Vision Money Market Fund
Vision Treasury Money Market Fund
(Portfolios of Vision Group of Funds, Inc.)
Class S Shares
Statement of Additional Information
This Statement of Additional Information relates to the prospectus of two
portfolios of the Vision Group of Funds, Inc., referred to as the Vision
Money Market Fund and Vision Treasury Money Market Fund (collectively, the
"Funds" or individually, a "Fund") which Funds offer Class S Shares dated
May 1, 1998.
This Statement of Additional Information is not a prospectus itself, but
should be read in conjunction with the Funds' current prospectus dated May
1, 1998. This Statement of Additional Information is incorporated into the
Funds' prospectus by reference. To receive a copy of the prospectus, or a
paper copy of this Statement of Additional Information, if you have received
it electronically, write to Vision Group of Funds, Inc., P.O. Box 4556,
Buffalo, NY 14240-4556, or call (800) 836-2211 or (716) 635-9368. Please
retain this Statement of Additional Information for further reference.
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
Statement of Additional Information dated May 1, 1998
MANUFACTURERS AND TRADERS
TRUST COMPANY
Investment Adviser
A subsidiary of First Empire State Corporation
Federated Securities Corp. is distributor for the Funds.
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Table of Contents
I
General Information About the Funds 1
Investment Objectives and Policies 1
Credit Enhancement 2
Investment Limitations 3
Regulatory Compliance 4
Vision Group of Funds, Inc. Management 5
Fund Ownership 6
Directors' Compensation 7
Director Liability 7
Investment Advisory Services 7
Adviser to the Funds 7
Advisory Fees 8
Other Services 8
Administrative Services 8
Custodian and Portfolio Accountant 8
Transfer Agent and Dividend Disbursing
Agent 8
Independent Auditors 10
Brokerage Transactions 8
Description of Fund Shares 9
How to Buy Shares 10
Conversion to Federal Funds 10
Cash Sweep Program 10
Determining Net Asset Value 10
Redeeming Fund Shares 11
Banking Laws 11
Tax Status 11
The Funds' Tax Status 11
Shareholders' Tax Status 11
Total Return 12
Yield 12
Effective Yield 12
Performance Comparisons 13
Economic and Market Information 13
Appendix 15
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18
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 Funds offer two classes of shares,
Class A Shares and Class S Shares. This Statement relates to Class S Shares of
the Funds.
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.
U.S. Government Obligations
The types of U.S. government obligations in which the Money Market Fund may
invest generally include direct obligations of the U.S. Treasury (such as
U.S. Treasury bills, notes, and bonds) and obligations issued or guaranteed
by U.S. government agencies or instrumentalities. These securities are
backed by:
o the full faith and credit of the U.S. Treasury;
o the issuer's right to borrow from the U.S. Treasury;
o the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
o the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
o Farm Credit Banks;
o Student Loan Marketing Association;
o Federal Home Loan Banks;
o Federal Home Loan Mortgage Corporation; and
o Federal National Mortgage Association.
The Treasury Money Market Fund may only invest in direct obligations of
the U.S. Treasury which matures in 397 days or less, and repurchase
agreements collateralized by such securities.
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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 may invest in certificates of deposit of domestic
branches of U.S. commercial banks which are members of the Federal Reserve
System or the deposits of which are insured by the Federal Deposit
Insurance Corporation having total assets at the time of purchase in
excess of $1 billion, and bankers' acceptances guaranteed by domestic
branches of U.S. commercial banks having total assets at the time of
purchase in excess of $1 billion.
Commercial Paper
The Money Market Fund may invest in commercial paper rated at the time of
purchase "A-2" or better by Standard & Poor's ("S&P") or "Prime-2" or
better by Moody's Investors Service, Inc. ("Moody's") or, if not rated,
found by M&T Bank to be of comparable quality pursuant to guidelines
approved by the Board of Directors.
Repurchase Agreements
The Funds may invest in repurchase agreements as described in the
prospectus.
