be led by the management who founded the
company in 1955. Federated Funds are presently at work in and through 4,000
financial institutions nationwide.
CODE OF ETHICS
The Corporation, the Adviser and the Sub-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.
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, Inc.
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 and Sub-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 ("FAS") PROVIDES THE
FUNDS WITH CERTAIN
ADMINISTRATIVE PERSONNEL AND
SERVICES NECESSARY TO OPERATE
THE FUNDS. FEDERATED SERVICES
COMPANY ("FEDERATED SERVICES")
PROVIDES THE FUNDS WITH CERTAIN
FINANCIAL, TRANSFER AGENCY AND
FUND ACCOUNTING SERVICES. FAS
AND FEDERATED SERVICES ARE
INDIRECT WHOLLY OWNED
SUBSIDIARIES OF FEDERATED
INVESTORS, INC. THESE SERVICES
ARE PROVIDED FOR AN AGGREGATE
ANNUAL FEE AS SPECIFIED BELOW:
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE DAILY NET ASSETS OF
MAXIMUM FEE VISION GROUP OF FUNDS, INC.
----------- ------------------------------------
<C> <S>
.140% on the first $1.4 billion
.100% on the next $750 million
.07% on assets in excess of $2.15 billion
</TABLE>
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, Jr. 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, Jr. Day).
The Funds reserve the right to reject any purchase request.
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
635-9368). 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. 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 and class, if applicable) 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.
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 do not issue
certificates. Federated Shareholder Services Company is a subsidiary of
Federated Investors, Inc.
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.
- -------------------------------------------------------------------------------
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. 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 for 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 635-9368). 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.
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, Vet-
erans' Day, and Martin Luther King, Jr. Day). While you may redeem various
amounts by telephone, check, or written request, you can close your account only
by writing.
TELEPHONE REDEMPTIONS
- -------------------------------------------------------------------------------
YOU MAY REDEEM YOUR FUND SHARES
BY TELEPHONE, UNLESS YOU
DECLINE THE PRIVILEGE ON YOUR
ACCOUNT APPLICATION.
- -------------------------------------------------------------------------------
You may redeem your shares by calling M&T Bank's Mutual Fund Services at (800)
836-2211 (in the Buffalo area, phone 635-9368) 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 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 and class, if applicable, your account number, and the share or dollar
amount you want to redeem.
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 your-
self 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-ex- empt
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.
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 20 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 eight 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 Municipal Income Fund, Vision Growth
and Income Fund, Vision Capital Appreciation Fund, and Vision Equity Income
Fund. The Vision Money Market Fund and Vision Treasury Money Market Fund also
offer another class of shares, Class S Shares.
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 Corpora- tion'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 August 7, 1998, Tice & Co.,
Buffalo, New York, acting in various capacities for numerous accounts, was the
owner of record of 264,655,657 Class A shares (35.90%) of the Money Market Fund;
364,201,354 Class A shares (76.46%) of the Treasury Money Market Fund; and
36,489,416 shares (35.25%) of the Tax-Free 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 rein-
vestment 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 Corpo- ration's
Board of Directors and are conclusive.
OTHER CLASSES OF SHARES
The Money Market Fund and Treasury Money Market Fund offer another class of
shares, Class S Shares. Class S Shares are sold at net asset value and are
subject to an initial investment of $500, unless the investment is in a
retirement plan, in which case the minimum initial investment is $250.
Class A and S Shares are subject to certain of the same expenses.
Class S Shares are distributed with a 12b-1 Plan fee of 0.25%, as well as a
shareholder servicing fee, although no shareholder servicing fee is currently
being accrued or paid by Class S Shares. Class A Shares are not distributed with
a 12b-1 Plan, but are subject to a maximum shareholder servicing fee of 0.25%.
Expense differences between classes may affect the performance of each class of
shares.
To obtain more information and a prospectus for Class S Shares, investors may
call 1-800-836-2211 or in the Buffalo area, call (716) 635-9368.
ADDRESSES
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York
14240-4556 (800) 836-2211 (716) 635-9368
DISTRIBUTOR
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
INVESTMENT ADVISER
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14240
SUB-ADVISER
(New York Tax-Free Money Market Fund only)
Federated Investment Counseling
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8609
Boston, Massachusetts 02266-8609
ADMINISTRATOR
Federated Administrative Services
Federated Investors Tower
1001 Liberty Avenue
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
[This Page Intentionally Left Blank]
Vision
Money Market
Fund
------------------------------
Vision
Treasury
Money Market
Fund
------------------------------
Vision
New York Tax-Free
Money Market
Fund
------------------------------
Prospectus dated
August 31, 1998
VISION
LOGO
GROUP OF FUNDS, INC.
Federated Securities Corp.
Distributor Manufacturers And Traders
Federated Investors Tower Trust Company
Pittsburgh, PA 15222-3779 -----------------------------------
92830F307 Investment Adviser
92830F109 A subsidiary of M&T Bank Corporation
92830F208
1072302A (8/98) TR1072302A (8/98)
[RECYCLED LOGO APPEARS HERE]
Vision Money Market Fund
Class A Shares
Class S Shares
Vision Treasury Money Market Fund
Class A Shares
Class S Shares
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 prospectuses of
three money market 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").
This Statement of Additional Information is not a prospectus itself, but
should be read in conjunction with the Funds' current prospectus dated
August 31, 1998. Class S Shares of Vision Money Market Fund and Vision
Treasury Money Market Fund have a separate prospectus dated May 1, 1998.
This Statement of Additional Information is incorporated into the Funds'
prospectuses by reference. To receive a copy of a 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.
Vision Group of Funds, Inc.
