As filed via EDGAR with the Securities and Exchange Commission on March 7, 1996
File No. 811-8358
Registration No. 33-75250
- --------------------------------------------------------------------------------
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. 5 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 5 |X|
------------------------------
MUTUAL FUND TRUST
(Exact Name of Registrant as Specified in Charter)
125 West 55th Street
New York, New York 10019
--------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 492-1600
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Copies to:
George Martinez, Esq. Carl Frischling, Esq. Molly Sheehan, Esq Gary S. Schpero, Esq.
Mutual Fund Trust Kramer, Levin, et. al. Chemical Bank Simpson Thacher & Bartlett
125 West 55th Street 919 Third Avenue 270 Park Avenue 425 Lexington Avenue
New York, New York 10019 New York, New York 10022 New York, New York 10017 New York, New York 10017
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
|_| immediately upon filing pursuant to |_| on ( ) pursuant to
paragraph (b) paragraph (b)
|_| 60 days after filing pursuant to |X| on May 6, 1996 pursuant to
paragraph (a)(1) paragraph (a)(1)
|_| 75 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(2) paragraph (a)(2) rule 485.
If appropriate, check the following box:
|_| this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
------------------
The Registrant has registered an indefinite number or amount of its shares of
common stock for each of its three series of shares under the Securities Act of
1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940 on July 18,
1994 and the Rule 24f-2 Notice for the Registrant's fiscal year ended August 31,
1995 was filed on October 21, 1995.
<PAGE>
CROSS-REFERENCE SHEET
(Pursuant to Rule 404 showing location in each form of Prospectus of the
responses to the Items in Part A and location in each form of Prospectus and the
Statement of Additional Information of the responses to the Items in Part B of
Form N-1A).
VISTA(SM) SHARES
VISTA(SM) PREMIER SHARES
VISTA(SM) INSTITUTIONAL SHARES
VISTA(SM) NEW YORK TAX FREE INCOME FUND
VISTA(SM) CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
VISTA(SM) TAX FREE INCOME FUND
VISTA(SM) PRIME MONEY MARKET FUND CLASS B SHARES
<TABLE>
<CAPTION>
Item Number Statement of
Form N-1A, Additional
Part A Prospectus Caption Information Caption
----------- ------------------ -------------------
<S> <C> <C>
Captions in parenthesis indicate Income Fund
Prospectus captions which do not exist in the
Money Market Fund Prospectuses.
1 Front Cover Page *
2(a) Expense Summary *
(b) Not Applicable *
3(a) Financial Highlights *
(b) Not Applicable *
(c) Performance Information *
4(a)(b) Fund Objectives and Investment Approach; *
(Fund Objective; Investment Policies)
Other Information Concerning the Fund(s)
(c) Fund Objectives and Investment Approach; *
Common Investment Policies (Money Market
Funds Only); (Fund Objectives; Investment
Policies)
5(a) Management *
(b) Management *
(c) Management *
(d) Other Information Concerning the Fund(s) *
(e) Back Covers *
(f) Financial Highlights; Other Information *
Concerning the Fund(s)
5A.(a-b) Not Applicable *
6(a) Other Information Concerning the Fund(s) *
(b) Not Applicable *
(c) Not Applicable *
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Item Number Statement of
Form N-1A, Additional
Part A Prospectus Caption Information Caption
----------- ------------------ -------------------
<S> <C> <C>
(d) Not Applicable *
(e) How to Buy, Sell and Exchange Shares; *
Other Information Concerning the Fund(s)
(f) How Dividends and Distributions are Made; *
Tax Information; (How Distributions are Made;
Tax Information)
(g) How Distributions are Made; Tax Information; Tax Matters
(How Distributions are Made; Tax Information)
7(a) How to Buy, Sell and Exchange Shares; Other *
Information Concerning the Fund(s)
(b) How the Funds Value Their Shares; *
How to Buy, Sell and Exchange Shares;
Other Information Concerning the Fund(s)
(c) How to Buy, Sell and Exchange Shares *
(d) How to Buy, Sell and Exchange Shares *
(e) Management; Other Information Concerning *
the Fund(s)
(f) Other Information Concerning the Fund(s) Management of the Funds
8(a) How to Buy, Sell and Exchange Shares *
(b) How to Buy, Sell and Exchange Shares *
(c) How to Buy, Sell and Exchange Shares *
(d) How to Buy, Sell and Exchange Shares *
9 Not Applicable *
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
10 * Front Cover Page
11 * Front Cover Page
12 * Not Applicable
13 Fund Objectives and Investment Approach Investment Policies and
(Fund Objectives; Investment Policies) Restrictions
14 * Management of the Funds
15(a) * Not Applicable
(b) * Principal Holders
(c) * Principal Holders
16(a) Management Management of the Funds
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(b) Management Management of the Funds
(c) Other Information Concerning Management of the Funds
the Fund(s)
(d) Management Management of the Funds
(e) * Not Applicable
(f) How to Buy, Sell and Exchange Shares; Management of the Funds
Other Information Concerning the Fund(s)
(g) * Not Applicable
(h) * Management of the Funds;
Independent Accountants;
Back Cover Page
(i) * Not Applicable
17 Fund Objectives and Investment Approach; Investment Policies and
(Fund Objective; Investment Policies) Restrictions
18 Other Information Concerning the Fund(s) General Information
19(a) How to Buy, Sell and Exchange Shares *
(b) How the Funds Value Their Shares Determination of Net Asset
Value
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Item Number
Form N-1A, Statement of Additional
Part B Prospectus Caption Information Caption
- ----------- ------------------ -----------------------
<S> <C> <C>
(c) * Purchases, Redemptions
and Exchanges
20 How Dividends and Distributions Are Made; Tax Matters
Tax Information; (How Distributions are
Made; Tax Information)
21(a) * Management of the Funds
(b) * Management of the Funds
(c) * Not Applicable
22 * Performance Information
23 * Not Applicable
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.
-v-
<PAGE>
PART A
<PAGE>
PROSPECTUS
VISTA[SM] 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
VISTA[SM] TREASURY PLUS MONEY MARKET FUND
VISTA[SM] FEDERAL MONEY MARKET FUND
VISTA[SM] U.S. GOVERNMENT MONEY MARKET FUND
VISTA[SM] CASH MANAGEMENT FUND
VISTA[SM] TAX FREE MONEY MARKET FUND
VISTA[SM] NEW YORK TAX FREE MONEY MARKET FUND
VISTA[SM] CALIFORNIA TAX FREE MONEY MARKET FUND
Vista[SM] Shares
May 6, 1996
Investment Strategy: Current Income
This Prospectus explains concisely what you should know before investing.
Please read it carefully and keep it for future reference. You can find more
detailed information about the Funds in their May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK OR ANY OF ITS AFFILIATES AND
ARE NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary.................................................................
The expenses you pay on your Fund investment, including examples
Financial Highlights............................................................
The Funds' financial history
Fund Objectives and Approach....................................................
Vista 100% U.S. Treasury Securities Money Market Fund
Vista Treasury Plus Money Market Fund
Vista Federal Money Market Fund
Vista U.S. Government Money Market Fund
Vista Cash Management Fund
Vista Tax Free Money Market Fund
Vista New York Tax Free Money Market Fund
Vista California Tax Free Money Market Fund
Common Investment Policies......................................................
Management .....................................................................
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management
and Texas Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares............................................
How the Funds Value their Shares................................................
How Distributions Are Made; Tax Information.....................................
How the Funds distribute their earnings, and
tax treatment related to those earnings
Other Information Concerning the Funds..........................................
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information.........................................................
How performance is determined, stated and/or advertised
- 2 -
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs from investing in the
Fund based on expenses incurred in the most recent fiscal year. The examples
show the cumulative expenses attributable to a hypothetical $1,000 investment
over specified periods.
<TABLE>
<CAPTION>
100% U.S. U.S. N.Y. Tax California
Treasury Treasury Federal Government Tax Free Free Tax Free
Securities Plus Money Money Money Cash Money Money Money
Money Market Market Market Management Market Market Market
Market Fund Fund Fund Fund Fund Fund Fund Fund
--------------------------------------------------------------------------------------------
Vista Vista Vista Vista Vista Vista Vista Vista
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Annual Fund Operating
Expenses
(as a percentage of
average net assets)
Investment Advisory Fee
(after estimated waiver
of fees) (*) 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.00%
12b-1 Fee (**) + 0.10% 0.10% 0.10% 0.10% n/a 0.10% 0.10% 0.10%
Shareholder Servicing Fee
(after estimated waiver
of Fees) (*) 0.18% 0.20% 0.35% 0.23% 0.33% 0.21% 0.20% 0.10%
Other Expenses 0.21% 0.19% 0.15% 0.16% 0.16% 0.18% 0.19% 0.35%
- -------------------------
Total Fund Operating Expenses
(after waiver of fees) (*) (++) 0.59% 0.59% 0.70% 0.59% 0.59% 0.59% 0.59% 0.55%
</TABLE>
Example:
You would pay the following expenses on a $1,000 investment in a Fund, assuming
(1) 5% annual return and (2) redemption at the end of:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year $ 6 $ 6 $ 7 $ 6 $ 6 $ 6 $ 6 $ 6
3 years 19 19 22 19 19 19 19 18
5 years 33 33 38 33 33 33 33 31
10 years 74 74 86 74 74 74 74 69
</TABLE>
- ----------------
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Investment Advisory Fee and Shareholder Servicing Fee would be 0.10%
and 0.35%, respectively, for all funds, and Total Fund Operating Expenses
for Vista 100% U.S. Treasury Securities Money Market Fund, Vista Treasury
Plus Money Market Fund, Vista U.S. Government Money Market Fund, Vista Cash
Management Fund, Vista Tax Free Money Market Fund, Vista New York Tax Free
Money Market Fund and Vista California Tax Free Money Market Fund would be
0.71%, 0.74%, 0.71%, 0.61%, 0.73%, 0.74%, and 0.90%, respectively, of
average net assets. Total Fund Operating Expenses reflect the agreement by
Chase voluntarily to waive fees payable to it and/or reimburse expenses for
a period of at least one year to the extent necessary to prevent Total Fund
Operating Expenses of Vista Shares of each Fund from exceeding the
- 3 -
<PAGE>
amounts indicated in the table, excluding California and Federal. In
addition, Chase has agreed to waive fees payable to it and/or reimburse
expenses for a two year period (until May 6, 1998) to the extent necessary
to prevent Total Fund Operating Expenses for Vista Shares of the Vista
Treasury Plus Money Market Fund, Vista U.S. Government Money Market Fund,
Vista Cash Management Money Market Fund, Vista Tax Free Money Market Fund
and the Vista N.Y.Tax Free Money Market Fund from exceeding 0.73%, 0.76%,
0.72% 0.74% and 0.71%, respectively, of average net assets during such
period.
+ Shareholder Servicing Agents may provide various services to their
customers and charge additional fees for these services. The Shareholder
Servicing Fee includes fees for activities in connection with serving as
liaison for holders of Vista Shares and in providing personal services to
such shareholders as well as other ministerial and servicing activities.
Fees for the activities in connection with serving as liaison to, and
providing personal services to, holders of Vista Shares will not exceed the
NASD's maximum fee of 0.25% for these types of activities. The other
ministerial and servicing activities provided for the Fund include:
assisting in processing purchase and redemption transactions; transmitting
and receiving funds in connection with purchase and redemption orders;
preparing and providing periodic statements showing account balances; and
preparing and transmitting proxy statements and other periodic reports and
communications from the Trust to customers.
++ A shareholder may incur a $10.00 charge for certain wire redemptions.
The expense summary is intended to assist investors in understanding the
various costs and expenses that a shareholder in any class of shares of each
Fund will bear directly or indirectly. The expense summary shows the investment
advisory fee, distribution fee, administrative fee, sub-administration fee and
shareholder servicing agent fee expected to be incurred by shares of each Fund,
after certain waivers of fees.
As a result of the distribution fees, long-term investors may pay more than
the economic equivalent of the maximum front-end sales charge permitted by the
National Association of Securities Dealers, Inc. ("NASD"). More complete
descriptions of each Class of shares' expenses, including any fee waivers, are
set forth herein or in the prospectus for such class of Shares.
The "Example" set forth above should not be considered a representation of
future expenses of a class of shares of a Fund; actual expenses may be greater
or less than those shown.
- 4 -
<PAGE>
FINANCIAL HIGHLIGHTS
On May 6, 1996, The Hanover 100% U.S. Treasury Securities Money Market Fund
("Hanover 100% Treasury Fund") merged into Vista 100% U.S. Treasury Securities
Money Market Fund, which was created to be the successor to the Hanover 100%
Treasury Fund. The table set forth below provides selected per share data and
ratios for one Hanover 100% Treasury Fund (the accounting survivor of the
merger) share outstanding throughout each period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Hanover 100% Treasury Fund's Annual Report to Shareholders for the fiscal year
ended November 30, 1995, which is incorporated by reference into the SAI.
Shareholders can obtain a copy of this report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below, unless otherwise indicated,
have been audited by KPMG Peat Marwick LLP, independent accountants, whose
report thereon is included in the Hanover 100% Treasury Fund's Annual Report to
shareholders.
VISTA 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
-----------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
--------------------------------------------------------------
1995 1994 1993 1992 1991*
----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.050 0.033 0.026 0.033 0.021
------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (0.050) (0.033) (0.026) (0.033) (0.021)
------ ------ ------ ------ ------
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ======
TOTAL RETURN 5.15% 3.32% 2.62% 3.33% 2.58%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted) $1,337,549 $1,024,125 $873,631 $383,688 $141,875
Ratio of Expenses to Average Net Assets # 0.58% 0.59% 0.58% 0.55% 0.45%
Ratio of Net Investment Income to
Average Net Assets # 4.99% 3.26% 2.58% 3.28% 5.02%
Ratio of expenses without waivers and
assumption of expenses to Average
Net Assets # 0.61% 0.62% 0.61% 0.67% 0.74
Ratio of net investment income without
waivers and assumption of expenses
to Average Net Assets (unaudited)# 4.96% 3.23% 2.55% 3.16% 4.73%
</TABLE>
- --------------------------
# Short periods have been annualized.
* Fund commenced operations on July 1, 1991.
- 5 -
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for a
Vista share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders.
VISTA FEDERAL MONEY MARKET FUND
-------------------------------
<TABLE>
<CAPTION>
Vista Shares
------------
Year 5/9/94**
ended through
8/31/95 8/31/94
------- -------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD.......................................... $ 1.00 $ 1.00
-------- -------
Income From Investment Operations:
Net Investment Income..................................................... 0.051 0.013
-------- -------
Total from Investment Operations.......................................... 0.051 0.013
Less dividends from net investment income................................... 0.051 0.013
-------- -------
NET ASSET VALUE, END OF PERIOD................................................ $ 1.00 $ 1.00
======== =======
TOTAL RETURN.................................................................. 5.20% 1.26%
======== =======
Ratios/Supplemental Data $203,399 $19,955
Net assets, End of Period (000 omitted).................................... 0.69% 0.40%
Ratio of Expenses to Average Net Assets#................................... 5.16% 4.36%
Ratio of expenses without waivers and assumption of expenses to average net 0.93% 1.02%
assets#....................................................................... 4.92% 3.74%
</TABLE>
- ---------------------------
# Periods less than one year have been annualized.
* Commencement of operations.
** Commencement of offering shares.
- 6 -
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
one Vista Share outstanding throughout each period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders can obtain a copy of this report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below for each of the periods set
forth in the table below, have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is included in the Annual Report to
shareholders.
VISTA U.S. GOVERNMENT MONEY MARKET FUND(1)
------------------------------------------
<TABLE>
<CAPTION>
VISTA SHARES
---------------------------------------
Year 11/1/93 For the Period
ended through 1/1/93 to
8/31/95 8/31/94+ 10/31/1993*
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................................... $ 1.00 $ 1.00 $ 1.00
-------- -------- --------
Income from Investment Operations:
Net Investment Income............................................ 0.049 0.025 0.019
-------- -------- --------
Total from Investment Operations................................. 0.049 0.025 0.019
Less Distributions:
Dividends from net investment income............................. 0.049 0.025 0.019
-------- -------- --------
Total Distributions.............................................. 0.049 0.025 0.019
NET ASSET VALUE, END OF PERIOD....................................... $ 1.00 $ 1.00 $ 1.00
======== ======== ========
TOTAL RETURN............................................................... 5.05% 2.48% 2.02%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).......................... $341,336 $335,365 $323,498
Ratio of Expenses to Average Net Assets#......................... 0.80% 0.80% 0.82%
Ratio of Net Investment Income to Average Net Assets#............ 4.93% 2.94% 2.39%
Ratio of expenses without variance and assumption of expenses to
Average Net Assets+.......................................... 0.80% 0.80% 0.82%
Ratio of net investment income without variance and assumption of
expenses to Average Net Assets#.............................. 4.93% 2.94% 2.39%
</TABLE>
# Periods less than one year have been annualized.
* Commencement of offering of shares.
+ In 1994 the U.S. Government Money Market Fund changed its fiscal year-end
from October 31, to August 31.
(1) Trinity Government Fund and Vista U.S. Government Money Market Fund each
reorganized as a new portfolio of Mutual Fund Group effective January 1,
1993 in a tax-free reorganization, and subsequently were reorganized into
the Trust on ______. The new portfolio is named Vista U.S. Government Money
Market Fund. In connection with its reorganization, shares of the Trinity
Government Fund were reorganized as Premier Shares of the Vista U.S.
Government Money Market Fund at $1 per share. In addition, net assets of
the former Vista U.S. Government Money Market Fund consisting of both Vista
and Premier Shares were reorganized as Vista shares and Premier shares of
the new Vista U.S. Government Money Market Fund, at $1 per share. The per
share data and ratios for the periods prior to January 1, 1993 relate to
the Trinity Government Fund.
- 7 -
<PAGE>
FINANCIAL HIGHLIGHTS
On May 6, 1996, The Hanover Cash Management Fund ("Hanover Cash Management
Fund") merged into Vista Cash Management Fund. The table set forth below
provides selected per share data and ratios for one Hanover Cash Management Fund
(the accounting survivor of the merger) share outstanding throughout each period
shown. This information is supplemented by financial statements and accompanying
notes appearing in the Hanover Cash Management Fund's Annual Report to
Shareholders for the fiscal year ended November 30, 1995, which is incorporated
by reference into the SAI. Shareholders can obtain a copy of this report by
contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below, unless otherwise indicated, have been audited by KPMG Peat Marwick
LLP, independent accountants, whose report thereon is included in the Hanover
Cash Management Fund's Annual Report to shareholders.
VISTA CASH MANAGEMENT FUND
--------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
-----------------------
1995 1994 1993 1992 1991 1990 1989*
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.054 0.036 0.027 0.035 0.059 0.077 0.076
------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (0.054) (0.036) (0.027) (0.035) (0.059) (0.077) (0.076)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN 5.49% 3.62% 2.74% 3.51% 6.01% 7.94% 7.83%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000 omitted) $1,634,493 $990,045 $861,025 $560,173 $343,166 $196,103 $134,503
Ratio of Expenses to Average
Net Assets # 0.58% 0.58% 0.61% 0.67% 0.67% 0.67% 0.67%
Ratio of Net Investment Income
to Average Net Assets # 5.35% 3.62% 2.70% 3.41% 5.84% 7.65% 8.62%
Ratio of expenses without waivers and
assumption of expenses to Average
Net Assets # 0.62% 0.62% 0.64% 0.72% 0.73% 0.73% 0.74%
Ratio of net investment income
without waivers and assumption
of expenses to Average Net
Assets (unaudited)# 5.31% 3.58% 2.67% 3.36% 5.78% 7.59% 8.55%
</TABLE>
- -----------------------------
# Short periods have been annualized.
* Fund commenced operations January 17, 1989.
- 8 -
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
one Vista Share outstanding throughout each period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders can obtain a copy of this report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the table below for each of the five years in
the period ended August 31, 1995, have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is included in the Annual Report
to Shareholders.
VISTA TAX FREE MONEY MARKET FUND
--------------------------------
<TABLE>
<CAPTION>
VISTA SHARES
------------------------------------------------------------------
Year 11/1/93 Year ended
ended through October 31,
8/31/95 8/31/94+ 1993 1992 1991 1990
------- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income..................... 0.029 0.015 0.019 0.028 0.043 0.054
------ ------ ------ ------ ------ ------
Total from Investment Operations.......... 0.029 0.015 0.019 0.028 0.043 0.054
Less Distributions:
Dividends from net investment income...... 0.029 0.015 0.019 0.028 0.043 0.054
------ ------ ------ ------ ------ ------
Total Distributions....................... 0.029 0.015 0.019 0.028 0.043 0.054
NET ASSET VALUE, END OF PERIOD..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN....................................... 2.99% 1.54% 1.90% 2.79% 4.37% 5.47%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted).......................... $166,915 $121,710 $160,497 $145,241 $115,770 112,770
Ratio of Expenses to Average
Net Assets#............................ 0.86% 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of Net Investment Income to
Average Net Assets#.................... 2.96% 1.82% 1.88% 2.70% 4.27% 5.33%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets#............................ 0.94% 0.85% 0.91% 0.98% 0.99% 0.97%
Ratio of net investment income without
waivers and assumption of expenses
to Average Net Assets#................. 2.87% 1.82% 1.83% 2.57% 4.13% 5.21%
</TABLE>
<TABLE>
<CAPTION>
VISTA SHARES
---------------------------------
Year ended
October 31,
9/4/87*
to
1989 1988 10/31/92
---- ---- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............... $1.00 $1.00 $1.00
Income from Investment Operations:
Net Investment Income..................... 0.056 0.045 0.007
------ ------ ------
Total from Investment Operations.......... 0.056 0.045 0.007
Less Distributions:
Dividends from net investment income...... 0.056 0.045 0.007
------ ------ ------
Total Distributions....................... 0.056 0.045 0.007
NET ASSET VALUE, END OF PERIOD..................... $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN....................................... 5.76% 4.61% 4.50%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted).......................... $107,534 $116,260 $133,177
Ratio of Expenses to Average
Net Assets#............................ 0.85% 0.85% 0.85%
Ratio of Net Investment Income to
Average Net Assets#.................... 5.59% 4.47% 4.47%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets#............................ 1.01% 1.02% 1.18%
Ratio of net investment income without
waivers and assumption of expenses
to Average Net Assets#................. 5.43% 4.30% 4.15%
</TABLE>
* Commencement of offering of Shares.
+ In 1994 the Tax Free Money Market Fund changed its fiscal year-end from
October 31 to August 31.
# Periods less than one year have been annualized.
- 9 -
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for one Vista Share outstanding throughout each period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1995, which is incorporated by reference into the Statement of
Additional Information. Shareholders can obtain a copy of this report by
contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below for each of the five years in the period ended August 31, 1995, have
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is included in the Annual Report to shareholders.
VISTA NEW YORK TAX FREE MONEY MARKET FUND
-----------------------------------------
<TABLE>
<CAPTION>
Year 11/1/93 Year ended
ended through October 31,
8/31/95 8/31/94+ 1993 1992 1991 1990
------- -------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF
PERIOD............................................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income..................... 0.028 0.015 0.017 0.025 0.038 0.050
------ ------ ------ ------ ------ ------
Total from Investment Operations.......... 0.028 0.015 0.017 0.025 0.038 0.050
Less Distributions:
Dividends from net investment income...... 0.028 0.015 0.017 0.025 0.038 0.050
------ ------ ------ ------ ------ ------
Total Distributions....................... 0.028 0.015 0.017 0.025 0.038 0.050
NET ASSET VALUE, END OF PERIOD..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN....................................... 2.88% 1.48% 1.75% 2.53% 3.87% 5.02%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted).......................... $378,400 $365,669 $300,425 $285,889 $230,855 251,897
Ratio of Expenses to Average
Net Assets#............................ 0.86% 0.85% 0.85% 0.85% 0.85% 0.83%
Ratio of Net Investment Income to
Average Net Assets#.................... 2.84% 1.77% 1.72% 2.48% 3.83% 4.91%
Ratio of expenses without waivers and
assumption of expenses to Average
Net Assets#............................ 0.95% 0.85% 0.89% 0.92% 0.92% 0.91%
Ratio of net investment income without
waivers and assumption of expenses
to Average Net Assets#................. 2.75% 1.77% 1.68% 2.41% 3.76% 4.83%
</TABLE>
<TABLE>
<CAPTION>
Year ended 9/4/87*
October 31, to
1989 1988 10/31/87
---- ---- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF
PERIOD............................................. $1.00 $1.00 $1.00
Income from Investment Operations:
Net Investment Income..................... 0.051 0.043 0.009
------ ------ ------
Total from Investment Operations.......... 0.051 0.043 0.009
Less Distributions:
Dividends from net investment income...... 0.051 0.043 0.009
------ ------ ------
Total Distributions....................... 0.051 0.043 0.009
NET ASSET VALUE, END OF PERIOD..................... $1.00 $1.00 $1.00
===== ===== =====
TOTAL RETURN....................................... 5.28% 4.50% 4.71%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted).......................... $252,201 $230,639 $ 2,385
Ratio of Expenses to Average
Net Assets#............................ 0.81% 0.78% 0.25%
Ratio of Net Investment Income to
Average Net Assets#.................... 5.15% 4.26% 4.71%
Ratio of expenses without waivers and
assumption of expenses to Average
Net Assets#............................ 0.95% 1.10% 1.50%
Ratio of net investment income without
waivers and assumption of expenses
to Average Net Assets#................. 5.01% 3.94% 3.46%
</TABLE>
- -----------------
# Periods less than one year have been annualized.
* Commencement of operations.
+ In 1994 the New York Tax Free Money Market Fund changed its fiscal year-end
from October 31 to August 31.
- 10 -
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for
one Vista Share outstanding throughout each period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
The financial statements and notes, as well as the financial information set
forth in the table set forth below, have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is also included in the Annual
Report to Shareholders. Shareholders can obtain a copy of this report by
contacting the Fund or their Shareholder Servicing Agent.
VISTA CALIFORNIA TAX FREE MONEY MARKET FUND
-------------------------------------------
<TABLE>
<CAPTION>
Year 11/1/93 Year 3/4/92*
ended through ended through
8/31/95 8/31/94+ 10/31/93 10/31/92
------- -------- -------- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF PERIOD.......................... $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------
Income from Investment Operations:
Net Investment Income................................ 0.033 0.018 0.023 0.019
------ ------ ------ ------
Total from Investment Operations..................... 0.033 0.018 0.023 0.019
Less Distributions:
Dividends from net investment income................. 0.033 0.018 0.023 0.019
------ ------ ------ ------
Total Distributions.................................. 0.033 0.018 0.023 0.019
NET ASSET VALUE, END OF PERIOD................................ $1.00 $1.00 $1.00 $1.00
===== ===== ===== =====
TOTAL RETURN.................................................. 3.32% 1.82% 2.30% 2.89%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted)..................................... $58,315 $64,423 $45,346 $44,643
Ratio of Expenses to Average Net Assets#............. 0.48% 0.46% 0.42% 0.06%
Ratio of Net Investment Income to Average Net Assets# 3.25% 2.17% 2.26% 2.86%
Ratio of expenses without waivers and assumption of
expenses to Average Net Assets#................... 1.07% 0.94% 1.02% 1.23%
Ratio of net investment income without waivers and
assumption of expenses to Average Net Assets#..... 2.66% 1.69% 1.66% 1.69%
</TABLE>
- ------------------
# Periods less than one year have been annualized.
* Commencement of operations.
+ In 1994 the California Tax Free Money Market Fund changed its fiscal
year-end from October 31 to August 31.
- 11 -
<PAGE>
FUND OBJECTIVES AND INVESTMENT APPROACH
Vista 100% U.S. Treasury Securities Money Market Fund
The Fund's objective is to provide maximum current income consistent with
maximum safety of principal and maintenance of liquidity.
The Fund invests in direct obligations of the U.S. Treasury, including
Treasury bills, bonds and notes, which differ principally only in their interest
rates, maturities and dates of issuance. The Fund does not purchase securities
issued or guaranteed by agencies or instrumentalities of the U.S. Government,
and does not enter into repurchase agreements. The dollar weighted average
maturity of the Fund will be 90 days or less.
Vista Treasury Plus Money Market Fund
The Fund's objective is to provide maximum current income consistent with
the preservation of capital and maintenance of liquidity.
The Fund invests in direct obligations of the U.S. Treasury, including
Treasury bills, bonds and notes, which differ principally only in their interest
rates, maturities and dates of issuance. In addition, the Fund will seek to
enhance its yield by investing in repurchase agreements which are fully
collateralized by U.S. Treasury obligations. The dollar weighted average
maturity of the Fund will be 60 days or less.
Vista Federal Money Market Fund
The Fund's objective is to provide current income consistent with
preservation of capital and maintenance of liquidity.
The Fund invests primarily in direct obligations of the U.S. Treasury,
including Treasury bills, bonds and notes. The Fund may also from time to time
invest in obligations issued or guaranteed as to principal and interest by
certain agencies or instrumentalities of the U.S. Government. Income on direct
investments in U.S. Treasury securities and obligations of the agencies and
instrumentalities in which the Fund invests is generally not subject to state
and local income taxes by reason of federal law. The dollar weighted average
maturity of the Fund will be 90 days or less.
Shareholders in a particular state that imposes an income tax should
determine through consultation with their own tax advisors whether such interest
income, when distributed by the Fund, will be considered by the state to have
retained exempt status, and whether the Fund's capital gains and other income,
if any, when distributed will be subject to the state's income tax. See "How
Distributions are Made; Tax Information." Due to state income tax
considerations, the Fund will not enter into repurchase agreements.
Vista U.S. Government Money Market Fund
The Fund's objective is to provide as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity.
The Fund invests substantially all of its assets in obligations issued or
guaranteed by the U.S. Treasury, agencies and instrumentalities of the U.S.
Government, and by instrumentalities that have been established or sponsored by
the U.S. Government, and in repurchase agreements collateralized by these
obligations. Neither the United States nor any of its agencies insures or
guarantees the market value of shares of the Fund. The dollar weighted average
maturity of the Fund will be 60 days or less.
- 12 -
<PAGE>
Vista Cash Management Fund
The Fund's objective is to provide maximum current income consistent with
the preservation of capital and the maintenance of liquidity.
The Fund invests in high-quality, short-term U.S. dollar-denominated money
market instruments. The Fund invests principally in (i) high quality commercial
paper and other short-term obligations, including floating and variable rate
master demand notes of U.S. and foreign corporations; (ii) U.S.
dollar-denominated obligations of foreign governments and supranational agencies
(e.g., the International Bank for Reconstruction and Development); (iii)
obligations issued or guaranteed by U.S. banks with total assets exceeding $1
billion (including obligations of foreign branches of such banks) and by foreign
banks with total assets exceeding $10 billion (or the equivalent in other
currencies) which have branches or agencies in the U.S. (including U.S. branches
of such banks), or such other U.S. or foreign commercial banks which are judged
by the Fund's advisers to meet comparable credit standing criteria; (iv)
securities issued or guaranteed as by the U.S. Government, its agencies or
instrumentalities; and (v) repurchase agreements. The dollar weighted average
maturity of the Fund will be 90 days or less.
Vista Tax Free Money Market Fund
The Fund's objective is to provide as high a level of current income which
is excluded from gross income for federal income tax purposes as is consistent
with the preservation of capital and maintenance of liquidity.
The Fund invests in a non-diversified portfolio of short-term, fixed rate
and variable rate Municipal Obligations (as defined under "Certain Investment
Policies of the Tax Free Funds"). As a fundamental policy, under normal market
conditions the Fund will have at least 80% of its assets invested in Municipal
Obligations the interest on which, in the opinion of bond counsel, is excluded
from gross income for federal income tax purposes and does not constitute a
preference item which would be subject to the federal alternative minimum tax on
individuals (these preference items are referred to as "AMT Items"). Although
the Fund will seek to invest 100% of its assets in such Municipal Obligations,
it reserves the right under normal market conditions to invest up to 20% of its
total assets in AMT Items or securities the interest on which is subject to
federal income tax. For temporary defensive purposes, the Fund may exceed this
limitation. The dollar weighted average maturity of the Fund will be 90 days or
less.
Vista New York Tax Free Money Market Fund
The Fund's objective is to provide as high a level of current income which
is excluded from gross income for federal income tax purposes and from New York
State and New York City personal income taxes as is consistent with the
preservation of capital and maintenance of liquidity.
The Fund invests in a non-diversified portfolio of short-term, fixed rate
and variable rate Municipal Obligations. Except when the Fund's advisers
determine that acceptable securities are unavailable for investment, at least
65% of the assets of the Fund will be invested in New York Municipal Obligations
(as defined under "Certain Investment Policies of the Tax Free Funds"), although
the exact amount of its assets invested in such securities will vary from time
to time. To the extent suitable New York Municipal Obligations are not available
for investment, the Fund may purchase Municipal Obligations issued by other
states, their agencies and instrumentalities. The portion of the Fund's assets
invested in such other Municipal Obligations would generally be subject to New
York State and New York City personal income taxes.
As a fundamental policy, under normal market conditions the Fund will have
at least 80% of its assets invested in Municipal Obligations the interest on
which, in the opinion of bond counsel, is excluded from gross
- 13 -
<PAGE>
income for federal income tax purposes and which are not AMT Items. Although the
Fund will seek to invest 100% of its assets in such Municipal Obligations, it
reserves the right under normal market conditions to invest up to 20% of its
total assets in AMT Items or securities the interest on which is subject to
federal income tax. For temporary defensive purposes, the Fund may exceed this
limitation. The dollar weighted average maturity of the Fund will be 90 days or
less.
Vista California Tax Free Money Market Fund
The Fund's objective is to provide as high a level of current income exempt
from federal and State of California income taxes as is consistent with the
preservation of capital and maintenance of liquidity.
The Fund invests primarily in a non-diversified portfolio of California
Municipal Obligations (as defined under "Certain Investment Policies of the Tax
Free Funds"). As a fundamental policy, the Fund will invest at least at least
65% of the value of its total assets in California Municipal Obligations, except
when the Fund is maintaining a temporary defensive position. To the extent
suitable California Municipal Obligations are not available for investment, the
Fund may purchase Municipal Obligations issued by other states, their agencies
and instrumentalities. The portion of the Fund's assets invested in such other
Municipal Obligations would generally be subject to California state personal
income tax.
As a fundamental policy, the Fund will invest at least 80% of the value of
its net assets in Municipal Obligations, except when the Fund is maintaining a
temporary defensive position. Although the Fund will seek to invest 100% of its
assets in Municipal Obligations, it reserves the right under normal market
conditions to invest up to 20% of its total assets in AMT Items or securities
the interest on which is subject to federal income tax. For temporary defensive
purposes, the Fund may exceed this limitation. The dollar weighted average
maturity of the Fund will be 90 days or less.
COMMON INVESTMENT POLICIES
The Funds seek to maintain a net asset value of $1.00 per share.
The Funds invest only in high quality obligations which are determined to
present minimal credit risks. This credit determination must be made in
accordance with procedures established by the Board of Trustees. Each investment
must be rated in the highest short-term rating category (the two highest
short-term rating categories in the case of Vista New York Tax Free Money Market
Fund and Vista California Tax Free Money Market Fund) by at least two national
rating organizations ("NROs") (or one NRO if the instrument was rated only by
one such organization) or, if unrated, must be determined to be of comparable
quality in accordance with the procedures of the Trustees. If a security has an
unconditional guarantee or similar enhancement, the issuer of the guarantee or
enhancement may be relied upon in meeting these ratings requirements rather than
the issuer of the security. Securities in which the Funds invest may not earn as
high a level of current income as long-term or lower quality securities.
The Funds purchase only instruments which have or are deemed to have
remaining maturities of 397 days or less in accordance with federal regulations.
Although each Fund seeks to be fully invested, at times it may hold
uninvested cash reserves, which would adversely affect its yield.
Vista Tax Free Money Market Fund, Vista New York Tax Free Money Market Fund
and Vista California Tax Free Money Market Fund (together, the "Tax Free Funds")
are classified as "non-diversified" funds under
- 14 -
<PAGE>
federal securities law. These Funds' assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Funds were
diversified.
As a matter of fundamental policy, each Fund is permitted to invest all or
a part of its assets in an investment company having substantially the same
investment objective and policies as the applicable Fund.
There can be no assurance that any Fund will achieve its investment
objective.
Other Investment Practices
The Funds may also engage in the following investment practices, when
consistent with their overall objectives and policies. These practices, and
certain associated risks, are more fully described in the SAI.
U.S. Government Obligations. Each Fund may invest in direct obligations of
the U.S. Treasury. Each Fund other than Vista 100% U.S. Treasury Securities
Money Market Fund and Vista Treasury Plus Money Market Fund may also invest in
other obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (collectively, "U.S. Government Obligations"). Certain U.S.
Government Obligations, such as U.S. Treasury securities and direct pass-through
certificates of the Government National Mortgage Association (GNMA), are backed
by the "full faith and credit" of the U.S. Government. Other U.S. Government
Obligations, such as obligations of Federal Home Loan Banks and the Federal Home
Loan Mortgage Corporation, are not backed by the "full faith and credit" of the
U.S. Government. In the case of securities not backed by the "full faith and
credit" of the U.S. Government, the investor must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the U.S. Government itself in the event the
agency or instrumentality does not meet its commitments.
Repurchase Agreements and Forward Commitments. Each Fund other than Vista
100% U.S. Treasury Securities Money Market Fund and Vista Federal Money Market
Fund may enter into agreements to purchase and resell securities at an
agreed-upon price and time. These transactions must be fully collateralized at
all times. Each Fund may purchase securities for future delivery, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date. These
transactions involve some risk to a Fund if the other party should default on
its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. Each Fund may borrow money
from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. Each Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever a Fund enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). A Fund would be required to pay interest on amounts obtained
through reverse repurchase agreements, which are considered borrowings under
federal securities laws.
Stand-By Commitments. Each Fund may enter into put transactions, including
transactions sometimes referred to as stand-by commitments, with respect to
securities in its portfolio. In these transactions, a Fund would acquire the
right to sell a security at an agreed upon price within a specified period prior
to its maturity date. These transactions involve some risk to a Fund if the
other party should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
- 15 -
<PAGE>
STRIPS and Zero Coupon Obligations. Each Fund other than Vista 100% U.S.
Treasury Securities Money Market Fund may invest up to 20% of its total assets
in separately traded principal and interest components of securities backed by
the full faith and credit of the U.S. Government, including instruments known as
"STRIPS". Vista Cash Management Fund and each Tax Free Fund may also invest in
zero coupon obligations. Zero coupon obligations are debt securities that do not
pay regular interest payments, and instead are sold at substantial discounts
from their value at maturity. The value of STRIPS and zero coupon obligations
tends to fluctuate more in response to changes in interest rates than the value
of ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates. Each
Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which the Tax Free Funds, and the
Vista Cash Management Fund may invest include participation certificates and, in
the case of Vista Cash Management Fund, certificates of indebtedness or
safekeeping. Participation certificates are pro rata interests in securities
held by others; certificates of indebtedness or safekeeping are documentary
receipts for such original securities held in custody by others. As a result of
the variable rate nature of these investments, the Fund's yield may decline and
it may forego the opportunity for capital appreciation during periods when
interest rates decline; however, during periods when interest rates increase,
the Fund's yield may increase and it may have reduced risk of capital
depreciation. Demand features on certain variable rate securities may obligate
the Fund to pay a "tender fee" to a third party. Demand features provided by
foreign banks involve certain risks associated with foreign investments. The
Internal Revenue Service has not ruled on whether participations in variable
rate municipal obligations is tax exempt and the Tax Free Funds would purchase
such instruments based on opinions of bond counsel.