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 typically evaluates the credit quality and ratings of
credit-enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the "credit enhancer"), rather than the
issuer. However, credit-enhanced securities will not be treated as having been
issued by the credit enhancer for diversification purposes, unless the Fund has
invested more than 10% of its assets in securities issued, guaranteed or
otherwise credit enhanced by the credit enhancer, in which case the securities
will be treated as having been issued by both the issuer and the credit
enhancer.
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Investment Limitations
The Funds will not change any of the investment limitations described below
without approval of a majority of the outstanding shares of the Funds.
Selling Short and Buying on Margin
The Funds will not sell any securities short or purchase any securities on
margin, or participate on a joint or joint and several basis in any
securities trading account.
Borrowing Money
The Funds may borrow funds for temporary purposes by entering into reverse
repurchase agreements in accordance with the terms described in the
prospectus. No Fund anticipates entering into reverse repurchase
agreements in excess of 5% of its net assets.
Pledging Securities
The Funds will not mortgage, pledge, or hypothecate any assets, except in
connection with any such borrowing and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's
total assets at the time of its borrowing.
Investing in Commodities, Commodity Contracts, or Real Estate
The Funds will not invest in commodities, commodity contracts (including
futures contracts), real estate, oil, gas, or mineral exploration or
development programs, except that it may purchase marketable securities of
companies engaged in such activities.
Underwriting
The Funds will not engage in underwriting securities issued by others.
Lending Cash or Securities
The Funds will not make loans, except that each Fund may purchase or hold
debt instruments, including repurchase agreements, in accordance with its
investment objective and policies.
Investing in Securities of Other Investment Companies
The Funds will not invest in securities issued by any other investment
company, except as part of a merger, consolidation, reorganization, or
acquisition of assets.
Diversification of Investments
The Money Market Fund will not purchase securities issued by any one
issuer (other than cash, cash items, or securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, and repurchase
agreements collateralized by such securities) if as a result more than 5%
of the value of its total assets would be invested in the securities of
that issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.
Concentration of Investments
The Money Market Fund 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 Funds will not issue senior securities.
Investing in Restricted Securities
The Funds will not invest in securities subject to legal or contractual
restrictions.
Investing in Issuers Whose Securities are Owned by Officers and Directors
of the Corporation
The Funds will not purchase or retain the securities of any issuer if the
officers or Directors of the Corporation or the Funds' investment adviser
owning beneficially more than one-half of 1% of the issuer's securities
together own beneficially more than 5% of such securities.
Dealing in Puts and Calls
The Funds will not write or purchase put or call options.
Investing in New Issuers
The Funds will not invest more than 10% of the value of its total assets
in the securities of issuers which have records of less than three years
of continuous operation, including the operation of any predecessor.
Voting Securities
The Funds will not buy common stocks.
Purchasing Securities to Exercise Control
The Funds will not invest in any issuer for purposes of exercising control
or management.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Funds did not borrow money in excess of 5% of the value of their respective
net assets during the last fiscal year and have no present intent to do so in
the coming fiscal year.
Regulatory Compliance
The Funds are money market funds. Many of a Fund's investment policies are
fundamental, cannot be changed without vote of shareholders, and were
constructed so as to comply with Rules promulgated by the Securities and
Exchange Commission (SEC) governing mutual funds' use of the amortized cost
method of accounting, as they were in effect at the time a Fund was created.
The SEC has subsequently revised Rule 2a-7 under the Investment Company Act of
1940 which governs money market funds' use of the amortized cost method of
accounting. As a result of the revisions, the Funds will adhere to certain
nonfundamental operating policies that are more restrictive in order to comply
with revised Rule 2a-7. Since the Funds may follow such operating policies
without violating their fundamental investment policies and limitations, the
Funds do not presently intend to ask for shareholder approval of changes to a
Fund's investment policies or limitations.