P.O. Box 4556
Buffalo, New York 14240-4556
Statement of Additional Information dated August 31, 1998
MANUFACTURERS AND TRADERS
TRUST COMPANY
Investment Adviser
A subsidiary of M&T Bank 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
Municipal Security Issues (Tax-Free Money Market Fund only) 1
Temporary Investments 3
Investing in Securities of Other Investment Companies 3
Restricted and Illiquid Securities 3
U.S. Government Obligations 3
When-Issued and Delayed Delivery Transactions 3
Certificates of Deposit and Bankers' Acceptances 4
Commercial Paper 4
Repurchase Agreements 4
Reverse Repurchase Agreements 4
Credit Enhancement 4
Credit Guidelines 4
New York Investment Risks 5
Investment Limitations 6
Regulatory Compliance 8
Vision Group of Funds, Inc. Management 9
Fund Ownership 10
Directors' Compensation 11
Director Liability 11
Investment Advisory Services 11
Adviser to the Funds 11
Advisory Fees 12
Other Services 12
Administrative Services 12
Custodian and Portfolio Accountant 13
Transfer Agent and Dividend Disbursing Agent 13
Independent Auditors 13
Brokerage Transactions 13
Description of Fund Shares 14
How to Buy Shares 15
Conversion to Federal Funds 15
Cash Sweep Program 15
Determining Net Asset Value 15
Redeeming Fund Shares 15
Banking Laws 16
Tax Status 16
The Funds' Tax Status 16
Corporate Shareholder Information 16
Shareholders' Tax Status 16
Total Return 17
Yield 17
Effective Yield 17
Tax-Equivalent Yield 18
Tax-Equivalency Table 18
Performance Comparisons 19
Economic and Market Information 19
Financial Statements 20
Appendix 21
<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. The Vision Money Market Fund and Vision
Treasury Money Market Fund offer two classes of shares, Class A Shares and Class
S Shares. This Statement relates to both classes of shares of the Vision Money
Market Fund and Vision Treasury Money Market Fund, and the Vision New York
Tax-Free Money Market Fund (which does not presently offer classes of shares).
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 investment
objective cannot be changed without shareholder approval. Unless otherwise
noted, the investment policies listed below for the Tax-Free Money Market Fund
may be changed by the Board of Directors. Shareholders will be notified before
any material change in these policies becomes effective.
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. This is a fundamental policy
which cannot be changed without shareholder approval.
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"). As a fundamental policy, 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 ("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") and Federated
Investment Counseling ("FIC"), the investment adviser and subadviser,
respectively, 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.
Investing in Securities of Other Investment Companies
The Tax-Free Money Market Fund may invest in the securities of affiliated money
market funds as an efficient means of managing the Fund's uninvested
cash.
Restricted and Illiquid 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 Directors consider the following criteria in determining the
liquidity of certain restricted securities:
o the frequency of trades and quotes for the security;
o the number of dealers willing to purchase or sell the security and the
number of other potential buyers; o dealer undertakings to make a market
in the security; and o the nature of the security and the nature of the
marketplace trades.
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.
In addition, the Tax-Free Money Market Fund may invest in any other U.S.
Government Obligations that qualifies as an "Eligible Security" under Rule 2a-7.
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. The Tax-Free Money Market Fund may also invest in other bank
obligations, provided they qualify as "Eligible Securities" under Rule 2a-7.
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, or FIC in the case of
Tax-Free Money Market Fund, 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 prospectuses.
<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, 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, if the Corporation's board or its delegate determines
that the Fund is not relying on the credit enhancer to determine quality,
maturity, or liquidity of the underlying security.
Credit Guidelines
The Tax-Free Money Market Fund invests in municipal securities that are
determined by M&T Bank or FIC, the Fund's investment adviser and subadviser,
respectively, 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: o rated within the two highest rating categories by
Moody's (Aaa or Aa) or S&P (AAA or AA), in the cases of bonds; o rated SP-1 or
SP-2 by S&P or MIG-1 or MIG-2 by Moody's, in the case of notes; o rated VMIG-1
or VMIG-2 by Moody's, in the case of variable rate municipal securities; o rated
A-2 or higher by S&P or Prime-2 by Moody's, in the case of tax-exempt commercial
paper; and o 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 or
FIC. M&T Bank and FIC use guidelines approved by the Corporation's Board of
Directors to make these quality determinations. 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.
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 current ratings on New York State general obligation debt are A-2 by Moody's
and A by S&P.
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.
<PAGE>
Investment Limitations
The Funds will not change the following 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 Money Market Fund and Treasury Money Market Fund 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.
The Tax-Free Money Market Fund will not sell any securities short or
purchase any securities on margin but may obtain such short-term credits
as may be necessary for clearance of transactions.
Issuing Senior Securities and Borrowing Money
The Money Market Fund and Treasury Money Market Fund may borrow funds for
temporary purposes by entering into reverse repurchase agreements in
accordance with the terms described in the prospectuses. The Money Market
Fund and Treasury Money Market Fund will not issue senior securities.
Neither Fund anticipates entering into reverse repurchase agreements in
excess of 5% of its net assets.
The Tax-Free Money Market Fund will not issue senior securities except
that the Fund may borrow money in amounts up to one-third of the value of
its total assets, including the amounts borrowed.
As an operating policy, the Tax-Free Money Market Fund does not anticipate
entering into reverse repurchase agreements in excess of 5% of its net
assets.
Pledging Securities
The Money Market Fund and Treasury Money Market Fund 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 mortgage, pledge, or hypothecate
any assets, except in connection with any such borrowing.
(including reverse repurchase agreements) are outstanding.
Investing in Commodities, Commodity Contracts, or Real Estate
The Money Market Fund and Treasury Money Market Fund 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.
The Tax-Free Money Market Fund will not invest in commodities, commodity
contracts or commodity futures contracts.
The Tax-Free Money Market Fund will not purchase or sell real estate
although it may invest in securities of issuers whose business involves
the purchase or sale of real estate or in securities which are secured by
real estate or interests in real estate.
Underwriting
The Money Market Fund and Treasury Money Market Fund will not engage in
underwriting securities issued by others.
The Tax-Free Money Market Fund will not underwrite any issue of securities
except as it may be deemed to be an underwriter under the Securities Act
of 1933 in connection with the sale of securities in accordance with its
investment objective, policies and limitations.
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 Money Market Fund and Treasury Money Market Fund 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 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.
The 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,
repurchase agreements collateralized by such securities, and securities of
other investment companies) 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 will not invest more than 25% of the value of its
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 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 Tax-Free Money Market Fund will not invest more than 25% of the value
of its total assets in issuers of the same industry, except that it 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 association and bankers' acceptances), securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
instruments secured by these money market instruments (i.e., repurchase
agreements), or in securities of other investment companies.