Other Money Market Funds. Each Fund other than Vista 100% U.S. Treasury
Securities Money Market Fund may invest up to 10% of its total assets in shares
of other money market funds, subject to applicable regulatory limitations.
Additional Investment Policies of Vista Cash Management Fund
Vista Cash Management Fund may invest in the following instruments, when
consistent with their overall objectives and policies. These instruments, and
certain associated risks, are more fully described in the SAI.
Bank Obligations. Bank obligations include certificates of deposit, time
deposits and bankers' acceptances issued or guaranteed by U.S. banks (including
their foreign branches) and foreign banks (including their U.S. branches) .
These obligations may be general obligations of the parent bank or may be
limited to the issuing branch by the terms of the specific obligation or by
government regulation. Foreign bank obligations involve certain risks associated
with foreign investing.
Asset-Backed Securities. Asset-backed securities represent a participation
in, or are secured by and payable from, a stream of payments generated by
particular assets, most often a pool of assets similar to one another, such as
motor vehicle receivables or credit card receivables.
Municipal Obligations. The Fund may invest in high-quality, short-term
municipal obligations that carry yields that are competitive with those of other
types of money market instruments in which it may invest. Dividends paid by this
Fund that are derived from interest on municipal obligations will be taxable to
shareholders for federal income tax purposes.
- 16 -
<PAGE>
Securities of Foreign Governments and Supranational Agencies. The Fund
intends to invest a substantial portion of their assets from time to time in
securities of foreign governments and supranational agencies. The Fund will
limit its investments in foreign government obligations to the commercial paper
and other short-term notes issued or guaranteed by the governments of Western
Europe, Australia, New Zealand, Japan and Canada. Obligations of supranational
agencies, such as the International Bank for Reconstruction and Development
(also known as the World Bank) are supported by subscribed, but unpaid,
commitments of its member countries. There is no assurance that these
commitments will be undertaken or complied with in the future, and foreign and
supranational securities are subject to certain risks associated with foreign
investing.
Custodial Receipts. The Fund may acquire securities in the form of
custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms and are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.
Additional Investment Policies of the Tax Free Funds
The following provides additional information regarding the permitted
investments of the Tax Free Funds. These investments, and certain associated
risks, are more fully described in the SAI.
Municipal Obligations. "Municipal Obligations" are obligations issued by or
on behalf of states, territories and possessions of the United States, and their
authorities, agencies, instrumentalities and political subdivisions, the
interest on which, in the opinion of bond counsel, is excluded from gross income
for federal income tax purposes (without regard to whether the interest thereon
is also exempt from the personal income taxes of any state or whether the
interest thereon constitutes a preference item for purposes of the federal
alternative minimum tax). "New York Municipal Obligations" are Municipal
Obligations of the State of New York and its political subdivisions and of
Puerto Rico, other U.S. territories and their political subdivisions, the
interest on which, in the opinion of bond counsel, is exempt from New York State
and New York City personal income taxes. "California Municipal Obligations" are
Municipal Obligations of the State of California, its political subdivisions,
authorities and corporations, the interest from which is, in the opinion of bond
counsel, is exempt from State of California personal income taxes.
Municipal Obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various private activities, including the lending of funds to
public or private institutions for the construction of housing, educational or
medical facilities, and may include certain types of industrial development
bonds, private activity bonds or notes issued by public authorities to finance
privately owned or operated facilities, or to fund short-term cash requirements.
Short-term Municipal Obligations may be issued as interim financing in
anticipation of tax collections, revenue receipts or bond sales to finance
various public purposes. The Municipal Obligations in which the Tax Free Funds
invest may consist of municipal notes, municipal commercial paper and municipal
bonds maturing or deemed to mature in 397 days or less.
The two principal classifications of Municipal Obligations are general
obligation and special obligation (or special revenue obligation) securities.
General obligation securities involve a pledge of the credit of an issuer
possessing taxing power and are payable from the issuer's general unrestricted
revenues. Their payment may depend on an appropriation by the issuer's
legislative body. The characteristics and methods of enforcement of general
obligation securities vary according to the law applicable to the particular
issuer. Special obligation (or special revenue obligation) securities are
payable only from the revenues derived from a particular facility or class of
facilities, or a specific revenue source, and generally are not payable from the
unrestricted revenues of the issuer. Industrial development bonds and private
activity bonds are in most cases special obligation securities, the credit
quality of which is directly related to the private user of the facilities.
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From time to time, the Tax Free Fund may invest more than 25% of the value
of its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental issuers such as hospitals or airports,
provided, however, that the Tax Free Fund may not invest more than 25% of the
value of its total assets in such bonds if the issuers are in the same industry.
Municipal Lease Obligations. The Tax Free Funds may invest in municipal
lease obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment payments in future years unless money is later appropriated for such
purpose. The Tax Free Funds will limit investments in non-appropriation leases
to 10% of its assets.
Limiting Investment Risks
Specific regulations and investment restrictions help the Funds limit
investment risks for their shareholders. These regulations and restrictions
prohibit the Funds from: (a) with certain limited exceptions, investing more
than 5% of their total assets in the securities of any one issuer (this
limitation does not apply to the Tax Free Funds or to U.S. Government
Obligations held by the other Funds); (b) investing more than 10% of its net
assets in illiquid securities (which include securities restricted as to resale
unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than 25%
of its total assets in any one industry (excluding U.S. Government Obligations,
bank obligations and, for the Tax Free Funds, municipal obligations secured by
bank letters of credit or guarantees). A complete description of the relevant
investment restrictions is included in the SAI. Except for each Fund's
investment objective, restriction (c) above and investment policies designated
as fundamental above or in the SAI, the Funds' investment policies are not
fundamental. The Trustees may change any non-fundamental investment policy
without shareholder approval.
Risk Factors
General. There can be no assurance that any Fund will be able to maintain a
stable net asset value. Changes in interest rates may affect the value of the
obligations held by the Funds. The value of fixed income securities varies
inversely with changes in prevailing interest rates, although money market
instruments are generally less sensitive to changes in interest rates than are
longer-term securities. For a discussion of certain other risks associated with
the Funds' additional investment activities, see "Other Investment
Practices,"Additional Investment Policies of Vista Cash Management Fund" and
"Additional Investment Policies of the Tax Free Funds."
Vista Cash Management Fund. This Fund may invest without limit in
obligations of domestic and foreign banks, and in obligations of other foreign
issuers. The ability to concentrate in the banking industry may involve certain
credit risks, such as defaults or downgrades, if at some future date adverse
economic conditions prevail in such industries. U.S. banks are subject to
extensive governmental regulations which may limit both the amount and types of
loans which may be made and interest rates which may be charged. In addition,
the profitability of the banking industry is largely dependent upon the
availability and cost of funds for the purpose of financing lending operations
under prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in the operations of this industry.
Securities issued by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable
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domestic obligations, the possible imposition of withholding taxes on interest
income, the possible seizure or nationalization of foreign assets, and the
possible establishment of exchange controls or other restrictions. In addition,
there may be less publicly available information concerning foreign issuers,
there may be difficulties in obtaining or enforcing a judgment against a foreign
issuer (including branches). and accounting, auditing and financial reporting
standards and practices may differ from those applicable to U.S. issuers. In
addition, foreign banks are not subject to regulations comparable to U.S.
banking regulations.
The Tax Free Funds. Each Tax Free Fund may invest without limitation in
Municipal Obligations secured by letters of credit or guarantees from U.S. and
foreign banks, and other foreign institutions. These investments are subject to
the considerations discussed in the preceding paragraphs relating to Vista Cash
Management Fund.
Each of the Tax Free Funds is "non-diversified," which may make the value
of their shares more susceptible to developments affecting issuers in which
these Funds invest. In addition, more than 25% of the assets of each Tax Free
Fund may be invested in securities to be paid from revenue of similar projects,
which may cause these Funds to be more susceptible to similar economic,
political, or regulatory developments (particularly with respect to Vista New
York Tax Free Money Market Fund and Vista California Tax Free Money Market Fund,
since the issuers in which these Funds invest will generally be located in a
single state).
Because the Tax Free Funds will invest primarily in obligations issued by
states, cities, public authorities and other municipal issuers, the Tax Free
Funds are susceptible for factors affecting such states and their municipal
issuers. The New York and California Funds will be particularly susceptible to
factors affecting the State of New York, the State of California, and their
respective municipal issuers. A number of municipal issuers, including the State
of New York, New York City, the State of California and certain California
counties, have a recent history of significant financial and fiscal
difficulties.
California's Orange County recently defaulted on certain of its
indebtedness. If a municipal issuer is unable to meet its financial obligations,
the income derived by the related Fund and that Fund's ability to preserve
capital and liquidity could be adversely affected. See Appendices C and D in the
SAI for further information.
Interest on certain Municipal Obligations (including certain industrial
development bonds), while exempt from federal income tax, is a preference item
for the purpose of the alternative minimum tax. Where a mutual fund receives
such interest, a proportionate share of any exempt-interest dividend paid by the
mutual fund may be treated as such a preference item to shareholders. Federal
tax legislation enacted over the past few years has limited the types and volume
of bonds which are not AMT Items and the interest on which is not subject to
federal income tax. This legislation may affect the availability of Municipal
Obligations for investment by the Tax Free Funds.
MANAGEMENT
The Funds' Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to each of
the Funds pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of each of the Funds, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience. For its investment advisory
services to each of the Funds, Chase is entitled to receive an annual fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is
the sub-investment adviser to each Fund other than Cash Management Fund and Tax
Free Money Market Fund, pursuant to a Sub-Investment
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Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of the Adviser. CAM makes investment decisions for each of these
Funds on a day-to-day basis. For these services, CAM receives a fee, payable by
Chase from its advisory fee, in a mutually agreed amount. CAM was recently
formed for the purpose of providing discretionary investment advisory services
to institutional clients and to consolidate Chase's investment management
function. The same individuals who serve as portfolio managers for Chase also
serve as portfolio managers for CAM.
Texas Commerce Bank, National Association ("TCB") is the sub-investment
adviser to the Cash Management Fund and the Tax Free Money Market Fund pursuant
to a Sub-Investment Advisory Agreement between Chase and TCB. TCB makes
investment decisions for the Cash Management Fund and Tax Free Money Market Fund
on a day-to-day basis. For these services, TCB receives a fee, payable by Chase
from its advisory fee, in a mutually agreed amount. TCB has been in the
investment counselling business since 1987 and is ultimately controlled and
owned by The Chase Manhattan Corporation.
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HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a fund account with as little as $2,500 ($1,000 for IRAs and
SEP-IRAs) and make additional investments at any time with as little as $100.
You can buy fund shares three ways- through an investment representative or
shareholder servicing agent, through the Fund's distributor (at 1-800-34-VISTA),
or through a systematic investment plan
All purchases made by check should be in U.S. dollars and made payable to
the Vista Funds. Third party checks, except those payable to an existing
shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar days. In addition, redemption
of shares purchased by periodic automatic investment will not be allowed for 7
calendar days. In the event a check used to pay for shares is not honored by a
bank, the purchase order will be cancelled and the shareholder will be liable
for any losses or expenses incurred by the Fund.
Buying shares through the Funds' distributor. Complete and return the
enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through the Systematic Investment Plan. You can make regular
investments of $100 or more per month through automatic deduction from your bank
savings or checking account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin the Plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Buying shares through an investment representative or shareholder servicing
agent. Vista Shares of the Funds may be purchased through a shareholder
servicing agent (i.e., a financial institution, such as a bank, trust company or
savings and loan association that has entered into a shareholder servicing
agreement with the Funds) or to customers of brokers or certain financial
institutions which have entered into Selected Dealer Agreements with the Funds'
distributor. An investor may purchase Vista Shares by authorizing his
shareholder servicing agent or investment representative to purchase shares on
his behalf through the Funds' Distributor. Shareholder servicing agents may
offer additional services to their customers, including customized procedures
for the purchase and redemption of Vista Shares, such as pre-authorized or
systematic purchase and withdrawal programs and "sweep" checking programs. For
further information, See "Other Information Concerning the Funds" in this
prospectus and the SAI.
Shares are sold without a sales load at the net asset value next determined
after the Vista Service Center receives your order on any business day during
which the Federal Reserve Bank of New York, the New York Stock Exchange and the
Funds' advisers are open for business ("Fund Business Day"). To receive that
day's price, the Vista Service Center or your investment representative or
shareholder servicing agent must generally receive your order prior to the
Funds' Cut-off Time. For the Vista 100% U.S. Treasury Securities Money Market
Fund and the Tax Free Funds, the Cut-off Time is 12:00 noon. For the Treasury
Plus Fund, the Federal Fund, the U.S. Government Fund, and the Cash Management
Fund, the Cut-off Time is 2:00 p.m. Orders for shares received after and
accepted prior to the Cut-off Times will be entitled to all dividends declared
on that day. Orders received for shares after a Fund's Cut-off time and prior to
4:00 p.m. on any Fund Business Day will only be accepted and executed on the
same day at the Funds' discretion. The Funds reserve the right to reject any
purchase order.
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How to Sell Shares
You can sell your shares to the Fund on any Fund Business Day either
directly or through your investment representative or shareholder servicing
agent. The Fund will only redeem shares for which it has received payment.
Selling Shares directly to the Fund. Send a signed letter of instruction to
the Vista Service Center. The price you receive is the next net asset value
calculated after your request is received in proper form.
If you want your redemption proceeds sent to an address other than your
address as it appears on Vista's records, a signature guarantee is required. The
Fund usually requires additional documentation for the sale of shares by a
corporation, partnership, agent or fiduciary, or a surviving joint owner.
Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the Fund Business Day
after your request is received provided your request is received by the Vista
Service Center prior to the Fund's Cut-off Time. Under unusual circumstances,
the Fund may suspend redemptions, or postpone payment for more than seven
business days, as permitted by federal securities laws.
You may use Vista's Telephone Redemption Privilege to redeem shares valued
up to $100,000 from your account unless you have notified the Vista Service
Center of an address change within the preceding 15 days. Unless an investor
indicates otherwise on the account application, the Fund will be authorized to
act upon redemption and transfer instructions received by telephone from a
shareholder, or any person claiming to act as his or her representative, who can
provide the Fund with his or her account registration and address as it appears
on the Fund's records.
The Vista Service Center will employ these and other reasonable procedures
to confirm that instructions communicated by telephone are genuine; if it fails
to employ reasonable procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. For information, consult the Vista
Service Center.
During periods of unusual market changes and shareholder activity, you may
experience delays in contacting the Vista Service Center by telephone. In this
event, you may wish to submit a written redemption request, or contact your
investment representative or shareholder servicing agent. The Telephone
Redemption Privilege may be modified or terminated without notice.
Systematic Withdrawal Plan. Make regular withdrawals of $100 or more
monthly, quarterly or semi-annually from an account valued at $5,000 or more.
Selling shares through your investment representative or your shareholder
servicing agent. Your investment representative or your shareholder servicing
agent must receive your request before the Cut-off Time for your Fund to receive
that day's net asset value. Your representative will be responsible for
furnishing all necessary documentation to the Vista Service Center.
Redemption of Accounts of Less than $500. Each Fund may redeem your shares
if the aggregate net asset value of the shares in your account is less than
$500. In the event of any such redemption, you will receive at least 60 days'
notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Vista Shares of certain other Vista money
market funds at net asset value and for certain classes of shares of the Vista
non-money market funds at net asset value plus any applicable sales
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charge. Not all Vista funds offer all classes of shares. The prospectus of the
other Vista fund into which shares are being exchanged should be read carefully
and retained for future reference.
To exchange your shares, simply complete the Exchange Authorization Form
contained in your prospectus and send it to the Vista Service Center. The form
is also available from the Vista Service Center. For federal income tax
purposes, an exchange is treated as a sale of shares and generally results in a
capital gain or loss. A Telephone Exchange Privilege is currently available for
amounts up to $500,000. The Vista Service Center's procedures for telephone
transactions are described under "How to sell shares." Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Please read the prospectus carefully before investing and keep it for
future reference. Shares of certain Vista funds are not available to residents
of all states.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving a Fund in a year or three in a
calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
HOW THE FUNDS VALUE THEIR SHARES
The net asset value of Vista Shares of the Funds is currently determined
daily as of 12:00 noon and 4:00 p.m., Eastern time on each Fund Business Day by
dividing the net assets of a Fund by the number of its shares outstanding at the
time the determination is made. Effective with the anticipated introduction of
certain automated share purchase programs, the net asset value of Funds
available through the programs will also be determined as of 6:00 p.m., Eastern
time on each Fund Business Day.
The portfolio securities of each Fund are valued at their amortized cost in
accordance with federal securities laws, certain requirements of which are
summarized under "Common Fund Policies." This method increases stability in
valuation, but may result in periods during which the stated value of a
portfolio security is higher or lower than the price the Fund would receive if
the instrument were sold. It is anticipated that the net asset value of each
share will remain constant at $1.00 and these Funds will employ specific
investment policies and procedures to accomplish this result, although no
assurance can be given that they will be able to do so on a continuing basis.
The Board of Trustees will review the holdings of each Fund at intervals it
deems appropriate to determine whether that Fund's net asset value calculated by
using available market quotations (or an appropriate substitute which reflects
current market conditions) deviates from $1.00 per share based upon amortized
cost. In the event the Trustees determine that a deviation exists that may
result in material dilution or other unfair results to investors or existing
shareholders, the Trustees will take such corrective action as they regard as
necessary and appropriate.
HOW DIVIDENDS AND DISTRIBUTIONS ARE MADE; TAX INFORMATION
The net investment income of each class of shares of each Fund is declared
daily as a dividend to the shareholders each Fund Business Day. Dividends are
declared as of the time of day which corresponds to the latest time on that day
that the Fund's net asset value is determined. Shares begin accruing dividends
on the day they are purchased. Dividends are distributed monthly. Unless a
shareholder arranges to receive dividends in cash , dividends are distributed in
the form of additional shares. Dividends that are otherwise taxable are still
taxable to you whether received in cash or additional shares. Net realized
short-term capital gains, if any, will be distributed at least annually. The
Funds do not expect to realize net long-term capital gains.
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Net investment income for each Fund consists of all interest accrued and
discounts earned less, amortization of any market premium on the portfolio
assets of the Fund, and the accrued expenses of the Fund.
Each Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to you. Each Fund intends to distribute substantially all of its
ordinary income and capital gain net income on a current basis. If a Fund does
not qualify as a regulated investment company for any taxable year or does not
make distributions as it intends, the Fund will be subject to tax on all of its
income and gains.
Distributions by a Fund of its ordinary income and short-term capital gains
are generally taxable to you as ordinary income. Distributions by the Tax Free
Funds of their tax-exempt interest income will not be subject to federal income
tax. Such distributions will generally be subject to state and local taxes, but
may be exempt if paid out of interest on municipal obligations of the state or
locality in which you reside. Distributions by a Fund of net long-term capital
gains will be taxable as such, regardless of the length of time you have held
your shares. Distributions will be taxable in the same manner for federal income
tax purposes whether received in cash or in shares through the reinvestment of
distributions.
To the extent distributions are attributable to interest from obligations
of the U.S. Government and certain of its agencies and instrumentalities, such
distributions may be exempt from certain types of state and local taxes.
Early in each calendar year the Funds will notify you of the amount and tax
status of distributions paid to you for the preceding year.
The foregoing is a summary of certain federal income tax consequences of
investing in the Funds. You should consult your tax adviser to determine the
precise effect of an investment in the Funds on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Funds' distributor is Vista Broker-Dealer Services, Inc. ("VBDS"). VBDS
is a subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. Each
Fund has adopted a Rule 12b-1 distribution plan which provides that each Fund
(other than the Cash Management Fund) will pay distribution fees at annual rates
of up to 0.10% annually of the average daily net assets attributable to Vista
Shares. There is no distribution plan for the Cash Management Fund. Payments
under the distribution plan shall be used to compensate or reimburse the Funds'
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Vista Shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers with
trail or maintenance commissions at an annual rate of up to [ %] of the average
daily net asset value of Vista Shares maintained in the Fund by customers of
these broker-dealers. Trail or maintenance commissions are paid to
broker-dealers beginning the 13th month following the purchase of shares by
their customers. Some activities intended to promote the sale of Vista Shares
will be conducted generally by the Vista Family of Mutual Funds, and activities
intended to promote a Fund's Vista Shares may also benefit the Fund's other
shares and other Vista funds.
VBDS may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement
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for travel expenses, including lodging and meals, in connection with attendance
at training and educational meetings within and outside the U.S.
Shareholder Servicing Agents
Each Fund has entered into shareholder servicing agreements with certain
shareholder servicing agents (including Chase) under which the shareholder
servicing agents have agreed to provide certain support services to their
customers including, assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to .35% of the average
daily net assets of the Vista Shares of each Fund held by investors for whom the
shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services. The Board of Trustees has determined that the
amount payable in respect of "service fees" (as defined in the NASD Rules of
Fair Practice) does not exceed .25% of the average annual net assets
attributable to the Vista Shares of each Fund.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures and payment for the purchase and
redemption of Fund shares, such as pre-authorized or systematic purchase and
redemption programs, "sweep" programs, cash advances and redemption checks. Each
shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Funds to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as shareholder servicing agents.
Administrator and Sub-Administrator
Chase acts as the Funds' administrator and is entitled to receive a fee
computed daily and paid monthly at an annual rate equal to 0.05% of each Fund's
average daily net assets.
VBDS provides certain sub-administrative services to each Fund pursuant to
its distribution and sub-administration agreement and is entitled to receive a
fee for these services from each Fund at an annual rate equal to 0.05% of the
Fund's average daily net assets. VBDS has agreed to use a portion of this fee to
pay for certain expenses incurred in connection with organizing new series of
the Trust and certain other ongoing expenses of the Trust. VBDS is located at
125 West 55th Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for each Fund and receives
compensation under an agreement with the Funds. Securities and cash of each Fund
may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.
Expenses
Each Fund pays the expenses incurred in its operations, including its pro
rata share of expenses of the Trust. These expenses include investment advisory
and administrative fees; the compensation of the Trustees: registration fees;
interest charges; taxes; expenses connected with the execution, recording and
settlement of security transactions; fees and expenses of the Fund's custodian
for all services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors
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and to government offices and commissions; expenses of meetings of investors;
fees and expenses of independent accountants, of legal counsel and of any
transfer agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net income
on, shares of the Fund. Shareholder servicing and distribution fees are
allocated to specific classes of the Fund. In addition, the Fund may allocate
transfer agency and certain other expenses by class. Service providers to the
Fund may, from time to time, voluntarily waive all or a portion of any fees to
which they are entitled.
Organization and Description of Shares
Each Fund is a portfolio of Mutual Fund Trust, an open-end management
investment company organized as a Massachusetts business trust in 1994 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class. Fund shares will be maintained in
book entry form, and no certificates representing shares owned will be issued to
shareholders.
Each Fund issues multiple classes of shares. This Prospectus relates only
to Vista Shares of the Funds. The Funds offer other classes of shares in
addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which will affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of all series or classes when in the
judgment of the Trustees it is necessary or desirable to submit matters for a
shareholder vote. The Trustees will promptly call a meeting of shareholders to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently interpreted,
prohibit bank holding companies and their affiliates from sponsoring,
organizing, controlling, or distributing shares of, mutual funds, and generally
prohibit banks from issuing, underwriting, selling or distributing securities.
These laws do not prohibit banks or their affiliates from acting as investment
adviser, administrator or custodian to mutual funds or from purchasing mutual
fund shares as agent for a customer. Chase and the Trust believe that Chase
(including its affiliates) may perform the services to be performed by it as
described in this Prospectus without violating such laws. If future changes in
these laws or interpretations required Chase to alter or discontinue any of
these services, it is expected that the Board of Trustees would recommend
alternative arrangements and that investors would not suffer adverse
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financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of any
of the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Funds' distributor or affiliates of the distributor. Chase will
not invest any Fund assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by any Fund. Chase has informed the Funds that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of such Chase or in the
possession of any affiliate of Chase, including the division that performs
services for the Trust as custodian. Shareholders of the Funds should be aware
that, subject to applicable legal or regulatory restrictions, Chase and its
affiliates may exchange among themselves certain information about the
shareholders and their accounts. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
Each Fund may advertise its annualized "yield" and its 'effective yield".
Annualized "yield" is determined by assuming that income generated by an
investment in a Fund over a stated seven-day period (the "Yield") will continue
to be generated each week over a 52-week period. It is shown as a percentage of
such investment. "Effective yield" is the annualized "yield" calculated assuming
the reinvestment of the income earned during each week of the 52-week period.
The "effective yield" will be slightly higher than the "yield" due to the
compounding effect of this assumed reinvestment.
The Tax Free Funds may also quote a "tax equivalent yield", the yield that
a taxable money market fund would have to generate in order to produce an
after-tax yield equivalent to a Tax Free Fund's yield. The tax equivalent yield
of a taxable money market fund can then be compared to the yield of a Tax Free
Fund.
Investment performance may from time to time be included in advertisements
about the Funds. Performance is calculated separately for each class of shares.
Because this performance information is based on historical earnings, it should
not be considered as an indication or representation of future performance.
Investment performance, which will vary, is based on many factors, including
market conditions, the composition of each Fund's portfolio, each Fund's
operating expenses and which class of shares you purchase. Investment
performance also reflects the risks associated with each Fund's investment
objective and policies. These factors should be considered when comparing each
Fund's investment results to those of other mutual funds and investment
vehicles. Quotations of investment performance for any period when an expense
limitation was in effect will be greater if the limitation had not been in
effect. Each Fund's performance may be compared to other mutual funds, relevant
indices and rankings prepared by independent services. See the SAI.
- 27 -
<PAGE>
PROSPECTUS
VISTA[SM] 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
VISTA[SM] TREASURY PLUS MONEY MARKET FUND
VISTA[SM] FEDERAL MONEY MARKET FUND
VISTA[SM] U.S. GOVERNMENT MONEY MARKET FUND
VISTA[SM] CASH MANAGEMENT FUND
VISTA[SM] PRIME MONEY MARKET FUND
VISTA[SM] TAX FREE MONEY MARKET FUND
Premier[SM] Shares
May 6, 1996
Investment Strategy: Current Income
This Prospectus explains concisely what you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about the Funds in their May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK OR ANY OF ITS AFFILIATES AND
ARE NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary................................................................
The expenses you pay on your Fund investment, including examples
Financial Highlights...........................................................
The Funds' financial history
Fund Objectives and Approach ..................................................
Vista 100% U.S. Treasury Securities Money Market Fund
Vista Treasury Plus Money Market Fund
Vista Federal Money Market Fund
Vista U.S. Government Money Market Fund
Vista Cash Management Fund
Vista Prime Money Market Fund
Vista Tax Free Money Market Fund
Common Investment Policies.....................................................
Management ....................................................................
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management
and Texas Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares...........................................
How the Funds Value their Shares...............................................
How Distributions Are Made; Tax Information
How the Funds distribute their earnings, and
tax treatment related to those earnings
Other Information Concerning the Funds
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information
How performance is determined, stated and/or advertised
-2-
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs from investing in the
Fund based on expenses incurred in the most recent fiscal year. The examples
show the cumulative expenses attributable to a hypothetical $1,000 investment
over specified periods.
<TABLE>
<CAPTION>
100% U.S. U.S.
Treasury Treasury Federal Government Prime Tax Free
Securities Plus Money Money Money Cash Money Money
Money Market Market Market Management Market Market
Market Fund Fund Fund Fund Fund Fund Fund
-------------------------------------------------------------------------------------
Premier Premier Premier Premier Premier Premier Premier
Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Fund Operating
Expenses
(as a percentage
of average net assets)
Investment Advisory Fee 0.10% 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
12b-1 Fee n/a n/a n/a 0.10% n/a n/a n/a
Shareholder Servicing Fee
(after estimated waiver
of Fees) (*) 0.25% 0.25% 0.20% 0.19% 0.23% 0.20% 0.25%
Other Expenses 0.20% 0.20% 0.20% 0.16% 0.17% 0.15% 0.20%
- -------------------------
Total Fund Operating Expenses
(after waiver of fees) (*) 0.55% 0.55% 0.50% 0.55% 0.50% 0.45% 0.55%
Example:
You would pay the following expenses on a $1,000 investment in a Fund, assuming
(1) 5% annual return and (2) redemption at the end of:
1 Year $ 6 $ 6 $ 6 $ 6 $ 6 $ 5 $ 6
3 years 18 18 17 18 17 16 18
5 years 31 31 30 31 30 28 31
10 years 69 69 66 69 66 63 69
</TABLE>
- -------------------
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waivers,
the Shareholder Servicing Fee would be 0.25% for all funds, and Total Fund
Operating Expenses for Vista Federal Money Market Fund, Vista U.S.
Government Money Market Fund, Vista Cash Management Money Market Fund and
Vista Prime Fund would be 0.55%, 0.52%, 0.50% and 0.61%, respectively, of
average net assets.
+ Fees waived pursuant to an agreement with the Adviser. See "The Adviser."
++ Shareholder Servicing Agents may provide various services to their
customers and charge additional fees for these services. The Shareholder
Servicing Fee includes fees for activities in connection with serving as
liaison for holders of Premier Shares and in providing personal services to
such shareholders as well as other ministerial and servicing activities.
Fees for the activities in connection with serving as liaison to, and
providing personal services to, holders of Premier Shares will not exceed
the NASD's maximum fee of 0.25% for these types of activities. The other
ministerial and servicing activities provided for the Fund include:
assisting in processing purchase and redemption transactions; transmitting
and receiving funds in connection with purchase and redemption orders;
preparing and providing periodic statements showing account balances; and
preparing and transmitting proxy statements and other periodic reports and
communications from the Trust to customers.
-3-
<PAGE>
++ A shareholder may incur $10.00 charge for certain wire redemptions.
The expense summary is intended to assist investors in understanding
the various costs and expenses that a shareholder in any class of shares of each
Fund will bear directly or indirectly. The expense summary shows the investment
advisory fee, distribution fee, administrative fee, sub-administrative fee and
shareholder servicing agent fee expected to be incurred by Premier Shares of
each Fund, after waiver of fees.
As a result of the distribution fees, long-term investors may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by the National Association of Securities Dealers, Inc. ("NASD"). More
complete descriptions of each Class of shares' expenses, including any fee
waivers, are set forth herein or in the prospectus for such class of Shares.
The "Example" set forth above should not be considered a
representation of future expenses of a class of Shares of a Fund; actual
expenses may be greater or less than those shown.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, has been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is included
in the Annual Report to Shareholders.
VISTA TREASURY PLUS MONEY MARKET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 4/22/94**
ended through
8/31/95 8/31/94
------- -------
Premier
Shares
------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................. $1.00 $1.00
------ ------
Income From Investment Operations:
Net Investment Income....................................... 0.050 0.014
------ ------
Less dividends from net investment income................... 0.050 0.014
------ ------
Net Asset Value, End of Period........................................ $1.00 $1.00
====== ======
Total Return.......................................................... 5.17% 1.37%
====== ======
Ratios/Supplemental Data
Net assets, End of Period (000 omitted)......................... $18,572 $ 36
Ratio of Expenses to Average Net Assets#........................ 0.50% 0.49%
Ratio of Net Investment Income to Average Net Assets#........... 5.23% 3.85%
Ratio of expenses without waivers and assumption of expenses to
average net assets#......................................... 1.57% 0.89%
Ratio of net investment income without waivers and assumption of
expenses to average net assets#............................. 4.16% 3.46%
</TABLE>
- ---------------
# Periods less than one year have been annualized.
* Commencement of operations.
** Commencement of offering shares.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, has been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is included
in the Annual Report to Shareholders.
VISTA FEDERAL MONEY MARKET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 4/22/94**
ended through
8/31/95 8/31/94
------- -------
Premier
Shares
------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period................................... $1.00 $1.00
------- ------
Income From Investment Operations:
Net Investment Income........................................ 0.053 0.015
------- ------
Less dividends from net investment income.................... 0.053 0.015
------- ------
Net Asset Value, End of Period......................................... $1.00 $1.00
======= ======
Total Return........................................................... 5.40% 1.47%
======= ======
Ratios/Supplemental Data
Net assets, end of Period (000 omitted).......................... $148,512 $55,768
Ratio of Expenses to Average Net Assets#......................... 0.49% 0.35%
Ratio of Net Investment Income to Average Net Assets#............ 5.32% 4.38%
Ratio of expenses without waivers and assumption to expenses to
average net assets#.......................................... 0.59% 0.74%
Ratio of net investment income without waivers and assumption of
expenses to average net assets#.............................. 5.22% 4.00%
</TABLE>
- ----------------
# Periods less than one year have been annualized.
* Commencement of operations.
** Commencement of offering shares.
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for one Premier Share outstanding throughout each period shown. This
information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1995, which is incorporated by reference into the Statement of
Additional Information. Shareholders can obtain a copy of this report by
contacting the Fund or their Shareholder Servicing Agent. The financial
statements and notes, as well as the financial information set forth in the
table below for each of the periods commencing subsequent to June 30, 1992, have
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is included in the annual report to Shareholders. Periods ended prior to
July 1, 1993 were audited by other independent accountants.
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND(1)
-----------------------------------------------------------------------------------------------
PREMIER SHARES
-----------------------------------------------------------------------------------------------
For the
Period
July 1
Year 11/1/93 Year ended through
Ended through October 31, Oct. 31,* Year Ended June 30,
----- ------- ----------- --------- ---------------------------
8/31/95 8/31/94++ 1993 1992 1992 1991 1990(2)
------- --------- ---- ---- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- ----- -----
Income from Investment
Operations:
Net Investment Income......... 0.052 0.027 0.027 0.010 0.041(3) 0.068 0.075
----- ----- ----- ----- ----- ----- -----
Total from Investment
Operations................. 0.052 0.027 0.027 0.010 0.041 0.068 0.075
Less Distributions:
Dividends from net
investment income.......... 0.052 0.027 0.027 0.010 0.041(3) 0.068 0.075
----- ----- ----- ----- ----- ----- -----
Total Distributions........... 0.052 0.027 0.027 0.010 0.041 0.068 0.075
NET ASSET VALUE, END
OF PERIOD....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== ===== =====
TOTAL RETURN........................ 5.31% 2.70% 2.70% 0.98% 4.68% 6.91% 8.13%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted)....... $763,609 $545,999 $1,609,704 $108,505 $ 78,795 $193,308 $63,774
Ratio of Expenses to
Average Net Assets+........ 0.55% 0.55% 0.55% 0.58% 0.57% 0.57% 0.72%
Ratio of Net Income to
Average Net Assets+........ 5.22% 3.13% 2.66% 2.87% 4.10% 6.76% 7.46%
Ratio of expenses without
waivers and
assumption of expenses
to Average Net
Assets+.................... 0.59% 0.61% 0.67% 0.70% 0.64% 0.65% --
Ratio of net investment
income without waivers
and assumption of
expenses to Average
Net Assets+................ 5.18% 3.07% 2.54% 2.75% 4.03% 6.68% --
</TABLE>
<TABLE>
<CAPTION>
U.S. GOVERNMENT MONEY MARKET FUND(1)
----------------------------------------------------
PREMIER SHARES
----------------------------------------------------
Year Ended September 30,
----------------------------------------------------
1989 1988 1987 1986 1985 1984
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from Investment
Operations:
Net Investment Income......... 0.083 0.065 0.058 0.062 0.072 0.083
----- ----- ----- ----- ----- -----
Total from Investment
Operations................. 0.083 0.065 0.058 0.062 0.072 0.083
Less Distributions:
Dividends from net
investment income.......... 0.083 0.065 0.058 0.062 0.072 0.083
----- ----- ----- ----- ----- -----
Total Distributions........... 0.083 0.065 0.058 0.062 0.072 0.083
NET ASSET VALUE, END
OF PERIOD....................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN........................ 6.34% 6.54% 5.78% 6.24% 7.13% 6.25%
Ratios/Supplemental Data
Net Assets, End of
Period (000 omitted)....... $84,752 $79,541 $82,068 $86,475 $14,523 $ 3,991
Ratio of Expenses to
Average Net Assets+........ 0.70% 0.67% 0.64% 0.68% 1.03% 1.54%
Ratio of Net Income to
Average Net Assets+........ 8.31% 6.54% 5.78% 6.24% 7.16% 8.25%
Ratio of expenses without
waivers and
assumption of expenses
to Average Net
Assets+.................... -- -- -- -- 1.10% 2.23%
Ratio of net investment
income without waivers
and assumption of
expenses to Average
Net Assets+................ -- -- -- -- 7.09% 7.56%
</TABLE>
+ Periods less than one year have been annualized.
++ In 1994 the U.S. Government Money Market Fund changed its fiscal year-end
from October 31 to August 31.
* In 1992 the Trinity Government Fund, the predecessor to the Vista U.S.
Government Money Market Fund, changed its fiscal year-end from June 30 to
October 31.
(1) Trinity Government Fund and Vista U.S. Government Money Market Fund each
reorganized as a new portfolio of Mutual Fund Group effective January 1,
1993 in a tax-free reorganization, and subsequently were reorganized into
the Trust on _________. The new portfolio was named Vista U.S. Government
Money Market Fund.
(2) On January 31, 1990, the Trinity Government Fund was reorganized into a
series of Trinity Assets Trust. Prior to the reorganization, the Trinity
Government Fund had been incorporated under the laws of the State of
Florida since July 10, 1980 as Pinnacle Government Fund, Inc. with a fiscal
year ended September 30. Actual per share income and capital changes for
the nine-month period ended June 30, 1990 have been annualized in order to
provide a comparison to prior years' results.
(3) Include $0.001 short-term capital gain per share.
-7-
<PAGE>
FINANCIAL HIGHLIGHTS
On _____, 1996, The Hanover Cash Management Fund ("Hanover Cash
Management Fund") merged into the Cash Management Fund; therefore, commencing
with the fiscal year ending August 31, 1996, selected per share data and ratios
for one Hanover Cash Management share outstanding will be provided. No
information will be reflected for periods prior to August 31, 1996.
-8-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, has been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is included
in the Annual Report to Shareholders.
VISTA PRIME MONEY MARKET
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year 11/15/93*
ended through
8/31/95 8/31/94+
------- --------
Premier
Shares
-----------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................. $1.00 $1.00
------ ------
Income From Investment Operations:
Net Investment Income....................................... 0.053 0.027
Net Realized Loss on Securities............................. (0.003) -
------ ------
Total Income from Investment Operations..................... 0.050 0.027
Voluntary Capital Contribution.............................. 0.003 -
Less dividends from net investment income............................. 0.053 0.027
------ ------
Net Asset Value, End of Period........................................ $1.00 $1.00
===== =====
Total Return(1)....................................................... 5.44% 2.75%
===== =====
Ratios/Supplemental Data
Net assets, end of Period (000 omitted)......................... $62,737 $73,253
Ratio of Expenses to Average Net Assets#........................ 0.45% 0.45%
Ratio of Net Investment Income to Average Net Assets#........... 5.24% 3.15%
Ratio of expenses without waivers and assumption to expenses to
average net assets#......................................... 0.65% 0.56%
Ratio of net investment income without waivers and assumption of
expenses to average net assets#............................. 5.04% 3.04%
</TABLE>
- -------------
# Periods less than one year have been annualized.
* Commencement of operations.
+ In 1994 Prime Money Market Fund changed its fiscal year-end from October 31
to August 31.