The Funds will invest in money market instruments (See the section of the
prospectus entitled "Acceptable Investments") rated in one of the two highest
short-term rating categories by nationally recognized statistical rating
organizations ("NRSROs") or of comparable quality to securities having such
rating.
The Funds will follow applicable regulations in determining whether a security
rated by NRSROs can be treated as being in the two highest short-term rating
categories.
The Funds will invest more than 5% of their respective total assets in any one
issuer only under circumstances permitted by Rule 2a-7. The Funds will also
determine the effective maturity of their investments, as well as their ability
to consider a security as having received the requisite short-term ratings by
NRSROs, according to Rule 2a-7. The Fund may change these operating policies to
reflect changes in the laws and regulations without the approval of their
shareholders, unless such changes are more permissive than the Funds'
fundamental policies.
Vision Group of Funds, Inc. Management
Officers and Directors are listed with their addresses, birthdates, present
positions with Vision Group of Funds, Inc., and principal occupations.
Randall I. Benderson
570 Delaware Avenue
Buffalo, NY
Birthdate: January 12, 1955
Director
Senior Vice President and Chief Operating Officer, Benderson Development
Company, Inc.
Joseph J. Castiglia
Roycroft Campus
21 South Grove Street, Suite 291
East Aurora, NY 14052
Birthdate: July 20, 1934
Director
Director, New York State Electric & Gas Corp.; Secewsow Environmental Services,
Inc.; Blue Cross & Blue Shield of Western New York; Buffalo Branch, Federal
Reserve Bank of New York; and Former President, Chief Executive Officer and Vice
Chairman, Pratt & Lambert United, Inc.
Daniel R. Gernatt, Jr.
Richardson & Taylor Hollow Roads
Collins, NY
Birthdate: July 14, 1940
Director
President and CFO of Gernatt Asphalt Products, Inc.; Executive Vice President,
Dan Gernatt Gravel Products, Inc.; Vice President, Countryside Sand & Gravel,
Inc.
George K. Hambleton, Jr.
670 Young Street
Tonawanda, NY
Birthdate: February 8, 1933
Director
Former President, Brand Name Sales, Inc.; President, Hambleton & Carr, Inc.
<PAGE>
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
President and Treasurer
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp., and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of other funds distributed by
Federated Securities Corp.; President, Executive Vice President and Treasurer of
other funds distributed by Federated Securities Corp.
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 Administrative Services.
Charles L. Davis, Jr.
Federated Investors Tower
Pittsburgh, PA
Birthdate: March 23, 1960
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; Vice President and Assistant
Treasurer of other funds distributed by Federated Securities Corp.
Victor R. Siclari
Federated Investors Tower
Pittsburgh, PA
Birthdate: November 17, 1961
Secretary
Corporate Counsel and Vice President, Federated Administrative Services;
formerly Attorney, Morrison & Foerster (law firm).
Fund Ownership
As of April 15, 1998, Officers and Directors own less than 1% of each Fund's
outstanding shares.
As of April 15, 1998, the following shareholders of record owned 5% or more of
the outstanding shares of the Money Market Fund: Tice & Co., Buffalo, New York,
owned approximately 256,813,668 shares (37.73%) and National Financial Services
Co., New York, New York, owned approximately 40,783,430 shares (5.99%).
As of April 15, 1998, the following shareholder of record owned 5% or more of
the outstanding shares of the Treasury Money Market Fund: Tice & Co., Buffalo,
New York, owned approximately 332,297,413 shares (70.88%).
The Funds did not have class designations prior to May 1, 1998.
<PAGE>
Directors' Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM
CORPORATION CORPORATION * #
Randall I. Benderson,
Director $8,500
Joseph J. Castiglia,
Director $8,000
Daniel R. Gernatt, Jr.,
Director $8,500
George K. Hambleton, Jr.,
Director $8,000
*Information is furnished for the fiscal year ended April 30, 1997. The
Corporation is the only investment company in the Fund Complex.