Investing in Restricted Securities
The Money Market Fund and Treasury Money Market Fund 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 Money Market Fund and Treasury Money Market Fund 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 Money Market Fund and Treasury Money Market Fund will not write or
purchase put or call options.
<PAGE>
Investing in New Issuers
The Money Market Fund and Treasury Money Market Fund 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 Money Market Fund and Treasury Money Market Fund will not buy common
stocks or voting securities of state, municipal or industrial revenue bond
issuers.
Purchasing Securities to Exercise Control
The Money Market Fund and Treasury Money Market Fund will not invest in
any issuer for purposes of exercising control or management.
The following limitations, 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 Restricted Securities and Illiquid Securities
The Tax-Free Money Market Fund will not invest more than 10% of the value
of its net assets in illiquid securities, including repurchase agreements
providing for settlement in more than seven days after notice, and
restricted securities that have not been determined to be liquid under
criteria established by the Corporation's Directors.
Dealing in Puts and Calls
The Tax-Free Money Market Fund will not write or purchase put or call
options.
Purchasing Securities to Exercise Control
The Tax-Free Money Market Fund 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.
The Tax-Free Money Market Fund will not borrow money for investment leverage,
but rather as a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio assets is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of the value of its total assets are outstanding.
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 each
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
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.; Sevenson Environmental Services,
Inc.; Blue Cross & Blue Shield of Western 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
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
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.; Vice Chairman, Federated Investors, Inc.; 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.
Beth S. Broderick
Federated Investors Tower
Pittsburgh, PA
Birthdate: August 2, 1965
Vice President and Assistant Treasurer
Assistant Vice President & Client Services Officer, Mutual Fund Services
Division, Federated Services Company.
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
Senior Corporate Counsel and Vice President, Federated Administrative Services;
formerly Attorney, Morrison & Foerster (law firm).
<PAGE>
Fund Ownership
As of August 7, 1998, Officers and Directors own less than 1% of each Fund's
outstanding shares.
As of August 7, 1998, the following shareholders of record owned 5% or more of
the outstanding Class A Shares of the Money Market Fund: Tice & Co., Buffalo,
New York, owned approximately 264,655,657 shares (35.90%) and National Financial
Services Co., New York, New York, owned approximately 51,050,919 shares (6.92%).
As of August 7, 1998, the following shareholder of record owned 5% or more of
the outstanding Class S Shares of the Money Market Fund: John T. Nothnagle Inc.,
Rochester, New York, owned approximately 1,319,306 shares (8.68%).
As of August 7, 1998, the following shareholder of record owned 5% or more of
the outstanding Class A Shares of the Treasury Money Market Fund: Tice & Co.,
Buffalo, New York, owned approximately 364,201,354 shares (76.46%).
<PAGE>
As of August 7, 1998, 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 36,489,416 shares (35.25%); Caldwell Manufacturing
Company Rochester, New York, owned approximately 6,225,000 shares (6.01%); and
National Financial Services Co., New York, New York, owned approximately
17,277,171 shares (16.69%).
Directors' Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION * #
Randall I. Benderson,
Director $7,500
Joseph J. Castiglia,
Director $8,500
Daniel R. Gernatt, Jr.,
Director $8,500
George K. Hambleton, Jr.,
Director $8,500
*Information is furnished for the fiscal year ended April 30, 1998. The
Corporation is the only investment company in the Fund Complex.
#The aggregate compensation is provided for the Corporation which is comprised
of eight 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 with respect to the Money Market Fund and Treasury Money
Market Fund, and September 1, 1998 with respect to the Tax-Free Money Market
Fund. 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'
prospectuses.
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.
After an initial 2 year term, 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 each 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.
Sub-Adviser to the Tax-Free Money Market Fund
The Tax-Free Money Market Fund's sub-adviser is Federated Investment Counseling
(the "Sub-Adviser"). It is a subsidiary of Federated Investors, Inc.. All the
voting securities of Federated Investors, Inc. are owned by a trust, the
trustees of which are John F. Donahue, his wife, and his son, J.
Christopher Donahue.
The Sub-Adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
Advisory Fees
For its advisory services, M&T Bank receives an annual investment advisory fee
as described in each prospectus.
During the fiscal years ended April 30, 1998, 1997, and 1996, for the Money
Market Fund and Treasury Money Market Fund, M&T Bank earned $3,158,235,
$2,862,559, and $2,339,981, and $2,304,815, $2,296,162, and $1,699,400,
respectively, which was reduced by $336,623, $555,870, and $530,234 and
$379,597, $448,656, and $319,668, 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 each prospectus.
During the fiscal years ended April 30, 1998, 1997, and 1996, for the New York
Tax-Free Money Market Fund, M&T Bank earned $389,766, $355,253, and $277,858,
respectively, of which $218,264, $250,546, and $211,303, respectively, were
voluntarily waived.
Sub-Advisory Fees
For its sub-advisory services, the Sub-Adviser receives an annual investment
sub-advisory fee as described in the prospectus.
Other Services
Administrative Services
Federated Administrative Services ("FAS"), a subsidiary of Federated Investors,
Inc., provides administrative personnel and services to the Funds. Federated
Services Company provides the Funds with certain financial, administrative,
transfer agency and Fund accounting services. Effective December 31, 1997, these
services are provided for an aggregate annual fee as described in each
prospectus. For the period from December 1, 1997 to April 30, 1998, the Money
Market Fund, Treasury Money Market Fund and New York Tax-Free Fund incurred
aggregate costs of $367,315; $301,148; and $47,088, respectively.
Prior to December 1, 1997, FAS was paid by the Funds based on the following fee
schedule:
Maximum Administrative Fee Aggregate Daily Net Assets of the Corporation
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on asset in excess of $750 million
The administrative fee received during any year was at least $50,000 per Fund.