-9-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provide selected per share data and ratios
for one Premier Share outstanding throughout each period shown. This information
is supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders can obtain a copy of this report by contacting the Fund or their
Shareholder Servicing Agent. The financial statements and notes, as well as the
financial information set forth in the tables set forth below, for each of the
five years ended August 31, 1995, have been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is included in the Annual Report
to shareholders.
VISTA TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
PREMIER SHARES
------------------------------------------------------------------
Year 11/1/93
Ended through Year ended October 31, 7/18/90*
-------------------------- through
8/31/95 8/31/94++ 1993 1992 1991 10/31/90
------- --------- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE
Net Asset Value, Beginning of Period..................... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income................................ 0.032 0.018 0.022 0.031 0.046 0.002
------ ------ ------ ------ ------ ------
Total from Investment Operations..................... 0.032 0.018 0.022 0.031 0.046 0.002
Less Distributions:
Dividends from net investment income................. 0.032 0.018 0.022 0.031 0.046 0.002
------ ------ ------ ------ ------ ------
Total Distributions.................................. 0.032 0.018 0.022 0.031 0.046 0.002
NET ASSET VALUE, END OF PERIOD................................ $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
TOTAL RETURN.................................................. 3.29% 1.79% 2.21% 3.09% 4.68% 6.82%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted)..................................... $148,436 $229,306 $225,791 $ 87,027 $19,174 $11,320
Ratio of Expenses to Average Net Assets+............. 0.56% 0.55% 0.55% 0.55% 0.55% 0.55%
Ratio of Net Investment Income to Average Net Assets+ 3.21% 2.11% 2.16% 2.92% 4.39% 6.82%
Ratio of Expenses without waivers and assumption of
expenses+......................................... 0.84% 0.78% 0.79% 0.76% 0.82% 0.71%
Ratio of net investment income without waivers and
assumption of expenses to Average Net Assets+..... 2.93% 1.89% 1.92% 2.71% 4.12% 6.66%
</TABLE>
- -------------
+ Periods less than one year have been annualized.
++ In 1994 the Tax Free Money Market Fund changed its fiscal year-end from
October 31 to August 31.
* Commencement of operations.
-10-
<PAGE>
FUND OBJECTIVES AND INVESTMENT APPROACH
Vista 100% U.S. Treasury Securities Money Market Fund
The Fund's objective is to provide maximum current income consistent
with maximum safety of principal and maintenance of liquidity.
The Fund invests in direct obligations of the U.S. Treasury,
including Treasury bills, bonds and notes, which differ principally only in
their interest rates, maturities and dates of issuance. The Fund does not
purchase securities issued or guaranteed by agencies or instrumentalities of the
U.S. Government, and does not enter into repurchase agreements. The dollar
weighted average maturity of the Fund will be 90 days or less.
Vista Treasury Plus Money Market Fund
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and maintenance of liquidity.
The Fund invests in direct obligations of the U.S. Treasury,
including Treasury bills, bonds and notes, which differ principally only in
their interest rates, maturities and dates of issuance. In addition, the Fund
will seek to enhance its yield by investing in repurchase agreements which are
fully collateralized by U.S. Treasury obligations. The dollar weighted average
maturity of the Fund will be 60 days or less.
Vista Federal Money Market Fund
The Fund's objective is to provide current income consistent with
preservation of capital and maintenance of liquidity.
The Fund invests primarily in direct obligations of the U.S.
Treasury, including Treasury bills, bonds and notes. The Fund may also from time
to time invest in obligations issued or guaranteed as to principal and interest
by certain agencies or instrumentalities of the U.S. Government. Income on
direct investments in U.S. Treasury securities and obligations of the agencies
and instrumentalities in which the Fund invests is generally not subject to
state and local income taxes by reason of federal law. The dollar weighted
average maturity of the Fund will be 90 days or less.
Shareholders in a particular state that imposes an income tax
should determine through consultation with their own tax advisors whether such
interest income, when distributed by the Fund, will be considered by the state
to have retained exempt status, and whether the Fund's capital gains and other
income, if any, when distributed will be subject to the state's income tax. See
"How Distributions are Made; Tax Information." Due to state income tax
considerations, the Fund will not enter into repurchase agreements.
Vista U.S. Government Money Market Fund
The Fund's objective is to provide as high a level of current income
as is consistent with the preservation of capital and maintenance of liquidity.
The Fund invests substantially all of its assets in obligations
issued or guaranteed by the U.S. Treasury, agencies and instrumentalities of the
U.S. Government, and by instrumentalities that have been established or
sponsored by the U.S. Government, and in repurchase agreements collateralized by
these obligations. Neither the United States nor any of its agencies insures or
guarantees the market value of shares of the Fund. The dollar weighted average
maturity of the Fund will be 60 days or less.
Vista Cash Management Fund
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and the maintenance of liquidity.
-11-
<PAGE>
The Fund invests in high-quality, short-term U.S. dollar-denominated
money market instruments. The Fund invests principally in (i) high quality
commercial paper and other short-term obligations, including floating and
variable rate master demand notes of U.S. and foreign corporations; (ii) U.S.
dollar-denominated obligations of foreign governments and supranational agencies
(e.g., the International Bank for Reconstruction and Development); (iii)
obligations issued or guaranteed by U.S. banks with total assets exceeding $1
billion (including obligations of foreign branches of such banks) and by foreign
banks with total assets exceeding $10 billion (or the equivalent in other
currencies) which have branches or agencies in the U.S. (including U.S. branches
of such banks), or such other U.S. or foreign commercial banks which are judged
by the Fund's advisers to meet comparable credit standing criteria; (iv)
securities issued or guaranteed as by the U.S. Government, its agencies or
instrumentalities; and (v) repurchase agreements. The dollar weighted average
maturity of the Fund will be 90 days or less.
Vista Prime Money Market Fund
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and maintenance of liquidity
The Fund invests in high-quality, short-term U.S. dollar-denominated
money market instruments. The Fund invests principally in (i) high quality
commercial paper and other short-term obligations, including floating and
variable rate master demand notes of U.S. and foreign corporations; (ii) U.S.
dollar-denominated obligations of foreign governments and supranational agencies
(e.g., the International Bank for Reconstruction and Development); (iii)
obligations issued or guaranteed by U.S. banks with total assets exceeding $1
billion (including obligations of foreign branches of such banks) and by foreign
banks with total assets exceeding $10 billion (or the equivalent in other
currencies) which have branches or agencies in the U.S. (including U.S. branches
of such banks), or such other U.S. or foreign commercial banks which are judged
by the Fund's advisers to meet comparable credit standing criteria; (iv)
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (v) repurchase agreements. The dollar weighted average
maturity of the Fund will be 60 days or less.
Vista Tax Free Money Market Fund
The Fund's objective is to provide as high a level of current income
which is excluded from gross income for federal income tax purposes as is
consistent with the preservation of capital and maintenance of liquidity.
The Fund invests in a non-diversified portfolio of short-term, fixed
rate and variable rate Municipal Obligations (as defined under "Certain
Investment Policies of the Tax Free Fund"). As a fundamental policy, under
normal market conditions the Fund will have at least 80% of its assets invested
in Municipal Obligations the interest on which, in the opinion of bond counsel,
is excluded from gross income for federal income tax purposes and does not
constitute a preference item which would be subject to the federal alternative
minimum tax on individuals (these preference items are referred to as "AMT
Items"). Although the Fund will seek to invest 100% of its assets in such
Municipal Obligations, it reserves the right under normal market conditions to
invest up to 20% of its total assets in AMT Items or securities the interest on
which is subject to federal income tax. For temporary defensive purposes, the
Fund may exceed this limitation. The dollar weighted average maturity of the
Fund will be 90 days or less.
Vista Tax Free Money Market Fund is classified as a
"non-diversified" fund under federal securities law. The Fund's assets may be
more concentrated in the securities of any single issuer or group of issuers
than if the Fund were diversified.
COMMON INVESTMENT POLICIES
The Funds seek to maintain a net asset value of $1.00 per share.
The Funds invest only in high quality obligations which are
determined to present minimal credit risks. This credit determination must be
made in accordance with procedures established by the Board of Trustees. Each
investment must be rated in the highest short-term rating category by at least
two national rating
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organizations ("NROs") (or one NRO if the instrument was rated only by one such
organization) or, if unrated, must be determined to be of comparable
quality in accordance with the procedures of the Trustees. If a security
has an unconditional guarantee or similar enhancement, the issuer of the
guarantee or enhancement may be relied upon in meeting these ratings
requirements rather than the issuer of the security. Securities in which
the Funds invest may not earn as high a level of current income as
long-term or lower quality securities.
The Funds purchase only instruments which have or are deemed to have
remaining maturities of 397 days or less in accordance with federal regulations.
Although each Fund seeks to be fully invested, at times it may hold
uninvested cash reserves, which would adversely affect its yield.
As a matter of fundamental policy, each Fund is permitted to invest
all or a part of its assets in an investment company having substantially the
same investment objective and policies as the applicable Fund.
There can be no assurance that any Fund will achieve its investment
objective.
Other Investment Practices
The Funds may also engage in the following investment practices,
when consistent with their overall objectives and policies. These practices, and
certain associated risks, are more fully described in the SAI.
U.S. Government Obligations. Each Fund may invest in direct
obligations of the U.S. Treasury. Each Fund other than Vista 100% U.S. Treasury
Securities Money Market Fund and Vista Treasury Plus Money Market Fund may also
invest in other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (collectively, "U.S. Government Obligations").
Certain U.S. Government Obligations, such as U.S. Treasury securities and direct
pass-through certificates of the Government National Mortgage Association
(GNMA), are backed by the "full faith and credit" of the U.S. Government. Other
U.S. Government Obligations, such as obligations of Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are not backed by the "full faith
and credit" of the U.S. Government. In the case of securities not backed by the
"full faith and credit" of the U.S. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the U.S. Government
itself in the event the agency or instrumentality does not meet its commitments.
Repurchase Agreements, Securities Loans and Forward Commitments.
Each Fund other than Vista 100% U.S. Treasury Securities Money Market Fund and
Vista Federal Money Market Fund may enter into agreements to purchase and resell
securities at an agreed-upon price and time. Each Fund other than the Tax Free
Funds also has the ability to lend portfolio securities of not more than 30% of
its total assets to generate additional income. These transactions must be fully
collateralized at all times. Each Fund may purchase securities for future
delivery, which may increase its overall investment exposure and involves a risk
of loss if the value of the securities declines prior to the settlement date.
These transactions involve some risk to a Fund if the other party should default
on its obligation and the Fund is delayed or prevented from recovering the
collateral or completing the transaction.
Borrowings and Reverse Repurchase Agreements. Each Fund may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. Each Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever a Fund enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). A Fund would be required to pay interest on amounts obtained
through reverse repurchase agreements, which are considered borrowings under
federal securities laws.
Stand-By Commitments. Each Fund may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, a Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to a
Fund if the other party should default on its obligation and the
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Fund is delayed or prevented from recovering the collateral or completing the
transaction. Acquisition of puts will have the effect of increasing the
cost of the securities subject to the put and thereby reducing the yields
otherwise available from such securities.
STRIPS and Zero Coupon Obligations. Each Fund other than Vista 100%
U.S. Treasury Securities Money Market Fund may invest up to 20% of its total
assets in separately traded principal and interest components of securities
backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". Vista Cash Management Fund, Vista Prime Money
Market Fund and each Tax Free Fund may also invest in zero coupon obligations.
Zero coupon obligations are debt securities that do not pay regular interest
payments, and instead are sold at substantial discounts from their value at
maturity. The value of STRIPS and zero coupon obligations tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates.
Each Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which Vista Tax Free Money Market
Fund, Vista Cash Management Fund and Vista Prime Money Market Fund may invest
include participation certificates and, in the case of Vista Cash Management
Fund and Vista Prime Money Market Fund, certificates of indebtedness or
safekeeping. Participation certificates are pro rata interests in securities
held by others; certificates of indebtedness or safekeeping are documentary
receipts for such original securities held in custody by others. As a result of
the variable rate nature of these investments, the Fund's yield may decline and
it may forego the opportunity for capital appreciation during periods when
interest rates decline; however, during periods when interest rates increase,
the Fund's yield may increase and it may have reduced risk of capital
depreciation. Demand features on certain variable rate securities may obligate
the Fund to pay a "tender fee" to a third party. Demand features provided by
foreign banks involve certain risks associated with foreign investments. The
Internal Revenue Service has not ruled on whether participations in variable
rate municipal obligations is tax exempt and the Tax Free Fund would purchase
such instruments based on opinions of bond counsel.
Other Money Market Funds. Each Fund other than Vista 100% U.S.
Treasury Securities Money Market Fund may invest up to 10% of its total assets
in shares of other money market funds, subject to applicable regulatory
limitations.
Additional Investment Policies of Vista Cash Management Fund
and Vista Prime Money Market Fund
Vista Cash Management Fund and Vista Prime Money Market Fund may
invest in the following instruments, when consistent with their overall
objectives and policies. These instruments, and certain associated risks, are
more fully described in the SAI.
Bank Obligations. Bank obligations include certificates of deposit,
time deposits and bankers' acceptances issued or guaranteed by U.S. banks
(including their foreign branches) and foreign banks (including their U.S.
branches) . These obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation or
by government regulation. Foreign bank obligations involve certain risks
associated with foreign investing.
Asset-Backed Securities. Asset-backed securities represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables or credit card receivables.
Municipal Obligations. The Funds may invest in high-quality,
short-term municipal obligations that carry yields that are competitive with
those of other types of money market instruments in which it may invest.
Dividends paid by these Funds that are derived from interest on municipal
obligations will be taxable to shareholders for federal income tax purposes.
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Securities of Foreign Governments and Supranational Agencies. The
Funds intend to invest a substantial portion of their assets from time to time
in securities of foreign governments and supranational agencies.
The Funds will limit their investments in foreign government obligations to the
commercial paper and other short-term notes issued or guaranteed by the
governments of Western Europe, Australia, New Zealand, Japan and Canada.
Obligations of supranational agencies, such as the International Bank for
Reconstruction and Development (also known as the World Bank) are supported by
subscribed, but unpaid, commitments of its member countries. There is no
assurance that these commitments will be undertaken or complied with in the
future, and foreign and supranational securities are subject to certain risks
associated with foreign investing.
Custodial Receipts. The Funds may acquire securities in the form of
custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms and are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.
Additional Investment Policies of Vista Tax Free Money Market Fund
The following provides additional information regarding the
permitted investments of Vista Tax Free Money Market Fund. These investments,
and certain associated risks, are more fully described in the SAI.
Municipal Obligations. "Municipal Obligations" are obligations
issued by or on behalf of states, territories and possessions of the United
States, and their authorities, agencies, instrumentalities and political
subdivisions, the interest on which, in the opinion of bond counsel, is excluded
from gross income for federal income tax purposes (without regard to whether the
interest thereon is also exempt from the personal income taxes of any state or
whether the interest thereon constitutes a preference item for purposes of the
federal alternative minimum tax).
Municipal Obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various private activities, including the lending of funds to
public or private institutions for the construction of housing, educational or
medical facilities, and may include certain types of industrial development
bonds, private activity bonds or notes issued by public authorities to finance
privately owned or operated facilities, or to fund short-term cash requirements.
Short-term Municipal Obligations may be issued as interim financing in
anticipation of tax collections, revenue receipts or bond sales to finance
various public purposes. The Municipal Obligations in which the Fund invest may
consist of municipal notes, municipal commercial paper and municipal bonds
maturing or deemed to mature in 397 days or less.
The two principal classifications of Municipal Obligations are
general obligation and special obligation (or special revenue obligation)
securities. General obligation securities involve a pledge of the credit of an
issuer possessing taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an appropriation by the
issuer's legislative body. The characteristics and methods of enforcement of
general obligation securities vary according to the law applicable to the
particular issuer. Special obligation (or special revenue obligation) securities
are payable only from the revenues derived from a particular facility or class
of facilities, or a specific revenue source, and generally are not payable from
the unrestricted revenues of the issuer. Industrial development bonds and
private activity bonds are in most cases special obligation securities, the
credit quality of which is directly related to the private user of the
facilities.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental issuers such as hospitals or airports,
provided, however, that the Fund may not invest more than 25% of the value of
its total assets in such bonds if the issuers are in the same industry.
Municipal Lease Obligations. The Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no
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obligation to make lease or installment payments in future years unless money
is later appropriated for such purpose. The Fund will limit its investments
in non-appropriation leases to 10% of its assets.
Limiting Investment Risks
Specific regulations and investment restrictions help the Funds
limit investment risks for their shareholders. These regulations and
restrictions prohibit the Funds from: (a) with certain limited exceptions,
investing more than 5% of their total assets in the securities of any one issuer
(this limitation does not apply to the Tax Free Fund or to U.S. Government
Obligations held by the other Funds); (b) investing more than 10% of its net
assets in illiquid securities (which include securities restricted as to resale
unless they are determined to be readily marketable in accordance with
procedures established by the Board of Trustees); or (c) investing more than 25%
of its total assets in any one industry (excluding U.S. Government Obligations,
bank obligations and, for the Tax Free Funds, municipal obligations secured by
bank letters of credit or guarantees). A complete description of the relevant
investment restrictions is included in the SAI. Except for each Fund's
investment objective, restriction (c) above and investment policies designated
as fundamental above or in the SAI, the Funds' investment policies are not
fundamental. The Trustees may change any non-fundamental investment policy
without shareholder approval.
Risk Factors
General. There can be no assurance that any Fund will be able to
maintain a stable net asset value. Changes in interest rates may affect the
value of the obligations held by the Funds. The value of fixed income securities
varies inversely with changes in prevailing interest rates, although money
market instruments are generally less sensitive to changes in interest rates
than are longer-term securities. For a discussion of certain other risks
associated with the Funds' additional investment activities, see "Other
Investment Practices," "Additional Investment Policies of Vista Cash Management
Fund and Vista Prime Money Market Fund" and "Additional Investment Policies of
Vista Tax Free Money Market Fund."
Vista Cash Management Fund and Vista Prime Money Market Fund. These
Funds may invest without limit in obligations of domestic and foreign banks, and
in obligations of other foreign issuers. The ability to concentrate in the
banking industry may involve certain credit risks, such as defaults or
downgrades, if at some future date adverse economic conditions prevail in such
industries. U.S. banks are subject to extensive governmental regulations which
may limit both the amount and types of loans which may be made and interest
rates which may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of this industry.
Securities issued by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable domestic obligations, the possible
imposition of withholding taxes on interest income, the possible seizure or
nationalization of foreign assets, and the possible establishment of exchange
controls or other restrictions. In addition, there may be less publicly
available information concerning foreign issuers, there may be difficulties in
obtaining or enforcing a judgment against a foreign issuer (including branches).
and accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are not
subject to regulations comparable to U.S. banking regulations.
Vista Tax Free Money Market Fund. This Fund may invest without
limitation in Municipal Obligations secured by letters of credit or guarantees
from U.S. and foreign banks, and other foreign institutions. These investments
are subject to the considerations discussed in the preceding paragraphs relating
to Vista Cash Management Fund and Vista Prime Money Market Fund.
This Fund is "non-diversified," which may make the value of its
shares more susceptible to developments affecting issuers in which the Fund
invest. In addition, more than 25% of the assets of the Fund
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may be invested in securities to be paid from revenue of similar projects,
which may cause these Funds to be more susceptible to similar economic,
political, or regulatory developments.
Because this Fund will invest primarily in obligations issued by
states, cities, public authorities and other municipal issuers, the Fund is
susceptible for factors affecting such states and their municipal issuers. A
number of municipal issuers have a recent history of significant financial and
fiscal difficulties. If a municipal issuer is unable to meet its financial
obligations, the income derived by the Fund and the Fund's ability to preserve
capital and liquidity could be adversely affected.
Interest on certain Municipal Obligations (including certain
industrial development bonds), while exempt from federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a mutual
fund receives such interest, a proportionate share of any exempt-interest
dividend paid by the mutual fund may be treated as such a preference item to
shareholders. Federal tax legislation enacted over the past few years has
limited the types and volume of bonds which are not AMT Items and the interest
on which is not subject to federal income tax. This legislation may affect the
availability of Municipal Obligations for investment by the Fund.
MANAGEMENT
The Funds' Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to
each of the Funds pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of each of the Funds, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience. For its investment advisory
services to each of the Funds, Chase is entitled to receive an annual fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is the sub-investment adviser to each Fund other than Cash Management
Fund and Tax Free Money Market Fund, pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary of
the Adviser. CAM makes investment decisions for each of these Funds on a
day-to-day basis. For these services, CAM receives a fee, payable by Chase from
its advisory fee, in a mutually agreed amount. CAM was recently formed for the
purpose of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM.
Texas Commerce Bank, National Association ("TCB") is the
sub-investment adviser to the Cash Management Fund and the Tax Free Money Market
Fund pursuant to a Sub-Investment Advisory Agreement between Chase and TCB. TCB
makes investment decisions for the Cash Management Fund and Tax Free Money
Market Fund on a day-to-day basis. For these services, TCB receives a fee,
payable by Chase from its advisory fee, in a mutually agreed amount. TCB has
been in the investment counselling business since 1987 and is ultimately
controlled and owned by The Chase Manhattan Corporation.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
Premier Shares may be purchased through certain investment
representatives or shareholder servicing agents. Qualified investors are defined
to be institutions, trusts, partnerships, corporations, qualified and other
retirement plans and fiduciary accounts opened by a bank, trust company or
thrift institution which exercises investment authority over such accounts.
All purchases made by check should be in U.S. dollars and made
payable to the Vista Funds. Third party checks, except those payable to an
existing shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. When purchases are
made by check, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 calendar
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days. In addition, redemption of shares purchased by periodic automatic
investment will not be allowed for 7 calendar days. In the event a check
used to pay for shares is not honored by a bank, the purchase order will be
cancelled and the shareholder will be liable for any losses or expenses
incurred by the Fund.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Buying shares through the Systematic Investment Plan. You can make
regular investments of $100 or more per month through automatic deduction from
your bank savings or checking account. Shareholders electing to start this
Systematic Investment Plan when opening an account should complete Section 8 of
the account application. Current shareholders may begin the Plan at any time by
sending a signed letter with signature guarantee to the Vista Service Center.
Call the Vista Service Center at 1-800-34-VISTA for complete instructions.
Buying shares through an investment representative or shareholder
servicing agent. Premier Shares of the Funds may be purchased through a
shareholder servicing agent (i.e., a financial institution, such as a bank,
trust company or savings and loan association that has entered into a
shareholder servicing agreement with the Funds) or to customers of brokers or
certain financial institutions which have entered into Selected Dealer
Agreements with the Funds' distributor. An investor may purchase Premier Shares
by authorizing his shareholder servicing agent or investment representative to
purchase shares on his behalf through the Funds' Distributor. Shareholder
servicing agents may offer additional services to their customers, including
customized procedures for the purchase and redemption of Premier Shares, such as
pre-authorized or systematic purchase and withdrawal programs and "sweep"
checking programs. For further information, See "Other Information Concerning
the Funds" in this prospectus and the SAI.
Shares are sold without a sales load at the net asset value next
determined after the Vista Service Center receives your order on any business
day during which the Federal Reserve Bank of New York, the New York Stock
Exchange and the Funds' advisers are open for business ("Fund Business Day"). To
receive that day's price, the Vista Service Center or your investment
representative or shareholder servicing agent must generally receive your order
prior to the Funds' Cut-off Time. For the Vista 100% U.S. Treasury Securities
Money Market Fund and the Tax Free Money Market Funds, the Cut-off Time is 12:00
noon. For the Treasury Plus Fund, the Federal Fund, the U.S. Government Fund,
the Cash Management Fund and the Prime Fund, the Cut-off Time is 2:00 p.m.
Orders for shares received and accepted prior to the Cut-off Times will be
entitled to all dividends declared on that day. Orders received for shares after
a Fund's Cut-off Time and prior to 4:00 p.m. on any Fund Business Day will only
be accepted and executed on the same day at the Funds' discretion. The Funds
reserve the right to reject any purchase order.
Minimum Investments
Each Fund has established a minimum initial investment amount of
$100,000 for the purchase of Premier Shares. Shareholders must maintain an
average account balance of $100,000 in the Premier Shares of a Fund at all
times. There is no minimum for subsequent investments.
How to Sell Shares
You can sell your shares to the Fund on any Fund Business Day either
directly or through your investment representative or shareholder servicing
agent. The Fund will only redeem shares for which it has received payment.
Selling Shares directly to the Fund. Send a signed letter of
instruction to the Vista Service Center. The price you receive is the next net
asset value calculated after your request is received in proper form.
If you want your redemption proceeds sent to an address other than
your address as it appears on Vista's records, a signature guarantee is
required. The Fund usually requires additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving joint
owner. Contact the Vista Service Center for details.
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The Fund generally sends you payment for your shares the Fund
Business Day after your request is received provided your request is received by
the Vista Service Center prior to the Fund's Cut-off Time. Under unusual
circumstances, the Fund may suspend redemptions, or postpone payment for more
than seven business days, as permitted by federal securities laws.
You may use Vista's Telephone Redemption Privilege to redeem shares
valued up to $100,000 from your account unless you have notified the Vista
Service Center of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For information, consult
the Vista Service Center.
During periods of unusual market changes and shareholder activity,
you may experience delays in contacting the Vista Service Center by telephone.
In this event, you may wish to submit a written redemption request, or contact
your investment representative or shareholder servicing agent. The Telephone
Redemption Privilege may be modified or terminated without notice.
Systematic Withdrawal Plan. Make regular withdrawals of $100 or more
monthly, quarterly or semi-annually from an account valued at $5,000 or more.
Selling shares through your investment representative or your
shareholder servicing agent. Your investment representative or your shareholder
servicing agent must receive your request before the Cut-off Time for your Fund
to receive that day's net asset value. Your representative will be responsible
for furnishing all necessary documentation to the Vista Service Center.
Redemption of Accounts of Less than $500. Each Fund may redeem your
shares if the aggregate net asset value of the shares in your account is less
than $500. In the event of any such redemption, you will receive at least 60
days' notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Premier Shares of certain other
Vista money market funds at net asset value and for certain classes of shares of
the Vista non-money market funds at net asset value plus any applicable sales
charge. Not all Vista funds offer all classes of shares. The prospectus of the
other Vista fund into which shares are being exchanged should be read carefully
and retained for future reference.
To exchange your shares, simply complete the Exchange Authorization
Form contained in your prospectus and send it to the Vista Service Center. The
form is also available from the Vista Service Center. For federal income tax
purposes, an exchange is treated as a sale of shares and generally results in a
capital gain or loss. A Telephone Exchange Privilege is currently available for
amounts up to $500,000. The Vista Service Center's procedures for telephone
transactions are described under "How to sell shares." Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Please read the prospectus carefully before investing and keep it for
future reference. Shares of certain Vista funds are not available to residents
of all states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving a Fund in a year or three in a
calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action
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to the extent required by law. Consult the Vista Service Center before
requesting an exchange. See the SAI to find out more about the exchange
privilege.
HOW THE FUNDS VALUE THEIR SHARES
The net asset value of Premier Shares of the Funds is currently
determined daily as of 12:00 noon and 4:00 p.m., Eastern time on each Fund
Business Day by dividing the net assets of a Fund by the number of its shares
outstanding at the time the determination is made. Effective with the
anticipated introduction of certain automated share purchase programs, the net
asset value of Funds available through the programs will also be determined as
of 6:00 p.m., Eastern time on each Fund Business Day.
The portfolio securities of each Fund are valued at their amortized
cost in accordance with federal securities laws, certain requirements of which
are summarized under "Common Fund Policies." This method increases stability in
valuation, but may result in periods during which the stated value of a
portfolio security is higher or lower than the price the Fund would receive if
the instrument were sold. It is anticipated that the net asset value of each
share will remain constant at $1.00 and these Funds will employ specific
investment policies and procedures to accomplish this result, although no
assurance can be given that they will be able to do so on a continuing basis.
The Board of Trustees will review the holdings of each Fund at intervals it
deems appropriate to determine whether that Fund's net asset value calculated by
using available market quotations (or an appropriate substitute which reflects
current market conditions) deviates from $1.00 per share based upon amortized
cost. In the event the Trustees determine that a deviation exists that may
result in material dilution or other unfair results to investors or existing
shareholders, the Trustees will take such corrective action as they regard as
necessary and appropriate.
HOW DIVIDENDS AND DISTRIBUTIONS ARE MADE; TAX INFORMATION
The net investment income of each class of shares of each Fund is
declared daily as a dividend to the shareholders each Fund Business Day.
Dividends are declared as of the time of day which corresponds to the latest
time on that day that the Fund's net asset value is determined. Shares begin
accruing dividends on the day they are purchased. Dividends are distributed
monthly. Unless a shareholder arranges to receive dividends in cash , dividends
are distributed in the form of additional shares. Dividends that are otherwise
taxable are still taxable to you whether received in cash or additional shares.
Net realized short-term capital gains, if any, will be distributed at least
annually. The Funds do not expect to realize net long-term capital gains.
Net investment income for each Fund consists of all interest accrued
and discounts earned [except for Vista Tax Free Money Market Fund] less,
amortization of any market premium on the portfolio assets of the Fund, and the
accrued expenses of the Fund
Each Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to you. Each Fund intends to distribute substantially all of its
ordinary income and capital gain net income on a current basis. If a Fund does
not qualify as a regulated investment company for any taxable year or does not
make distributions as it intends, the Fund will be subject to tax on all of its
income and gains.
Distributions by a Fund of its ordinary income and short-term
capital gains are generally taxable to you as ordinary income. Distributions by
Vista Tax Free Money Market Fund of its tax-exempt interest income will not be
subject to federal income tax. Such distributions will generally be subject to
state and local taxes, but may be exempt if paid out of interest on municipal
obligations of the state or locality in which you reside. Distributions by a
Fund of net long-term capital gains will be taxable as such, regardless of the
length of time you have held your shares. Distributions will be taxable in the
same manner for federal income tax purposes whether received in cash or in
shares through the reinvestment of distributions.
To the extent distributions are attributable to interest from
obligations of the U.S. Government and certain of its agencies and
instrumentalities, such distributions may be exempt from certain types of state
and local taxes.
-20-
<PAGE>
Early in each calendar year the Funds will notify you of the amount
and tax status of distributions paid to you for the preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Funds. You should consult your tax adviser to
determine the precise effect of an investment in the Funds on your particular
tax situation (including possible liability for state and local taxes and, for
foreign shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Arrangements
The Funds' distributor is Vista Broker-Dealer Services, Inc.
("VBDS"). VBDS is a subsidiary of The BISYS Group, Inc. and is unaffiliated with
Chase. Vista U.S. Government Money Market Fund has adopted a Rule 12b-1
distribution plan which provides that it will pay distribution fees at annual
rates of up to 0.10% annually of the average daily net assets attributable to
Premier Shares. There is no distribution plan for Premier Shares of the other
Funds. Payments under the distribution plan shall be used to compensate or
reimburse the Funds' distributor and broker-dealers for services provided and
expenses incurred in connection with the sale of Premier Shares of Vista U.S.
Government Money Market Fund, and are not tied to the amount of actual expenses
incurred. [Payments may be used to compensate broker-dealers with trail or
maintenance commissions at an annual rate of up to _.__% of the average daily
net asset value of Premier Shares maintained in that Fund by customers of these
broker-dealers. Trail or maintenance commissions are paid to broker-dealers
beginning the 13th month following the purchase of shares by their customers.]
Some activities intended to promote the sale of Premier Shares will be conducted
generally by the Vista Family of Mutual Funds, and activities intended to
promote a Fund's Premier Shares may also benefit the Fund's other shares and
other Vista funds.
VBDS may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
Each Fund has entered into shareholder servicing agreements with
certain shareholder servicing agents (including Chase) under which the
shareholder servicing agents have agreed to provide certain support services to
their customers including, assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to .25% of the average
daily net assets of the Premier Shares of each Fund held by investors for whom
the shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures and payment for the purchase and
redemption of Fund shares, such as pre-authorized or systematic purchase and
redemption programs, "sweep" programs, cash advances and redemption checks. Each
shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Funds to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as shareholder servicing agents.
Administrator and Sub-Administrator
Chase acts as the Funds' administrator and is entitled to receive a
fee computed daily and paid monthly at an annual rate equal to 0.05% of each
Fund's average daily net assets.
-21-
<PAGE>
VBDS provides certain sub-administrative services to each Fund
pursuant to its distribution and sub-administration agreement and is entitled to
receive a fee for these services from each Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VBDS has agreed to use a portion of this
fee to pay for certain expenses incurred in connection with organizing new
series of the Trust and certain other ongoing expenses of the Trust. VBDS is
located at 125 West 55th Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for each Fund and
receives compensation under an agreement with the Funds. Securities and cash of
each Fund may be held by sub-custodian banks if such arrangements are reviewed
and approved by the Trustees.
Expenses
Each Fund pays the expenses incurred in its operations, including
its pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees: registration
fees; interest charges; taxes; expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent accountants,
of legal counsel and of any transfer agent, registrar or dividend disbursing
agent of the Trust; insurance premiums; and expenses of calculating the net
asset value of, and the net income on, shares of the Fund. Shareholder servicing
and distribution fees are allocated to specific classes of the Fund. In
addition, the Fund may allocate transfer agency and certain other expenses by
class. Service providers to the Fund may, from time to time, voluntarily waive
all or a portion of any fees to which they are entitled.
Organization and Description of Shares
Each Fund is a portfolio of Mutual Fund Trust, an open-end
management investment company organized as a Massachusetts business trust in
1994 (the "Trust"). The Trust has reserved the right to create and issue
additional series and classes. Each share of a series or class represents an
equal proportionate interest in that series or class with each other share of
that series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class. Fund shares will be maintained in
book entry form, and no certificates representing shares owned will be issued to
shareholders.
Each Fund issues multiple classes of shares. This Prospectus relates
only to Premier Shares of the Funds. Premier Shares may be purchased only by
qualified investors. See "How to Buy, Sell and Exchange Shares." The Funds offer
other classes of shares in addition to these classes. The categories of
investors that are eligible to purchase shares and minimum investment
requirements may differ for each class of Fund shares. In addition, other
classes of Fund shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of certain
other expenses, which will affect the relative performance of the different
classes. Investors may call 1-800-34-VISTA to obtain additional information
about other classes of shares of the Fund that are offered. Any person entitled
to receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The Trust is not required to hold annual meetings of shareholders
but will hold special meetings of shareholders of all series or classes when in
the judgment of the Trustees it is necessary or desirable to submit matters for
a shareholder vote. The Trustees will promptly call a meeting of shareholders to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of all outstanding shares of the Trust.
-22-
<PAGE>
Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting as
investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws. If
future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of any
of the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Funds' distributor or affiliates of the distributor. Chase will
not invest any Fund assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by any Fund. Chase has informed the Funds that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of such Chase or in the
possession of any affiliate of Chase, including the division that performs
services for the Trust as custodian. Shareholders of the Funds should be aware
that, subject to applicable legal or regulatory restrictions, Chase and its
affiliates may exchange among themselves certain information about the
shareholders and their accounts. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
Each Fund may advertise its annualized "yield" and its 'effective
yield". Annualized "yield" is determined by assuming that income generated by an
investment in a Fund over a stated seven-day period (the "Yield") will continue
to be generated each week over a 52-week period. It is shown as a percentage of
such investment. "Effective yield" is the annualized "yield" calculated assuming
the reinvestment of the income earned during each week of the 52-week period.
The "effective yield" will be slightly higher than the "yield" due to the
compounding effect of this assumed reinvestment.
The Vista Tax Free Money Market Funds may also quote a "tax
equivalent yield", the yield that a taxable money market fund would have to
generate in order to produce an after-tax yield equivalent to a tax free fund's
yield. The tax equivalent yield of a taxable money market fund can then be
compared to the yield of a tax free fund.
Investment performance may from time to time be included in
advertisements about the Funds. Performance is calculated separately for each
class of shares. Because this performance information is based on historical
earnings, it should not be considered as an indication or representation of
future performance. Investment performance, which will vary, is based on many
factors, including market conditions, the composition of each Fund's portfolio,
each Fund's operating expenses and which class of shares you purchase.
Investment performance also reflects the risks associated with each Fund's
investment objective and policies. These factors should be considered when
comparing each Fund's investment results to those of other mutual funds and
investment vehicles.
-23-
<PAGE>
Quotations of investment performance for any period when an expense limitation
was in effect will be greater if the limitation had not been in effect. Each
Fund's performance may be compared to other mutual funds, relevant indices and
rankings prepared by independent services. See the SAI.
-24-
<PAGE>
PROSPECTUS
VISTA[SM] 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
VISTA[SM] TREASURY PLUS MONEY MARKET FUND
VISTA[SM] FEDERAL MONEY MARKET FUND
VISTA[SM] U.S. GOVERNMENT MONEY MARKET FUND
VISTA[SM] CASH MANAGEMENT FUND
VISTA[SM] PRIME MONEY MARKET FUND
VISTA[SM] TAX FREE MONEY MARKET FUND
Institutional[SM] Shares
May 6, 1996
Investment Strategy: Current Income
This Prospectus explains concisely what you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about the Funds in their May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-622-4273. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK OR ANY OF ITS AFFILIATES AND
ARE NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary................................................................
The expenses you pay on your Fund investment, including examples
Financial Highlights...........................................................
The Funds' financial history
Fund Objectives and Approach...................................................
Vista 100% U.S. Treasury Securities Money Market Fund
Vista Treasury Plus Money Market Fund
Vista Federal Money Market Fund
Vista U.S. Government Money Market Fund
Vista Cash Management Fund
Vista Prime Money Market Fund
Vista Tax Free Money Market Fund
Common Investment Policies.....................................................
Management
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management
and Texas Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares...........................................
How the Funds Value their Shares...............................................
How Distributions Are Made; Tax Information....................................
How the Funds distribute their earnings, and
tax treatment related to those earnings
Other Information Concerning the Funds.........................................
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information........................................................
How performance is determined, stated and/or advertised
-2-
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs from investing in the
Fund based on expenses incurred in the most recent fiscal year. The examples
show the cumulative expenses attributable to a hypothetical $1,000 investment
over specified periods.
<TABLE>
<CAPTION>
U.S.
Treasury Federal Prime Tax Free Government Cash
Money Market Money Market Money Market Money Market Money Market Management
Fund Fund Fund Fund Fund Fund
------------- ------------- ------------- ------------- ------------- -------------
Institutional Institutional Institutional Institutional Institutional Institutional
Shares Shares Shares Shares Shares Shares
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee ..................... 0.10% 0.10% 0.10% 0.10% 0.10% 0.10%
12b-1 Fee ................................... n/a n/a n/a n/a n/a n/a
Shareholder Servicing Fee ................... n/a n/a n/a n/a n/a n/a
Other Expenses............................... 0.17% 0.20% 0.17% 0.20% 0.17% 0.17%
Total Fund Operating Expenses................ 0.27% 0.30% 0.27% 0.30% 0.27% 0.27%
Example:
You would pay the following expenses on a $1,000 investment in a Fund, assuming
(1) 5% annual return and (2) redemption at the end of:
1 year....................................... 3 3 3 3 3 3
3 years...................................... 9 9 9 9 9 9
5 years...................................... 15 15 15 15 15 15
10 years..................................... 34 34 34 34 34 34
</TABLE>
- -----------------
++ A $10.00 charge may be incurred for certain wire redemptions.
The expense summary is intended to assist investors in understanding
the various costs and expenses that a shareholder of each Fund will bear
directly or indirectly. The expense summary shows the investment advisory fee,
administration fee and sub-administration fee expected to be incurred by each
Fund, after waiver of fees.