#The aggregate compensation is provided for the Corporation which is comprised
of seven portfolios.
Director Liability
With respect to the removal of a Director of the Corporation, the Corporation's
By-Laws provide, in accordance with applicable law, that a Director may be
removed from the Board at a meeting of shareholders called for that purpose upon
the majority vote of the shareholders of the Corporation entitled to vote at
such meeting. Such a meeting shall be called by the President or the Board of
Directors or at the request in writing of shareholders entitled to cast at least
ten percent (10%) of the votes entitled to be cast at such meeting. Such
shareholders' request shall state the purpose of the proposed meeting, and the
Corporation shall inform those shareholders of the reasonably estimated cost of
preparing and mailing a notice of the meeting to the other shareholders and, on
payment of these costs, shall notify each shareholder entitled to notice of the
meeting.
Investment Advisory Services
Adviser to the Funds
Investment advisory services are provided to the Funds by Manufacturers and
Traders Trust Company ("M&T Bank"), pursuant to an investment advisory agreement
dated April 25, 1988. The advisory services provided and the expenses assumed by
M&T Bank, as well as the advisory fees payable to it, are described in the
Funds' prospectus.
The investment advisory agreement provides that M&T Bank shall not be liable for
any error of judgment or mistake of law or for any loss suffered by a Fund in
connection with its performance under the advisory agreement, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of M&T Bank in the performance of its
duties, or from reckless disregard by it of its duties and obligations
thereunder. Because of internal controls maintained by M&T Bank to restrict the
flow of non-public information, Fund investments are typically made without any
knowledge of M&T Bank's or its affiliates' lending relationships with an issuer.
Unless sooner terminated, the advisory agreement between the Funds and M&T Bank
will continue in effect from year to year if such continuance is approved at
least annually by the Corporation's Board of Directors, or by vote of a majority
of the outstanding shares of a Fund (as defined in the prospectus), and by a
majority of the Directors who are not parties to the advisory agreement or
interested persons (as defined in the Investment Company Act of 1940) of any
party to the advisory agreement, by vote cast in person at a meeting called for
such purpose. The advisory agreement is terminable at any time on 60 days'
written notice without penalty by the Directors, by vote of a majority of the
outstanding shares of a Fund, or by M&T Bank. The advisory agreement also
terminates automatically in the event of its assignment, as defined in the
Investment Company Act of 1940.
<PAGE>
Advisory Fees
For its advisory services, M&T Bank receives an annual investment advisory fee
as described in the prospectus.
During the fiscal years ended April 30, 1997, 1996, and 1995, for the Money
Market Fund and Treasury Money Market Fund, M&T Bank earned $2,862,559,
$2,339,981, and $1,635,164 and $2,296,162, $1,699,400, and $1,120,905,
respectively, which was reduced by $555,870, $530,234, and $618,151 and
$448,656, $319,668, and $418,701, respectively, because of undertakings to limit
the Funds' expenses. All advisory fees were computed on the same basis as in the
advisory contract described in the Prospectus.
Other Services
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Funds for a fee as described in the
prospectus. For the fiscal years ended April 30, 1997, 1996, and 1995 the Money
Market Fund and Treasury Money Market Fund incurred costs for administrative
services of $598,092 and $531,676; $478,882 and $384,262; and $74,362 and
$62,956, respectively, of which $27,570 and $5,988; $11,635 and $2,303; and
$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.
The Funds will not execute portfolio transactions through, acquire portfolio
securities issued by, make savings deposits in, or enter into repurchase or
reverse repurchase agreements with M&T Bank or its affiliates, and will not give
preference to M&T Bank's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements and reverse repurchase
agreements. While serving as investment adviser to the Funds, M&T Bank has
agreed to maintain its policy and practice of conducting its Trust and
Investment Services Division independently of its Commercial Department.