For the period from May 1, 1997 to November 30, 1997, and the fiscal years ended
April 30, 1997, and 1996, the Money Market Fund, Treasury Money Market Fund, and
New York Tax-Free Fund incurred costs for administrative services of $368,544,
$598,092, and $531,676; $242,184, $478,882, and $384,262; $44,110, $74,362, and
$62,956;, respectively, of which $0, $27,570, and $5,988; $0, $11,635, and
$2,303; and $0, $1,843, and $392, 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.
Unless otherwise permitted by law, 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.
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, 1998, 1997, and 1996, the Money Market
Fund, Treasury Money Market Fund, and Tax-Free Money Market Fund paid no
commissions on brokerage transactions.
<PAGE>
Description of Fund Shares
The Corporation's Articles of Incorporation authorize the Board of Directors to
issue up to twenty billion full and fractional shares of Common Stock, of which
fourteen billion shares have been classified into eight classes. Six billion
shares remain unclassified at this time. Authorized classes of shares for each
Fund and amounts are as follows:
<TABLE>
<CAPTION>
<S> <C>
Fund Name Authorized Class and Amount
Vision Money Market Fund 2 billion Class A Common Stock, Series A (Class A Shares)
2 billion Class A Common Stock, Series S (Class S Shares)
Vision Treasury Money Market Fund 2 billion Class B Common Stock, Series A (Class A Shares)
2 billion Class B Common Stock, Series S (Class S Shares)
Vision New York Tax-Free Money Market Fund 1 billion Class C Common Stock, Series A
Vision U.S. Government Securities Fund 1 billion Class D Common Stock, Series A
Vision New York Municipal Income Fund 1 billion Class E Common Stock, Series A
Vision Growth and Income Fund 1 billion Class F Common Stock, Series A
Vision Capital Appreciation Fund 1 billion Class G Common Stock, Series A
Vision Equity Income Fund 1 billion Class H Common Stock, Series A
</TABLE>
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' Prospectuses 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
Fund are entitled to receive the assets available for distribution belonging to
the respective shares of a Fund 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 or class of shares
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. All shares of all classes of each Fund in the Corporation have equal
voting rights, except in matters affecting only a particular Fund or class of
shares, only shares of that Fund or class of shares are entitled to vote.
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 each 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 each
prospectus under "Redeeming Shares."
<PAGE>
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 invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
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.
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 average annual total returns for the Money Market Fund's Class A Shares for
the one-year and five-year periods ended April 30, 1998, and for the period from
June 1, 1988 (date of initial public investment) to April 30, 1998, were 5.11%,
4.63%, and 5.46%, respectively. There is no performance for Class S Shares for
periods prior to May 1, 1998, since they were not offered prior to that time.
The average annual total returns for the Treasury Money Market Fund's Class A
Shares for the one-year and five-year periods ended April 30, 1998, and for the
period from June 1, 1988 (date of initial public investment) to April 30, 1998,
were 4.98%, 4.50%, and 5.26%, respectively. There is no performance for Class S
Shares for periods prior to May 1, 1998, since they were not offered prior to
that time.
The average annual total returns for the Tax-Free Money market Fund for the
one-year and five-year periods ended April 30, 1998, and for the period from
June 1, 1988 (date of initial public investment) to April 30, 1998, were 3.14%,
2.81%, and 3.34%, 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 Class A Shares of Money Market Fund, Class A Shares of
Treasury Money Market Fund and Tax-Free Money Market Fund for the seven-day
period ended April 30, 1998, were 4.94%, 4.82%, and 3.40%, respcectively. Each
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.
Effective Yield
The effective yields for Class A Shares of Money Market Fund, Class A Shares of
Treasury Money Market Fund and Tax-Free Money Market Fund for the seven-day
period ended April 30, 1998, were 5.06%, 4.94%, and 3.46%, 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.
<PAGE>
Tax-Equivalent Yield
The Tax-Free Money Market Fund's tax-equivalent yield for the seven-day period
ended April 30, 1998, was 5.22%.
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.
TAXABLE YIELD EQUIVALENT FOR 1998
STATE OF NEW YORK
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%
3,351- $1- $4$102,301-$155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450
SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450
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%
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 New York Tax-Free Fund.
*Some portion of the New York Tax-Free Fund's income may be subject to the
federal alternative minimum tax and state and local income taxes.
Effective Yield
<PAGE>
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' prospectuses 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 $4.4 trillion to the more than 6,700 funds available.
Financial Statements
The financial statements for the fiscal year ended April 30, 1998 are
incorporated herein by reference to the Funds' Annual Report dated April 30,
1998 (File Nos. 33-20673 and 811-5514). A copy of the Annual Report accompanies
this Statement of Additional Information. In addition, the Annual Report may be
obtained without charge by contacting the Funds at the address located on the
back cover of each prospectus or by calling the Funds at 1-800-836-2211 or in
the Buffalo area, telephone 635-9368.
<PAGE>
Appendix
Standard & Poor's 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 IBCA, 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 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 IBCA, 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 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
92830F
92830F109
92830F
92830F208
G01716-06 (8/98)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (1-8) Incorporated by reference to the
Registrant's Annual Report dated April 30, 1998.
(b) Exhibits:
(1) (i) Conformed copy of Amended Articles of Incorporation
of the Registrant; (21)
(ii) Conformed copy of Articles Supplementary; (8)
(iii) Conformed copy of Articles Supplementary dated
May 29, 1996; (15)
(iv) Conformed copy of Articles Supplementary dated
April 20, 1998; (21)
(2) (i) Copy of By-Laws of the Registrant; (11)
(ii) Copy of Amendment No. 1 to Bylaws; (21)
(3) Not applicable;
(4) (i) Copy of Specimen Certificate for Shares of Capital
Stock of the Registrant; (8)
(ii) Copy of Specimen Certificate for Shares of Capital Stock
of the Vision Capital Appreciation Fund; (15)
(5) (i) Conformed copy of Investment Advisory Contract of the
Registrant; (9)
(ii) Conformed copy of Sub-Advisory Contract; (10) (iii)
Conformed copy of Exhibit B to Investment Advisory Contract;
(14) (iv) Conformed copy of Exhibit C to Investment Advisory
Contract; (19)
+ All Exhibits have been filed electronically.