The "Example" set forth above should not be considered a
representation of future expenses of a class of Shares of a Fund; actual
expenses may be greater or less than those shown.
-3-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is included
in the Annual Report to Shareholders.
TREASURY FUND
<TABLE>
<CAPTION>
Institutional
Shares
------
4/20/94*
Year through
ended August
8/31/95 31, 1994
------- --------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................. $1.00 $1.00
------- -------
Income From Investment Operations:
Net Investment Income..................................... 0.053 0.014
------- -------
Total from Investment Operations.......................... 0.053 0.014
Less dividends from net investment income............................. 0.053 0.014
------- -------
Net Asset Value, End of Period........................................ $1.00 $1.00
======= =======
Total Return.......................................................... 5.36% 1.45%
======= =======
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)......................... $17,636 $14,976
Ratio of Expenses to Average Net Assets#........................ 0.32% 0.32%
Ratio of Net Investment Income to Average Net Assets#........... 5.21% 3.93%
Ratio of expenses without waivers and assumption of expenses to
average net assets#........................................... 0.89% 0.53%
Ratio of net investment income without waivers and assumption
of expenses to average net assets#............................ 4.64% 3.72%
</TABLE>
- -------------------
# Periods less than one year have been annualized.
* Commencement of operations.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is included
in the Annual Report to Shareholders.
FEDERAL FUND
<TABLE>
<CAPTION>
Institutional
Shares
------
4/20/94*
Year through
ended August
8/31/95 31, 1994
------- --------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.................................. $1.00 $1.00
-------- --------
Income From Investment Operations:
Net Investment Income..................................... 0.054 0.015
-------- --------
Total from Investment Operations.......................... 0.054 0.015
Less dividends from net investment income............................. 0.054 0.015
-------- --------
Net Asset Value, End of Period........................................ $1.00 $1.00
======== ========
Total Return.......................................................... 5.57% 1.54%
======== ========
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)......................... $113,591 $117,364
Ratio of Expenses to Average Net Assets#........................ 0.31% 0.30%
Ratio of Net Investment Income to Average Net Assets#........... 5.45% 4.26%
Ratio of expenses without waivers and assumption of expenses to
average net assets#........................................... 0.37% 0.49%
Ratio of net investment income without waivers and assumption of
expenses to average net assets#............................... 5.39% 4.06%
</TABLE>
- ---------------------
# Periods less than one year have been annualized.
* Commencement of operations.
** Commencement of offering shares.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout the period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this annual report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is included
in the Annual Report to Shareholders.
PRIME FUND
<TABLE>
<CAPTION>
Institutional
Shares
Year 4/26/94*
ended through
8/31/95 8/31/94+
------- --------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.............................................. $1.00 $1.00
-------- -------
Income From Investment Operations:
Net Investment Income....................................................... 0.055 0.014
Net Realized Loss on Securities............................................. (0.003) --
-------- -------
Total from Investment Operations............................................ 0.052 0.014
-------- -------
Voluntary Capital Contribution.............................................. 0.003 --
-------- -------
Less dividends from net investment income......................................... 0.055 0.014
-------- -------
Net Asset Value, End of Period.................................................... $1.00 $1.00
======== =======
Total Return...................................................................... 5.62% 1.50%
======== =======
Ratios/Supplemental Data
Net assets, End of Period (000 omitted)..................................... $185,640 $57,961
Ratio of Expenses to Average Net Assets#.................................... 0.27% 0.27%
Ratio of Net Investment Income to Average Net Assets#....................... 5.57% 4.21%
Ratio of expenses without waivers and assumption of expenses
to average net assets#.................................................... 0.35% 0.37%
Ratio of net investment income without waivers and assumption of expenses to
average net assets#....................................................... 5.49% 4.11%
</TABLE>
- ------------------------
# Periods less than one year have been annualized.
+ In 1994 the Prime Money Market Fund changed its fiscal year-end from
October 31 to August 31.
* Commencement of offering shares.
-6-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for one Institutional Share outstanding throughout each period shown.
This information is supplemented by financial statements and accompanying notes
appearing in the Fund's Annual Report to Shareholders for the fiscal year ended
August 31, 1995, which is incorporated by reference into the Statement of
Additional Information. Shareholders can obtain a copy of this report by
contacting the Fund. The financial statements and notes, as well as the
financial information set forth in the table below for each of the periods have
been audited by Price Waterhouse LLP, independent accountants, whose report
thereon is included in the Annual Report to shareholders.
TAX FREE FUND
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
------
11/1/93*
Year ended through
8/31/95 8/31/94++
------- ---------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................... $1.00 $1.00
-------- --------
Income from Investment Operations:
Net Investment Income........................................... 0.035 0.019
-------- --------
Total from Investment Operations................................ 0.035 0.019
Less Distributions:
Dividends from net investment income............................ 0.035 0.019
-------- --------
Total Distributions............................................. 0.035 0.019
-------- --------
NET ASSET VALUE, END OF PERIOD..................................... $1.00 $1.00
======== ========
TOTAL RETURN....................................................... 3.53% 1.95%
======== ========
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted)...................... $108,494 $110,332
Ratio of Expenses to Average Net Assets+..................... 0.33% 0.34%
Ratio of Net Investment Income to Average Net Assets+........ 3.46% 2.38%
Ratio of Expenses without waivers and assumption of expenses+ 0.34% 0.34%
Ratio of net investment income without waivers and assumption
of expenses to Average Net Assets+..................... 3.45% 2.38%
</TABLE>
- --------------------
+ Short periods have been annualized.
++ In 1994 the Tax Free Money Market Fund changed its fiscal year-end from
October 31 to August 31.
* Commencement of offering of shares.
-7-
<PAGE>
FINANCIAL HIGHLIGHTS
The information on selected per share data and ratios with respect
to each of the two fiscal periods ended August 31, 1995, and the related
financial statements, have been audited by Price Waterhouse LLP, independent
accountants, whose report thereon is included in the Statement of Additional
Information. The following information should be read in conjunction with the
financial statements and notes thereto which are included in the Statement of
Additional Information.
U.S. GOVERNMENT FUND(1)
<TABLE>
<CAPTION>
INSTITUTIONAL
SHARES
------
Year 12/10/93*
ended through
8/31/95 8/31/94+
------- --------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................. $1.00 $1.00
-------- --------
Income from Investment Operations:
Net Investment Income...................................... 0.055 0.026
-------- --------
Total from Investment Operations........................... 0.055 0.026
Less Distributions:
Dividends from net investment income....................... 0.055 0.026
-------- --------
Total Distributions........................................ 0.055 0.026
NET ASSET VALUE, END OF PERIOD................................... $1.00 $1.00
======== ========
TOTAL RETURN..................................................... 5.60% 2.61%
======== ========
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).................... $466,083 $212,810
Ratio of Expenses to Average Net Assets.......................... 0.27% 0.27%#
Ratio of Net Investment Income to Average Net Assets............. 5.58% 3.81%#
Ratio of expenses without variance and assumption of expenses to
Average Net Assets............................................ 0.28% 0.27%#
Ratio of net investment income without variance and assumption of
expenses to Average Net Assets................................ 5.57% 3.81%#
</TABLE>
- -----------------------
# Short periods have been annualized.
* Commencement of offering of shares.
+ In 1994 the U.S. Government Money Market Fund changed its fiscal year-end
from October 31 to August 31.
(1) Trinity Government Fund and Vista U.S. Government Money Market Fund each
reorganized as a new portfolio of Mutual Fund Group effective January 1,
1993 in a tax-free reorganization, and subsequently were reorganized into
the Trust on ______________. The new portfolio is named Vista U.S.
Government Money Market Fund.
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FINANCIAL HIGHLIGHTS
On May 3, 1996, The Hanover Cash Management Fund ("Hanover Cash
management Fund") merged into the Cash Management Fund; therefore, commencing
with the fiscal year ending August 31, 1996, selected per share data and ratios
for one Hanover Cash Management share outstanding will be provided. No
information will be reflected for periods prior to August 31, 1996.
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FUND OBJECTIVES AND INVESTMENT APPROACH
Vista 100% U.S. Treasury Securities Money Market Fund
The Fund's objective is to provide maximum current income consistent
with maximum safety of principal and maintenance of liquidity.
The Fund invests in direct obligations of the U.S. Treasury,
including Treasury bills, bonds and notes, which differ principally only in
their interest rates, maturities and dates of issuance. The Fund does not
purchase securities issued or guaranteed by agencies or instrumentalities of the
U.S. Government, and does not enter into repurchase agreements. The dollar
weighted average maturity of the Fund will be 90 days or less.
Vista Treasury Plus Money Market Fund
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and maintenance of liquidity.
The Fund invests in direct obligations of the U.S. Treasury,
including Treasury bills, bonds and notes, which differ principally only in
their interest rates, maturities and dates of issuance. In addition, the Fund
will seek to enhance its yield by investing in repurchase agreements which are
fully collateralized by U.S. Treasury obligations. The dollar weighted average
maturity of the Fund will be 60 days or less.
Vista Federal Money Market Fund
The Fund's objective is to provide current income consistent with
preservation of capital and maintenance of liquidity.
The Fund invests primarily in direct obligations of the U.S.
Treasury, including Treasury bills, bonds and notes. The Fund may also from time
to time invest in obligations issued or guaranteed as to principal and interest
by certain agencies or instrumentalities of the U.S. Government. Income on
direct investments in U.S. Treasury securities and obligations of the agencies
and instrumentalities in which the Fund invests is generally not subject to
state and local income taxes by reason of federal law. The dollar weighted
average maturity of the Fund will be 90 days or less.
Shareholders in a particular state that imposes an income tax
should determine through consultation with their own tax advisors whether such
interest income, when distributed by the Fund, will be considered by the state
to have retained exempt status, and whether the Fund's capital gains and other
income, if any, when distributed will be subject to the state's income tax. See
"How Distributions are Made; Tax Information." Due to state income tax
considerations, the Fund will not enter into repurchase agreements.
Vista U.S. Government Money Market Fund
The Fund's objective is to provide as high a level of current income
as is consistent with the preservation of capital and maintenance of liquidity.
The Fund invests substantially all of its assets in obligations
issued or guaranteed by the U.S. Treasury, agencies and instrumentalities of the
U.S. Government, and by instrumentalities that have been established or
sponsored by the U.S. Government, and in repurchase agreements collateralized by
these obligations. Neither the United States nor any of its agencies insures or
guarantees the market value of shares of the Fund. The dollar weighted average
maturity of the Fund will be 60 days or less.
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Vista Cash Management Fund
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and the maintenance of liquidity.
The Fund invests in high-quality, short-term U.S. dollar-denominated
money market instruments. The Fund invests principally in (i) high quality
commercial paper and other short-term obligations, including floating and
variable rate master demand notes of U.S. and foreign corporations; (ii) U.S.
dollar-denominated obligations of foreign governments and supranational agencies
(e.g., the International Bank for Reconstruction and Development); (iii)
obligations issued or guaranteed by U.S. banks with total assets exceeding $1
billion (including obligations of foreign branches of such banks) and by foreign
banks with total assets exceeding $10 billion (or the equivalent in other
currencies) which have branches or agencies in the U.S. (including U.S. branches
of such banks), or such other U.S. or foreign commercial banks which are judged
by the Fund's advisers to meet comparable credit standing criteria; (iv)
securities issued or guaranteed as by the U.S. Government, its agencies or
instrumentalities; and (v) repurchase agreements. The dollar weighted average
maturity of the Fund will be 90 days or less.
Vista Prime Money Market Fund
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and maintenance of liquidity
The Fund invests in high-quality, short-term U.S. dollar-denominated
money market instruments. The Fund invests principally in (i) high quality
commercial paper and other short-term obligations, including floating and
variable rate master demand notes of U.S. and foreign corporations; (ii) U.S.
dollar-denominated obligations of foreign governments and supranational agencies
(e.g., the International Bank for Reconstruction and Development); (iii)
obligations issued or guaranteed by U.S. banks with total assets exceeding $1
billion (including obligations of foreign branches of such banks) and by foreign
banks with total assets exceeding $10 billion (or the equivalent in other
currencies) which have branches or agencies in the U.S. (including U.S. branches
of such banks), or such other U.S. or foreign commercial banks which are judged
by the Fund's advisers to meet comparable credit standing criteria; (iv)
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (v) repurchase agreements. The dollar weighted average
maturity of the Fund will be 60 days or less.
Vista Tax Free Money Market Fund
The Fund's objective is to provide as high a level of current income
which is excluded from gross income for federal income tax purposes as is
consistent with the preservation of capital and maintenance of liquidity.
The Fund invests in a non-diversified portfolio of short-term, fixed
rate and variable rate Municipal Obligations (as defined under "Certain
Investment Policies of the Tax Free Fund"). As a fundamental policy, under
normal market conditions the Fund will have at least 80% of its assets invested
in Municipal Obligations the interest on which, in the opinion of bond counsel,
is excluded from gross income for federal income tax purposes and does not
constitute a preference item which would be subject to the federal alternative
minimum tax on individuals (these preference items are referred to as "AMT
Items"). Although the Fund will seek to invest 100% of its assets in such
Municipal Obligations, it reserves the right under normal market conditions to
invest up to 20% of its total assets in AMT Items or securities the interest on
which is subject to federal income tax. For temporary defensive purposes, the
Fund may exceed this limitation. The dollar weighted average maturity of the
Fund will be 90 days or less.
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Vista Tax Free Money Market Fund is classified as a
"non-diversified" fund under federal securities law. The Fund's assets may be
more concentrated in the securities of any single issuer or group of issuers
than if the Fund were diversified.
COMMON INVESTMENT POLICIES
The Funds seek to maintain a net asset value of $1.00 per share.
The Funds invest only in high quality obligations which are
determined to present minimal credit risks. This credit determination must be
made in accordance with procedures established by the Board of Trustees. Each
investment must be rated in the highest short-term rating category by at least
two national rating organizations ("NROs") (or one NRO if the instrument was
rated only by one such organization) or, if unrated, must be determined to be of
comparable quality in accordance with the procedures of the Trustees. If a
security has an unconditional guarantee or similar enhancement, the issuer of
the guarantee or enhancement may be relied upon in meeting these ratings
requirements rather than the issuer of the security. Securities in which the
Funds invest may not earn as high a level of current income as long-term or
lower quality securities.
The Funds purchase only instruments which have or are deemed to have
remaining maturities of 397 days or less in accordance with federal regulations.
Although each Fund seeks to be fully invested, at times it may hold
uninvested cash reserves, which would adversely affect its yield.
As a matter of fundamental policy, each Fund is permitted to invest
all or a part of its assets in an investment company having substantially the
same investment objective and policies as the applicable Fund.
There can be no assurance that any Fund will achieve its investment
objective.
Other Investment Practices
The Funds may also engage in the following investment practices,
when consistent with their overall objectives and policies. These practices, and
certain associated risks, are more fully described in the SAI.
U.S. Government Obligations. Each Fund may invest in direct
obligations of the U.S. Treasury. Each Fund other than Vista 100% U.S. Treasury
Securities Money Market Fund and Vista Treasury Plus Money Market Fund may also
invest in other obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (collectively, "U.S. Government Obligations").
Certain U.S. Government Obligations, such as U.S. Treasury securities and direct
pass-through certificates of the Government National Mortgage Association
(GNMA), are backed by the "full faith and credit" of the U.S. Government. Other
U.S. Government Obligations, such as obligations of Federal Home Loan Banks and
the Federal Home Loan Mortgage Corporation, are not backed by the "full faith
and credit" of the U.S. Government. In the case of securities not backed by the
"full faith and credit" of the U.S. Government, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the U.S. Government
itself in the event the agency or instrumentality does not meet its commitments.
Repurchase Agreements and Forward Commitments. Each Fund other than
Vista 100% U.S. Treasury Securities Money Market Fund and Vista Federal Money
Market Fund may enter into agreements to purchase and resell securities at an
agreed-upon price and time. These transactions must be fully collateralized at
all times. Each Fund may purchase securities for future delivery, which may
increase its overall investment exposure and involves a risk of loss if the
value of the securities declines prior to the settlement date. These
transactions involve
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some risk to a Fund if the other party should default on its obligation and the
Fund is delayed or prevented from recovering the collateral or completing the
transaction.
Borrowings and Reverse Repurchase Agreements. Each Fund may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. Each Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever a Fund enters into a reverse repurchase agreement, it will
establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). A Fund would be required to pay interest on amounts obtained
through reverse repurchase agreements, which are considered borrowings under
federal securities laws.
Stand-By Commitments. Each Fund may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, a Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to a
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
STRIPS and Zero Coupon Obligations. Each Fund other than Vista 100%
U.S. Treasury Securities Money Market Fund may invest up to 20% of its total
assets in separately traded principal and interest components of securities
backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". Vista Cash Management Fund, Vista Prime Money
Market Fund and each Tax Free Fund may also invest in zero coupon obligations.
Zero coupon obligations are debt securities that do not pay regular interest
payments, and instead are sold at substantial discounts from their value at
maturity. The value of STRIPS and zero coupon obligations tends to fluctuate
more in response to changes in interest rates than the value of ordinary
interest-paying debt securities with similar maturities. The risk is greater
when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates.
Each Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which Vista Tax Free Money Market
Fund, Vista Cash Management Fund and Vista Prime Money Market Fund may invest
include participation certificates and, in the case of Vista Cash Management
Fund and Vista Prime Money Market Fund, certificates of indebtedness or
safekeeping. Participation certificates are pro rata interests in securities
held by others; certificates of indebtedness or safekeeping are documentary
receipts for such original securities held in custody by others. As a result of
the variable rate nature of these investments, the Fund's yield may decline and
it may forego the opportunity for capital appreciation during periods when
interest rates decline; however, during periods when interest rates increase,
the Fund's yield may increase and it may have reduced risk of capital
depreciation. Demand features on certain variable rate securities may obligate
the Fund to pay a "tender fee" to a third party. Demand features provided by
foreign banks involve certain risks associated with foreign investments. The
Internal Revenue Service has not ruled on whether participations in variable
rate municipal obligations is tax exempt and the Tax Free Fund would purchase
such instruments based on opinions of bond counsel.
Other Money Market Funds. Each Fund other than Vista 100% U.S.
Treasury Securities Money Market Fund may invest up to 10% of its total assets
in shares of other money market funds, subject to applicable regulatory
limitations.
Additional Investment Policies of Vista Cash Management Fund
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and Vista Prime Money Market Fund
Vista Cash Management Fund and Vista Prime Money Market Fund may
invest in the following instruments, when consistent with their overall
objectives and policies. These instruments, and certain associated risks, are
more fully described in the SAI.
Bank Obligations. Bank obligations include certificates of deposit,
time deposits and bankers' acceptances issued or guaranteed by U.S. banks
(including their foreign branches) and foreign banks (including their U.S.
branches) . These obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation or
by government regulation. Foreign bank obligations involve certain risks
associated with foreign investing.
Asset-Backed Securities. Asset-backed securities represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables or credit card receivables.
Municipal Obligations. The Funds may invest in high-quality,
short-term municipal obligations that carry yields that are competitive with
those of other types of money market instruments in which it may invest.
Dividends paid by these Funds that are derived from interest on municipal
obligations will be taxable to shareholders for federal income tax purposes.
Securities of Foreign Governments and Supranational Agencies. The
Funds intend to invest a substantial portion of their assets from time to time
in securities of foreign governments and supranational agencies. The Funds will
limit their investments in foreign government obligations to the commercial
paper and other short-term notes issued or guaranteed by the governments of
Western Europe, Australia, New Zealand, Japan and Canada. Obligations of
supranational agencies, such as the International Bank for Reconstruction and
Development (also known as the World Bank) are supported by subscribed, but
unpaid, commitments of its member countries. There is no assurance that these
commitments will be undertaken or complied with in the future, and foreign and
supranational securities are subject to certain risks associated with foreign
investing.
Custodial Receipts. The Funds may acquire securities in the form of
custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms and are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.
Additional Investment Policies of Vista Tax Free Money Market Fund
The following provides additional information regarding the
permitted investments of Vista Tax Free Money Market Fund. These investments,
and certain associated risks, are more fully described in the SAI.
Municipal Obligations. "Municipal Obligations" are obligations
issued by or on behalf of states, territories and possessions of the United
States, and their authorities, agencies, instrumentalities and political
subdivisions, the interest on which, in the opinion of bond counsel, is excluded
from gross income for federal income tax purposes (without regard to whether the
interest thereon is also exempt from the personal income taxes of any state or
whether the interest thereon constitutes a preference item for purposes of the
federal alternative minimum tax).
Municipal Obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various private activities, including the lending of funds to
public or private institutions for the construction of housing, educational or
medical facilities, and may include certain types of industrial development
bonds, private activity bonds or notes issued by public authorities to finance
privately owned or operated facilities,
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or to fund short-term cash requirements. Short-term Municipal Obligations may be
issued as interim financing in anticipation of tax collections, revenue receipts
or bond sales to finance various public purposes. The Municipal Obligations in
which the Fund invest may consist of municipal notes, municipal commercial paper
and municipal bonds maturing or deemed to mature in 397 days or less.
The two principal classifications of Municipal Obligations are
general obligation and special obligation (or special revenue obligation)
securities. General obligation securities involve a pledge of the credit of an
issuer possessing taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an appropriation by the
issuer's legislative body. The characteristics and methods of enforcement of
general obligation securities vary according to the law applicable to the
particular issuer. Special obligation (or special revenue obligation) securities
are payable only from the revenues derived from a particular facility or class
of facilities, or a specific revenue source, and generally are not payable from
the unrestricted revenues of the issuer. Industrial development bonds and
private activity bonds are in most cases special obligation securities, the
credit quality of which is directly related to the private user of the
facilities.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental issuers such as hospitals or airports,
provided, however, that the Fund may not invest more than 25% of the value of
its total assets in such bonds if the issuers are in the same industry.
Municipal Lease Obligations. The Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment payments in future years unless money is later appropriated for such
purpose. The Fund will limit its investments in non-appropriation leases to 10%
of its assets.
Limiting Investment Risks
Specific regulations and investment restrictions help the Funds
limit investment risks for their shareholders. These regulations and
restrictions prohibit the Funds from: (a) with certain limited exceptions,
investing more than 5% of their total assets in the securities of any one issuer
(this limitation does not apply to the Vista Tax Free Money Market Fund or to
U.S. Government Obligations held by the other Funds); (b) investing more than
10% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable in
accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry (excluding U.S.
Government Obligations, bank obligations and, for the Vista Tax Free Money
Market Fund, municipal obligations secured by bank letters of credit or
guarantees). A complete description of the relevant investment restrictions is
included in the SAI. Except for each Fund's investment objective, restriction
(c) above and investment policies designated as fundamental above or in the SAI,
the Funds' investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
General. There can be no assurance that any Fund will be able to
maintain a stable net asset value. Changes in interest rates may affect the
value of the obligations held by the Funds. The value of fixed income securities
varies inversely with changes in prevailing interest rates, although money
market instruments are generally less sensitive to changes in interest rates
than are longer-term securities. For a discussion of certain other risks
associated with the Funds' additional investment activities, see "Other
Investment Practices," "Additional Investment Policies of Vista Cash Management
Fund and Vista Prime Money Market Fund" and "Additional Investment Policies of
Vista Tax Free Money Market Fund."
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Vista Cash Management Fund and Vista Prime Money Market Fund. These
Funds may invest without limit in obligations of domestic and foreign banks, and
in obligations of other foreign issuers. The ability to concentrate in the
banking industry may involve certain credit risks, such as defaults or
downgrades, if at some future date adverse economic conditions prevail in such
industries. U.S. banks are subject to extensive governmental regulations which
may limit both the amount and types of loans which may be made and interest
rates which may be charged. In addition, the profitability of the banking
industry is largely dependent upon the availability and cost of funds for the
purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of this industry.
Securities issued by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable domestic obligations, the possible
imposition of withholding taxes on interest income, the possible seizure or
nationalization of foreign assets, and the possible establishment of exchange
controls or other restrictions. In addition, there may be less publicly
available information concerning foreign issuers, there may be difficulties in
obtaining or enforcing a judgment against a foreign issuer (including branches).
and accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are not
subject to regulations comparable to U.S. banking regulations.
Vista Tax Free Money Market Fund. This Fund may invest without
limitation in Municipal Obligations secured by letters of credit or guarantees
from U.S. and foreign banks, and other foreign institutions. These investments
are subject to the considerations discussed in the preceding paragraphs relating
to Vista Cash Management Fund and Vista Prime Money Market Fund.
This Fund is "non-diversified," which may make the value of its
shares more susceptible to developments affecting issuers in which the Fund
invest. In addition, more than 25% of the assets of the Fund may be invested in
securities to be paid from revenue of similar projects, which may cause these
Funds to be more susceptible to similar economic, political, or regulatory
developments.
Because this Fund will invest primarily in obligations issued by
states, cities, public authorities and other municipal issuers, the Fund is
susceptible for factors affecting such states and their municipal issuers. A
number of municipal issuers have a recent history of significant financial and
fiscal difficulties. If a municipal issuer is unable to meet its financial
obligations, the income derived by the Fund and the Fund's ability to preserve
capital and liquidity could be adversely affected.
Interest on certain Municipal Obligations (including certain
industrial development bonds), while exempt from federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a mutual
fund receives such interest, a proportionate share of any exempt-interest
dividend paid by the mutual fund may be treated as such a preference item to
shareholders. Federal tax legislation enacted over the past few years has
limited the types and volume of bonds which are not AMT Items and the interest
on which is not subject to federal income tax. This legislation may affect the
availability of Municipal Obligations for investment by the Fund.
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MANAGEMENT
The Funds' Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to
each of the Funds pursuant to an Investment Advisory Agreement and has overall
responsibility for investment decisions of each of the Funds, subject to the
oversight of the Board of Trustees. Chase is a wholly-owned subsidiary of The
Chase Manhattan Corporation, a bank holding company. Chase and its predecessors
have over 100 years of money management experience. For its investment advisory
services to each of the Funds, Chase is entitled to receive an annual fee
computed daily and paid monthly at an annual rate equal to 0.10% of each
Fund's average daily net assets.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is the sub-investment adviser to each Fund other than Cash Management
Fund and Tax Free Money Market Fund, pursuant to a Sub-Investment Advisory
Agreement between CAM and Chase. CAM is a wholly-owned operating subsidiary of
the Adviser. CAM makes investment decisions for each of these Funds on a
day-to-day basis. For these services, CAM receives a fee, payable by Chase from
its advisory fee, in a mutually agreed amount. CAM was recently formed for the
purpose of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM.
Texas Commerce Bank, National Association ("TCB") is the
sub-investment adviser to the Cash Management Fund and the Tax Free Money Market
Fund pursuant to a Sub-Investment Advisory Agreement between Chase and TCB. TCB
makes investment decisions for the Cash Management Fund and Tax Free Money
Market Fund on a day-to-day basis. For these services, TCB receives a fee,
payable by Chase from its advisory fee, in a mutually agreed amount. TCB has
been in the investment counselling business since 1987 and is ultimately
controlled and owned by The Chase Manhattan Corporation.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
Institutional Shares may be purchased through selected financial
service firms, such as broker-dealer firms and banks ("Dealers") who have
entered into a selected dealer agreement with the Funds' distributor on each
business day during which the Federal Reserve Bank of New York, the New York
Stock Exchange and the Funds' advisers are open for business ("Fund Business
Day"). Qualified investors are defined as institutions, trusts, partnerships,
corporations, qualified and other retirement plans and fiduciary accounts opened
by a bank, trust company or thrift institution which exercises investment
authority over such accounts.
Institutional Shares are sold at without a sales load at the net
asset value next determined after the Vista Service Center receives your order
on any Fund Business Day. To receive that day's price, the Vista Service Center
or your investment representative or shareholder servicing agent must generally
receive your order prior to the Funds' Cut-off Time. For the Vista 100% U.S.
Treasury Securities Money Market Fund and Vista Tax Free Money Market Fund, the
Cut-off Time is 12:00 noon. For the Treasury Plus Fund, the Federal Fund, the
U.S. Government Fund, the Cash Management Fund and the Prime Fund, the Cut-off
Time is 2:00 p.m. In addition, orders received for shares of these Funds after
2:00 p.m. and prior to 4:00 p.m. on any Fund Business Day may be accepted and
executed on the same day at the Funds' discretion. Orders for shares received
and accepted prior to the Cut-off Times will be entitled to all dividends
declared on that day. The Funds reserve the right to reject any purchase order.
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All purchases of Institutional Shares must be paid for by federal
funds wire. If federal funds are not available with respect to any such order by
the close of business on the day the order is received by the Vista Service
Center, the order will be cancelled. Any order received after the Cut-off Times
noted above will not be accepted. Any funds received in connection with late
orders will be invested on the next Fund Business Day.
Federal regulations require that each investor provide a certified
Taxpayer Identification Number upon opening an account.
Dealers may offer additional services to their customers, including
customized procedures for the purchase and redemption of Institutional Shares,
such as pre-authorized or systematic purchase and withdrawal programs, "sweep"
checking programs, cash advances, automated access and direct demand deposit
debit.
Minimum Investments
Each Fund has established a minimum initial investment amount of
$1,000,000 for the purchase of Institutional Shares. Shareholders must maintain
an average account balance of $1,000,000 in the Institutional Shares of a Fund
at all times. There is no minimum for subsequent investments.
How to Sell Shares
You may redeem all or any portion of the shares in your account on
any Fund Business Day at the net asset value next determined after a redemption
required in proper form is furnished by you to your Dealer and transmitted to
and received by the Vista Service Center. A wire redemption may be requested by
telephone or wire to the Vista Service Center. For telephone redemptions, call
the Vista Service Center at 1-800-622-4273.
In making redemption requests, the names of the registered
shareholders on your account and your account number must be supplied. The price
you receive is the next net asset value calculated after your request is
received in proper form. In order to receive that day's net asset value, the
Vista Service Center must receive your request before 12:00 noon, unless your
Fund has a later Cut-off Time. The Treasury Plus Fund, the Federal Fund, the
U.S. Government Fund, the Cash Management Fund and the Prime Fund have a Cut-off
Time of 2:00 p.m. In order to allow the Fund's advisers to most effectively
manage the Funds' portfolios, investors are urged to make redemption requests as
early in the day as possible.
Payment for redemption requests received prior to the Cut-off Time
is normally made in federal funds wired to the redeeming shareholder on the same
Fund Business Day. Payment for redemption requests received after the Cut-off
Time is normally made in federal funds wired to the redeeming shareholder on the
next Fund Business Day. Under unusual circumstances, the Fund may suspend
redemptions, or postpone payment for more than seven business days, as permitted
by federal securities laws.
You may use Vista's Telephone Redemption Privilege to redeem shares
valued up to $1,000,000 from your account unless you have notified the Vista
Service Center of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For information, consult
the Vista Service Center.
During periods of unusual market changes and shareholder activity,
you may experience delays in contacting the Vista Service Center by telephone.
In this event, you may wish to submit a written redemption request, or contact
your Dealer. The Telephone Redemption Privilege may be modified or terminated
without notice.
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<PAGE>
Selling shares through your Dealer. Your Dealer must receive your
request before the Cut-off Time for your Fund to receive that day's net asset
value. Your representative will be responsible for furnishing all necessary
documentation to the Vista Service Center.
Redemption of Accounts of Less than $1,000,000. Each Fund may redeem
your shares if the aggregate net asset value of the shares of that Fund in your
account is less than $1,000,000. In the event of any such redemption, you will
receive at least 60 days' notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for Institutional Shares of certain
other Vista money market funds at net asset value and for certain classes of
shares of the Vista non-money market funds at net asset value plus any
applicable sales charge. Not all Vista funds offer all classes of shares. The
prospectus of the other Vista fund into which shares are being exchanged should
be read carefully and retained for future reference.
To exchange your shares, simply complete the Exchange Authorization
Form contained in your prospectus and send it to the Vista Service Center. The
form is also available from the Vista Service Center. For federal income tax
purposes, an exchange is treated as a sale of shares and generally results in a
capital gain or loss. A Telephone Exchange Privilege is currently available for
amounts up to $500,000. The Vista Service Center's procedures for telephone
transactions are described under "How to sell shares." Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Please read the prospectus carefully before investing and keep it for
future reference. Shares of certain Vista funds are not available to residents
of all states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving a Fund in a year or three in a
calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
HOW THE FUNDS VALUE THEIR SHARES
The net asset value of Institutional Shares of the Funds is
currently determined daily as of 12:00 noon and 4:00 p.m., Eastern time on each
Fund Business Day by dividing the net assets of a Fund by the number of its
shares outstanding at the time the determination is made. Effective with the
anticipated introduction of a new automated share purchase program by certain
Dealers, the net asset value of Funds available through the program will also be
determined as of 6:00 p.m., Eastern time on each Fund Business Day.
The portfolio securities of each Fund are valued at their amortized
cost in accordance with federal securities laws, certain requirements of which
are summarized under "Common Fund Policies." This method increases stability in
valuation, but may result in periods during which the stated value of a
portfolio security is higher or lower than the price the Fund would receive if
the instrument were sold. It is anticipated that the net asset value of each
share will remain constant at $1.00 and these Funds will employ specific
investment policies and procedures to accomplish this result, although no
assurance can be given that they will be able to do so on a continuing basis.
The Board of Trustees will review the holdings of each Fund at intervals it
deems appropriate to determine whether that Fund's net asset value calculated by
using available market quotations (or an appropriate substitute which reflects
current market conditions) deviates from $1.00 per share based upon amortized
cost. In the event the
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<PAGE>
Trustees determine that a deviation exists that may result in material dilution
or other unfair results to investors or existing shareholders, the Trustees will
take such corrective action as they regard as necessary and appropriate.
HOW DIVIDENDS AND DISTRIBUTIONS ARE MADE; TAX INFORMATION
The net investment income of each class of shares of each Fund is
declared daily as a dividend to the shareholders each Fund Business Day.
Dividends are declared as of the time of day which corresponds to the latest
time on that day that the Fund's net asset value is determined. Shares begin
accruing dividends on the day they are purchased. Dividends are distributed
monthly. Unless a shareholder arranges to receive dividends in cash , dividends
are distributed in the form of additional shares. Dividends that are otherwise
taxable are still taxable to you whether received in cash or additional shares.
Net realized short-term capital gains, if any, will be distributed at least
annually. The Funds do not expect to realize net long-term capital gains.
Net investment income for each Fund consists of all interest accrued
and discounts earned less, amortization of any market premium on the portfolio
assets of the Fund, and the accrued expenses of the Fund.
Each Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to you. Each Fund intends to distribute substantially all of its
ordinary income and capital gain net income on a current basis. If a Fund does
not qualify as a regulated investment company for any taxable year or does not
make distributions as it intends, the Fund will be subject to tax on all of its
income and gains.
Distributions by a Fund of its ordinary income and short-term
capital gains are generally taxable to you as ordinary income. Distributions by
Vista Tax Free Money Market Fund of its tax-exempt interest income will not be
subject to federal income tax. Such distributions will generally be subject to
state and local taxes, but may be exempt if paid out of interest on municipal
obligations of the state or locality in which you reside. Distributions by a
Fund of net long-term capital gains will be taxable as such, regardless of the
length of time you have held your shares. Distributions will be taxable in the
same manner for federal income tax purposes whether received in cash or in
shares through the reinvestment of distributions.
To the extent distributions are attributable to interest from
obligations of the U.S. Government and certain of its agencies and
instrumentalities, such distributions may be exempt from certain types of state
and local taxes.
Early in each calendar year the Funds will notify you of the amount
and tax status of distributions paid to you for the preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Funds. You should consult your tax adviser to
determine the precise effect of an investment in the Funds on your particular
tax situation (including possible liability for state and local taxes and, for
foreign shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Administrator
Chase acts as the Funds' administrator and is entitled to receive a
fee computed daily and paid monthly at an annual rate equal to 0.05% of each
Fund's average daily net assets.
Sub-Administrator and Distributor
Vista Broker-Dealer Services, Inc. ("VBDS") acts as the Funds'
sub-administrator and distributor. VBDS is a subsidiary of The BISYS Group, Inc.
and is unaffiliated with Chase. For the sub-administrative services it performs,
VBDS is entitled to receive a fee from each Fund at an annual rate equal to
0.05% of the Fund's average
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daily net assets. VBDS has agreed to use a portion of this fee to pay for
certain expenses incurred in connection with organizing new series of the Trust
and certain other ongoing expenses of the Trust. VBDS is located at 125 West
55th Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for each Fund and
receives compensation under an agreement with the Funds. Securities and cash of
each Fund may be held by sub-custodian banks if such arrangements are reviewed
and approved by the Trustees.
Expenses
Each Fund pays the expenses incurred in its operations, including
its pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees: registration
fees; interest charges; taxes; expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent accountants,
of legal counsel and of any transfer agent, registrar or dividend disbursing
agent of the Trust; insurance premiums; and expenses of calculating the net
asset value of, and the net income on, shares of the Fund. Shareholder servicing
and distribution fees are allocated to specific classes of the Fund. In
addition, the Fund may allocate transfer agency and certain other expenses by
class. Service providers to the Fund may, from time to time, voluntarily waive
all or a portion of any fees to which they are entitled.
Organization and Description of Shares
Each Fund is a portfolio of Mutual Fund Trust, an open-end
management investment company organized as a Massachusetts business trust in
1994 (the "Trust"). The Trust has reserved the right to create and issue
additional series and classes. Each share of a series or class represents an
equal proportionate interest in that series or class with each other share of
that series or class. The shares of each series or class participate equally in
the earnings, dividends and assets of the particular series or class. Shares
have no preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class. Fund shares will be maintained in
book entry form, and no certificates representing shares owned will be issued to
shareholders.
Each Fund issues multiple classes of shares. This Prospectus relates
only to Institutional Shares of the Funds. Institutional Shares may be purchased
only by qualified investors. See "How to Buy, Sell and Exchange Shares." The
Funds offer other classes of shares in addition to these classes. The categories
of investors that are eligible to purchase shares and minimum investment
requirements may differ for each class of Fund shares. In addition, other
classes of Fund shares may be subject to differences in sales charge
arrangements, ongoing distribution and service fee levels, and levels of certain
other expenses, which will affect the relative performance of the different
classes. Investors may call 1-800-34-VISTA to obtain additional information
about other classes of shares of the Fund that are offered. Any person entitled
to receive compensation for selling or servicing shares of the Fund may receive
different levels of compensation with respect to one class of shares over
another.
The Trust is not required to hold annual meetings of shareholders
but will hold special meetings of shareholders of all series or classes when in
the judgment of the Trustees it is necessary or desirable to submit
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<PAGE>
matters for a shareholder vote. The Trustees will promptly call a meeting of
shareholders to remove a trustee(s) when requested to do so in writing by record
holders of not less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting as
investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws. If
future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of any
of the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Funds' distributor or affiliates of the distributor. Chase will
not invest any Fund assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by any Fund. Chase has informed the Funds that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of such Chase or in the
possession of any affiliate of Chase, including the division that performs
services for the Trust as custodian. Shareholders of the Funds should be aware
that, subject to applicable legal or regulatory restrictions, Chase and its
affiliates may exchange among themselves certain information about the
shareholders and their accounts. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
Each Fund may advertise its annualized "yield" and its 'effective
yield". Annualized "yield" is determined by assuming that income generated by an
investment in a Fund over a stated seven-day period (the "Yield") will continue
to be generated each week over a 52-week period. It is shown as a percentage of
such investment. "Effective yield" is the annualized "yield" calculated assuming
the reinvestment of the income earned during each week of the 52-week period.