The Funds' advisory agreement provides that, in making investment
recommendations for the Funds, Trust and Investment Services Division personnel
will not inquire or take into consideration whether the issuer of securities
proposed for purchase or sale by the Funds is a customer of the Commercial
Department and, in dealing with its commercial customers, the Commercial
Department will not inquire or take into consideration whether securities of
such customers are held by the Funds.
Although investment decisions for the Funds are made independently from those of
the other accounts managed by M&T Bank, investments of the type the Fund may
make may also be made by those other accounts. When the Funds and one or more
other accounts managed by M&T Bank are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by M&T Bank to be equitable to each. In
some cases, this procedure may adversely affect the price paid or received by
the Funds or the size of the position obtained or disposed of by the Funds. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Funds.
For the fiscal years ended April 30, 1997, 1996, and 1995, the Money Market Fund
and Treasury Money Market Fund, paid no commissions on brokerage transactions.
Description of Fund Shares
The Corporation's Articles of Incorporation authorize the Board of Directors to
issue up to 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
2 billion Class A Common Stock, Series S
Vision Treasury Money Market Fund 2 billion Class B Common Stock, Series A
2 billion Class B Common Stock, Series S
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 their net asset value without a sales charge on
days on which the New York Stock Exchange and the Federal Reserve wire system
are open for business. The procedure for purchasing shares of the Funds is
explained in the prospectus under "How to Buy Shares."
Conversion to Federal Funds
It is the Funds' policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. M&T Bank and State Street Bank
act as the shareholders' agents in depositing checks and converting them to
federal funds.
Cash Sweep Program
Class S Shares of the Funds are offered through a Cash Sweep Program. For
participating accounts, cash accumulations in demand deposit accounts with M&T
Bank are automatically invested in shares of the Funds on a day selected by M&T
Bank and its customer, or when the demand deposit account reaches a
predetermined dollar amount (e.g., $5,000).
Participating Depository Institutions
Participating depository institutions would be responsible for prompt
transmission of orders relating to the program. These depository
institutions would be the record owners of the shares of the Funds.
Depository institutions participating in this program would be able to
charge their customers for services relating to the program. This
Statement of Additional Information should, therefore, be read together
with any agreement between the customer and the depository institution
with regard to the services to be provided, the fees to be charged for
those services, and any restrictions and limitations that would be
imposed. Beneficial ownership of shares of the Funds held by M&T Bank and
other institutional investors on behalf of their customers would be
recorded by the institutions and reflected in the regular account
statements provided by institutions to their customers.
Determining Net Asset Value
The Directors have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Funds computed by dividing the annualized daily income on a Fund's portfolio by
the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.
The Funds' use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions of Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Directors must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and a Fund's investment objective. The procedures
include monitoring the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Directors will decide what, if any, steps should be taken if there is
a difference of more than 0.5% between the two values. The Directors will take
any steps they consider appropriate (such as redemption in kind or shortening
the average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of determining
net asset value.
Redeeming Fund Shares
The Funds redeem shares at the next computed net asset value after the Funds
receive the redemption request. Redemption procedures are explained in the
Prospectus under "Redeeming Shares."
Banking Laws
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any affiliate thereof from sponsoring, organizing or controlling a registered,
open-end investment company continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, or custodian to such an
investment company or from purchasing shares of such company as agent for and
upon the order of their customers.
Some entities providing services to the Funds are subject to such banking laws
and regulations. They believe that they may perform those services for the Funds
contemplated by any agreement entered into with the Funds without violating
those laws or regulations. Changes in either federal or state statutes and
regulations relating to the permissible activities of banks and their
subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of present or future statutes and regulations,
could prevent these entities from continuing to perform all or a part of the
above services. If this happens, the Corporation's Board of Directors would
consider alternative means of continuing available services. It is not expected
that shareholders would suffer any adverse financial consequences as a result of
any of these occurrences.