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 11 on Form N-1A filed September 3, l993. (File Nos. 33-20673
and 811-5514)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed December 27, 1993 (File Nos. 33-20673
and 811-5514)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed March 31, 1994 (File Nos. 33-20673 and
811-5514)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed June 27, 1994. (File Nos. 33-20673 and
811-5514)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed December 20, 1996. (File Nos. 33-20673
and 811-5514)
19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed September 24, 1997 (File Nos. 33-20673
and 811-5514)
21. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed April 22, 1998 (File Nos. 33-20673 and
811-5514)
<PAGE>
(6) (i) Conformed copy of Distributor's Contract of the Registrant; (9)
(ii) Conformed copy of Exhibit C to Distributor's Contract; (14)
(iii) Conformed copy of Exhibit D to the Distributor's Contract; (20)
(iv) Conformed copy of Exhibit E to the Distributor's Contract; (22)
(v) Conformed copy of Administrative Services Agreement of the
Registrant; (9)
(vi) Conformed copy of Shareholder Services Plan of Registrant; (9)
(vii) Conformed copy of Exhibit A to Amended and Restated Shareholder
Services Plan; (22)
(viii)Conformed copy of Amended and Restated Shareholder Services
Agreement; (13)
(ix) Copy of Amendment No. 1 to Exhibit A to Shareholder Services
Agreement; (14)
(x) Copy of Amendment No. 2 to Exhibit A to Shareholder Services
Agreement; (18)
(7) Not applicable;
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed December 27, 1993 (File Nos. 33-20673
and 811-5514)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed May 3, 1996. (File Nos. 33-20673 and
811-5514)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 6, 1997. (File Nos. 33-20673 and
811-5514)
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed December 22, 1997. (File Nos. 33-20673
and 811-5514)
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed July 8, 1988. (File Nos. 33-20673 and
811-5514)
<PAGE>
(8) (i) Conformed copy of Custodian Agreement of the Registrant; (12)
(ii) Copy of Amendment No. 2 to Exhibit A to
Custodian Contract; (14)
(iii) Copy of Amendment No. 3 to Exhibit A to Custodian Contract; (18)
(iv) Conformed copy of State Street Domestic Custody Fee Schedule; (20)
(9) (i) Conformed copy of Agreement for Fund Accounting Services
and Transfer Agency Services; (16) (ii) Copy of Exhibit 1 to
Agreement for Fund Accounting Services and Transfer Agency
Services; (18)
(iii) Conformed copy of Amendment to Administrative Services Agreement
and the Agreement for Fund Accounting Services and Transfer Agency
Services; (20)
(iv) Conformed copy of Amendment No. 1 to Exhibit 1 to Agreement for
Fund Accounting Services and Transfer Agency Services; (22)
(10) Conformed copy of Opinion and Consent of Counsel as to legality of
shares being registered; (11)
(11) Conformed copy of Consent of Independent Auditors; +
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding; (11)
(14) Not applicable;
- ----------------------------------
+ All Exhibits have been filed electronically.
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 on Form N-1A filed June 27, 1994. (File Nos. 33-20673 and
811-5514)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed June 26, 1995. (File Nos. 33-20673 and
811-5514)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)
16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 26 on Form N-1A filed June 20, 1997. (File Nos. 33-20673 and
811-5514)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 6, 1997. (File Nos. 33-20673 and
811-5514)
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed December 22, 1997. (File Nos. 33-20673
and 811-5514)
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed July 8, 1988. (File Nos. 33-20673 and
811-5514)
<PAGE>
(15) (i) Copy of Rule 12b-1 Plan; (7)
(ii) Conformed copy of Exhibit B to Rule 12b-1 Plan; (14)
(iii) Conformed copy of Exhibit C to Rule 12b-1 Plan; (20)
(iv) Copy of Rule 12b-1 Agreement; (7) (v) Copy of Exhibit B
to Rule 12b-1 Agreement; (14) (vi) Copy of Exhibit C to Rule
12b-1 Agreement; (18) (vii) Amended and Restated Plan with
conformed copy of Exhibit D; (22) (viii)Conformed copy of
Exhibit D to Rule 12b-1 Agreement;(22) (ix) Copy of Dealer
(Sales) Agreement; (7)
(16) (i) Copy of Schedule for Computation of Fund
Performance Data; (12)
(ii) Copy of Schedule for Computation of Fund Performance Data
for the Vision Capital Appreciation Fund; (15) (iii) Copy of
Schedule for Computation of Fund Performance Data for the
Vision Equity Income Fund; (20)
(17) Copy of Financial Data Schedules;+
(18) Conformed copy of the Registrant's Multiple Class Plan with
conformed copies of Exhibits A and B;(22) (19) Conformed copy of
Power of Attorney; (14)
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
- ----------------------------------
+ All Exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 17, 1993. (File Nos. 33-20673 and
811-5514)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 20 on Form N-1A filed June 26, 1995. (File Nos. 33-20673 and
811-5514)
14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed June 27, 1996. (File Nos. 33-20673 and
811-5514)
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 24 on Form N-1A filed December 20, 1996. (File Nos. 33-20673
and 811-5514)
18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 28 on Form N-1A filed August 6, 1997. (File Nos. 33-20673 and
811-5514)
20. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 on Form N-1A filed December 22, 1997. (File Nos. 33-20673
and 811-5514)
22. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed July 8, 1988. (File Nos. 33-20673 and
811-5514)
<PAGE>
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of August 7, 1998
-------------- ---------------------
Shares of capital stock
($0.001 per Share par value)
Vision Money Market Fund
Class A Shares 15,226
Class S Shares 110
Vision New York Tax-Free Money Market Fund 624
Vision Treasury Money Market Fund
Class A Shares 907
Class S Shares 140
Vision U.S. Government Securities Fund 1,035
Vision New York Municipal Income Fund 1,586
(formerly, Vision New York Tax-Free Fund) 1,527
Vision Growth and Income Fund 7,522
Vision Capital Appreciation Fund 4,480
Vision Equity Income Fund 1,193
Item 27. Indemnification: (7)
Item 28. Business and Other Connections of Investment Adviser:
(a) Manufacturers & Traders Trust Company ("M&T Bank") performs
investment advisory services for the Registrant. M&T Bank is the
principal banking subsidiary of First Empire State Corporation, a
$14 billion bank holding company, as of December 31, 1997,
headquartered in Buffalo, New York. As of December 31, 1997, M&T
Bank has 177 offices throughout New York State and an office in
Nassau, The Bahamas.