The "effective yield" will be slightly higher than the "yield" due to the
compounding effect of this assumed reinvestment.
Vista Tax Free Money Market Fund may also quote a "tax equivalent
yield", the yield that a taxable money market fund would have to generate in
order to produce an after-tax yield equivalent to the tax free fund's
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<PAGE>
yield. The tax equivalent yield of a taxable money market fund can then be
compared to the yield of the tax free fund.
Investment performance may from time to time be included in
advertisements about the Funds. Performance is calculated separately for each
class of shares. Because this performance information is based on historical
earnings, it should not be considered as an indication or representation of
future performance. Investment performance, which will vary, is based on many
factors, including market conditions, the composition of each Fund's portfolio,
each Fund's operating expenses and which class of shares you purchase.
Investment performance also reflects the risks associated with each Fund's
investment objective and policies. These factors should be considered when
comparing each Fund's investment results to those of other mutual funds and
investment vehicles. Quotations of investment performance for any period when an
expense limitation was in effect will be greater if the limitation had not been
in effect. Each Fund's performance may be compared to other mutual funds,
relevant indices and rankings prepared by independent services. See the SAI.
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<PAGE>
PROSPECTUS
VISTA[SM] NEW YORK TAX FREE INCOME FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS
OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary................................................................
Financial Highlights...........................................................
Fund Objectives................................................................
Investment Policies............................................................
Management.....................................................................
About Your Investment..........................................................
How to Buy, Sell and Exchange Shares...........................................
How the Fund Values its Shares.................................................
How Distributions are Made; Tax Information....................................
Other Information Concerning the Fund..........................................
Performance Information........................................................
Make the Most of Your Vista Privileges.........................................
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<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs and estimated annual
expenses from investing in the Fund based on expenses incurred in the most
recent fiscal year. The examples show the cumulative expenses attributable to a
hypothetical $1,000 investment over specified periods.
<TABLE>
<CAPTION>
Class A Class B
Shareholder Transaction Expenses Shares Shares
- -------------------------------- ------ ------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................... 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)(*)..................... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver) (**)......... 0.20% 0.20%
12b-1 Fee(***)................................................ 0.25% 0.75%
Shareholder Servicing Fee (after estimated waiver) (**)....... 0.00% 0.25%
Other Expenses ............................................... 0.45% 0.45%
Total Fund Operating Expenses (after waiver of fee) (**)...... 0.90% 1.65%
</TABLE>
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares(+)................... $54 $72 $91 $142
Class B Shares:
Assuming complete
redemption at the
end of the
period(++)(+++).................. $68 $85 $113 $166
Assuming no
redemptions (+++)................ $17 $52 $90 $166
- -----------------------
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<PAGE>
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge
generally declines by 1% annually thereafter (except in the fourth
year), reaching zero after six years. See "How to Buy, Sell and
Exchange Shares."
** Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such
waivers, the Investment Advisory Fee and Shareholder Servicing Fee
would be 0.30% and 0.25%, respectively, for Class A and Class B
shares, and Total Fund Operating Expenses would be 1.25% and 1.75%
for Class A and Class B shares, respectively, of average net assets.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as
Class A and Class B shareholders of the Fund, may pay more than the
economic equivalent of the maximum front-end sales charge permitted
by rules of the National Association of Securities Dealers, Inc.
("NASD").
+ Assumes deduction at the time of purchase of the maximum sales
charge, as applicable.
++ Assumes deduction at the time of redemption of the maximum
applicable deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A
shares at the beginning of the ninth year. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses that the Fund
incurs. The examples should not be considered representations of past or future
expenses or returns; actual expenses and returns may be greater or less than
shown.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund."
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<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for both Class A and Class B shares. The information for each of the five
years in the period ended October 31, 1995 has been audited by Price Waterhouse
LLP, the Fund's independent accountants, whose report on the financial
statements which includes this information and the financial statements are
incorporated by reference into this Prospectus. The Fund's Annual Report for the
fiscal year ended October 31, 1995 includes these financial statements and is
available without charge upon request.
NEW YORK TAX FREE INCOME FUND
<TABLE>
<CAPTION>
Year 11/4/93** Year 11/1/93
ended through ended through
8/31/95 8/31/94+ 8/31/95 8/31/94+ Year ended October 31,
------- -------- ------- --------
----------------------------------
1993 1992 1991
Class B Class B Class A Class A Class A Class A Class A
Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........... $11.27 $12.11 $11.30 $12.27 $11.18 $11.24 $10.48
Income from Investment Operations:
Net Investment Income..................... 0.485 0.419 0.570 0.473 0.592 0.473 0.635
Net Gains or Losses in Securities (both
realized and unrealized)................ 0.162 (0.543) 0.167 (0.688) 1.281 0.274 0.762
----- ------ ----- ------ ----- ----- -----
Total from Investment Operations.......... 0.647 (0.124) 0.737 (0.215) 1.873 0.747 1.397
Less Distributions:
Dividends from net investment income...... 0.507 0.433 0.567 0.472 0.591 0.473 0.635
Distributions from capital gains.......... - 0.283 - 0.283 0.194 0.334 0.000
-------- ------- ------- ------- ------- ------- --------
Total Distributions....................... 0.507 0.716 0.567 0.755 0.785 0.807 0.635
Net Asset Value, End of Period................. $11.41 $11.27 $11.47 $11.30 $12.27 $11.18 $11.24
====== ====== ====== ====== ====== ====== ======
Total Return(1)................................ 5.99% (1.11%) 6.82% (1.81%) 17.31% 8.57% 13.68%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)... $10,633 $7,234 $104,168 $103,113 $120,809 $48,420 $24,062
Ratio of Expenses to Average Net Assets... 1.61% 1.51% 0.85% 0.76% 0.75% 0.75% 0.76%
Ratio of Net Investment Income to Average 4.35% 4.28% 5.11% 4.89% 4.86% 5.74% 5.85%
Net Assets..............................
Ratio of expenses without waivers and
assumption of expenses to Average Net
Assets.................................. 1.87% 1.76% 1.37% 1.25% 1 .11% 1.41% 1.71%
Ratio of net investment income without
waivers and assumption of expenses to
Average Net Assets...................... 4.09% 4.03% 4.59% 4.40% 4.50% 5.08% 4.90%
Portfolio Turnover Rate................... 122% 162% 122% 162% 150% 280% 353%
</TABLE>
<TABLE>
<CAPTION>
Year ended
October 31, 9/4/87*
-------------------------- to
1990 1989 1988 10/31/87
Class A Class A Class A Class A
Shares Shares Shares Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........... $10.60 $10.62 $10.08 $10.00
Income from Investment Operations:
Net Investment Income..................... 0.671 0.739 0.701 0.053
Net Gains or Losses in Securities (both
realized and unrealized)................ (0.100) 0.045 0.590 0.027
------ ----- ----- -----
Total from Investment Operations.......... 0.571 0.784 1.291 0.080
Less Distributions:
Dividends from net investment income...... 0.672 0.741 0.751 0.000
Distributions from capital gains.......... 0.020 0.063 0.000 0.000
------- ------- ------- --------
Total Distributions....................... 0.692 0.804 0.751 0.000
Net Asset Value, End of Period................. $10.48 $10.60 $10.62 $10.08
====== ====== ====== ======
Total Return(1)................................ 5.56% 7.69% 13.24% 5.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)... $20,413 $17,545 $5,557 $101
Ratio of Expenses to Average Net Assets... 0.71% 0.20% 0.00% 0.00%#
Ratio of Net Investment Income to Average 6.34% 6.90% 7.16% 7.49%#
Net Assets..............................
Ratio of expenses without waivers and
assumption of expenses to Average Net
Assets.................................. 1.68% 2.30% 1.50% 1.50%#
Ratio of net investment income without
waivers and assumption of expenses to
Average Net Assets...................... 5.38% 4.81% 5.66% 5.99%#
Portfolio Turnover Rate................... 143% 286% 362% 90%
</TABLE>
- ---------------
# Annualized.
* Commencement of operations.
** Commencement of offering of shares.
(1) Total return figures are calculated before taking into account effect of
4.50% sales charge.
+ In 1994 the New York Tax Free Income Fund changed its fiscal year-end from
October 31 to August 31.
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<PAGE>
FUND OBJECTIVES
Vista New York Tax Free Income Fund seeks to provide monthly
dividends which are excluded from gross income for federal tax purposes and
exempt from New York State and New York City personal income taxes, as well as
to protect the value of its shareholders' investment. The Fund is not intended
to be a complete investment program, and there is no assurance it will achieve
its objective.
INVESTMENT POLICIES
Investment Approach
The Fund invests primarily in New York Municipal Obligations (as
defined under "Municipal Obligations"). As a fundamental policy, under normal
market conditions, the Fund will have at least 80% of its assets in New York
Municipal Obligations the interest on which, in the opinion of bond counsel,
does not constitute a preference item which would be subject to the federal
alternative minimum tax on individuals (these preference items are referred to
as "AMT Items"). The Fund reserves the right under normal market conditions to
invest up to 20% of its total assets in AMT Items or securities the interest on
which is subject to federal income tax and New York State and New York City
personal income taxes. For temporary defensive purposes, the Fund may exceed
this limitation.
The Fund's investments may include, among other instruments, fixed,
variable or floating rate general obligation and revenue bonds, zero coupon
securities, inverse floaters and bonds with interest rate caps. The Fund's
Municipal Obligations will be rated at least in the category Baa, MIG-2 or
VMIG-2 by Moody's Investors Service, Inc. ("Moody's"), BBB by Standard & Poor's
Corporation ("S&P") or BBB or FIN-3 by Fitch Investors Service, Inc. ("Fitch")
or comparably rated by another national rating organization, or, if unrated,
considered by the Fund's advisers to be of comparable quality.
There is no restriction on the maturity of the Fund's portfolio or
any individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations of
future changes in interest rates.
The Fund is classified as a "non-diversified" fund under federal
securities law. The Fund's assets may be more concentrated in the securities of
any single issuer or group of issuers than if the Fund were diversified.
For temporary defensive purposes, the Fund may invest without
limitation in high quality money market instruments and repurchase agreements,
the interest income from which may be taxable to shareholders as ordinary income
for federal income tax purposes.
Municipal Obligations
"Municipal Obligations" are obligations issued by or on behalf of
states, territories and possessions of the United States, and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which,
in the opinion of bond counsel, is excluded from gross income for federal income
tax purposes (without regard to whether the interest thereon is also exempt from
the personal income taxes of any state or whether the interest thereon
constitutes a preference item for purposes of the federal alternative minimum
tax). "New York Municipal Obligations" are Municipal Obligations of the State of
New York and its political subdivisions and of Puerto Rico, other U.S.
territories and their political subdivisions, the interest on which, in the
opinion of bond counsel, is exempt from New York State and New York City
personal income taxes. Municipal Obligations are issued to obtain funds for
various public purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of outstanding debts.
They may also be issued to finance various private
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<PAGE>
activities, including the lending of funds to public or private institutions for
the construction of housing, educational or medical facilities, and may include
certain types of industrial development bonds, private activity bonds or notes
issued by public authorities to finance privately owned or operated facilities,
or to fund short-term cash requirements. Short-term Municipal Obligations may be
issued as interim financing in anticipation of tax collections, revenue receipts
or bond sales to finance various public purposes.
The two principal classifications of Municipal Obligations are
general obligation and special obligation (or special revenue obligation)
securities. General obligation securities involve a pledge of the credit of an
issuer possessing taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an appropriation by the
issuer's legislative body. The characteristics and methods of enforcement of
general obligation securities vary according to the law applicable to the
particular issuer. Special obligation (or special revenue obligation) securities
are payable only from the revenues derived from a particular facility or class
of facilities, or a specific revenue source, and generally are not payable from
the unrestricted revenues of the issuer. Industrial development bonds and
private activity bonds are in most cases special obligation securities, the
credit quality of which is directly related to the private user of the
facilities.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental issuers such as hospitals or airports,
provided, however, that the Fund may not invest more than 25% of the value of
its total assets in such bonds if the issuers are in the same industry.
Municipal Lease Obligations. The Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment payments in future years unless money is later appropriated for such
purpose. The Fund will limit its investments in non-appropriation leases to 10%
of its assets.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or
high-quality, short-term money market instruments. Such instruments may include
U.S. Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
U.S. Government Obligations. The Fund may invest in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
Repurchase Agreements and Forward Commitments. The Fund may enter
into agreements to purchase and resell securities at an agreed-upon price and
time. The Fund may purchase securities for future delivery, which may increase
its overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse
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repurchase agreement, it will establish a segregated account in which it will
maintain liquid assets on a daily basis in an amount at least equal to the
repurchase price (including accrued interest). The Fund would be required to pay
interest on amounts obtained through reverse repurchase agreements, which are
considered borrowings under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to the
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
STRIPS and Zero Coupon Obligations. The Fund may invest up to 20% of
its total assets in separately traded principal and interest components of
securities backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". The Fund may also invest in zero coupon
obligations. Zero coupon obligations are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. The value of STRIPS and zero coupon obligations tends to
fluctuate more in response to changes in interest rates than the value of
ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates.
The Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
Participation certificates are pro rata interests in securities held by others;
certificates of indebtedness or safekeeping are documentary receipts for such
original securities held in custody by others. As a result of the variable rate
nature of these investments, the Fund's yield may decline and it may forego the
opportunity for capital appreciation during periods when interest rates decline;
however, during periods when interest rates increase, the Fund's yield may
increase and it may have reduced risk of capital depreciation. Demand features
on certain variable rate securities may obligate the Fund to pay a "tender fee"
to a third party. Demand features provided by foreign banks involve certain
risks associated with foreign investments. The Internal Revenue Service has not
ruled on whether interest on participations in variable rate municipal
obligations is tax exempt and the Fund would purchase such instruments based on
opinions of bond counsel.
Inverse Floaters and Interest Rate Caps. The Fund may invest in
inverse floaters and in bonds with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate bond. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than municipal bonds which do not include such a structure.
Other Money Market Funds. The Fund may invest up to 10% of its total
assets in shares of other money market funds, subject to applicable regulatory
limitations. The Fund is authorized to seek to achieve its objective by
investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
Derivatives and Related Instruments. The Fund may invest its assets
in derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write
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and exercise call and put options on securities and securities indexes
(including using options in combination with securities, other options or
derivative instruments); (ii) enter into swaps, futures contracts and options on
futures contracts; (iii) employ forward interest rate contracts; and (iv)
purchase and sell structured products, which are instruments designed to
restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives
and related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers to
forecast these factors correctly. Incorrect forecasts could expose the Fund to a
risk of loss. There can be no guarantee that there will be a correlation between
price movements in a hedging instrument and in the portfolio assets being
hedged. The Fund is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Fund than
hedging strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Fund seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward contracts,
there is a greater potential that a counterparty or broker may default. In the
event of a default, the Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment
risks for its shareholders. These restrictions prohibit the Fund from: (a)
investing more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of Trustees);
or (b) investing more than 25% of its total assets in any one industry (this
would apply to municipal obligations backed only by the assets and revenues of
nongovernmental users, but excludes municipal obligations secured by bank
letters of credit or guarantees). A complete description of these and other
investment policies is included in the SAI. Except for restriction (b) above and
investment policies designated as fundamental above or in the SAI, the Fund's
investment policies are not fundamental. The Trustees may change any
non-fundamental investment policy without shareholder approval.
Risk Factors
Changes in interest rates may affect the value of the obligations
held by the Fund. The value of fixed income securities varies inversely with
changes in prevailing interest rates. For a discussion of certain other risks
associated with the Fund's additional investment activities, see "Other
Investment Practices" and "Municipal Obligations."
Because the Fund will invest primarily in obligations issued by the
State of New York and its cities, public authorities and other municipal
issuers, the Fund is susceptible to factors affecting the State of New York and
its municipal issuers. The State of New York and New York City have a recent
history of significant financial and fiscal difficulties. If the State of New
York or any of its local government entities is unable to meet its financial
obligations, the income derived by the Fund and the Fund's ability to preserve
capital and liquidity could be adversely affected. See the SAI for further
information.
Interest on certain Municipal Obligations (including certain
industrial development bonds), while exempt from federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a mutual
fund receives such interest, a proportionate share of any exempt-interest
dividend paid by the mutual fund may be treated as such a preference item to
shareholders. Federal tax legislation enacted over the past few years has
limited the
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types and volume of bonds which are not AMT Items and the interest on which is
not subject to federal income tax. This legislation may affect the availability
of Municipal Obligations for investment by the Fund.
The Fund may invest without limitation in Municipal Obligations
secured by letters of credit or guarantees from U.S. and foreign banks, and
other foreign institutions. The dependence on banking institutions may involve
certain credit risks, such as defaults or downgrades, if at some future date
adverse economic conditions prevail in such industries. U.S. banks are subject
to extensive governmental regulations which may limit both the amount and types
of loans which may be made and interest rates which may be charged. In addition,
the profitability of the banking industry is largely dependent upon the
availability and cost of funds for the purpose of financing lending operations
under prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in the operations of this industry.
Obligations backed by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable domestic obligations, the possible
imposition of withholding taxes on interest income, the possible seizure or
nationalization of foreign assets, and the possible establishment of exchange
controls or other restrictions. In addition, there may be less publicly
available information concerning foreign issuers, there may be difficulties in
obtaining or enforcing a judgment against a foreign issuer (including branches).
and accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are not
subject to regulations comparable to U.S. banking regulations.
Because the Fund is "non-diversified," the value of its shares is
more susceptible to developments affecting issuers in which the Fund invests. In
addition, more than 25% of the Fund's assets may be invested in securities to be
paid from revenue of similar projects, which may cause the Fund to be more
susceptible to similar economic, political, or regulatory developments,
particularly in light of the fact that the issuers in which the Fund invest will
generally be located in the State of New York.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Fund pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly at an
annual rate equal to 0.30% of the Fund's average daily net assets. Chase is
located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is the sub-investment adviser to the Fund pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary Chase. CAM makes investment decisions for the Fund on a day-to-day
basis. For these services, CAM receives a fee, payable by Chase from its
advisory fee, in a mutually agreed amount. CAM was recently formed for the
purpose of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York, New
York 10036.
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Pamela Hunter has been responsible for the day-to-day management of
the Fund since its inception. Ms. Hunter is part of a team providing fixed
income strategy and product development. Prior to joining Chemical in May 1996,
Ms. Hunter was previously employed at Chase since 1980.
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A shares are not
subject to any sales charges when they are redeemed. Certain purchases of Class
A shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and Exchange
Shares" and "Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge ("CDSC") if
redeemed within a specified period after purchase. Class B shares also have
higher combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, eight years after purchase. For more information about
the conversion of Class B shares, see the SAI. This discussion will include
information about how shares acquired through reinvestment of distributions are
treated for conversion purposes. Class B shares provide an investor the benefit
of putting all of the investor's dollars to work from the time the investment is
made. Until conversion, Class B shares will have a higher expense ratio and pay
lower dividends than Class A shares because of the higher combined 12b-1 and
service fees. See "How to Buy, Sell and Exchange Shares" and "Other Information
Concerning the Fund."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a number
of factors, including the amount and intended length of the investment.
Investors making investments that qualify for reduced sales charges might
consider Class A shares. Investors who prefer not to pay an initial sales charge
might consider Class B shares. Orders for Class B shares for $250,000 or more
will be treated as orders for Class A shares or declined. For more information
about theses sales arrangements, consult your investment representative or the
Fund's distributor.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a fund account with as little as $2,500 ($1,000 for
IRAs and SEP-IRAs) and make additional investments at any time with as little as
$100. You can buy fund shares three ways-through an investment representative,
through the Fund's distributor buy calling the Vista Service Center, or through
a systematic investment plan.
All purchases made by check should be in U.S. dollars and made
payable to the Vista Funds. Third party checks, except those payable to an
existing shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. The Fund reserves the
right to reject any purchase order or cease offering shares for purchase at any
time. When purchases are made by check, redemptions will not be allowed until
the investment being redeemed has been in the account for 15 business days. In
addition, the redemption of shares through a Systematic Investment Plan will not
be allowed for 7 calendar days.
Buying shares through the Fund's distributor. Complete and return
the enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
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Buying shares through systematic investing. You can make regular
investments of $100 or more per month through automatic deduction from your bank
checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset
value next determined after the Vista Service Center receives your order. In
most cases, in order to receive that day's public offering price, the Vista
Service Center must receive your order before the close of regular trading on
the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you should pay for
those shares with a certified check to avoid any delay in redemption, exchange
or transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
Class A Shares
The public offering price of Class A shares is the net asset value
plus a sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Sales charge as a
percentage of:
--------------
Amount of sales charge
Amount of transaction at Offering Net amount reallowed to dealers as a
offering price($) price invested percentage of offering price
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under 100,000 4.50 4.71 4.00
- ---------------------------------------------------------------------------------------
100,000 but under 250,000 3.75 3.90 3.25
- ---------------------------------------------------------------------------------------
250,000 but under 500,000 2.50 2.56 2.25
- ---------------------------------------------------------------------------------------
500,000 but under 1,000,000 2.00 2.04 1.75
- ---------------------------------------------------------------------------------------
</TABLE>
There is no initial sales charge on purchases of Class A shares of
$1 million or more.
Except as stated below, the Fund's distributor pays broker-dealers
commissions on sales of Class A shares of $1 million or more based on an
investor's cumulative purchases (excluding money market funds) during the
one-year period beginning with the date of the initial purchase at net asset
value. Each subsequent one-year measuring period for these purposes will begin
with the first net asset value purchase following the end of the prior period.
Such commissions are paid at the rate of 1.00% of the amount under $2.5 million,
0.75% of the next $7.5 million, 0.50% of the next $40 million and 0.20%
thereafter. On sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in the Vista Family of
Funds (including a plan with at least 50 eligible employees), the Fund's
distributor pays commissions during each one-year measuring period, determined
as described above, at the rate of 1.00% of the first $2 million, 0.80% of the
next $1 million and 0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, the Fund's distributor pays
commissions on the initial investment and on subsequent net quarterly sales at a
rate of 0.15%.
Class B Shares
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Class B shares are sold without an initial sales charge, although a
CDSC will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described in
"How to Buy Shares". For other shares, the amount of the charge is determined as
a percentage of the lesser of the current market value or the cost of shares
being redeemed.
Year 1 2 3 4 5 6 7 8+
- ----------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund
will first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. For this purpose, the amount of any increase in a
share's value above its initial purchase price is not regarded as a share exempt
from the CDSC. Thus, when a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of [4.00%] of the offering price on sales of Class B shares, and the
distributor receives the entire amount of any CDSC you pay. The Fund's
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for details
about Vista's combined purchase privilege, cumulative quantity discount,
statement of intention, group sales plan, employee benefit plans, and other
plans. Descriptions are also included in enclosed application and in the SAI.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes of
determining whether the plan may purchase Class A shares at net asset value.
These investments will also be included for purposes of the discount privileges
and programs described above.
The Fund may sell Class A and Class B shares at net asset value
without an initial sales charge or a CDSC to the current and retired Trustees
(and their families), current and retired employees (and their families) of
Chase, the Fund's distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and their
families) of broker-dealers having selected dealer agreements with the Fund's
distributor, employees (and their families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares) financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares
of the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family of
Funds, any qualified retirement plan with 50 or more participants, or an
individual participant in a tax-qualified plan making a tax-free rollover or
transfer of assets from the plan in which Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial
sales charge through an investment adviser or financial planner who charges a
fee for their services. Purchases of Class A shares of the Fund may be made with
no initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed through
an omnibus account with the Fund or (ii) by clients of such investment adviser
or financial planner who place trades for their own accounts, if such accounts
are linked to a
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<PAGE>
master account of such investment adviser or financial planner on the books and
records of the broker or agent. Such purchases may be made for retirement and
deferred compensation plans and trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial
sales charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary, provided that appropriate notification of such
fiduciary relationship is reported at the time of the investment to the Fund,
the Fund's distributor or the Vista Service Center.
Shareholders of record of any Vista Fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with no
initial sales charge for as long as they continue to own Class A shares of any
Vista fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell shares at net asset value without an initial sales
charge or a CDSC in connection with the acquisition by the Fund of assets of an
investment company or personal holding company and the CDSC will be waived on
redemption of shares arising out of death or disability or in connection with
certain withdrawals from IRA or other retirement plans. Up to 12% of the value
of Class B shares subject to a systematic withdrawal plan may also be redeemed
each year without a CDSC. The SAI contains additional information about
purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on
purchases without an initial sales charge at any time and may reject any such
purchase request.
Shareholders of other Vista funds may be entitled to exchange their
shares for, or reinvest distributions from their funds in, shares of the Fund at
net asset value.
How to Sell Shares
You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your investment
representative. The Fund will only redeem shares for which it has received
payment.
Selling shares directly to the Fund. Send a signed letter of
instruction to the Vista Service Center, along with any certificates that
represent shares you want to sell. The price you will receive is the next net
asset value calculated after the Fund receives your request in proper form, less
any applicable CDSC. In order to receive that day's net asset value, the Vista
Service Center must receive your request before the close of regular trading on
the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than
your address as it appears on Vista's records, a signature guarantee is
required. The Fund usually requires additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving joint
owner. Contact the Vista Service Center for details.
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<PAGE>
The Fund generally sends you payment for your shares the business
day after your request is received. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares
valued up to $100,000 from your account unless you have notified the Vista
Service Center of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For information, consult
the Vista Service Center.
During periods of unusual market changes and shareholder activity,
you may experience delays in contacting the Vista Service Center by telephone.
In this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $100 or
more monthly, quarterly, or semiannually from an account valued at $5,000 or
more ($10,000 for Class B accounts, not to exceed 12% per year).
Selling shares through your investment representative. Your
investment representative must receive your request before the close of regular
trading on the New York Stock Exchange to receive that day's net asset value.
Your investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Redemption of accounts of less than $500. The Fund may involuntarily
redeem your shares if at such time the aggregate net asset value of the shares
in your account is less than $500. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption. In the event the Fund
redeems Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain
other Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista fund
into which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market
funds other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption -- and therefore subject to the conditions of the CDSC
- -- and a subsequent purchase. Class B shares of any Vista non-money market Fund
may be exchanged into the Class B shares of the Vista Prime Money Market Fund in
order to continue the aging of the initial purchase of such shares.
-15-
<PAGE>
To exchange your shares, simply complete an Exchange Authorization
Form and send it to the Vista Service Center. The form is available from the
Vista Service Center. For federal income tax purposes, an exchange is treated as
a sale of shares and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to $500,000. The Vista
Service Center's procedures for telephone transactions are described under "How
to Sell Shares." The Telephone Exchange Privilege is not available if you were
issued certificates for shares that remain outstanding. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving a Fund in a year or three in a
calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined
once daily based upon prices determined as of the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time, however, options
are priced at 4:15 p.m.), on each business day of the Fund, by dividing the net
assets of the Fund attributable to that class by the total number of outstanding
shares of that class. Values of assets held by the Fund are determined on the
basis of their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The fund declares dividends daily and distributed any net investment
income at least monthly. The Fund distributes any net realized capital gains at
least annually. Distributions from capital gains are made after applying any
available capital loss carryovers. Distributions paid by the Fund with respect
to Class A shares will generally be greater than those paid with respect to
Class B shares because expenses attributable to Class B shares will generally be
higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash while reinvesting capital gains
distributions in additional shares without a sales charge; or (3) receive all
distributions in cash. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not paid
in cash will be reinvested in shares of the class on which the distributions are
paid. You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
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<PAGE>
If a check representing Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund
or in another Vista fund. If the Vista Service Center does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all of
its ordinary income and gains on a current basis. If the Fund does not qualify
as a regulated investment company for any taxable year or does not make such
distributions, the Fund will be subject to tax on all of its income and gains.
Distributions by the Fund of its tax-exempt interest income will not
be subject to federal income tax, but generally will be subject to state and
local taxes. However, to the extent paid out interest on New York Municipal
Obligations, such distributions will also be exempt from New York State and New
York City personal income taxes for a New York individual resident shareholder.
All other Fund distributions will be taxable as ordinary income,
except that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
treated in the same manner for federal income tax purposes whether received in
cash or in shares through the reinvestment of distributions.
Investors should be careful to consider the tax implications of
purchasing shares just prior to the next distribution date. Those investors
purchasing shares just prior to a distribution will be taxed on the entire
amount of the taxable distribution received, even though the net asset value per
share on the date of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount
and tax status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your tax adviser to
determine the precise effect of an investment in the Fund on your particular tax
situation (including possible liability for state and local taxes and, for
foreign shareholders, U.S. withholding taxes).
-17-
<PAGE>
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Broker-Dealer Services, Inc.
("VBDS"). VBDS is a subsidiary of The BISYS Group, Inc. and is unaffiliated with
Chase. The Trust has adopted a Rule 12b-1 distribution plans for Class A and
Class B shares which provide that the Fund will pay distribution fees at annual
rates of up to 0.25% and 0.75% annually of the average daily net assets
attributable to Class A and Class B shares of the Fund, respectively. Payments
under the distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to the
amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or maintenance commissions at an annual rate of up to
0.25% of the average daily net asset value of Class A or Class B shares
maintained in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended to
promote the sale of Class A and Class B shares will be conducted generally by
the Vista Family of Funds, and activities intended to promote the Fund's Class A
and Class B shares may also benefit the Fund's other shares and other Vista
funds.
VBDS may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; and occasional meal, ticket to
a sporting event or theater or entertainment for broker-dealers and their
guests; and payment or reimbursement for travel expenses, including lodging and
meals, in connection with attendance at training and educational meetings within
and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with
certain shareholder servicing agents (including Chase) under which the
shareholder servicing agents have agreed to provide certain support services to
their customers who beneficially own Class A or Class B shares of the Fund.
These services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to .25% of the average
daily net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a
fee computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VBDS provides certain sub-administrative services to the Fund
pursuant to its distribution and sub- administration agreement and is entitled
to receive a fee for these services from the Fund at an annual rate equal to
0.05% of the Fund's average daily net assets. VBDS has agreed to use a portion
of this fee to pay for certain
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<PAGE>
expenses incurred in connection with organizing new series of the Trust and
certain other ongoing expenses of the Trust. VBDS is located at 125 West 55th
Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for the Fund and
receives compensation under an agreement with the Trust. Fund securities and
cash may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its
pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees: registration
fees; interest charges; taxes; expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent accountants,
of legal counsel and of any transfer agent, registrar or dividend disbursing
agent of the Trust; insurance premiums; and expenses of calculating the net
asset value of, and the net income on, shares of the Fund. Shareholder servicing
and distribution fees are allocated to specific classes of the Fund. In
addition, the Fund may allocate transfer agency and certain other expenses by
class. Service providers to the Fund may, from time to time, voluntarily waive
all or a portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Trust, an open-end management
investment company organized as a Massachusetts business trust in 1994 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates
only to Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ for
each class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call 1-800-34-VISTA
to obtain additional information about other classes of shares of the Fund that
are offered. Any person entitled to receive compensation for selling or
servicing shares of the Fund may receive different levels of compensation with
respect to one class of shares over another.
The Trust is not required to hold annual meetings of shareholders
but will hold special meetings of shareholders of all series or classes when in
the judgment of the Trustees it is necessary or desirable to submit matters for
a shareholder vote. The Trustees will promptly call a meeting of shareholders to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of all outstanding shares of the Trust.
-19-
<PAGE>
Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting as
investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws. If
future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund's assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by the Fund. Chase has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the division
that performs services for the Fund as custodian, or in the possession of any
affiliate of Chase. Shareholders of the Fund should be aware that, subject to
applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholder and his
account. Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included
in advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing the
annualized net investment income calculated pursuant to federal rules per share
during a recent 30- day period by the maximum public offering price per share of
such class on the last day of that period. "Effective yield" is the "yield"
calculated assuming the reinvestment of income earned, and will be slightly
higher than the "yield" due to the compounding effect of this assumed
reinvestment. "Tax equivalent yield "is the yield that a taxable fund would have
to generate in order to produce an after-tax yield equivalent to the Fund's
yield. The tax equivalent yield of a taxable fund can then be compared to the
yield of the Fund.
"Total return" for the one-, five- and ten-year periods (or for the
life of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in the
Fund invested at the maximum public offering price (in the case of Class A
shares) or reflecting the deduction of any applicable contingent deferred sales
charge (in the case of Class B shares). Total return reflects the deduction
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<PAGE>
of the maximum initial sales charge in the case of Class A shares, but does not
reflect the deduction of any contingent deferred sales charge in the case of
Class B shares. Total return may also be presented for other periods or based on
investment at reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results
and does not predict future performance. Investment performance, which will
vary, is based on many factors, including market conditions, the composition of
the Fund's portfolio, the Fund's operating expenses and which class of shares
you purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
-21-
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund shareholder.
o SYSTEMATIC INVESTMENT PLAN - Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
o SYSTEMATIC WITHDRAWAL - Make regular withdrawals of $100 or more
monthly, quarterly, or semiannually from an account valued at $5,000
or more ($10,000 for Class B accounts).
o SYSTEMATIC EXCHANGE - Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
o FREE EXCHANGE PRIVILEGE - Exchange money between Vista funds in the
same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. A
signature guarantee is required for exchanges of more than $500,000.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
o REINSTATEMENT PRIVILEGE - Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not
in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares with no initial
sales charge (in an amount not in excess of their redemption
proceeds) if the purchase occurs within 90 days of the redemption of
the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
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<PAGE>
VISTA FAMILY OF FUNDS
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
Transfer Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
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<PAGE>
PROSPECTUS
VISTA[SM] CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS
OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary...............................................................
Financial Highlights..........................................................
Fund Objective................................................................
Investment Policies...........................................................
Management....................................................................
About Your Investment.........................................................
How to Buy, Sell and Exchange Shares..........................................
How the Fund Values its Shares................................................
How Distributions are Made; Tax Information...................................
Other Information Concerning the Fund.........................................
Performance Information.......................................................
Make the Most of Your Vista Privileges........................................
-2-
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs and estimated annual
expenses from investing in shares of the Fund based on expenses incurred in the
most recent fiscal year. The examples show the cumulative expenses attributable
to a hypothetical $1,000 investment over specified periods.
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)...................................... 4.50%
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)................................... None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver)(*)...................... 0.00%
12b-1 Fee (after estimated waiver) (*)(**)............................... 0.00%
Shareholder Servicing Fee (after estimated waiver)(*).................... 0.00%
Other Expenses (after estimated waiver)(*)............................... 0.60%
Total Fund Operating Expenses (after waiver of fee)(*)................... 0.60%
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares(+).............. $51 $63 $77 $117
- -----------------------
* Reflects current waiver arrangement to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such
waivers, the Investment Advisory Fee, 12b-1 Fee, Shareholder
Servicing fee, and Other Expenses would be 0.30%, 0.25%, 0.25% and
0.70%, respectively, and Total Fund Operating Expenses would be
1.50% of average net assets.
** Long-term shareholders in mutual funds with 12b-1 fee may pay more
than the economic equivalent of the maximum front-end sales charge
permitted by rules of the National Association of Securities
Dealers, Inc.
("NASD").
+ Assumes deduction at the time of purchase of the maximum sales
charge, as applicable.
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses that the Fund
incurs. The examples should not be considered representations of past or future
expenses or returns; actual expenses and returns may be greater or less than
shown.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder
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<PAGE>
Servicing Agents may credit to the accounts of their customers from whom they
are already receiving other fees amounts not exceeding such other fees or the
fees received by the Shareholder Servicing Agent from the Fund with respect to
those accounts. See "Other Information Concerning the Fund."
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<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for shares. This information has been audited by Price Waterhouse LLP,
the Fund's independent accountants, whose report on the financial statements
which includes this information and the financial statements are incorporated by
reference into this Prospectus. The Fund's Annual Report for the fiscal year
ended October 31, 1995 includes these financial statements and is available
without charge upon request.
CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
<TABLE>
<CAPTION>
9/1/94 11/1/93 7/15/93*
through through through
8/31/95 8/31/94+ 10/31/93
------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period............................. $ 9.69 $ 10.30 $ 10.22
-------- -------- -------
Income From Investment Operations
Net Investment Income................................ 0.505 0.320 0.166
Net Gains or Losses in Securities (both realized and
unrealized)........................................ 0.200 (0.408) 0.081
-------- -------- -------
Total from Investment Operations..................... 0.705 (0.088) 0.247
-------- -------- -------
Less Distributions
Dividends from net investment income............................. 0.505 0.404 0.165
Distributions from capital gains................................. -- 0.118 --
-------- -------- -------
Total distributions.............................................. 0.505 0.522 0.165
-------- -------- -------
Net Asset Value, End of Period................................... $ 9.89 $ 9.69 $ 10.30
======== ======== =======
Total Return(1).................................................. 7.55% (0.86%) 2.42%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).............. $32,746 $36,264 $41,728
Ratio of Expenses to Average Net Assets+#............ 0.52% 0.52% 0.52%
Ratio of Net Investment Income to
Average Net Assets#................................ 5.24% 4.88% 4.83%
Ratio of expenses without waivers and assumption of
expenses to average net assets+#..................... 1.40% 1.37% 1.33%
Ratio of net investment income without waivers
and assumption of expenses to average net
assets+#........................................... 4.36% 4.03% 4.02%
Portfolio Turnover Rate.......................................... 94% 93% 40%
</TABLE>
- ---------------
(1) Total return figure does not include the effect of any front-end
sales load.
# Periods less than one year have been annualized.
* Commencement of offering shares.
+ In 1994 the California Intermediate Tax Free Income Fund changed
its fiscal year-end from October 31 to August 31.
-5-
<PAGE>
OBJECTIVE
Vista California Intermediate Tax Free Income Fund seeks to provide
current income exempt from federal and California personal income taxes. The
Fund is not intended to be a complete investment program, and there is no
assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund invests primarily in California Municipal Obligations (as
defined under "Municipal Obligations"). As a fundamental policy, under normal
market conditions, the Fund will have at least 80% of its assets in California
Municipal Obligations or in securities of territories and political subdivisions
of the U.S. Government the interest on which is deemed to be exempt from
federal, state and local income taxes. The Fund reserves the right under normal
market conditions to invest up to 20% of its total assets in securities which
constitute a preference item which would be subject to the alternative minimum
tax for noncorporate investors ("AMT Items") or securities the interest on which
is subject to federal and California personal income taxes. For temporary
defensive purposes, the Fund may exceed this limitation.
The Fund's investments may include, among other instruments, fixed,
variable or floating rate general obligation and revenue bonds, zero coupon
securities, inverse floaters and bonds with interest rate caps. The Fund's
Municipal Obligations will be rated at time of purchase at least in the category
BBB or SP-3 by Standard & Poor's Corporation ("S&P"), Baa, MIG-3 or VMIG-3 by
Moody's Investor's Services, Inc. ("Moody's"), BBB or FIN-3 by Fitch Investor's
Services, Inc. ("Fitch") or comparably rated by another national rating
organization, or, if unrated, considered by the Fund's advisors to be of
comparable quality.
The Fund's investments have an average maturity of 10 years or less.
The Fund's advisers may adjust the average maturity of the Fund's portfolio
based upon their assessment of the relative yields available on securities of
different maturities and their expectations of future changes in interest rates.
The Fund is classified as a "non-diversified" fund under federal
securities law. The Fund's assets may be more concentrated in the securities of
any single issuer or group of issuers than if the Fund were diversified.