Tax Status
The Funds' Tax Status
The Funds will pay no federal income tax because they expect to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, a Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
No portion of any income dividend paid by the Funds is eligible for the
dividends received deduction available to corporations. These dividends (to the
extent taxable), and any short-term capital gains, are taxable as ordinary
income.
Net income for dividend purposes includes (i) interest and dividends accrued and
discount earned on a Fund's assets (including both original issue and market
discount), less (ii) amortization of any premium and accrued expenses directly
attributable to such Fund, and the general expenses (e.g. legal, accounting and
directors' fees) of the Corporation prorated to each Fund on the basis of its
relative net assets.
Capital Gains
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If for
some extraordinary reason a Fund realizes net long-term capital gains, it
will distribute them at least once every 12 months.
Total Return
The Money Market Fund's and Treasury Money Market Fund's average annual total
returns for the one-year and five-year periods ended April 30, 1997, and for the
period from June 1, 1988 (date of initial public investment for the Funds) to
April 30, 1997, were 4.93% and 4.24% ; 4.82% and 4.11% ; and 2.96% and 2.51% ,
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.
The Funds did not have class designations prior to May 1, 1998.
Yield
The yields for the Money Market Fund and Treasury Money Market Fund for the
seven-day period ended April 30, 1997, were 4.90% and 4.80%, respectively. The
Funds did not have class designations prior to May 1, 1998. The Fund calculates
its yield daily, based upon the seven days ending on the day of the calculation,
called the "base period." This yield is computed by:
o determining the net change in the value of a hypothetical account with
a balance of one share at the beginning of the base period, with the
net change excluding capital changes but including the value of any
additional shares purchased with dividends earned from the original one
share and all dividends declared on the original and any purchased
shares;
o dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine the base
period return; and
o multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
Effective Yield
The effective yield for the Money Market Fund and, Treasury Money Market Fund
for the seven-day period ended April 30, 1997, were 5.02% and 4.92%,
respectively. The Funds did not have class designations prior to May 1, 1998.
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>
Performance Comparisons
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates on money market instruments;
o changes in Fund expenses; and
o the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the each Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of any
index used, prevailing market conditions, portfolio compositions of other funds,
and methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Funds use in advertising may
include:
o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all income dividends and
capital gains distributions, if any.
o Salomon 30-Day Treasury Bill Index is a weekly quote of the most
representative yields for selected securities issued by the U.S.
Treasury maturing in 30 days.
o Bank Rate Monitor National Index, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading
banks and thrift institution money market deposit accounts. The rates
published in the index are an average of the personal account rates
offered on the Wednesday prior to the date of publication by ten of the
largest banks and thrifts in each of the five largest Standard
Metropolitan Statistical Areas. Account minimums range upward from
$2,500 in each institution and compounding methods vary. If more than
one rate is offered, the lowest rate is used. Rates are subject to
change at any time specified by the institution.
o Donoghue's Money Fund Report publishes annualized yields of hundreds of
money market funds on a weekly basis and through its Money Market
Insight publication reports monthly and year-to-date investment results
for the same money funds.
From time to time, the Funds will quote their Lipper rankings in the "money
market instrument funds" category in advertising and sales literature. Investors
may use such a reporting service in addition to the Funds' prospectus to obtain
a more complete view of the Funds' performance before investing. Of course, when
comparing Fund performance to any reporting service, factors such as composition
of the reporting service and prevailing market conditions should be considered
in assessing the significance of such comparisons.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Funds' returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, a Fund can compare
its performance, or performance for the types of securities in which it invests,
to a variety of other investments, such as federally insured bank products,
including time deposits, bank savings accounts, certificates of deposit, and
Treasury bills, and to money market funds using the Lipper Analytical Services
money market instruments average. Unlike federally insured bank products, the
shares of the Funds are not insured.
Economic and Market Information
Advertising and sales literature for the Funds may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Funds' portfolio managers and their views and analysis on how
such developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute ("ICI"). For example, according to the ICI,
thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.
<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.
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.
92830F___
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