M&T Bank was founded in 1856 and provides comprehensive banking and
financial services to individuals, governmental entities and
businesses throughout western New York. Registrant's investments are
managed through the Trust and Investment Services Division of M&T
Bank. As of December 31, 1997, M&T Bank had over $4 billion in
assets under management for which it has investment discretion
(which includes employee benefits, personal trusts, estates,
agencies and other accounts). As of December 3l, 1997, M&T Bank
managed $1.29 billion in VISION money market mutual fund assets.
Except for Vision Group of Funds, Inc., M&T Bank does not presently
provide investment advisory services to any other registered
investment companies. The Funds' investments are managed through the
Trust & Investment Services Division of M&T Bank.
The principal executive Officers and the Directors of M&T Bank are
set forth in the following tables. Unless otherwise noted, the
position listed under Other Substantial Business, Profession,
Vocation or Employment is with M&T Bank.
- ---------------------
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 17, 1993. (File Nos. 33-20673 and
811-5514)
<PAGE>
(b)
Other Substantial
Position with Business, Profession,
Name the Adviser Vocation or Employment
William F. Allyn Director President, Welch Allyn,Inc.
P.O. Box 50
Skaneateles Falls, NY 13153-0050
Brent D. Baird Director Private Investor
1350 One M&T Plaza
Buffalo, NY 14203-2396
Robert J. Bennett Director and Chairman, M&T Bank
P.O. Box 4983 Executive Officer Corporation and Vice
Syracuse, NY 13221-4983 Chairman, M&T Bank
C. Angela Bontempo Director President, Bontempo &
207 Commerce Drive Associates, LLC
Amherst, NY 14228-2302
Robert T. Brady Director Chairman, President and
East Aurora, NY 14052-0018 Chief Executive Officer,
Moog Inc.
Emerson L. Brumback Executive Officer Executive Vice
One M&T Plaza, 19th Floor President, M&T Bank
Buffalo, NY 14203-2396 Corporation and
M&T Bank
Atwood Collins, III Executive Officer Executive Vice
350 Park Avenue President, and
6th Floor President and Chief
New York, NY 10022-6022 Executive Officer, New
York City Division
of Manufacturers and
Traders Trust Company;
and Executive Vice
President, M&T Bank
Corporation
Mark J. Czarnecki Executive Officer Executive Vice
One M&T Plaza President,
9th Floor Manufacturers and
Buffalo, NY 14203-2399 Traders Trust Company
Richard E. Garman Director President and Chief
2544 Clinton Street Executive Officer,
Buffalo, NY 14224-1092 A.B.C. Paving Co., Inc.
and Buffalo Crushed
Stone, Inc.
James V. Glynn Director President,
151 Buffalo Avenue Maid of the Mist
Suite 204 Corporation
Niagara Falls, NY 14303-1288
<PAGE>
Brian E. Hickey Executive Officer Executive Vice President
255 East Avenue and President, Rochester
3rd Floor Division-Manufacturers
Rochester, NY 14604-2624 and Traders Trust
Company; and Executive
Vice President,
M&T Bank Corporation
Patrick W.E. Hodgson Director President, Cinnamon
60 Bedford Road Investments Limited
2nd Floor
Toronto, Ontario
Canada M5R2K2
James L. Hoffman Executive Officer Executive Vice President
700 Corporate Blvd. and President, Hudson
Suite 701 Valley Division-Newburgh,
NY 12550-6046 Manufacturers
and Traders Trust
Company; and
Executive Vice
President, M&T Bank
Corporation
Samuel T. Hubbard, Jr. Director President & Chief
1059 West Ridge Road Executive Officer, The
Rochester, NY 14615-2731 Alling & Cory
Company
Robert J. Irwin Advisory Director Chairman and Chief
Executive Officer,
Ellicott Station ASA Limited
P.O. Box 1210
Buffalo, NY 14205-1210
Russell A. King Director Retired Partner and
4910 Red Pine Road Chief Executive Officer,
Manlius, NY 13104-1314 King & King
Architects,Inc.
Adam C. Kugler Executive Officer Executive Vice President
350 Park Avenue and Treasurer, M&T Bank
6th Floor Corporation and M&T Bank
New York, NY 10022-6022
Wilfred J. Larson Director Retired President and
200 Bahia Point Chief Executive Officer,
Naples, FL 34103-4368 Westwood-Squibb
Pharmaceuticals Inc.