Municipal Obligations
"Municipal Obligations" are obligations issued by or on behalf of
states, territories and possessions of the United States, and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which,
in the opinion of bond counsel, is exempt from federal income taxes (without
regard to whether the interest thereon is also exempt from the personal income
taxes of any state or whether the interest thereon constitutes a preference item
for purposes of the federal alternative minimum tax). "California Municipal
Obligations" are obligations of the State of California, its local governments
and political subdivisions, the interest on which, in the opinion of bond
counsel, is exempt from federal income taxes and California personal income
taxes and is not subject to the alternative minimum tax for noncorporate
investors. Municipal Obligations are issued to obtain funds for various public
purposes, such as the construction of public facilities, the payment of general
operating expenses or the refunding of outstanding debts. They may also be
issued to finance various private activities, including the lending of funds to
public or private institutions for the construction of housing, educational or
medical facilities, and may include certain types of industrial development
bonds, private activity bonds or notes issued by public authorities to finance
privately owned or operated facilities, or to fund short-term cash requirements.
Short-term Municipal Obligations may be issued as interim financing in
anticipation of tax collections, revenue receipts or bond sales to finance
various public purposes.
The two principal classifications of Municipal Obligations are
general obligation and special obligation (or special revenue obligation)
securities. General obligation securities involve a pledge of the credit of an
issuer possessing taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may
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depend on an appropriation by the issuer's legislative body. The characteristics
and methods of enforcement of general obligation securities vary according to
the law applicable to the particular issuer. Special obligation (or special
revenue obligation) securities are payable only from the revenues derived from a
particular facility or class of facilities, or a specific revenue source, and
generally are not payable from the unrestricted revenues of the issuer.
Industrial development bonds and private activity bonds are in most cases
special obligation securities, the credit quality of which is directly related
to the private user of the facilities.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental issuers such as hospitals or airports,
provided, however, that the Fund may not invest more than 25% of the value of
its total assets in such bonds if the issuers are in the same industry.
Municipal Lease Obligations. The Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment payments in future years unless money is later appropriated for such
purpose. The Fund will limit its investments in non-appropriation leases to 10%
of its assets.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or
high-quality, short-term money market instruments. Such instruments may include
U.S. Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
U.S. Government Obligations. The Fund may invest in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
Repurchase Agreements and Forward Commitments. The Fund may enter
into agreements to purchase and resell securities at an agreed-upon price and
time. The Fund may purchase securities for future delivery, which may increase
its overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Fund would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to the
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
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STRIPS and Zero Coupon Obligations. The Fund may invest up to 20% of
its total assets in separately traded principal and interest components of
securities backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". The Fund may also invest in zero coupon
obligations. Zero coupon obligations are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. The value of STRIPS and zero coupon obligations tends to
fluctuate more in response to changes in interest rates than the value of
ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates.
The Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
Participation certificates are pro rata interests in securities held by others;
certificates of indebtedness or safekeeping are documentary receipts for such
original securities held in custody by others. As a result of the variable rate
nature of these investments, the Fund's yield may decline and it may forego the
opportunity for capital appreciation during periods when interest rates decline;
however, during periods when interest rates increase, the Fund's yield may
increase and it may have reduced risk of capital depreciation. Demand features
on certain variable rate securities may obligate the Fund to pay a "tender fee"
to a third party. Demand features provided by foreign banks involve certain
risks associated with foreign investments. The Internal Revenue Service has not
ruled on whether interest on participations in variable rate municipal
obligations is tax exempt and the Fund would purchase such instruments based on
opinions of bond counsel.
Inverse Floaters and Interest Rate Caps. The Fund may invest in
inverse floaters and in bonds with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate bond. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than municipal bonds which do not include such a structure.
Other Money Market Funds. The Fund may invest up to 10% of its total
assets in shares of other money market funds, subject to applicable regulatory
limitations. The Fund is authorized to seek to achieve its objective by
investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
Derivatives and Related Instruments. The Fund may invest its assets
in derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; and (iv)
purchase and sell structured products, which are instruments designed to
restructure or reflect the characteristics of certain other investments.
There are a number of risks associated with the use of derivatives
and related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers to
forecast these factors correctly. Incorrect forecasts could expose the Fund to a
risk of loss. There can be no guarantee that there will be a correlation between
price movements in a hedging instrument and in the portfolio assets being
hedged. The Fund is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Fund than
hedging strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Fund seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage,
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"program trading," and other investment strategies may cause price distortions
in derivatives markets. In certain instances, particularly those involving
over-the-counter transactions or forward contracts, there is a greater potential
that a counterparty or broker may default. In the event of a default, the Fund
may experience a loss. For additional information concerning derivatives,
related instruments and the associated risks, see the SAI.
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment
risks for its shareholders. These restrictions prohibit the Fund from: (a)
investing more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of Trustees);
or (b) investing more than 25% of its total assets in any one industry (this
would apply to municipal obligations backed only by the assets and revenues of
nongovernmental users, but excludes municipal obligations secured by bank
letters of credit or guarantees). A complete description of these and other
investment policies is included in the SAI. Except for restriction (b) above and
investment policies designated as fundamental above or in the SAI, the Fund's
investment policies (including its objective) are not fundamental. The Trustees
may change any non-fundamental investment policy without shareholder approval.
Risk Factors
Changes in interest rates may affect the value of the obligations
held by the Fund. The value of fixed income securities varies inversely with
changes in prevailing interest rates. For a discussion of certain other risks
associated with the Fund's additional investment activities, see "Other
Investment Practices" and "Municipal Obligations."
Because the Fund will invest primarily in obligations issued by the
State of California and its cities, public authorities and other municipal
issuers, the Fund is susceptible to factors affecting the State of California
and its municipal issuers. The State of California and certain California
counties have a recent history of significant financial and fiscal difficulties.
California's Orange County recently defaulted on certain of its indebtedness. If
the State of California or any of its local government entities is unable to
meet its financial obligations, the income derived by the Fund and the Fund's
ability to preserve capital and liquidity could be adversely affected. See
the SAI for further information.
Interest on certain Municipal Obligations (including certain
industrial development bonds), while exempt from federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a mutual
fund receives such interest, a proportionate share of any exempt-interest
dividend paid by the mutual fund may be treated as such a preference item to
shareholders. Federal tax legislation enacted over the past few years has
limited the types and volume of bonds which are not AMT Items and the interest
on which is not subject to federal income tax. This legislation may affect the
availability of Municipal Obligations for investment by the Fund.
The Fund may invest without limitation in Municipal Obligations
secured by letters of credit or guarantees from U.S. and foreign banks, and
other foreign institutions. The dependence on banking institutions may involve
certain credit risks, such as defaults or downgrades, if at some future date
adverse economic conditions prevail in such industries. U.S. banks are subject
to extensive governmental regulations which may limit both the amount and types
of loans which may be made and interest rates which may be charged. In addition,
the profitability of the banking industry is largely dependent upon the
availability and cost of funds for the purpose of financing lending operations
under prevailing money market conditions. General economic conditions as well as
exposure to credit losses arising from possible financial difficulties of
borrowers play an important part in the operations of this industry.
Obligations backed by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable domestic obligations, the possible
imposition of withholding taxes on interest income, the possible seizure or
nationalization of foreign assets, and the possible establishment of exchange
controls or other restrictions. In
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addition, there may be less publicly available information concerning foreign
issuers, there may be difficulties in obtaining or enforcing a judgment against
a foreign issuer (including branches). and accounting, auditing and financial
reporting standards and practices may differ from those applicable to U.S.
issuers. In addition, foreign banks are not subject to regulations comparable to
U.S. banking regulations.
Because the Fund is "non-diversified," the value of its shares is
more susceptible to developments affecting issuers in which the Fund invests. In
addition, more than 25% of the Fund's assets may be invested in securities to be
paid from revenue of similar projects, which may cause the Fund to be more
susceptible to similar economic, political, or regulatory developments,
particularly in light of the fact that of the issuers in which the Fund invest
will generally are likely to be located in the State of California.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Fund pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly at an
annual rate equal to 0.30% of the Fund's average daily net assets. Chase is
located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is the sub-investment adviser to the Fund pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of Chase. CAM makes investment decisions for the Fund on a day-to-day
basis. For these services, CAM receives a fee, payable by Chase from its
advisory fee, in a mutually agreed amount. CAM was recently formed for the
purpose of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York, New
York 10036.
Pamela Hunter has been responsible for the day-to-day management of
the Fund since its inception. Ms. Hunter is part of a team providing fixed
income strategy and product development. Ms. Hunter has been employed at Chase
(including its predecessors) since 1980.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a fund account with as little as $2,500 ($1,000 for
IRAs and SEP-IRAs) and make additional investments at any time with as little as
$100. You can buy fund shares three ways-through an investment representative,
through the Fund's distributor by calling the Vista Service Center, or through a
systematic investment plan.
All purchases made by check should be in U.S. dollars and made
payable to the Vista Funds. Third party checks, except those payable to an
existing shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. The Fund reserves the
right to reject any purchase order or cease offering shares for purchase at any
time. When purchases are made by check, redemptions will not be allowed until
the investment being redeemed has been in the account for 15 business days. In
addition, the redemption of shares through a Systematic Investment Plan will not
be allowed for 7 calendar days.
Buying shares through the Fund's distributor. Complete and return
the enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
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Buying shares through systematic investing. You can make regular
investments of $100 or more per month through automatic deduction from your bank
checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current shareholders may begin such a plan at any time by sending a
signed letter with signature guarantee to the Vista Service Center. Call the
Vista Service Center at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset
value next determined after the Vista Service Center receives your order. In
most cases, in order to receive that day's public offering price, the Vista
Service Center must receive your order before the close of regular trading on
the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you should pay for
those shares with a certified check to avoid any delay in redemption, exchange
or transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
An investor who purchases shares pays a sales charge at the time of
purchase. As a result, shares are not subject to any sales charges when they are
redeemed. Certain purchases of shares qualify for reduced sales charges. See
"How to Buy, Sell and Exchange Shares" and "Other Information Concerning the
Fund."
The public offering price of shares is the net asset value plus a
sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Sales charge as a
percentage of:
Amount of sales charge
Amount of transaction at Offering Net amount reallowed to dealers as a
offering price($) price invested percentage of offering price
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under 100,000 4.50 4.71 4.00
- ---------------------------------------------------------------------------------------------
100,000 but under 250,000 3.75 3.90 3.25
- ---------------------------------------------------------------------------------------------
250,000 but under 500,000 2.50 2.56 2.25
- ---------------------------------------------------------------------------------------------
500,000 but under 1,000,000 2.00 2.04 1.75
- ---------------------------------------------------------------------------------------------
</TABLE>
There is no initial sales charge on purchases of shares of $1
million or more.
Except as stated below, the Fund's distributor pays broker-dealers
commissions on sales of shares of $1 million or more based on an investor's
cumulative purchases (excluding money market funds) during the one-year period
beginning with the date of the initial purchase at net asset value. Each
subsequent one-year measuring period for these purposes will begin with the
first net asset value purchase following the end of the prior period. Such
commissions are paid at the rate of 1.00% of the amount under $2.5 million,
0.75% of the next $7.5 million, 0.50% of the next $40 million and 0.20%
thereafter. On sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in the Vista Family of
Funds (including a plan with at least 50 eligible employees), the Fund's
distributor pays commissions during each one-year measuring period, determined
as described above, at the rate of 1.00% of the first $2 million, 0.80% of the
next $1 million and 0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, the Fund's distributor pays
commissions on the initial investment and on subsequent net quarterly sales at a
rate of 0.15%.
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General
You may be eligible to buy shares at reduced sales charges. Consult
your investment representative or the Vista Service Center for details about
Vista's combined purchase privilege, cumulative quantity discount, statement of
intention, group sales plan, employee benefit plans, and other plans.
Descriptions are also included in enclosed application and in the SAI.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes of
determining whether the plan may purchase shares at net asset value. These
investments will also be included for purposes of the discount privileges and
programs described above.
The Fund may sell shares at net asset value without an initial sales
charge to the current and retired Trustees (and their families), current and
retired employees (and their families) of Chase, the Fund's distributor and
transfer agent or any affiliates or subsidiaries thereof, registered
representatives and other employees (and their families) of broker-dealers
having selected dealer agreements with the Fund's distributor, employees (and
their families) of financial institutions having selected dealer agreements with
the Fund's distributor (or otherwise having an arrangement with a broker-dealer
or financial institution with respect to sales of Vista fund shares) financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of tax-qualified
plans when proceeds from repayments of loans to participants are invested (or
reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of shares of the
Fund by an investor seeking to invest the proceeds of a qualified retirement
plan where a portion of the plan was invested in the Vista Family of Funds, any
qualified retirement plan with 50 or more participants, or an individual
participant in a tax-qualified plan making a tax-free rollover or transfer of
assets from the plan in which Chase or an affiliate serves as trustee or
custodian of the plan or manages some portion of the plan's assets.
Purchases of shares of the Fund may be made with no initial sales
charge through an investment adviser or financial planner who charges a fee for
their services. Purchases of shares of the Fund may be made with no initial
sales charge (i) by an investment adviser, broker or financial planner, provided
arrangements are preapproved and purchases are placed through an omnibus account
with the Fund or (ii) by clients of such investment adviser or financial planner
who place trades for their own accounts, if such accounts are linked to a master
account of such investment adviser or financial planner on the books and records
of the broker or agent. Such purchases may be made for retirement and deferred
compensation plans and trusts used to fund those plans.
Purchases of shares of the Fund may be made with no initial sales
charge in accounts opened by a bank, trust company or thrift institution which
is acting as a fiduciary, provided that appropriate notification of such
fiduciary relationship is reported at the time of the investment to the Fund,
the Fund's distributor or the Vista Service Center.
Shareholders of record of any Vista Fund as of November 30, 1990 and
certain immediate family members may purchase shares of the Fund with no initial
sales charge for as long as they continue to own [Class A] shares of any Vista
fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase shares
of the Fund with no initial sales charge for as long as they continue to own
shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company. The SAI contains additional information
about purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on
purchases without an initial sales charge at any time and may reject any such
purchase request.
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<PAGE>
Shareholders of other Vista funds may be entitled to exchange their
shares for, or reinvest distributions from their funds in, shares of the Fund at
net asset value.
How to Sell Shares
You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your investment
representative. The Fund will only redeem shares for which it has received
payment.
Selling shares directly to the Fund. Send a signed letter of
instruction to the Vista Service Center, along with any certificates that
represent shares you want to sell. The price you will receive is the next net
asset value calculated after the Fund receives your request in proper form. In
order to receive that day's net asset value, the Vista Service Center must
receive your request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than
your address as it appears on Vista's records, a signature guarantee is
required. The Fund usually requires additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving joint
owner. Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the business
day after your request is received. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares
valued up to $100,000 from your account unless you have notified the Vista
Service Center of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For information, consult
the Vista Service Center.
During periods of unusual market changes and shareholder activity,
you may experience delays in contacting the Vista Service Center by telephone.
In this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $100 or
more monthly, quarterly, or semiannually from an account valued at $5,000 or
more.
Selling shares through your investment representative. Your
investment representative must receive your request before the close of regular
trading on the New York Stock Exchange to receive that day's net asset value.
Your investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
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<PAGE>
Redemption of accounts of less than $500. The Fund may involuntarily
redeem your shares if at such time the aggregate net asset value of the shares
in your account is less than $500. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain
other Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista fund
into which shares are being exchanged should be read carefully and retained for
future reference.
To exchange your shares, simply complete an Exchange Authorization
Form and send it to the Vista Service Center. The form is available from the
Vista Service Center. For federal income tax purposes, an exchange is treated as
a sale of shares and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to $500,000. The Vista
Service Center's procedures for telephone transactions are described under "How
to Sell Shares." The Telephone Exchange Privilege is not available if you were
issued certificates for shares that remain outstanding. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving a Fund in a year or three in a
calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next determined
subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption).
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined
once daily based upon prices determined as of the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time, however, options
are priced at 4:15 p.m.), on each business day of the Fund, by dividing the net
assets of the Fund attributable to that class by the total number of outstanding
shares of that class. Values of assets held by the Fund are determined on the
basis of their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains at
lease annually. Distributions from capital gains are made after applying any
available capital loss carryovers.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash while reinvesting capital gains
distributions in additional shares without a sales charge; or (3) receive all
distributions in cash. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not paid
in cash will be reinvested in shares of the class on which the distributions are
paid. You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
-14-
<PAGE>
If a check representing Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund
or in another Vista fund. If the Vista Service Center does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all of
its income and gains on a current basis. If the Fund does not qualify as a
regulated investment company for any taxable year or does not make such
distributions, the Fund will be subject to tax on all of its income and gains.
Distributions by the Fund of its tax-exempt interest income will not
be subject to federal income tax, but generally will be subject to state and
local taxes. However, to the extent paid out of interest on California Municipal
Obligations, such distributions will also be exempt from California personal
income taxes for a California individual resident shareholder.
All other Fund distributions will be taxable to you as ordinary
income, except that any distributions of net long-term capital gains will be
taxable as such, regardless of how long you have held the shares. Distributions
will be treated in the same manner for federal income tax purposes whether
received in cash or in shares through the reinvestment of distributions.
Investors should be careful to consider the tax implications of
purchasing shares just prior to the next distribution date. Those investors
purchasing shares just prior to a distribution will be taxed on the entire
amount of the taxable distribution received, even though the net asset value per
share on the date of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount
and tax status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your tax adviser to
determine the precise effect of an investment in the Fund on your particular tax
situation (including possible liability for state and local taxes and, for
foreign shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plan
The Fund's distributor is Vista Broker-Dealer Services, Inc.
("VBDS"). VBDS is a subsidiary of The BISYS Group, Inc. and is unaffiliated with
Chase. The Trust has adopted a Rule 12b-1 distribution plan which provides that
the Fund will pay distribution fees at annual rates of up to 0.25% annually of
the average daily net assets attributable to shares of the Fund. Payments under
the distribution plan shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of shares, and are not tied to the amount of actual
expenses incurred. Payments may be used to compensate broker-dealers with trail
or maintenance commissions at an annual rate of up to 0.25% of the average daily
net asset value of shares maintained in the Fund by customers of these
broker-dealers. Trail or maintenance commissions are paid to broker-dealers
beginning the 13th month following the purchase of shares by their customers.
Some activities intended to promote the sale of shares will be conducted
generally by the Vista Family of Funds, and activities intended to promote the
Fund's shares may also benefit the Fund's other shares and other Vista funds.
VBDS may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement
-15-
<PAGE>
for travel expenses, including lodging and meals, in connection with attendance
at training and education meetings within and outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with
certain shareholder servicing agents (including Chase) under which the
shareholder servicing agents have agreed to provide certain support services to
their customers who beneficially own shares of the Fund. These services include
assisting with purchase and redemption transactions, maintaining shareholder
accounts and records, furnishing customer statements, transmitting shareholder
reports and communications to customers and other similar shareholder liaison
services. For performing these services, each shareholder servicing agent
receives an annual fee of up to 0.25% of the average daily net assets of shares
of the Fund held by investors for whom the shareholder servicing agent maintains
a servicing relationship. Shareholder servicing agents may subcontract with
other parties for the provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding the fees for
their services as shareholder servicing agents.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a
fee computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VBDS provides certain sub-administrative services to the Fund
pursuant to its distribution and sub- administration agreement and is entitled
to receive a fee for these services from the Fund at an annual rate equal to
0.05% of the Fund's average daily net assets. VBDS has agreed to use a portion
of this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VBDS is
located at 125 West 55th Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for the Fund and
receives compensation under an agreement with the Trust. Fund securities and
cash may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its
pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees: registration
fees; interest charges; taxes; expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent accountants,
of legal counsel and of any transfer agent, registrar or dividend disbursing
agent of the Trust; insurance premiums; and expenses of calculating the net
asset value of, and the net income on, shares of the Fund. Shareholder servicing
and distribution fees are allocated to specific classes of the Fund. In
addition, the Fund may allocate transfer agency and certain other expenses by
class. Service providers to the Fund may, from time to time, voluntarily waive
all or a portion of any fees to which they are entitled.
-16-
<PAGE>
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Trust, an open-end management
investment company organized as a Massachusetts business trust in 1994 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates
only to shares of the Fund. The Fund offers other classes of shares in addition
to these classes. The categories of investors that are eligible to purchase
shares and minimum investment requirements may differ for each class of Fund
shares. In addition, other classes of Fund shares may be subject to differences
in sales charge arrangements, ongoing distribution and service fee levels, and
levels of certain other expenses, which will affect the relative performance of
the different classes. Investors may call 1-800-34-VISTA to obtain additional
information about other classes of shares of the Fund that are offered. Any
person entitled to receive compensation for selling or servicing shares of the
Fund may receive different levels of compensation with respect to one class of
shares over another.
The Trust is not required to hold annual meetings of shareholders
but will hold special meetings of shareholders of all series or classes when in
the judgment of the Trustees it is necessary or desirable to submit matters for
a shareholder vote. The Trustees will promptly call a meeting of shareholders to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting as
investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws. If
future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund's assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an
-17-
<PAGE>
underwriting syndicate in which Chase or an affiliate is a non-principal member.
This restriction may limit the amount or type of U.S. Government obligations,
municipal obligations or commercial paper available to be purchased by the Fund.
Chase has informed the Fund that in making its investment decisions, it does not
obtain or use material inside information in the possession of any other
division or department of Chase, including the division that performs services
for the Fund as custodian, or in the possession of any affiliate of Chase.
Shareholders of the Fund should be aware that, subject to applicable legal or
regulatory restrictions, Chase and its affiliates may exchange among themselves
certain information about the shareholder and his account. Transactions with
affiliated broker-dealers will only be executed on an agency basis in accordance
with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included
in advertisements about the Fund. "Yield" is calculated by dividing the
annualized net investment income calculated pursuant to federal rules per share
during a recent 30-day period by the maximum public offering price per share of
such class on the last day of that period. "Effective yield" is the "yield"
calculated assuming the reinvestment of income earned, and will be slightly
higher than the "yield" due to the compounding effect of this assumed
reinvestment. "Tax equivalent yield "is the yield that a taxable fund would have
to generate in order to produce an after-tax yield equivalent to the Fund's
yield. The tax equivalent yield of a taxable fund can then be compared to the
yield of the Fund.
"Total return" for the one-, five- and ten-year periods (or for the
life of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in the
Fund invested at the maximum public offering price. Total return reflects the
deduction of the maximum initial sales charge. Total return may also be
presented for other periods or based on investment at reduced sales charge
levels. Any quotation of investment performance not reflecting the maximum
initial sales charge or contingent deferred sales charge would be reduced if
such sales charges were used.
All performance data is based on the Fund's past investment results
and does not predict future performance. Investment performance, which will
vary, is based on many factors, including market conditions, the composition of
the Fund's portfolio, the Fund's operating expenses and which class of shares
you purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
-18-
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund shareholder.
o SYSTEMATIC INVESTMENT PLAN - Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
o SYSTEMATIC WITHDRAWAL - Make regular withdrawals of $100 or more
monthly, quarterly, or semiannually from an account valued at $5,000
or more.
o SYSTEMATIC EXCHANGE Transfer - assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
o FREE EXCHANGE PRIVILEGE - Exchange money between Vista funds in the
same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. A
signature guarantee is required for exchanges of more than $500,000.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
o REINSTATEMENT PRIVILEGE - Shareholders have a one time privilege of
reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the
redemption, accompanied by payment for the shares (not in excess of
the redemption).
For more information about any of these services and privileges,
call your shareholder servicing agent, investment representative or the Vista
Service Center at 1-800-34-VISTA. These privileges are subject to change or
termination.
-19-
<PAGE>
VISTA FAMILY OF FUNDS
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
Transfer Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
-20-
<PAGE>
PROSPECTUS
VISTA[SM] TAX FREE INCOME FUND
Class A and B Shares
May 6, 1996
Investment Strategy: Income
This Prospectus explains concisely what you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about the Fund in its May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS
OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN
BANK OR ANY OF ITS AFFILIATES AND ARE NOT INSURED BY, OBLIGATIONS OF OR
OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary...............................................................
Financial Highlights..........................................................
Fund Objectives...............................................................
Investment Policies...........................................................
Management....................................................................
About Your Investment.........................................................
How to Buy, Sell and Exchange Shares..........................................
How the Fund Values its Shares................................................
How Distributions are Made; Tax Information...................................
Other Information Concerning the Fund.........................................
Performance Information.......................................................
Make the Most of Your Vista Privileges........................................
-2-
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs and estimated annual
expenses from investing in the Fund based on expenses incurred in the most
recent fiscal year. The examples show the cumulative expenses attributable to a
hypothetical $1,000 investment over specified periods.
Class A Class B
Shareholder Transaction Expenses Shares Shares
------ ------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).......................... 4.50% None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)(*).................... None 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver) (**)........ 0.15% 0.15%
12b-1 Fee(***)............................................... 0.25% 0.75%
Shareholder Servicing Fee (after estimated waiver) (**)...... 0.00% 0.25%
Other Expenses .............................................. 0.50% 0.50%
Total Fund Operating Expenses (after waiver of fee) (**)..... 0.90% 1.65%
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares(+)................ $54 $72 $91 $142
Class B Shares:
Assuming complete
redemption at the
end of the
period(++)(+++)............... $68 $85 $113 $166
Assuming no
redemptions (+++)............. $17 $52 $90 $166
- -----------------------
-3-
<PAGE>
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge
generally declines by 1% annually thereafter (except in the fourth
year), reaching zero after six years. See "How to Buy, Sell and
Exchange Shares."
** Reflects current waiver arrangements to maintain Total Fund
Operating Expenses at the levels indicated in the table above.
Absent such waivers, the Investment Advisory Fee and Shareholder
Servicing Fee would be 0.30% and 0.25%, respectively, for Class A
and Class B shares, and Total Fund Operating Expenses would be 1.30%
and 1.80% for Class A and Class B shares, respectively, of average
net assets.
*** Long-term shareholders in mutual funds with 12b-1 fees, such as
Class A and Class B shareholders of the Fund, may pay more than the
economic equivalent of the maximum front-end sales charge permitted
by rules of the National Association of Securities Dealers, Inc.
("NASD").
+ Assumes deduction at the time of purchase of the maximum sales
charge, as applicable.
++ Assumes deduction at the time of redemption of the maximum
applicable deferred sales charge.
+++ Ten-year figures assume conversion of Class B shares to Class A
shares at the beginning of the ninth year. See "How to Buy, Sell and
Exchange Shares".
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses that the Fund
incurs. The examples should not be considered representations of past or future
expenses or returns; actual expenses and returns may be greater or less than
shown.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund."
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for both Class A and Class B shares. The information for each of the five
years in the period ended October 31, 1995 has been audited by Price Waterhouse
LLP, the Fund's independent accountants, whose report on the financial
statements which includes this information and the financial statements are
incorporated by reference into this Prospectus. The Fund's Annual Report for the
fiscal year ended October 31, 1995 includes these financial statements and is
available without charge upon request.
VISTA TAX FREE INCOME FUND
<TABLE>
<CAPTION>
Year 11/4/93** Year 11/1/93
ended through ended through Year ended October 31,
8/31/95 8/31/94+ 8/31/95 8/31/94+ ---------------------------------------
------- -------- ------- -------- 1993 1992 1991 1990
Class B Class B Class A Class A Class A Class A Class A Class A
Shares Shares Shares Shares Shares Shares Shares Shares
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........... $11.65 $12.51 $11.70 $12.70 $11.52 $11.12 $10.43 $10.58
------ ------ ----- ------ ----- ----- ----- ------
Income from Investment Operations:
Net Investment Income..................... 0.498 0.423 0.585 0.475 0.662 0.731 0.727 0.723
Net Gains or Losses in Securities (both
realized and unrealized)................ 0.140 (0.707) 0.147 (0.847) 1.412 0.556 0.693 (0.094)
------ ------ ----- ------ ----- ----- ----- ------
Total from Investment Operations.......... 0.638 (0.284) 0.732 (0.372) 2.074 1.287 1.420 0.629
------ ------ ----- ------ ----- ----- ----- ------
Less Distributions:
Dividends from net investment income...... 0.518 0.423 0.582 0.475 0.662 0.731 0.726 0.726
Distributions from capital gains.......... - 0.153 - 0.153 0.237 0.156 - 0.055
------ ------ ------- ------ ------- ------- ------- -------
Total Distributions....................... 0.518 0.576 0.582 0.628 0.899 0.887 0.726 0.781
----- ----- ----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................. $11.77 $11.65 $11.85 $11.70 $12.70 $11.52 $11.12 $10.43
====== ====== ====== ====== ====== ====== ====== ======
Total Return(1)................................ 5.70% (2.35%) 6.53% (2.99%) 18.72% 11.99% 13.98% 6.18%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted)... $14,265 $11,652 $88,783 $98,054 $83,672 $17,548 $5,425 $3,973
Ratio of Expenses to Average Net Assets... 1.61% 1.47%# 0.85% 0.58%# 0.23% 0.00% 0.04% 0.12%
Ratio of Net Income to Average Net Assets. 4.31% 3.95%# 5.07% 4.75%# 5.25% 6.26% 6.71% 6.86%
Ratio of expenses without waivers and
assumption of expenses to Average Net
Assets.................................. 1.97% 1.81%# 1.47% 1.29% 1.20% 2.34% 4.04% 2.50%
Ratio of net investments income without
waivers and assumption of expenses to
Average Net Assets...................... 3.95% 3.61%# 4.45% 4.03%# 4.28% 3.92% 2.71% 4.48%
Portfolio Turnover Rate................... 233% 258% 233% 258%# 149% 266% 211% 89%
</TABLE>
<TABLE>
<CAPTION>
Year ended
October 31, 9/4/87*
---------------- to
1989 1988 10/31/87
Class A Class A Class A
Shares Shares Shares
------ ------ ------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period.......................... $10.63 $10.08 $10.00
----- ----- -----
Income from Investment Operations:
Net Investment Income.................................... 0.756 0.738 0.059
Net Gains or Losses in Securities (both
realized and unrealized)............................... 0.006 0.603 0.021
----- ----- -----
Total from Investment Operations......................... 0.762 1.341 0.080
----- ----- -----
Less Distributions:
Dividends from net investment income..................... 0.759 0.791 -
Distributions from capital gains......................... 0.053 - -
------ ------ ------
Total Distributions...................................... 0.812 0.791 -
----- ----- ------
Net Asset Value, End of Period................................ $10.58 $10.63 $10.08
====== ====== ======
Total Return(1)............................................... 7.48% 13.83% 5.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted).................. $3,196 $1,197 $101
Ratio of Expenses to Average Net Assets.................. 0.00% 0.00% 0.00%#
Ratio of Net Income to Average Net Assets................ 7.06% 7.50% 7.35%#
Ratio of expenses without waivers and
assumption of expenses to Average Net
Assets................................................. 2.50% 2.00% 2.00%#
Ratio of net investments income without
waivers and assumption of expenses to
Average Net Assets..................................... 4.56% 5.50% 5.35%#
Portfolio Turnover Rate.................................. 257% 422% 94%
</TABLE>
- ---------------
# Periods less than one year have been annualized.
* Commencement of operations.
** Commencement of offering of shares.
+ In 1994 the Tax Free Income Fund changed ifs fiscal year-end from October 31
to August 31.
-5-
<PAGE>
FUND OBJECTIVES
Vista Tax Free Income Fund seeks to provide monthly dividends which
are excluded from gross income for federal tax purposes, as well as to protect
the value of its shareholders' investment, by investing primarily (i.e., at
least 80% of its assets under normal conditions) in Municipal Obligations. The
Fund is not intended to be a complete investment program, and there is no
assurance it will achieve its objective.
INVESTMENT POLICIES
Investment Approach
The Fund invests primarily in Municipal Obligations (as defined
under "Municipal Obligations"). As a fundamental policy, under normal market
conditions, the Fund will have at least 80% of its assets in Municipal
Obligations the interest on which, in the opinion of bond counsel, is excluded
from gross income for federal income tax purposes and does not constitute a
preference item which would be subject to the federal alternative minimum tax on
individuals (these preference items are referred to as "AMT Items"). The Fund
reserves the right under normal market conditions to invest up to 20% of its
total assets in AMT Items or securities the interest on which is subject to
federal income tax. For temporary defensive purposes, the Fund may exceed this
limitation.
The Fund's investments may include, among other instruments, fixed,
variable or floating rate general obligation and revenue bonds, zero coupon
securities, inverse floaters and bonds with interest rate caps. The Fund's
Municipal Obligations will be rated at time of purchase at least in the category
Baa, MIG-[2] or VMIG-[2] by Moody's Investors Service, Inc. ("Moody's"), BBB by
Standard & Poor's Corporation ("S&P"), BBB or FIN-[3] by Fitch Investors
Service, Inc. ("Fitch") or comparably rated by another national rating
organization, or, if unrated, considered by the Fund's advisers to be of
equivalent quality.
There is no restriction on the maturity of the Fund's portfolio or
any individual portfolio security. The Fund's advisers may adjust the average
maturity of the Fund's portfolio based upon their assessment of the relative
yields available on securities of different maturities and their expectations of
future changes in interest rates.
The Fund is classified as a "non-diversified" fund under federal
securities law. The Fund's assets may be more concentrated in the securities of
any single issuer or group of issuers than if the Fund were diversified.
For temporary defensive purposes, the Fund may invest without
limitation in high quality money market instruments and repurchase agreements,
the interest income from which may be taxable to shareholders as ordinary income
for federal income tax purposes.
Municipal Obligations
"Municipal Obligations" are obligations issued by or on behalf of
states, territories and possessions of the United States, and their authorities,
agencies, instrumentalities and political subdivisions, the interest on which,
in the opinion of bond counsel, is excluded from gross income for federal income
tax purposes (without regard to whether the interest thereon is also exempt from
the personal income taxes of any state or whether the interest thereon
constitutes a preference item for purposes of the federal alternative minimum
tax). These securities are issued to obtain funds for various public purposes,
such as the construction of public facilities, the payment of general operating
expenses or the refunding of outstanding debts. They may also be issued to
finance various private activities, including the lending of funds to public or
private institutions for the construction of housing, educational or medical
facilities, and may include certain types of industrial development bonds,
private activity bonds or notes issued by public authorities to finance
privately owned or operated facilities, or to fund short-term cash requirements.
Short-term Municipal Obligations may be issued as interim financing in
anticipation of tax collections, revenue receipts or bond sales to finance
various public purposes.
-6-
<PAGE>
The two principal classifications of Municipal Obligations are
general obligation and special obligation (or special revenue obligation)
securities. General obligation securities involve a pledge of the credit of an
issuer possessing taxing power and are payable from the issuer's general
unrestricted revenues. Their payment may depend on an appropriation by the
issuer's legislative body. The characteristics and methods of enforcement of
general obligation securities vary according to the law applicable to the
particular issuer. Special obligation (or special revenue obligation) securities
are payable only from the revenues derived from a particular facility or class
of facilities, or a specific revenue source, and generally are not payable from
the unrestricted revenues of the issuer. Industrial development bonds and
private activity bonds are in most cases special obligation securities, the
credit quality of which is directly related to the private user of the
facilities.
From time to time, the Fund may invest more than 25% of the value of
its total assets in industrial development bonds which, although issued by
industrial development authorities, may be backed only by the assets and
revenues of the non-governmental issuers such as hospitals or airports,
provided, however, that the Fund may not invest more than 25% of the value of
its total assets in such bonds if the issuers are in the same industry.
Municipal Lease Obligations. The Fund may invest in municipal lease
obligations. These are participations in a lease obligation or installment
purchase contract obligation and typically provide a premium interest rate.
Municipal lease obligations do not constitute general obligations of the
municipality. Certain municipal lease obligations contain "non-appropriation"
clauses which provide that the municipality has no obligation to make lease or
installment payments in future years unless money is later appropriated for such
purpose. The Fund will limit its investments in non-appropriation leases to 10%
of its assets.
Other Investment Practices
The Fund may also engage in the following investment practices, when
consistent with the Fund's overall objective and policies. These practices, and
certain associated risks, are more fully described in the SAI.
Money Market Instruments. The Fund may invest in cash or
high-quality, short-term money market instruments. Such instruments may include
U.S. Government securities, commercial paper of domestic and foreign issuers and
obligations of domestic and foreign banks. Investments in foreign money market
instruments may involve certain risks associated with foreign investment.
U.S. Government Obligations. The Fund may invest in obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities.
Repurchase Agreements and Forward Commitments. The Fund may enter
into agreements to purchase and resell securities at an agreed-upon price and
time. The Fund may purchase securities for future delivery, which may increase
its overall investment exposure and involves a risk of loss if the value of the
securities declines prior to the settlement date. These transactions involve
some risk to the Fund if the other party should default on its obligation and
the Fund is delayed or prevented from recovering the collateral or completing
the transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Fund would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
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<PAGE>
Stand-By Commitments. The Fund may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to the
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
STRIPS and Zero Coupon Obligations. The Fund may invest up to 20% of
its total assets in separately traded principal and interest components of
securities backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". The Fund may also invest in zero coupon
obligations. Zero coupon obligations are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. The value of STRIPS and zero coupon obligations tends to
fluctuate more in response to changes in interest rates than the value of
ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates.
The Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
Participation certificates are pro rata interests in securities held by others;
certificates of indebtedness or safekeeping are documentary receipts for such
original securities held in custody by others. As a result of the variable rate
nature of these investments, the Fund's yield may decline and it may forego the
opportunity for capital appreciation during periods when interest rates decline;
however, during periods when interest rates increase, the Fund's yield may
increase and it may have reduced risk of capital depreciation. Demand features
on certain variable rate securities may obligate the Fund to pay a "tender fee"
to a third party. Demand features provided by foreign banks involve certain
risks associated with foreign investments. The Internal Revenue Service has not
ruled on whether interest on participations in variable rate municipal
obligations is tax exempt and the Fund would purchase such instruments based on
opinions of bond counsel.
Inverse Floaters and Interest Rate Caps. The Fund may invest in
inverse floaters and in bonds with interest rate caps. Inverse floaters are
instruments whose interest rates bear an inverse relationship to the interest
rate on another security or the value of an index, and their price may be
considerably more volatile than a fixed-rate bond. Interest rate caps are
financial instruments under which payments occur if an interest rate index
exceeds a certain predetermined interest rate level, known as the cap rate,
which is tied to a specific index. These financial products will be more
volatile in price than municipal bonds which do not include such a structure.
Other Money Market Funds. The Fund may invest up to 10% of its total
assets in shares of other money market funds, subject to applicable regulatory
limitations. The Fund is authorized to seek to achieve its objective by
investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
Derivatives and Related Instruments. The Fund may invest its assets
in derivative and related instruments to hedge various market risks or to
increase the Fund's income or gain. Some of these instruments will be subject to
asset segregation requirements to cover the Fund's obligations. The Fund may (i)
purchase, write and exercise call and put options on securities and securities
indexes (including using options in combination with securities, other options
or derivative instruments); (ii) enter into swaps, futures contracts and options
on futures contracts; (iii) employ forward interest rate contracts; and (iv)
purchase and sell structured products, which are instruments designed to
restructure or reflect the characteristics of certain other investments.