Peter J. O'Donnell, Jr. Director President, Pine Tree
675 Highland Avenue Management Corporation
Clark Green, PA 18411-2502
Jorge G. Pereira Director Vice Chairman of the
350 Park Avenue Board, M&T Bank
6th Floor Corporation and
New York, NY 10022-6022 Manufacturers and
Traders Trust Company
<PAGE>
John L. Pett Executive Officer Executive Vice President
One Fountain Plaza and Chief Credit
9th Floor Officer, Maufacturers
Buffalo, NY 14203-1495 Manufacturers and
Traders Trust Company
and M&T Bank Corporation
Michael P. Pinto Executive Officer Executive Vice President
One M&T Plaza and Chief Financial
19th Floor Officer, Manufacturers
Buffalo, NY 14203-2399 and Traders Trust
Company and M&T Bank
Corporation
Melinda R. Rich Director President,
P.O. Box 245 Rich Entertainment
Buffalo, NY 14240-0245 Group
Robert E. Sadler, Jr. Director and President, Manufacturers
One M&T Plaza Executive Officer and Traders Trust
19th Floor Company and
Buffalo, NY 14203-2399 Executive Vice
President, M&T Bank
Corporation
John L. Vensel Director Chairman and Chief Executive
P.O. Box 977 Officer, Crucible Materials
Syracuse, NY 13201-0977 Corporation
Herbert L. Washington Director President,
3280 Monroe Avenue H.L.W. Fast Track, Inc.
Rochester, NY 14618-4608
John L. Wehle, Jr. Director Chairman of the
445 St. Paul Street Board, President and
Rochester, NY 14605-1775 Chief Executive
Officer, Genessee
Corporation
Robert G. Wilmers Director and President and Chief
One M&T Plaza Executive Officer Executive Officer,
19th Floor M&T Bank Corporation;
Buffalo, NY 14203-2399 and Chairman of the
Board and Chief
Executive Officer,
Manufacturers and
Traders Trust Company
Item 29. Principal Underwriters:
(a)...Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following open-end investment
companies, including the Registrant:
111 Corcoran Funds; Automated Government Money Trust; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds;
Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; High Yield
Cash Trust; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; Regions
Funds; RIGGS Funds; SouthTrust Funds; Star Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Virtus Funds; The Wachovia
Funds; The Wachovia Municipal Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; and World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant
Richard B. Fisher Director, Chairman, Chief --
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice President and
Federated Investors Tower President, Federated, Treasurer
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
<PAGE>
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(c) Not applicable
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
Vision Group of Funds, Inc. Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
("Transfer Agent, Dividend
Disbursing Agent and Portfolio
Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") 1001 Libery Avenue
Pittsburgh, Pennsylvania 15222-3779
Manufacturers and Traders Trust One M&T Plaza
Company Buffalo, New York 14240
("Adviser")
<PAGE>
Federated Investment Counseling Federated Investors Tower
("Sub-Adviser" to the Vision New) 1001 Libery Avenue
York Free Money Market Fund only) Pittsburgh, Pennsylvania 15222-3779
State Street Bank and Trust Company P.O. Box 8609
("Custodian") Boston, Massachusetts 02266-8609
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees/Directors and the calling of special shareholder meetings
by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, VISION GROUP OF FUNDS, INC.,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
26th day of August, 1998.
VISION GROUP OF FUNDS, INC.
BY: /s/Victor R. Siclari
Victor R. Siclari, Secretary
Attorney in Fact for Edward C. Gonzales
August 26, 1998
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
By: /s/ Victor R. Siclari
Victor R. Siclari Attorney In Fact August 26, 1998
SECRETARY For the Persons
Listed Below
NAME TITLE
Edward C. Gonzales* President and Treasurer
(Chief Executive Officer
and Principal Financial and
Accounting Officer)
Randall I. Benderson* Director
Joseph J. Castiglia* Director
Daniel R. Gernatt, Jr.* Director
George K. Hambleton, Jr.* Director
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the caption "Financial
Highlights" and to the use of our reports dated June 17, 1998, in Post-Effective
Amendment Number 33 to the Registration Statement (Form N-1A No. 33-20673)and
the related Prospectuses of Vision Group of Funds, Inc. (comprising
respectively, Vision Money Market Fund, Vision Treasury Money Market Fund,
Vision New York Tax-Free Money Market Fund, Vision Growth & Income Fund, Vision
U.S. Government Securities Fund, Vision Equity Income Fund, Vision Capital
Appreciation Fund, and Vision New York Municipal Income Fund).
By: ERNST & YOUNG LLP
/s/Ernst & Young LLP
Pittsburgh, Pennsylvania
August 25, 1998
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 07
<NAME> Vision Funds
Vision Capital
Appreciation Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 63,056,422
<INVESTMENTS-AT-VALUE> 74,845,406
<RECEIVABLES> 295,177
<ASSETS-OTHER> 16,079
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 75,156,662
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 62,048
<TOTAL-LIABILITIES> 62,048
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61,676,100
<SHARES-COMMON-STOCK> 5,085,531
<SHARES-COMMON-PRIOR> 2,970,646
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,659,530
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,758,984
<NET-ASSETS> 75,094,614
<DIVIDEND-INCOME> 284,216
<INTEREST-INCOME> 173,354
<OTHER-INCOME> 0
<EXPENSES-NET> 798,101
<NET-INVESTMENT-INCOME> (340,531)
<REALIZED-GAINS-CURRENT> 4,792,594
<APPREC-INCREASE-CURRENT> 11,433,260
<NET-CHANGE-FROM-OPS> 15,885,323
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,397,390
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,401,323
<NUMBER-OF-SHARES-REDEEMED> 509,464
<SHARES-REINVESTED> 223,026
<NET-CHANGE-IN-ASSETS> 41,654,098
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 604,857
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 453,674
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 800,786
<AVERAGE-NET-ASSETS> 53,462,906
<PER-SHARE-NAV-BEGIN> 11.260
<PER-SHARE-NII> (0.070)
<PER-SHARE-GAIN-APPREC> 4.440
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.860
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 14.770
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 08
<NAME> Vision Funds
Vision Equity Income Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 34,646,449
<INVESTMENTS-AT-VALUE> 37,167,159
<RECEIVABLES> 280,407
<ASSETS-OTHER> 253
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37,447,819
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 44,894
<TOTAL-LIABILITIES> 44,894
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 34,817,754
<SHARES-COMMON-STOCK> 3,260,662
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 29,028
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 35,433
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,520,710
<NET-ASSETS> 37,402,925
<DIVIDEND-INCOME> 269,680
<INTEREST-INCOME> 29,517
<OTHER-INCOME> 0
<EXPENSES-NET> 129,756
<NET-INVESTMENT-INCOME> 169,441
<REALIZED-GAINS-CURRENT> 35,433
<APPREC-INCREASE-CURRENT> 2,520,710
<NET-CHANGE-FROM-OPS> 2,725,584
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 140,413