-8-
<PAGE>
There are a number of risks associated with the use of derivatives
and related instruments and no assurance can be given that any strategy will
succeed. The value of certain derivatives or related instruments in which the
Fund invests may be particularly sensitive to changes in prevailing economic
conditions and market value. The ability of the Fund to successfully utilize
these instruments may depend in part upon the ability of the Fund's advisers to
forecast these factors correctly. Incorrect forecasts could expose the Fund to a
risk of loss. There can be no guarantee that there will be a correlation between
price movements in a hedging instrument and in the portfolio assets being
hedged. The Fund is not required to use any hedging strategies. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. Derivatives transactions not involving hedging may have speculative
characteristics, involve leverage and result in more risk to the Fund than
hedging strategies using the same instruments. There can be no assurance that a
liquid market will exist at a time when the Fund seeks to close out a
derivatives position. Activities of large traders in the futures and securities
markets involving arbitrage, "program trading," and other investment strategies
may cause price distortions in derivatives markets. In certain instances,
particularly those involving over-the-counter transactions or forward contracts,
there is a greater potential that a counterparty or broker may default. In the
event of a default, the Fund may experience a loss. For additional information
concerning derivatives, related instruments and the associated risks, see the
SAI.
Limiting Investment Risks
Specific investment restrictions help the Fund limit investment
risks for its shareholders. These restrictions prohibit the Fund from: (a)
investing more than 15% of its net assets in illiquid securities (which include
securities restricted as to resale unless they are determined to be readily
marketable in accordance with procedures established by the Board of Trustees);
or (b) investing more than 25% of its total assets in any one industry (this
would apply to municipal obligations backed only by the assets and revenues of
nongovernmental users, but excludes municipal obligations secured by bank
letters of credit or guarantees). A complete description of these and other
investment policies is included in the SAI. Except for the Fund's investment
objective, restriction (b) above and investment policies designated as
fundamental above or in the SAI, the Fund's investment policies are not
fundamental. The Trustees may change any non-fundamental investment policy
without shareholder approval.
Risk Factors
Changes in interest rates may affect the value of the obligations
held by the Fund. The value of fixed income securities varies inversely with
changes in prevailing interest rates. For a discussion of certain other risks
associated with the Fund's additional investment activities, see "Other
Investment Practices" and "Municipal Obligations."
Because the Fund will invest primarily in obligations issued by
states, cities, public authorities and other municipal issuers, the Fund is
susceptible to factors affecting such states and their municipal issuers. A
number of municipal issuers have a recent history of significant financial and
fiscal difficulties. If an issuer in which the Fund invests is unable to meet
its financial obligations, the income derived by the Fund and the Fund's ability
to preserve capital and liquidity could be adversely affected. See the SAI for
further information.
Interest on certain Municipal Obligations (including certain
industrial development bonds), while exempt from federal income tax, is a
preference item for the purpose of the alternative minimum tax. Where a mutual
fund receives such interest, a proportionate share of any exempt-interest
dividend paid by the mutual fund may be treated as such a preference item to
shareholders. Federal tax legislation enacted over the past few years has
limited the types and volume of bonds which are not AMT Items and the interest
on which is not subject to federal income tax. This legislation may affect the
availability of Municipal Obligations for investment by the Fund.
The Fund may invest without limitation in Municipal Obligations
secured by letters of credit or guarantees from U.S. and foreign banks, and
other foreign institutions. The dependence on banking institutions may involve
certain credit risks, such as defaults or downgrades, if at some future date
adverse economic conditions prevail in
-9-
<PAGE>
such industries. U.S. banks are subject to extensive governmental regulations
which may limit both the amount and types of loans which may be made and
interest rates which may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds
for the purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of this industry.
Obligations backed by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable domestic obligations, the possible
imposition of withholding taxes on interest income, the possible seizure or
nationalization of foreign assets, and the possible establishment of exchange
controls or other restrictions. In addition, there may be less publicly
available information concerning foreign issuers, there may be difficulties in
obtaining or enforcing a judgment against a foreign issuer (including branches).
and accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are not
subject to regulations comparable to U.S. banking regulations.
Because the Fund is "non-diversified," the value of its shares is
more susceptible to developments affecting issuers in which the Fund invests. In
addition, more than 25% of the Fund's assets may be invested in securities to be
paid from revenue of similar projects, which may cause the Fund to be more
susceptible to similar economic, political, or regulatory developments.
MANAGEMENT
The Fund's Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Fund pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly at an
annual rate equal to 0.30% of the Fund's average daily net assets. Chase is
located at 270 Park Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is the sub-investment adviser to the Fund pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of Chase. CAM makes investment decisions for the Fund on a day-to-day
basis. For these services, CAM receives a fee, payable by Chase from its
advisory fee, in a mutually agreed amount. CAM was recently formed for the
purpose of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM. CAM is located at 1211 Avenue of the Americas, New York, New
York 10036.
Pamela Hunter has been responsible for the day-to-day management of
the Fund since its inception. Ms. Hunter is part of a team providing fixed
income strategy and product development. Prior to joining Chemical in May 1996,
Ms. Hunter was previously employed at Chase since 1980.
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<PAGE>
ABOUT YOUR INVESTMENT
Alternative Sales Arrangements
Class A shares. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A shares are not
subject to any sales charges when they are redeemed. Certain purchases of Class
A shares qualify for reduced sales charges. Class A shares have lower combined
12b-1 and service fees than Class B shares. See "How to Buy, Sell and Exchange
Shares" and "Other Information Concerning the Fund."
Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge ("CDSC") if
redeemed within a specified period after purchase. Class B shares also have
higher combined 12b-1 and service fees than Class A shares.
Class B shares automatically convert into Class A shares, based on
relative net asset value, eight years after purchase. For more information about
the conversion of Class B shares, see the SAI. This discussion will include
information about how shares acquired through reinvestment of distributions are
treated for conversion purposes. The discussion will also note certain
circumstances under which a conversion may not occur. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
Which arrangement is best for you? The decision as to which class of
shares provides a more suitable investment for an investor depends on a number
of factors, including the amount and intended length of the investment.
Investors making investments that qualify for reduced sales charges might
consider Class A shares. Investors who prefer not to pay an initial sales charge
might consider Class B shares. Orders for Class B shares for $250,000 or more
will be treated as orders for Class A shares or declined. For more information
about these sales arrangements, consult your investment representative or the
Fund's distributor.
HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
You can open a fund account with as little as $2,500 ($1,000 for
IRAs and SEP-IRAs) and make additional investments at any time with as little as
$100. You can buy fund shares three ways-through an investment representative,
through the Fund's distributor by calling the Vista Service Center, or through a
systematic investment plan.
All purchases made by check should be in U.S. dollars and made
payable to the Vista Funds. Third party checks, except those payable to an
existing shareholder who is a natural person (as opposed to a corporation or
partnership), credit cards and cash will not be accepted. The Fund reserves the
right to reject any purchase order or cease offering shares for purchase at any
time. When purchases are made by check, redemptions will not be allowed until
the investment being redeemed has been in the account for 15 business days. In
addition, the redemption of shares through a Systematic Investment Plan will not
be allowed for 7 calendar days.
Buying shares through the Fund's distributor. Complete and return
the enclosed application and your check in the amount you wish to invest to the
Vista Service Center.
Buying shares through systematic investing. You can make regular
investments of $100 or more per month through automatic deduction from your bank
checking or savings account. Shareholders electing to start this Systematic
Investment Plan when opening an account should complete Section 8 of the account
application. Current
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<PAGE>
shareholders may begin such a plan at any time by sending a signed letter with
signature guarantee to the Vista Service Center. Call the Vista Service Center
at 1-800-34-VISTA for complete instructions.
Shares are sold at the public offering price based on the net asset
value next determined after the Vista Service Center receives your order. In
most cases, in order to receive that day's public offering price, the Vista
Service Center must receive your order before the close of regular trading on
the New York Stock Exchange. If you buy shares through your investment
representative, the representative must receive your order before the close of
regular trading on the New York Stock Exchange to receive that day's public
offering price.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you should pay for
those shares with a certified check to avoid any delay in redemption, exchange
or transfer. Otherwise the Fund may delay payment until the purchase price of
those shares has been collected or, if you redeem by telephone, until 15
calendar days after the purchase date. To eliminate the need for safekeeping,
the Fund will not issue certificates for your shares unless you request them.
Class A Shares
The public offering price of Class A shares is the net asset value
plus a sales charge that varies depending on the size of your purchase. The Fund
receives the net asset value. The sales charge is allocated between your
broker-dealer and the Fund's distributor as shown in the following table, except
when the Fund's distributor, in its discretion, allocates the entire amount to
your broker-dealer.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Sales charge as a
percentage of:
-------------- Amount of sales charge
Amount of transaction at offering Offering Net amount reallowed to dealers as a
price($) Price price percentage of offering price
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Under 100,000 4.50 4.71 4.00
- -----------------------------------------------------------------------------------------------
100,000 but under 250,000 3.75 3.90 3.25
- -----------------------------------------------------------------------------------------------
250,000 but under 500,000 2.50 2.56 2.25
- -----------------------------------------------------------------------------------------------
500,000 but under 1,000,000 2.00 2.04 1.75
- -----------------------------------------------------------------------------------------------
</TABLE>
There is no initial sales charge on purchases of Class A shares of
$1 million or more.
Except as stated below, the Fund's distributor pays broker-dealers
commissions on sales of Class A shares of $1 million or more based on an
investor's cumulative purchases (excluding money market funds) during the
one-year period beginning with the date of the initial purchase at net asset
value. Each subsequent one-year measuring period for these purposes will begin
with the first net asset value purchase following the end of the prior period.
Such commissions are paid at the rate of 1.00% of the amount under $2.5 million,
0.75% of the next $7.5 million, 0.50% of the next $40 million and 0.20%
thereafter. On sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in the Vista Family of
Funds (including a plan with at least 50 eligible employees), the Fund's
distributor pays commissions during each one-year measuring period, determined
as described above, at the rate of 1.00% of the first $2 million, 0.80% of the
next $1 million and 0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, the Fund's distributor pays
commissions on the initial investment and on subsequent net quarterly sales at a
rate of 0.15%.
Class B Shares
Class B shares are sold without an initial sales charge, although a
CDSC will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may
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<PAGE>
be redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described in
"How to Buy Shares." For other shares, the amount of the charge is determined as
a percentage of the lesser of the current market value or the cost of shares
being redeemed.
Year 1 2 3 4 5 6 7 8+
- ----------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund
will first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. For this purpose, the amount of any increase in a
share's value above its initial purchase price is not regarded as a share exempt
from the CDSC. Thus, when a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial purchase price.
For information on how sales charges are calculated if you exchange your shares,
see "How to Exchange Your Shares." The Fund's distributor pays broker-dealers a
commission of [4.00%] of the offering price on sales of Class B shares, and the
distributor receives the entire amount of my CDSC you pay. The Fund's
distributor receives the entire amount of any CDSC you pay.
General
You may be eligible to buy Class A shares at reduced sales charges.
Consult your investment representative or the Vista Service Center for details
about Vista's combined purchase privilege, cumulative quantity discount,
statement of intention, group sales plan, employee benefit plans, and other
plans. Descriptions are also included in enclosed application and in the SAI.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by the Board of Trustees may include amounts
invested in the other mutual funds participating in such program for purposes of
determining whether the plan may purchase Class A shares at net asset value.
These investments will also be included for purposes of the discount privileges
and programs described above.
The Fund may sell Class A and Class B shares at net asset value
without an initial sales charge or a CDSC to the current and retired Trustees
(and their families), current and retired employees (and their families) of
Chase, the Fund's distributor and transfer agent or any affiliates or
subsidiaries thereof, registered representatives and other employees (and their
families) of broker-dealers having selected dealer agreements with the Fund's
distributor, employees (and their families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of Vista fund shares) financial institution trust departments investing an
aggregate of $1 million or more in the Vista Family of Funds and clients of
certain administrators of tax-qualified plans when proceeds from repayments of
loans to participants are invested (or reinvested) in the Vista Family of Funds.
No initial sales charge will apply to the purchase of Class A shares
of the Fund by an investor seeking to invest the proceeds of a qualified
retirement plan where a portion of the plan was invested in the Vista Family of
Funds, any qualified retirement plan with 50 or more participants, or an
individual participant in a tax-qualified plan making a tax-free rollover or
transfer of assets from the plan in which Chase or an affiliate serves as
trustee or custodian of the plan or manages some portion of the plan's assets.
Purchases of Class A shares of the Fund may be made with no initial
sales charge through an investment adviser or financial planner who charges a
fee for their services. Purchases of Class A shares of the Fund may be made with
no initial sales charge (i) by an investment adviser, broker or financial
planner, provided arrangements are preapproved and purchases are placed through
an omnibus account with the Fund or (ii) by clients of such investment adviser
or financial planner who place trades for their own accounts, if such accounts
are linked to a
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<PAGE>
master account of such investment adviser or financial planner on the books and
records of the broker or agent. Such purchases may be made for retirement and
deferred compensation plans and trusts used to fund those plans.
Purchases of Class A shares of the Fund may be made with no initial
sales charge in accounts opened by a bank, trust company or thrift institution
which is acting as a fiduciary, provided that appropriate notification of such
fiduciary relationship is reported at the time of the investment to the Fund,
the Fund's distributor or the Vista Service Center.
Shareholders of record of any Vista Fund as of November 30, 1990 and
certain immediate family members may purchase Class A shares of the Fund with no
initial sales charge for as long as they continue to own Class A shares of any
Vista fund, provided there is no change in account registration. Shareholders of
record of any portfolio of The Hanover Funds, Inc. or The Hanover Investment
Funds, Inc. as of May 3, 1996 and certain related investors may purchase Class A
shares of the Fund with no initial sales charge for as long as they continue to
own shares of any Vista fund following this date, provided there is no change in
account registration.
The Fund may sell shares at net asset value without an initial sales
charge or a CDSC in connection with the acquisition by the Fund of assets of an
investment company or personal holding company and the CDSC will be waived on
redemption of shares arising out of death or disability or in connection with
certain withdrawals from IRA or other retirement plans. Up to 12% of the value
of Class B shares subject to a systematic withdrawal plan may also be redeemed
each year without a CDSC. The SAI contains additional information about
purchasing the Fund's shares at reduced sales charges.
The Fund reserves the right to change any of these policies on
purchases without an initial sales charge at any time and may reject any such
purchase request.
Shareholders of other Vista funds may be entitled to exchange their
shares for, or reinvest distributions from their funds in, shares of the Fund at
net asset value.
How to Sell Shares
You can sell your shares to the Fund any day the New York Stock
Exchange is open, either directly to the Fund or through your investment
representative. The Fund will only redeem shares for which it has received
payment.
Selling shares directly to the Fund. Send a signed letter of
instruction to the Vista Service Center, along with any certificates that
represent shares you want to sell. The price you will receive is the next net
asset value calculated after the Fund receives your request in proper form, less
any applicable CDSC. In order to receive that day's net asset value, the Vista
Service Center must receive your request before the close of regular trading on
the New York Stock Exchange.
If you sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives must be
guaranteed by a bank, broker-dealer or certain other financial institutions. See
the SAI for more information about where to obtain a signature guarantee.
If you want your redemption proceeds sent to an address other than
your address as it appears on Vista's records, a signature guarantee is
required. The Fund usually requires additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving joint
owner. Contact the Vista Service Center for details.
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<PAGE>
The Fund generally sends you payment for your shares the business
day after your request is received. Under unusual circumstances, the Fund may
suspend redemptions, or postpone payment for more than seven days, as permitted
by federal securities law.
You may use Vista's Telephone Redemption Privilege to redeem shares
valued up to $100,000 from your account unless you have notified the Vista
Service Center of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For information, consult
the Vista Service Center.
During periods of unusual market changes and shareholder activity,
you may experience delays in contacting the Vista Service Center by telephone.
In this event, you may wish to submit a written redemption request, as described
above, or contact your investment representative. The Telephone Redemption
Privilege is not available if you were issued certificates for shares that
remain outstanding. The Telephone Redemption Privilege may be modified or
terminated without notice.
Systematic withdrawal. You can make regular withdrawals of $100 or
more monthly, quarterly, or semiannually from an account valued at $5,000 or
more ($10,000 for Class B accounts, not to exceed 12% per year).
Selling shares through your investment representative. Your
investment representative must receive your request before the close of regular
trading on the New York Stock Exchange to receive that day's net asset value.
Your investment representative will be responsible for furnishing all necessary
documentation to the Vista Service Center, and may charge you for its services.
Redemption of accounts of less than $500. The Fund may involuntarily
redeem your shares if at such time the aggregate net asset value of the shares
in your account is less than $500. In the event of any such redemption, you will
receive at least 60 days notice prior to the redemption. In the event the Fund
redeems Class B shares pursuant to this provision, no CDSC will be imposed.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain
other Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista fund
into which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length of time you have owned your shares will be measured from
the date of original purchase and will not be affected by any exchange.
An exchange of Class B shares into any of the Vista money market
funds other than the Class B shares of the Vista Prime Money Market Fund will be
treated as a redemption -- and therefore subject to the conditions of the CDSC
- -- and a subsequent purchase. Class B shares of any Vista non-money market Fund
may be exchanged into the Class B shares of the Vista Prime Money Market Fund in
order to continue the aging of the initial purchase of such shares.
-15-
<PAGE>
To exchange your shares, simply complete an Exchange Authorization
Form and send it to the Vista Service Center. The form is available from the
Vista Service Center. For federal income tax purposes, an exchange is treated as
a sale of shares and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to $500,000. The Vista
Service Center's procedures for telephone transactions are described under "How
to Sell Shares." The Telephone Exchange Privilege is not available if you were
issued certificates for shares that remain outstanding. Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
funds. Shares of certain Vista funds are not available to residents of all
states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving a Fund in a year or three in a
calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
Reinstatement privilege. Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset value next
determined subject to written request within 90 calendar days of the redemption,
accompanied by payment for the shares (not in excess of the redemption). Class B
shareholders who have redeemed their shares and paid a CDSC with such redemption
may purchase Class A shares with no initial sales charge (in an amount not in
excess of their redemption proceeds) if the purchase occurs within 90 days of
the redemption of the Class B shares.
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of the Fund's shares is determined
once daily based upon prices determined as of the close of regular trading on
the New York Stock Exchange (normally 4:00 p.m. Eastern time, however, options
are priced at 4:15 p.m.), on each business day of the Fund, by dividing the net
assets of the Fund attributable to that class by the total number of outstanding
shares of that class. Values of assets held by the Fund are determined on the
basis of their market or other fair value, as described in the SAI.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund declares dividends daily and distributes any net investment
income at least monthly. The Fund distributes any net realized capital gains at
least annually. Distributions from capital gains are made after applying any
available capital loss carryovers. Distributions paid by the Fund with respect
to Class A shares will generally be greater than those paid with respect to
Class B shares because expenses attributable to Class B shares will generally be
higher.
You can choose from three distribution options: (1) reinvest all
distributions in additional Fund shares without a sales charge; (2) receive
distributions from net investment income in cash while reinvesting capital gains
distributions in additional shares without a sales charge; or (3) receive all
distributions in cash. You can change your distribution option by notifying the
Vista Service Center in writing. If you do not select an option when you open
your account, all distributions will be reinvested. All distributions not paid
in cash will be reinvested in shares of the class on which the distributions are
paid. You will receive a statement confirming reinvestment of distributions in
additional Fund shares promptly following the quarter in which the reinvestment
occurs.
-16-
<PAGE>
If a check representing Fund distribution is not cashed within a
specified period, the Vista Service Center will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund
or in another Vista fund. If the Vista Service Center does not receive your
election, the distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or the Vista Service Center is returned as
"undeliverable," distributions will automatically be reinvested in the Fund.
The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to shareholders. The Fund intends to distribute substantially all of
its income and gains on a current basis. If the Fund does not qualify as a
regulated investment company for any taxable year or does not make such
distributions, the Fund will be subject to tax on all of its income and gains.
Distributions by the Fund of its tax-exempt interest income will not
be subject to federal income tax. Such distributions will generally be subject
to state and local taxes, but may be exempt if paid out of interest on municipal
obligations of the state or locality in which the shareholder resides.
All other Fund distributions will be taxable as ordinary income,
except that any distributions of net long-term capital gains will be taxable as
such, regardless of how long you have held the shares. Distributions will be
treated in the same manner for Federal income tax purposes whether received in
cash or in shares through the reinvestment of distributions.
Investors should be careful to consider the tax implications of
purchasing shares just prior to the next distribution date. Those investors
purchasing shares just prior to a distribution will be taxed on the entire
amount of the taxable distribution received, even though the net asset value per
share on the date of such purchase reflected the amount of such distribution.
Early in each calendar year the Fund will notify you of the amount
and tax status of distributions paid to you by the Fund for the preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in the Fund. You should consult your tax adviser to
determine the precise effect of an investment in the Fund on your particular tax
situation (including possible liability for state and local taxes and, for
foreign shareholders, U.S. withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Broker-Dealer Services, Inc.
("VBDS"). VBDS is a subsidiary of The BISYS Group, Inc. and is unaffiliated with
Chase. The Trust has adopted Rule 12b-1 distribution plans for Class A and Class
B shares which provide that the Fund will pay distribution fees at annual rates
of up to 0.25% and 0.75% annually of the average daily net assets attributable
to Class A and Class B shares of the Fund, respectively. Payments under the
distribution plans shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class A and Class B shares, and are not tied to the
amount of actual expenses incurred. Payments may be used to compensate
broker-dealers with trail or maintenance commissions at an annual rate of up to
0.25% of the average daily net asset value of Class A or Class B shares
maintained in the Fund by customers of these broker-dealers. Trail or
maintenance commissions are paid to broker-dealers beginning the 13th month
following the purchase of shares by their customers. Some activities intended to
promote the sale of Class A and Class B shares will be conducted generally by
the Vista Family of Funds, and activities intended to promote the Fund's Class A
and Class B shares may also benefit the Fund's other shares and other Vista
funds.
-17-
<PAGE>
VBDS may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
The Trust has entered into shareholder servicing agreements with
certain shareholder servicing agents (including Chase) under which the
shareholder servicing agents have agreed to provide certain support services to
their customers who beneficially own Class A or Class B shares of the Fund.
These services include assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to 0.25% of the average
daily net assets of Class A and Class B shares of the Fund held by investors for
whom the shareholder servicing agent maintains a servicing relationship.
Shareholder servicing agents may subcontract with other parties for the
provision of shareholder support services.
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures for the purchase and redemption of
Fund shares, such as pre-authorized or systematic purchase and redemption plans.
Each shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees an amount not exceeding such other
fees or the fees for their services as shareholder servicing agents.
Administrator and Sub-Administrator
Chase act as the Fund's administrator and is entitled to receive a
fee computed daily and paid monthly at an annual rate equal to 0.10% of the
Fund's average daily net assets.
VBDS provides certain sub-administrative services to the Fund
pursuant to its distribution and sub- administration agreement and is entitled
to receive a fee for these services from the Fund at an annual rate equal to
0.05% of the Fund's average daily net assets. VBDS has agreed to use a portion
of this fee to pay for certain expenses incurred in connection with organizing
new series of the Trust and certain other ongoing expenses of the Trust. VBDS is
located at 125 West 55th Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for the Fund and
receives compensation under an agreement with the Trust. Fund securities and
cash may be held by sub-custodian banks if such arrangements are reviewed and
approved by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its
pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees: registration
fees; interest charges; taxes; expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors
-18-
<PAGE>
and to government offices and commissions; expenses of meetings of investors;
fees and expenses of independent accountants, of legal counsel and of any
transfer agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net income
on, shares of the Fund. Shareholder servicing and distribution fees are
allocated to specific classes of the Fund. In addition, the Fund may allocate
transfer agency and certain other expenses by class. Service providers to the
Fund may, from time to time, voluntarily waive all or a portion of any fees to
which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Trust, an open-end management
investment company organized as a Massachusetts business trust in 1994 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class.
The Fund issues multiple classes of shares. This Prospectus relates
only to Class A and Class B shares of the Fund. The Fund offers other classes of
shares in addition to these classes. The categories of investors that are
eligible to purchase shares and minimum investment requirements may differ for
each class of Fund shares. In addition, other classes of Fund shares may be
subject to differences in sales charge arrangements, ongoing distribution and
service fee levels, and levels of certain other expenses, which will affect the
relative performance of the different classes. Investors may call 1-800-34-VISTA
to obtain additional information about other classes of shares of the Fund that
are offered. Any person entitled to receive compensation for selling or
servicing shares of the Fund may receive different levels of compensation with
respect to one class of shares over another.
The Trust is not required to hold annual meetings of shareholders
but will hold special meetings of shareholders of all series or classes when in
the judgment of the Trustees it is necessary or desirable to submit matters for
a shareholder vote. The Trustees will promptly call a meeting of shareholders to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting as
investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws. If
future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse
-19-
<PAGE>
financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Fund's distributor or affiliates of the distributor. Chase will
not invest the Fund's assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by the Fund. Chase has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the division
that performs services for the Fund as custodian, or in the possession of any
affiliate of Chase. Shareholders of the Fund should be aware that, subject to
applicable legal or regulatory restrictions, Chase and its affiliates may
exchange among themselves certain information about the shareholder and his
account. Transactions with affiliated broker-dealers will only be executed on an
agency basis in accordance with applicable federal regulations.
PERFORMANCE INFORMATION
The Fund's investment performance may from time to time be included
in advertisements about the Fund. Performance is calculated separately for each
class of shares. "Yield" for each class of shares is calculated by dividing the
annualized net investment income calculated pursuant to federal rules per share
during a recent 30- day period by the maximum public offering price per share of
such class on the last day of that period. "Effective yield" is the "yield"
calculated assuming the reinvestment of income earned, and will be slightly
higher than the "yield" due to the compounding effect of this assumed
reinvestment. "Tax equivalent yield" is the yield that a taxable fund would have
to generate in order to produce an after-tax yield equivalent to the Fund's
yield. The tax equivalent yield of a taxable fund can then be compared to the
yield of the Fund.
"Total return" for the one-, five- and ten-year periods (or for the
life of a class, if shorter) through the most recent calendar quarter represents
the average annual compounded rate of return on an investment of $1,000 in the
Fund invested at the maximum public offering price (in the case of Class A
shares) or reflecting the deduction of any applicable contingent deferred sales
charge (in the case of Class B shares). Total return reflects the deduction of
the maximum initial sales charge in the case of Class A shares, but does not
reflect the deduction of any contingent deferred sales charge in the case of
Class B shares. Total return may also be presented for other periods or based on
investment at reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if such sales charges were used.
All performance data is based on the Fund's past investment results
and does not predict future performance. Investment performance, which will
vary, is based on many factors, including market conditions, the composition of
the Fund's portfolio, the Fund's operating expenses and which class of shares
you purchase. Investment performance also often reflects the risks associated
with the Fund's investment objectives and policies. These factors should be
considered when comparing the Fund's investment results to those of other mutual
funds and other investment vehicles. Quotation of investment performance for any
period when a fee waiver or expense limitation was in effect will be greater
than if the waiver or limitation had not been in effect. The Fund's performance
may be compared to other mutual funds, relevant indices and rankings prepared by
independent services. See the SAI.
-20-
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund shareholder.
o SYSTEMATIC INVESTMENT PLAN - Invest as much as you wish ($100 or
more) in the first or third week of any month. The amount will be
automatically transferred from your checking or savings account.
o SYSTEMATIC WITHDRAWAL - Make regular withdrawals of $100 or more
monthly, quarterly, or semiannually from an account valued at $5,000
or more ($10,000 for Class B accounts).
o SYSTEMATIC EXCHANGE - Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
o FREE EXCHANGE PRIVILEGE - Exchange money between Vista funds in the
same class of shares without charge. The exchange privilege allows
you to adjust your investments as your objectives change. A
signature guarantee is required for exchanges of more than $500,000.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
o REINSTATEMENT PRIVILEGE - Class A shareholders have a one time
privilege of reinstating their investment in the Fund at net asset
value next determined subject to written request within 90 calendar
days of the redemption, accompanied by payment for the shares (not
in excess of the redemption).
Class B shareholders who have redeemed their shares and paid a CDSC
with such redemption may purchase Class A shares with no initial
sales charge (in an amount not in excess of their redemption
proceeds) if the purchase occurs within 90 days of the redemption of
the Class B shares.
For more information about any of these services and privileges, call your
shareholder servicing agent, investment representative or the Vista Service
Center at 1-800-34-VISTA. These privileges are subject to change or termination.
-21-
<PAGE>
VISTA FAMILY OF FUNDS
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141-6392
Transfer Agent
DST Systems, Inc.
210 West 10th Street
Kansas City, MO 64105
Legal Counsel
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Independent Accountants
Price Waterhouse LLP
1177 Avenue of the Americas
New York, NY 10036
-22-
<PAGE>
PROSPECTUS
VISTA[SM] PRIME MONEY MARKET FUND
Class B Shares
May 6, 1996
Investment Strategy: Current Income
This Prospectus explains concisely what you should know before
investing. Please read it carefully and keep it for future reference. You can
find more detailed information about the Funds in their May 6, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy of
the SAI, call the Vista Service Center at 1-800-34-VISTA. The SAI has been filed
with the Securities and Exchange Commission and is incorporated into this
Prospectus by reference.
Investors should be aware that this Fund is made available for exchange purposes
only and that the yield on Class B shares will be substantially lower than other
classes of shares of the Fund. Class B shares of the Fund carry the same 0.75%
distribution fee as other Vista B shares.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL. SHARES OF THE FUNDS ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, THE CHASE MANHATTAN BANK OR ANY OF ITS AFFILIATES AND
ARE NOT INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY.
<PAGE>
TABLE OF CONTENTS
Expense Summary................................................................
The expenses you pay on your Fund investment, including examples
Financial Highlights...........................................................
The Fund's financial history
Fund Objectives and Approach...................................................
Other Investment Practices.....................................................
Management.....................................................................
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the
Fund's sub-adviser
About Your Investment..........................................................
How to Buy, Sell and Exchange Shares...........................................
How the Funds Value their Shares...............................................
How Distributions Are Made; Tax Information....................................
How the Funds distribute their earnings, and
tax treatment related to those earnings
Other Information Concerning the Funds.........................................
Distribution plans, shareholder servicing agents, administration,
custodian, expenses, organization and regulatory matters
Performance Information........................................................
How performance is determined, stated and/or advertised
-2-
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your maximum transaction costs from investing in the
Fund based on expenses incurred in the most recent fiscal year. The examples
show the cumulative expenses attributable to a hypothetical $1,000 investment
over specified periods.
Class B
Shareholder Transaction Expenses Shares
------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price).............................. None
Maximum Deferred Sales Charge
(as a percentage of the lower of original
purchase price or redemption proceeds)(*)........................ 5.00%
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee.......................................... 0.10%
12b-1 Fee (**)................................................... 0.75%
Shareholder Servicing Fee (after estimated waiver)(***).......... 0.00%
Other Expenses (after estimated waiver and reimbursement)(***)... 0.62%
Total Fund Operating Expenses (after waiver of fee and
expense reimbursement) (***)................................. 1.47%
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return:
1 Year 3 Years 5 Years 10 Years
----------------------------------
Class B Shares:
Assuming complete
redemption at the
end of the
period(+)(++)............ $67 $80 $104 $176
Assuming no
redemptions (++)......... $15 $46 $80 $176
- -----------------------
* The maximum deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge
generally declines by 1% annually thereafter (except in the fourth
year), reaching zero after six years. See "How to Buy, Sell and
Exchange Shares"
** Long-term shareholders in mutual funds with 12b-1 fees, such as
Class B shareholders of the Fund, may pay more than the economic
equivalent of the maximum front-end sales charge permitted by rules
of the National Association of Securities Dealers, Inc. ("NASD").
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<PAGE>
*** Reflects current fee waiver and expense subsidy arrangement to
maintain Total Fund Operating Expenses at the levels indicated in
the table above. Absent such arrangements, the Shareholder Servicing
Fee, and Other Expenses would be 0.25%, and 1.02%, respectively, and
Total Fund Operating Expenses would be 2.12% of average net assets.
+ Assumes deduction at the time of redemption of the maximum
applicable deferred sales charge.
++ Ten-year figures assume conversion of Class B shares to Class A
shares at the beginning of the ninth year. See "How to Buy, Sell and
Exchange Shares."
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses that the Fund
incurs. The examples should not be considered representations of past or future
expenses or returns; actual expenses and returns may be greater or less than
shown.
Charges or credits, not reflected in the expense table above, may be
incurred directly by customers of financial institutions in connection with an
investment in the Fund. The Fund understands that Shareholder Servicing Agents
may credit to the accounts of their customers from whom they are already
receiving other fees amounts not exceeding such other fees or the fees received
by the Shareholder Servicing Agent from the Fund with respect to those accounts.
See "Other Information Concerning the Fund" and the SAI.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and
ratios for a share outstanding throughout each period shown. This information is
supplemented by financial statements and accompanying notes appearing in the
Fund's Annual Report to Shareholders for the fiscal year ended August 31, 1995,
which is incorporated by reference into the Statement of Additional Information.
Shareholders may obtain a copy of this Annual Report by contacting the Fund or
their Shareholder Servicing Agent. The financial statements and notes, as well
as the financial information set forth in the table below, have been audited by
Price Waterhouse LLP, independent accountants, whose report thereon is also
included in the Annual Report to Shareholders.
VISTA PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
B Shares
-----------------------------
Year 4/21/94*
ended through
8/31/95 8/31/94+
-----------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period........................................ $ 1.00 $ 1.00
------ ------
Income from Investment Operations:
Net investment income .......................................... 0.043 0.011
Net Realized Loss on Securities ................................ (0.003) --
------- -----
Total Income from Investment Operations..................................... 0.040 0.011
----- -----
Voluntary Capital Contribution ................................. 0.003 --
----- -----
Less dividends from net investment income ...................... 0.043 0.011
----- -----
Net Asset Value, End of Period ............................................. $ 1.00 $ 1.00
====== ======
Total Return ............................................................... 4.37% 1.11%
==== ======
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000 omitted) .................................... $4,880 $1,452
Ratio of expenses to average net assets # ...................... 1.47% 1.47%
Ratio of net investment income to average net assets # ......... 4.33% 2.96%
Ratio of expenses without waivers and assumption of expenses to
average net assets # ........................................... 2.53% 1.67%
Ratio of net investment income without waivers and assumption of
expenses to average net assets # ............................... 3.27% 2.76%
</TABLE>
- -----------------
# Short periods have been annualized.
+ In 1994 the Prime Money Market Fund changed its fiscal year-end from
October 31 to August 31.
* Commencement of offering of classes of shares.
-5-
<PAGE>
FUND OBJECTIVES AND INVESTMENT APPROACH
The Fund's objective is to provide maximum current income consistent
with the preservation of capital and maintenance of liquidity
The Fund invests in high-quality, short-term U.S. dollar-denominated
money market instruments. The Fund invests principally in (i) high quality
commercial paper and other short-term obligations, including floating and
variable rate master demand notes of U.S. and foreign corporations; (ii) U.S.
dollar-denominated obligations of foreign governments and supranational agencies
(e.g., the International Bank for Reconstruction and Development); (iii)
obligations issued or guaranteed by U.S. banks with total assets exceeding $1
billion (including obligations of foreign branches of such banks) and by foreign
banks with total assets exceeding $10 billion (or the equivalent in other
currencies) which have branches or agencies in the U.S. (including U.S. branches
of such banks), or such other U.S. or foreign commercial banks which are judged
by the Fund's advisers to meet comparable credit standing criteria; (iv)
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities; and (v) repurchase agreements. The dollar weighted average
maturity of the Fund will be 60 days or less.
OTHER INVESTMENT PRACTICES
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund invests only in high quality obligations which are
determined to present minimal credit risks. This credit determination must be
made in accordance with procedures established by the Board of Trustees. Each
investment must be rated in the highest short-term rating category by at least
two national rating organizations ("NROs") (or one NRO if the instrument was
rated only by one such organization) or, if unrated, must be determined to be of
comparable quality in accordance with the procedures of the Trustees. If a
security has an unconditional guarantee or similar enhancement, the issuer of
the guarantee or enhancement may be relied upon in meeting these ratings
requirements rather than the issuer of the security. Securities in which the
Fund invests may not earn as high a level of current income as long-term or
lower quality securities.
The Fund purchases only instruments which have or are deemed to have
remaining maturities of 397 days or less in accordance with federal regulations.
Although the Fund seeks to be fully invested, at times it may hold uninvested
cash reserves, which would adversely affect its yield.
As a matter of fundamental policy, the Fund is permitted to invest
all or a part of its assets in an investment company having substantially the
same investment objective and policies as the applicable Fund. there can be no
assurance that the Fund will achieve its investment objective.
The Fund may also engage in the following investment practices, when
consistent with its overall objectives and policies. These practices, and
certain associated risks, are more fully described in the SAI.
U.S. Government Obligations. The Fund may invest in direct
obligations of the U.S. Treasury. The Fund may also invest in other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
(collectively, "U.S. Government Obligations"). Certain U.S. Government
Obligations, such as U.S. Treasury securities and direct pass-through
certificates of the Government National Mortgage Association (GNMA), are backed
by the "full faith and credit" of the U.S. Government. Other U.S. Government
Obligations, such as obligations of Federal Home Loan Banks and the Federal Home
Loan Mortgage Corporation, are not backed by the "full faith and credit" of the
U.S. Government. In the case of securities not backed by the "full faith and
credit" of the U.S. Government, the investor must look principally to the agency
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the U.S. Government itself in the event the
agency or instrumentality does not meet its commitments.
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Repurchase Agreements and Forward Commitments. The Fund may enter
into agreements to purchase and resell securities at an agreed-upon price and
time. These transactions must be fully collateralized at all times. The Fund may
purchase securities for future delivery, which may increase its overall
investment exposure and involve a risk of loss if the value of the securities
declines prior to the settlement date. These transactions involve some risk to
the Fund if the other party should default on its obligation and the Fund is
delayed or prevented from recovering the collateral or completing the
transaction.
Borrowings and Reverse Repurchase Agreements. The Fund may borrow
money from banks for temporary or short-term purposes, but will not borrow for
leveraging purposes. The Fund may also sell and simultaneously commit to
repurchase a portfolio security at an agreed-upon price and time, to avoid
selling securities during unfavorable market conditions in order to meet
redemptions. Whenever the Fund enters into a reverse repurchase agreement, it
will establish a segregated account in which it will maintain liquid assets on a
daily basis in an amount at least equal to the repurchase price (including
accrued interest). The Fund would be required to pay interest on amounts
obtained through reverse repurchase agreements, which are considered borrowings
under federal securities laws.
Stand-By Commitments. The Fund may enter into put transactions,
including transactions sometimes referred to as stand-by commitments, with
respect to securities in its portfolio. In these transactions, the Fund would
acquire the right to sell a security at an agreed upon price within a specified
period prior to its maturity date. These transactions involve some risk to the
Fund if the other party should default on its obligation and the Fund is delayed
or prevented from recovering the collateral or completing the transaction.
Acquisition of puts will have the effect of increasing the cost of the
securities subject to the put and thereby reducing the yields otherwise
available from such securities.
STRIPS and Zero Coupon Obligations. The Fund may invest up to 20% of
its total assets in separately traded principal and interest components of
securities backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". The Fund may also invest in zero coupon
obligations. Zero coupon obligations are debt securities that do not pay regular
interest payments, and instead are sold at substantial discounts from their
value at maturity. The value of STRIPS and zero coupon obligations tends to
fluctuate more in response to changes in interest rates than the value of
ordinary interest-paying debt securities with similar maturities. The risk is
greater when the period to maturity is longer.
Floating and Variable Rate Securities; Participation Certificates.