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,309,512
<NUMBER-OF-SHARES-REDEEMED> 57,101
<SHARES-REINVESTED> 8,251
<NET-CHANGE-IN-ASSETS> 37,402,925
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 83,847
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 191,839
<AVERAGE-NET-ASSETS> 21,065,303
<PER-SHARE-NAV-BEGIN> 9.990
<PER-SHARE-NII> 0.080
<PER-SHARE-GAIN-APPREC> 1.47
<PER-SHARE-DIVIDEND> 0.070
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.47
<EXPENSE-RATIO> 1.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 06
<NAME> Vision Funds
Vision Growth and Income Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 112,941,932
<INVESTMENTS-AT-VALUE> 138,392,771
<RECEIVABLES> 10,971,812
<ASSETS-OTHER> 2,370
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 149,366,953
<PAYABLE-FOR-SECURITIES> 5,711,994
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 250,892
<TOTAL-LIABILITIES> 5,962,886
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 109,903,605
<SHARES-COMMON-STOCK> 8,891,228
<SHARES-COMMON-PRIOR> 7,548,395
<ACCUMULATED-NII-CURRENT> 254,517
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,795,106
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,450,839
<NET-ASSETS> 143,404,067
<DIVIDEND-INCOME> 2,336,597
<INTEREST-INCOME> 237,458
<OTHER-INCOME> 0
<EXPENSES-NET> 1,671,688
<NET-INVESTMENT-INCOME> 902,367
<REALIZED-GAINS-CURRENT> 13,984,928
<APPREC-INCREASE-CURRENT> 21,896,866
<NET-CHANGE-FROM-OPS> 36,784,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 757,244
<DISTRIBUTIONS-OF-GAINS> 24,819,846
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,600,661
<NUMBER-OF-SHARES-REDEEMED> 2,585,548
<SHARES-REINVESTED> 1,327,720
<NET-CHANGE-IN-ASSETS> 29,313,760
<ACCUMULATED-NII-PRIOR> 109,394
<ACCUMULATED-GAINS-PRIOR> 18,630,024
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 968,660
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,671,688
<AVERAGE-NET-ASSETS> 136,781,405
<PER-SHARE-NAV-BEGIN> 15.110
<PER-SHARE-NII> 0.110
<PER-SHARE-GAIN-APPREC> 4.340
<PER-SHARE-DIVIDEND> 0.090
<PER-SHARE-DISTRIBUTIONS> 3.340
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 16.130
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Vision Funds
Vision Money Market fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 687,000,156
<INVESTMENTS-AT-VALUE> 687,000,156
<RECEIVABLES> 961,407
<ASSETS-OTHER> 393
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 687,961,956
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,703,263
<TOTAL-LIABILITIES> 1,703,263
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 686,258,693
<SHARES-COMMON-STOCK> 686,258,693
<SHARES-COMMON-PRIOR> 599,817,242
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 686,258,693
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35,654,620
<OTHER-INCOME> 0
<EXPENSES-NET> 4,045,440
<NET-INVESTMENT-INCOME> 31,609,180
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 31,609,180
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 31,609,180
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 18,911,301,933
<NUMBER-OF-SHARES-REDEEMED> 18,839,268,923
<SHARES-REINVESTED> 14,408,441
<NET-CHANGE-IN-ASSETS> 86,441,451
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,158,235
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,382,063
<AVERAGE-NET-ASSETS> 631,647,002
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> Vision Funds
Vision New York Municipal
Income Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 41,489,956
<INVESTMENTS-AT-VALUE> 42,604,683
<RECEIVABLES> 903,264
<ASSETS-OTHER> 45,043
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 43,552,990
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97,313
<TOTAL-LIABILITIES> 97,313
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 42,260,773
<SHARES-COMMON-STOCK> 4,170,692
<SHARES-COMMON-PRIOR> 3,518,501
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 80,177
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,114,727
<NET-ASSETS> 43,455,677
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,115,236
<OTHER-INCOME> 0
<EXPENSES-NET> 382,111
<NET-INVESTMENT-INCOME> 1,733,125
<REALIZED-GAINS-CURRENT> 400,518
<APPREC-INCREASE-CURRENT> 919,002
<NET-CHANGE-FROM-OPS> 3,052,645
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,735,765
<DISTRIBUTIONS-OF-GAINS> 150,071
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,147,398
<NUMBER-OF-SHARES-REDEEMED> 626,243
<SHARES-REINVESTED> 131,036
<NET-CHANGE-IN-ASSETS> 7,975,892
<ACCUMULATED-NII-PRIOR> 2,640
<ACCUMULATED-GAINS-PRIOR> (170,270)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 279,035
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 505,447
<AVERAGE-NET-ASSETS> 39,793,894
<PER-SHARE-NAV-BEGIN> 10.080
<PER-SHARE-NII> 0.460
<PER-SHARE-GAIN-APPREC> 0.380
<PER-SHARE-DIVIDEND> 0.460
<PER-SHARE-DISTRIBUTIONS> 0.040
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.420
<EXPENSE-RATIO> 0.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> Vision Funds
Vision New York Tax-Free
Money Market Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 73,019,996
<INVESTMENTS-AT-VALUE> 73,019,996
<RECEIVABLES> 1,880,693
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 74,900,689
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,555,783
<TOTAL-LIABILITIES> 1,555,783
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,344,906
<SHARES-COMMON-STOCK> 73,344,906
<SHARES-COMMON-PRIOR> 56,617,940
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 73,344,906
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,796,471
<OTHER-INCOME> 0
<EXPENSES-NET> 390,319
<NET-INVESTMENT-INCOME> 2,406,152
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,406,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,406,152
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,153,995,180
<NUMBER-OF-SHARES-REDEEMED> 1,138,416,526
<SHARES-REINVESTED> 1,148,312
<NET-CHANGE-IN-ASSETS> 16,726,966
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 389,766
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 608,583
<AVERAGE-NET-ASSETS> 77,953,192
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.030
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.030
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> Vision Funds
Vision Treasury Money Market
Fund
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1998
<PERIOD-END> Apr-30-1998
<INVESTMENTS-AT-COST> 439,869,671
<INVESTMENTS-AT-VALUE> 439,869,671
<RECEIVABLES> 3,505,513
<ASSETS-OTHER> 908
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 443,376,092
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,953,950
<TOTAL-LIABILITIES> 1,953,950
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 441,422,142
<SHARES-COMMON-STOCK> 441,422,142
<SHARES-COMMON-PRIOR> 373,484,637
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 441,422,142
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,569,696
<OTHER-INCOME> 0
<EXPENSES-NET> 2,705,955
<NET-INVESTMENT-INCOME> 22,863,741
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 22,863,741
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 22,863,741
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<TABLE> <S> <C>
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<NAME> Vision Funds
Vision U.S. Government
Securities Fund
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