The Fund may invest in floating rate securities, whose interest rates adjust
automatically whenever a specified interest rate changes, and variable rate
securities, whose interest rates are periodically adjusted. Certain of these
instruments permit the holder to demand payment of principal and accrued
interest upon a specified number of days' notice from either the issuer or a
third party. The variable rate securities in which the Fund may invest include
participation certificates and certificates of indebtedness or safekeeping.
Participation certificates are pro rata interests in securities held by others;
certificates of indebtedness or safekeeping are documentary receipts for such
original securities held in custody by others. As a result of the variable rate
nature of these investments, the Fund's yield may decline and it may forego the
opportunity for capital appreciation during periods when interest rates decline;
however, during periods when interest rates increase, the Fund's yield may
increase and it may have reduced risk of capital depreciation. Demand features
on certain variable rate securities may obligate the Fund to pay a "tender fee"
to a third party. Demand features provided by foreign banks involve certain
risks associated with foreign investments.
Other Money Market Funds. The Fund may invest up to 10% of its total
assets in shares of other money market funds, subject to applicable regulatory
limitations.
Bank Obligations. Bank obligations include certificates of deposit,
time deposits and bankers' acceptances issued or guaranteed by U.S. banks
(including their foreign branches) and foreign banks (including their U.S.
branches) . These obligations may be general obligations of the parent bank or
may be limited to the issuing branch by the terms of the specific obligation or
by government regulation. Foreign bank obligations involve certain risks
associated with foreign investing.
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Asset-Backed Securities. Asset-backed securities represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another, such as motor vehicle receivables or credit card receivables.
Municipal Obligations. The Fund may invest in high-quality,
short-term municipal obligations that carry yields that are competitive with
those of other types of money market instruments in which it may invest.
Dividends paid by the Fund that are derived from interest on municipal
obligations will be taxable to shareholders for federal income tax purposes.
Securities of Foreign Governments and Supranational Agencies. The
Fund intends to invest a substantial portion of its assets from time to time in
securities of foreign governments and supranational agencies. The Fund will
limit its investments in foreign government obligations to the commercial paper
and other short-term notes issued or guaranteed by the governments of Western
Europe, Australia, New Zealand, Japan and Canada. Obligations of supranational
agencies, such as the International Bank for Reconstruction and Development
(also known as the World Bank) are supported by subscribed, but unpaid,
commitments of its member countries. There is no assurance that these
commitments will be undertaken or complied with in the future, and foreign and
supranational securities are subject to certain risks associated with foreign
investing.
Custodial Receipts. The Fund may acquire securities in the form of
custodial receipts that evidence ownership of future interest payments,
principal payments or both on certain U.S. Treasury notes or bonds in connection
with programs sponsored by banks and brokerage firms and are not deemed U.S.
Government securities. These notes and bonds are held in custody by a bank on
behalf of the owners of the receipts.
Limiting Investment Risks
Specific regulations and investment restrictions help the Fund limit
investment risks for shareholders. These regulations and restrictions prohibit
the Fund from: (a) with certain limited exceptions, investing more than 5% of
their total assets in the securities of any one issuer (this limitation does not
apply to U.S. Government Obligations held by the Fund); (b) investing more than
10% of its net assets in illiquid securities (which include securities
restricted as to resale unless they are determined to be readily marketable in
accordance with procedures established by the Board of Trustees); or (c)
investing more than 25% of its total assets in any one industry (excluding U.S.
Government Obligations and bank obligations). A complete description of the
relevant investment restrictions is included in the SAI. Except for the Fund's
investment objective, restriction (c) above and investment policies designated
as fundamental above or in the SAI, the Fund's investment policies are not
fundamental. The Trustees may change any non-fundamental investment policy
without shareholder approval.
Risk Factors
There can be no assurance that the Fund will be able to maintain a
stable net asset value. Changes in interest rates may affect the value of the
obligations held by the Fund. The value of fixed income securities varies
inversely with changes in prevailing interest rates, although money market
instruments are generally less sensitive to changes in interest rates than are
longer-term securities.
The Fund may invest without limit in obligations of domestic and
foreign banks, and in obligations of other foreign issuers. The ability to
concentrate in the banking industry may involve certain credit risks, such as
defaults or downgrades, if at some future date adverse economic conditions
prevail in such industries. U.S. banks are subject to extensive governmental
regulations which may limit both the amount and types of loans which may be made
and interest rates which may be charged. In addition, the profitability of the
banking industry is largely dependent upon the availability and cost of funds
for the purpose of financing lending operations under prevailing money market
conditions. General economic conditions as well as exposure to credit losses
arising from possible financial difficulties of borrowers play an important part
in the operations of this industry.
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Securities issued by foreign banks, foreign branches of U.S. banks
and foreign governmental and private issuers involve investment risks in
addition to those of domestic obligations of domestic issuers, including risks
relating to future political and economic developments, more limited liquidity
of foreign obligations than comparable domestic obligations, the possible
imposition of withholding taxes on interest income, the possible seizure or
nationalization of foreign assets, and the possible establishment of exchange
controls or other restrictions. In addition, there may be less publicly
available information concerning foreign issuers, there may be difficulties in
obtaining or enforcing a judgment against a foreign issuer (including branches).
and accounting, auditing and financial reporting standards and practices may
differ from those applicable to U.S. issuers. In addition, foreign banks are not
subject to regulations comparable to U.S. banking regulations.
MANAGEMENT
The Funds' Advisers
The Chase Manhattan Bank ("Chase") acts as investment adviser to the
Fund pursuant to an Investment Advisory Agreement and has overall responsibility
for investment decisions of the Fund, subject to the oversight of the Board of
Trustees. Chase is a wholly-owned subsidiary of The Chase Manhattan Corporation,
a bank holding company. Chase and its predecessors have over 100 years of money
management experience. For its investment advisory services to the Fund, Chase
is entitled to receive an annual fee computed daily and paid monthly at an
annual rate equal to 0.10% of the Fund's average daily net assets.
Chase Asset Management, Inc. ("CAM"), a registered investment
adviser, is the sub-investment adviser to the Fund pursuant to a Sub-Investment
Advisory Agreement between CAM and Chase. CAM is a wholly-owned operating
subsidiary of the Adviser. CAM makes investment decisions for the Fund on a
day-to-day basis. For these services, CAM receives a fee, payable by Chase from
its advisory fee, in a mutually agreed amount. CAM was recently formed for the
purpose of providing discretionary investment advisory services to institutional
clients and to consolidate Chase's investment management function. The same
individuals who serve as portfolio managers for Chase also serve as portfolio
managers for CAM.
ABOUT YOUR INVESTMENT
Class B shares. Investors should be aware that this Fund is made
available for exchange purposes only from Class B shares of another Vista fund.
These shares are subject to a contingent deferred sales charge ("CDSC") if
redeemed within a specified period after purchase. However, no contingent
deferred sales charge is imposed on the Class B shares being disposed of in
exchange into the Fund.
Class B shares automatically convert into Class A shares, based on
relative net asset value, eight years after purchase. For more information about
the conversion of Class B shares, see the SAI. This discussion will include
information about how shares acquired through reinvestment of distributions are
treated for conversion purposes. The discussion will also note certain
circumstances under which a conversion may not occur. Class B shares provide an
investor the benefit of putting all of the investor's dollars to work from the
time the investment is made. Until conversion, Class B shares will have a higher
expense ratio and pay lower dividends than Class A shares because of the higher
combined 12b-1 and service fees. See "How to Buy, Sell and Exchange Shares" and
"Other Information Concerning the Fund."
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HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
Shares of the Fund may only be acquired via exchange from the same
class of an existing Vista fund and only if the account registrations are
identical. Shares of the Fund will be sold without an initial sales load at the
net asset value next determined by the Fund's distributor after an order is
received. For an order to be effective on that day, it must be placed with your
investment representative or shareholder servicing agent before 2:00 p.m. on any
business day during which the New York Stock Exchange, the federal bank of New
York and the Fund's advisers' are open for business ("Fund Business Day"). See
"Other Information Concerning the Fund". The Fund reserves the right to reject
any purchase order.
Class B Shares
Class B shares are sold without an initial sales charge, although a
CDSC will be imposed if you redeem shares within a specified period after
purchase, as shown in the table below. The following types of shares may be
redeemed without charge at any time: (i) shares acquired by reinvestment of
distributions and (ii) shares otherwise exempt from the CDSC, as described in
"How to Buy Shares-General." For other shares, the amount of the charge is
determined as a percentage of the lesser of the current market value or the cost
of shares being redeemed.
Year 1 2 3 4 5 6 7 8+
- ---------------------------------------------------
CDSC 5% 4% 3% 3% 2% 1% 0% 0%
In determining whether a CDSC is payable on any redemption, the Fund
will first redeem shares not subject to any charge, and then shares held longest
during the CDSC period. The holding period of Class B Shares of the Fund will be
calculated from the date that the Class B shares were initially acquired in one
of the other Vista funds. Those Class B shares being redeemed will be considered
to represent capital appreciation or dividend and capital gain distribution
reinvestments in other funds (if applicable) and then of shares held for the
longest period of time. As a result, the CDSC imposed should be the lowest
possible rate.
In calculating the CDSC, the amount of any increase in a share's value above its
initial purchase price is not regarded as a share exempt from the CDSC. Thus,
when a share that has appreciated in value is redeemed during the CDSC period, a
CDSC is assessed only on its initial purchase price. For information on how
sales charges are calculated if you exchange your shares, see "How to Exchange
Your Shares."
The Fund may sell Class B shares at net asset value without a CDSC
to the current and retired Trustees (and their families), current and retired
employees (and their families) of Chase, the Fund's distributor and transfer
agent or any affiliates or subsidiaries thereof, registered representatives and
other employees (and their families) of broker-dealers having selected dealer
agreements with the Fund's distributor, employees (and their families) of
financial institutions having selected dealer agreements with the Fund's
distributor (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of Vista fund shares) financial
institution trust departments investing an aggregate of $1 million or more in
the Vista Family of Funds and clients of certain administrators of tax-qualified
plans when proceeds from repayments of loans to participants are invested (or
reinvested) in the Vista Family of Funds.
The Fund may sell shares at net asset value without a CDSC in
connection with the acquisition by the Fund of assets of an investment company
or personal holding company and the CDSC will be waived on redemption of shares
arising out of death or disability or in connection with certain withdrawals
from IRA or other retirement plans. Up to 12% of the value of Class B shares
subject to a systematic withdrawal plan may also be redeemed each year without a
CDSC. The SAI contains additional information about purchasing the Fund's shares
at reduced sales charges.
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<PAGE>
How to Sell Shares
You can sell your shares to the Fund on any Fund Business Day either
directly or through your investment representative or shareholder servicing
agent. The Fund will only redeem shares for which it has received payment.
Selling Shares directly to the Fund. Send a signed letter of
instruction to the Vista Service Center. The price you receive is the next net
asset value calculated after your request is received in proper form less any
CDSC.
If you want your redemption proceeds sent to an address other than
your address as it appears on Vista's records, a signature guarantee is
required. The Fund usually requires additional documentation for the sale of
shares by a corporation, partnership, agent or fiduciary, or a surviving joint
owner. Contact the Vista Service Center for details.
The Fund generally sends you payment for your shares the Fund
Business Day after your request is received, provided it is received prior to
2:00 p.m. . Under unusual circumstances, the Fund may suspend redemptions, or
postpone payment for more than seven business days, as permitted by federal
securities laws.
You may use Vista's Telephone Redemption Privilege to redeem shares
valued up to $100,000 from your account unless you have notified the Vista
Service Center of an address change within the preceding 15 days. Unless an
investor indicates otherwise on the account application, the Fund will be
authorized to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as his or her
representative, who can provide the Fund with his or her account registration
and address as it appears on the Fund's records.
The Vista Service Center will employ these and other reasonable
procedures to confirm that instructions communicated by telephone are genuine;
if it fails to employ reasonable procedures, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. For information, consult
the Vista Service Center.
During periods of unusual market changes and shareholder activity,
you may experience delays in contacting the Vista Service Center by telephone.
In this event, you may wish to submit a written redemption request, or contact
your investment representative or shareholder servicing agent. The Telephone
Redemption Privilege may be modified or terminated without notice.
Systematic Withdrawal Plan. Make regular withdrawals of $100 or more
monthly, quarterly or semi-annually from an account valued at $5,000 or more.
Selling shares through your investment representative or your
shareholder servicing agent. Your investment representative or your shareholder
servicing agent must receive your request before 2:00 p.m. Eastern time to
receive that day's net asset value. Your representative will be responsible for
furnishing all necessary documentation to the Vista Service Center.
Redemption of Accounts of Less than $500. The Fund may involuntarily
redeem your shares if the aggregate net asset value of the shares in your
account is less than $500. In the event of any such redemption, you will receive
at least 60 days' notice prior to the redemption.
How to Exchange Your Shares
You can exchange your shares for shares of the same class of certain
other Vista funds at net asset value beginning 15 days after purchase. Not all
Vista funds offer all classes of shares. The prospectus of the other Vista fund
into which shares are being exchanged should be read carefully and retained for
future reference. If you exchange shares subject to CDSC, the transaction will
not be subject to the CDSC. However, when you redeem the shares acquired through
the exchange, the redemption may be subject to the CDSC, depending upon when you
originally purchased the shares. The CDSC will be computed using the schedule of
any fund into or from which you have exchanged your shares that would result in
your paying the highest CDSC applicable to your class of shares. In computing
the CDSC, the length
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<PAGE>
of time you have owned your shares will be measured from the date of original
purchase and will not be affected by any exchange.
To exchange your shares, simply complete the Exchange Authorization
Form contained in your prospectus and send it to the Vista Service Center. The
form is also available from the Vista Service Center. For federal income tax
purposes, an exchange is treated as a sale of shares and generally results in a
capital gain or loss. A Telephone Exchange Privilege is currently available for
amounts up to $500,000. The Vista Service Center's procedures for telephone
transactions are described under "How to sell shares." Ask your investment
representative or the Vista Service Center for prospectuses of other Vista
Funds. Please read the prospectus carefully before investing and keep it for
future reference. Shares of certain Vista Funds are not available to residents
of all states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio management and
have an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances where Vista management or the Trustees
believe doing so would be in the best interests of the Fund, the Fund reserves
the right to revise or terminate the exchange privilege, limit the amount or
number of exchanges or reject any exchange. In addition, any shareholder who
makes more than ten exchanges of shares involving the Fund in a year or three in
a calendar quarter will be charged a $5.00 administration fee for each such
exchange. Shareholders would be notified of any such action to the extent
required by law. Consult the Vista Service Center before requesting an exchange.
See the SAI to find out more about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The net asset value of the Fund's shares is currently determined
daily as of 12:00 noon and 4:00 p.m., Eastern time on each Fund Business Day by
dividing the net assets of the Fund by the number of its shares outstanding at
the time the determination is made. Effective with the anticipated introduction
of certain automated share purchase programs, the net asset value of the Fund
available through the programs will also be determined as of 6:00 p.m., Eastern
time on each Fund Business Day.
The portfolio securities of the Fund are valued at their amortized
cost in accordance with federal securities laws, certain requirements of which
are summarized under "Common Fund Policies." This method increases stability in
valuation, but may result in periods during which the stated value of a
portfolio security is higher or lower than the price the Fund would receive if
the instrument were sold. It is anticipated that the net asset value of each
share will remain constant at $1.00 and these Funds will employ specific
investment policies and procedures to accomplish this result, although no
assurance can be given that they will be able to do so on a continuing basis.
The Board of Trustees will review the holdings of the Fund at intervals it deems
appropriate to determine whether that Fund's net asset value calculated by using
available market quotations (or an appropriate substitute which reflects current
market conditions) deviates from $1.00 per share based upon amortized cost. In
the event the Trustees determine that a deviation exists that may result in
material dilution or other unfair results to investors or existing shareholders,
the Trustees will take such corrective action as they regard as necessary and
appropriate.
HOW DIVIDENDS AND DISTRIBUTIONS ARE MADE; TAX INFORMATION
The net investment income of each class of shares of The Fund is
declared daily as a dividend to the shareholders on each Fund Business Day.
Dividends are declared as of the time of day which corresponds to the latest
time on that day that the Fund's net asset value is determined. Shares begin
accruing dividends on the day they are purchased. Dividends are distributed
monthly. Unless a shareholder arranges to receive dividends in cash , dividends
are distributed in the form of additional shares. Dividends that are otherwise
taxable are still taxable to you whether received in cash or additional shares.
Net realized short-term capital gains, if any, will be distributed at least
annually. The Fund does not expect to realize net long-term capital gains.
Net investment income for the Fund consists of all interest accrued
and discounts earned less, amortization of any market premium on the portfolio
assets of the Fund, and the accrued expenses of the Fund.
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The Fund intends to qualify as a "regulated investment company" for
federal income tax purposes and to meet all other requirements that are
necessary for it to be relieved of federal taxes on income and gains it
distributes to you. The Fund intends to distribute substantially all of its
ordinary income and capital gain net income on a current basis. If the Fund does
not qualify as a regulated investment company for any taxable year or does not
make distributions as it intends, the Fund will be subject to tax on all of its
income and gains.
Distributions by the Fund of its ordinary income and short-term
capital gains are generally taxable to you as ordinary income. Such
distributions will generally be subject to state and local taxes, but may be
exempt if paid out of interest on municipal obligations of the state or locality
in which you reside. Distributions by the Fund of net long-term capital gains
will be taxable as such, regardless of the length of time you have held your
shares. Distributions will be taxable in the same manner for federal income tax
purposes whether received in cash or in shares through the reinvestment of
distributions.
To the extent distributions are attributable to interest from
obligations of the U.S. Government and certain of its agencies and
instrumentalities, such distributions may be exempt from certain types of state
and local taxes.
Early in each calendar year the Fund will notify you of the amount
and tax status of distributions paid to you for the preceding year. The
foregoing is a summary of certain federal income tax consequences of investing
in the Fund. You should consult your tax adviser to determine the precise effect
of an investment in the Funds on your particular tax situation (including
possible liability for state and local taxes and, for foreign shareholders, U.S.
withholding taxes).
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Broker-Dealer Services, Inc.
("VBDS"). VBDS is a subsidiary of The BISYS Group, Inc. and is unaffiliated with
Chase. The Fund has adopted a Rule 12b-1 distribution plan which provides that
the Fund will pay distribution fees at annual rates of up to 0.75% annually of
the average daily net assets attributable to the Class B Shares. Payments under
the distribution plan shall be used to compensate or reimburse the Fund's
distributor and broker-dealers for services provided and expenses incurred in
connection with the sale of Class B shares, and are not tied to the amount of
actual expenses incurred. Payments may be used to compensate broker-dealers with
trail or maintenance commissions at an annual rate of up to [ ]% of the average
daily net asset value of Class B shares maintained in the Fund by customers of
these broker-dealers. Trail or maintenance commissions are paid to
broker-dealers beginning the 13th month following the purchase of shares by
their customers. Some activities intended to promote the sale of Class B shares
will be conducted generally by the Vista Family of Mutual Funds, and activities
intended to promote the Fund's Class B shares may also benefit the Fund's other
shares and other Vista Funds.
VBDS may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista Funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket to a
sporting event or theater or entertainment for broker-dealers and their guests;
and payment or reimbursement for travel expenses, including lodging and meals,
in connection with attendance at training and educational meetings within and
outside the U.S.
Shareholder Servicing Agents
The Fund has entered into shareholder servicing agreements with
certain shareholder servicing agents (including Chase) under which the
shareholder servicing agents have agreed to provide certain support services to
their customers including, assisting with purchase and redemption transactions,
maintaining shareholder accounts and records, furnishing customer statements,
transmitting shareholder reports and communications to customers and other
similar shareholder liaison services. For performing these services, each
shareholder servicing agent receives an annual fee of up to .25% of the average
daily net assets of the Class B shares of The Fund held by investors for whom
the shareholder servicing agent maintains a servicing relationship. Shareholder
servicing agents may subcontract with other parties for the provision of
shareholder support services.
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<PAGE>
Shareholder servicing agents may offer additional services to their
customers, including specialized procedures and payment for the purchase and
redemption of Fund shares, such as pre-authorized or systematic purchase and
redemption programs, "sweep" programs, cash advances and redemption checks. Each
shareholder servicing agent may establish its own terms and conditions,
including limitations on the amounts of subsequent transactions, with respect to
such services. Certain shareholder servicing agents may (although they are not
required by the Funds to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as shareholder servicing agents.
Administrator and Sub-Administrator
Chase acts as the Fund's administrator and is entitled to receive a
fee computed daily and paid monthly at an annual rate equal to 0.05% of The
Fund's average daily net assets.
VBDS provides certain sub-administrative services to the Fund
pursuant to its distribution and sub-administration agreement and is entitled to
receive a fee for these services from the Fund at an annual rate equal to 0.05%
of the Fund's average daily net assets. VBDS has agreed to use a portion of this
fee to pay for certain expenses incurred in connection with organizing new
series of the Trust and certain other ongoing expenses of the Trust. VBDS is
located at 125 West 55th Street, New York, New York 10019.
Custodian
Chase acts as custodian and fund accountant for the Fund and
receives compensation under an agreement with the Fund. Securities and cash of
the Fund may be held by sub-custodian banks if such arrangements are reviewed
and approved by the Trustees.
Expenses
The Fund pays the expenses incurred in its operations, including its
pro rata share of expenses of the Trust. These expenses include investment
advisory and administrative fees; the compensation of the Trustees: registration
fees; interest charges; taxes; expenses connected with the execution, recording
and settlement of security transactions; fees and expenses of the Fund's
custodian for all services to the Fund, including safekeeping of funds and
securities and maintaining required books and accounts; expenses of preparing
and mailing reports to investors and to government offices and commissions;
expenses of meetings of investors; fees and expenses of independent accountants,
of legal counsel and of any transfer agent, registrar or dividend disbursing
agent of the Trust; insurance premiums; and expenses of calculating the net
asset value of, and the net income on, shares of the Fund. Shareholder servicing
and distribution fees are allocated to specific classes of the Fund. In
addition, the Fund may allocate transfer agency and certain other expenses by
class. Service providers to the Fund may, from time to time, voluntarily waive
all or a portion of any fees to which they are entitled.
Organization and Description of Shares
The Fund is a portfolio of Mutual Fund Trust, an open-end management
investment company organized as a Massachusetts business trust in 1994 (the
"Trust"). The Trust has reserved the right to create and issue additional series
and classes. Each share of a series or class represents an equal proportionate
interest in that series or class with each other share of that series or class.
The shares of each series or class participate equally in the earnings,
dividends and assets of the particular series or class. Shares have no
preemptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each whole share held, and each fractional share shall be entitled to a
proportionate fractional vote, except that Trust shares held in the treasury of
the Trust shall not be voted. Shares of each class of the Fund generally vote
together except when required under federal securities laws to vote separately
on matters that only affect a particular class, such as the approval of
distribution plans for a particular class. Fund shares will be maintained in
book entry form, and no certificates representing shares owned will be issued to
shareholders.
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The Fund issues multiple classes of shares. This Prospectus relates
only to Class B shares of the Fund. The Fund offers other classes of shares in
addition to these classes. The categories of investors that are eligible to
purchase shares and minimum investment requirements may differ for each class of
Fund shares. In addition, other classes of Fund shares may be subject to
differences in sales charge arrangements, ongoing distribution and service fee
levels, and levels of certain other expenses, which will affect the relative
performance of the different classes. Investors may call 1-800-34-VISTA to
obtain additional information about other classes of shares of the Fund that are
offered. Any person entitled to receive compensation for selling or servicing
shares of the Fund may receive different levels of compensation with respect to
one class of shares over another.
The Trust is not required to hold annual meetings of shareholders
but will hold special meetings of shareholders of all series or classes when in
the judgment of the Trustees it is necessary or desirable to submit matters for
a shareholder vote. The Trustees will promptly call a meeting of shareholders to
remove a trustee(s) when requested to do so in writing by record holders of not
less than 10% of all outstanding shares of the Trust.
Under Massachusetts law, shareholders of such a business trust may,
under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the Trust itself was unable to meet its
obligations.
Certain Regulatory Matters
Banking laws, including the Glass-Steagall Act as currently
interpreted, prohibit bank holding companies and their affiliates from
sponsoring, organizing, controlling, or distributing shares of, mutual funds,
and generally prohibit banks from issuing, underwriting, selling or distributing
securities. These laws do not prohibit banks or their affiliates from acting as
investment adviser, administrator or custodian to mutual funds or from
purchasing mutual fund shares as agent for a customer. Chase and the Trust
believe that Chase (including its affiliates) may perform the services to be
performed by it as described in this Prospectus without violating such laws. If
future changes in these laws or interpretations required Chase to alter or
discontinue any of these services, it is expected that the Board of Trustees
would recommend alternative arrangements and that investors would not suffer
adverse financial consequences. State securities laws may differ from the
interpretations of banking law described above and banks may be required to
register as dealers pursuant to state law.
Chase and its affiliates may have deposit, loan and other commercial
banking relationships with the issuers of securities purchased on behalf of any
of the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Chase and its
affiliates deal, trade and invest for their own accounts in U.S. Government
obligations, municipal obligations and commercial paper and are among the
leading dealers of various types of U.S. Government obligations and municipal
obligations. Chase and its affiliates may sell U.S. Government obligations and
municipal obligations to, and purchase them from, other investment companies
sponsored by the Funds' distributor or affiliates of the distributor. Chase will
not invest any Fund assets in any U.S. Government obligations, municipal
obligations or commercial paper purchased from itself or any affiliate, although
under certain circumstances such securities may be purchased from other members
of an underwriting syndicate in which Chase or an affiliate is a non-principal
member. This restriction may limit the amount or type of U.S. Government
obligations, municipal obligations or commercial paper available to be purchased
by any Fund. Chase has informed the Fund that in making its investment
decisions, it does not obtain or use material inside information in the
possession of any other division or department of such Chase or in the
possession of any affiliate of Chase, including the division that performs
services for the Trust as custodian. Shareholders of the Fund should be aware
that, subject to applicable legal or regulatory restrictions, Chase and its
affiliates may exchange among themselves certain information about the
shareholders and their accounts. Transactions with affiliated broker-dealers
will only be executed on an agency basis in accordance with applicable
federal regulations.
PERFORMANCE INFORMATION
The Fund may advertise its annualized "yield" and its 'effective
yield". Annualized "yield" is determined by assuming that income generated by an
investment in the Fund over a stated seven-day period (the "Yield") will
continue
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to be generated each week over a 52-week period. It is shown as a percentage of
such investment. "Effective yield" is the annualized "yield" calculated assuming
the reinvestment of the income earned during each week of the 52-week period.
The "effective yield" will be slightly higher than the "yield" due to the
compounding effect of this assumed reinvestment.
Investment performance may from time to time be included in
advertisements about the Fund. Performance is calculated separately for each
class of shares. Because this performance information is based on historical
earnings, it should not be considered as an indication or representation of
future performance. Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the Fund's portfolio,
the Fund's operating expenses and which class of shares you purchase. Investment
performance also reflects the risks associated with the Fund's investment
objective and policies. These factors should be considered when comparing the
Fund's investment results to those of other mutual funds and investment
vehicles. Quotations of investment performance for any period when an expense
limitation was in effect will be greater if the limitation had not been in
effect. The Fund's performance may be compared to other mutual funds, relevant
indices and rankings prepared by independent services. See the SAI.
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PART B
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
May 6, 1996
VISTA(SM) U.S. GOVERNMENT MONEY MARKET FUND
VISTA(SM) 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
VISTA(SM) CASH MANAGEMENT FUND
VISTA(SM) PRIME MONEY MARKET FUND
VISTA(SM) FEDERAL MONEY MARKET FUND
VISTA(SM) TREASURY PLUS MONEY MARKET FUND
VISTA(SM) TAX FREE MONEY MARKET FUND
VISTA(SM) CALIFORNIA TAX FREE MONEY MARKET FUND
VISTA(SM) NEW YORK TAX FREE MONEY MARKET FUND
VISTA(SM) TAX FREE INCOME FUND
VISTA(SM) NEW YORK TAX FREE INCOME FUND
VISTA(SM) CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
125 West 55th Street, New York, New York 10019
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Prospectuses offering shares of the Funds. This Statement of Additional
Information should be read in conjunction with the individual Prospectuses
offering shares of Vista Tax Free Income Fund, Vista California Intermediate Tax
Free Income Fund and Vista New York Tax Free Income Fund (the "Income Funds"),
the combined Prospectuses offering Vista Shares, Premier Shares and
Institutional Shares of Vista U.S. Government Money Market Fund, Vista 100% U.S.
Treasury Securities Money Market Fund, Vista Cash Management Fund, Vista Prime
Money Market Fund (does not offer Vista Shares), Vista Federal Money Market
Fund, Vista Treasury Plus Money Market, Vista Tax Free Money Market Fund, Vista
California Tax Free Money Market Fund (offers only Vista Shares) and Vista New
York Tax Free Money Market Fund (offers only Vista Shares) (the "Money Market
Funds"), and the Prospectus offering Class B shares of Vista Prime Money Market
Fund. Any reference to a "Prospectus" in this Statement of Additional
Information is a reference to one or more of the foregoing Prospectuses, as the
context requires. Copies of each Prospectus may be obtained by an investor
without charge by contacting Vista Broker-Dealer Services, Inc., the Funds'
distributor, at the above-listed address.
This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
For more information about your account, simply call the Vista Service
Center at our toll-free number:
1-800-34-VISTA
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141
<PAGE>
Table of Contents Page
The Funds....................................................................2
Investment Policies and Restrictions.........................................4
Performance Information.....................................................22
Determination of Net Asset Value............................................27
Tax Matters.................................................................28
Management of the Funds.....................................................34
Independent Accountants.....................................................50
General Information.........................................................51
Appendix A - Description of Ratings........................................A-1
Appendix B - Special Investment Considerations Relating to
Investing in New York Municipal Obligations.................B-1
Appendix C - Special Investment Considerations Relating to
Investing in California Municipal Obligations...............C-1
THE FUNDS
Mutual Fund Trust (the "Trust") is an open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on February 4, 1994. The Trust presently consists
of 12 separate series (the "Funds"). Certain of the Funds are diversified and
other Funds are non-diversified, as such term is defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). Under a multiple class
distribution system, the Money Market Funds and the Vista Tax Free Income Fund
and the Vista New York Tax Free Income Fund may be offered through multiple
classes of shares. The Vista Shares class of the Money Market Funds are referred
to in this Statement of Additional Information as the "Vista Shares", the
Premier Shares class of the Money Market Funds are referred to herein as the
"Premier Shares" and the Institutional Shares class of the Money Market Funds
are referred to herein as the "Institutional Shares." Those Income Funds offered
through two classes of shares may issue Class A shares (which are subject to an
initial sales load) and Class B shares (which are subject to a contingent
deferral sales load). The shares of the Income Funds and Money Market Funds are
collectively referred to in this Statement of Additional Information as the
"Shares." The Income Funds, Tax Free Money Market Fund, New York Tax Free Money
Market Fund and California Tax Free Money Market Fund are collectively referred
to herein as the "Tax Free Funds."
On August 25, 1994, the shareholders of each of the existing classes of
Shares of the Vista U.S. Government Money Market Fund, Vista Global Money Market
Fund, Vista Prime Money Market Fund, Vista Tax Free Money Market Fund, Vista
California Money Market Fund, Vista New York Tax Free Money Market Fund, Vista
Tax Free Income Fund, Vista New York Tax Free Income Fund and the Vista
California Intermediate Tax Free Income Fund approved the reorganization of each
of these Funds into newly-created series of the Mutual Fund Trust, effective
October 28, 1994. Prior to such approvals, each of these funds were series of
Mutual Fund Group, an affiliated investment company.
On December 4, 1992, the shareholders of each of the existing classes of
Shares of Vista Global Money Market Fund and Vista U.S. Government Money Market
Fund approved the reorganization of each of these Funds into newly-created
series of Mutual Fund Group, effective January 1, 1993. Prior to such approvals,
on December 4, 1992, the shareholders of each of the five existing series of
Trinity Assets Trust (Trinity Money Market Fund, Trinity Government Fund,
Trinity Bond Fund, Trinity Short-Term Bond Fund and Trinity Equity Fund)
(collectively, the "Trinity Funds") approved the reorganization of each of the
Trinity Funds into newly-created series of the Trust,
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effective January 1, 1993. Vista Global Money Market Fund and Trinity Money
Market Fund were reorganized into classes of Shares of "Vista Worldwide Money
Market Fund", which changed its name to "Vista Global Money Market Fund" as of
December 31, 1992. Vista U.S. Government Money Market Fund and Trinity
Government Fund were reorganized into classes of Shares of "Vista Government
Cash Fund", which changed its name to "Vista U.S. Government Money Market Fund"
as of December 31, 1992.
On May 6, 1996, The U.S. Treasury Money Market Fund of The Hanover Funds,
Inc. ("Hanover") merged into the Vista Shares of Treasury Plus Money Market
Fund, The Government Money Market Fund of Hanover merged into the Vista class of
U.S. Government Money Market Fund, The Cash Management Fund of Hanover merged
into the Vista class of Cash Management Fund (The Cash Management Fund of
Hanover was the accounting survivor of this merger), The Tax Free Money Market
Fund of Hanover merged into the Vista class of Tax Free Money Market Fund, The
New York Tax Free Money Market Fund of Hanover merged into the Vista class of
New York Tax Free Money Market Fund, and The 100% U.S. Treasury Securities Money
Market Fund of Hanover merged into the Vista class of 100% U.S. Treasury
Securities Money Market Fund. The foregoing mergers are referred to herein as
the "Hanover Reorganization."
The Funds' Shares are continuously offered for sale through Vista
Broker-Dealer Services, Inc. ("VBDS"), the Funds' distributor (the
"Distributor"), which is not affiliated with Chase Manhattan Bank, or its
affiliates.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Chase Manhattan Bank ("Chase") is
the investment adviser for the Funds. Chase also serves as the Trust's
administrator (the "Administrator") and supervises the overall administration of
the Trust, including the Funds. Occasionally, communications to shareholders may
contain the views of the investment adviser as to current market, economic,
trade and interest rate trends, as well as legislative, regulatory and monetary
developments, and may include investment strategies and related matters believed
to be of relevance to a Fund. A majority of the Trustees of the Trust are not
affiliated with the investment adviser or the sub-advisers.
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INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies applicable to
each Fund. As used in this Statement of Additional Information, with respect to
those Funds and policies for which they apply, the terms "Municipal Obligations"
and "tax-exempt securities" have the meanings given to it in the relevant Fund's
Prospectus. For descriptions of the securities ratings of Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P") and Fitch
Investors Service, Inc. ("Fitch") see Appendix A. For a general discussion of
special investment considerations relating to investing in (i) New York and (ii)
California Municipal Obligations, see Appendices B and C, respectively.
The management style used for Funds which invest in fixed-income
securities emphasizes several key factors. Portfolio managers consider the
security quality - that is, the ability of the debt issuer to make timely
payments of principal and interest. Managers also search for the lowest buying
price and highest selling price they can find. Because bonds are not traded in a
centralized environment, prices vary, giving managers the opportunity to take
advantage of market price inefficiencies.
Also important in the analysis is the relationship of a bond's yield and
its maturity, in which the managers evaluate the risks of investing in long-term
higher-yielding securities. Managers also use a computer model to simulate
possible fluctuations in prices and yields if interest rates change. Another
step in the analysis is comparing yields on different types of securities to
determine relative risk/reward profiles.
The following information supplements and should be read in conjunction
with the related sections of each Prospectus.
U.S. Government Securities -- U.S. Government Securities include (1) U.S.
Treasury obligations, which differ in their interest rates, maturities and times
of issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities which are supported by any of
the following: (a) the full faith and credit of the U.S. Treasury, (b) the right
of the issuer to borrow any amount listed to a specific line of credit from the
U.S. Treasury, (c) discretionary authority of the U.S. Government to purchase
certain obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. Agencies and instrumentalities of the
U.S. Government include but are not limited to: Federal Land Banks, Federal
Financing Banks, Banks for Cooperative,s Federal Intermediate Credit Banks, Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Student Loan Marketing Association,
United States Postal Service, Chrysler Corporate Loan Guarantee Board, Small
Business Administration, Tennessee Valley Authority and any other enterprise
established or sponsored by the U.S. Government. Certain U.S. Government
Securities, including U.S. Treasury bills, notes and bonds, Government National
Mortgage Association certificates and Federal Housing Administration debentures,
are supported by the full faith and credit of the United States. Other U.S.
Government Securities are issued or guaranteed by Federal agencies or government
sponsored enterprises and are not supported by the full faith and credit of the
United States. These securities include obligations that are supported by the
right of the issuer to borrow from the U.S. Treasury, such as obligations of
Federal Home Loan Banks, and obligations that are supported by the
creditworthiness of the particular instrumentality, such as obligations of
Federal National Mortgage Association or Federal Home Loan Mortgage Corporation.
Specialized Kinds of Government Agency Securities -- In addition, certain
U.S. Government agencies issue specialized types of securities, such as
guaranteed notes of the Small Business Administration, Federal Aviation
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Administration, Department of Defense, Bureau of Indian Affairs and Private
Export Funding Corporation, which often provide higher yields than are available
from the more common types of government-backed instruments. However, such
specialized instruments may only be available from a few sources, in limited
amounts, or only in very large denominations; they may also require specialized
capability in portfolio servicing and in legal matters related to government
guarantees. While they may frequently offer attractive yields, the
limited-activity markets of many of these securities means that, if a Fund were
required to liquidate any of them, it might not be able to do so advantageously;
accordingly, each Fund investing in such securities intends normally to hold
such securities to maturity or pursuant to repurchase agreements, and would
treat such securities (including repurchase agreements maturing in more than
seven days) as illiquid for purposes of its limitation on investment in illiquid
securities.
Bank Obligations -- Investments in bank obligations are limited to those
of U.S. banks (including their foreign branches) which have total assets at the
time of purchase in excess of $1 billion and the deposits of which are insured
by either the Bank Insurance Fund or the Savings and Loan Insurance Fund of the
Federal Deposit Insurance Corporation, and foreign banks (including their U.S.
branches) having total assets in excess of $10 billion.
A certificate of deposit is an interest-bearing negotiable certificate
issued by a bank against funds deposited in the bank. A bankers' acceptance is a
short-term draft drawn on a commercial bank by a borrower, usually in connection
with an international commercial transaction. Although the borrower is liable
for payment of the draft, the bank unconditionally guarantees to pay the draft
at its face value on the maturity date.
Commercial Paper-and Other Short-Term Obligations. The commercial paper
and other short-term obligations of U.S. and foreign corporations which may be
purchased by the Prime Fund and the Cash Management Fund other than those of
bank holding companies, include obligations which are (i) rated Prime-I by
Moody's, A-1 by S&P's, F-1 by Fitch or D-1 by Duff & Phelps ("D&P"); or (ii)
determined by the Adviser to be of comparable quality to those rated obligations
which may be purchased by the Prime Fund and the Cash Management Fund at the
date of purchase or which at the date of purchase have an outstanding debt issue
rated in the highest rating category by Moody's, S&P's or Fitch. The commercial
paper and other short-term obligations of U.S. bank holding companies which may
be purchased by the Cash Management Fund include obligations issued or
guaranteed by bank holding companies with total assets exceeding $1 billion. For
purposes of the size standards with respect to banks and bank holding companies,
"total deposits" and "total assets" are determined on an annual basis by
reference to an institution's then most recent annual financial statements.
Repurchase Agreements -- A Fund will enter into repurchase agreements only
with member banks of the Federal Reserve System and securities dealers believed
creditworthy by the Trustees, and only if fully collateralized by securities in
which such Fund is permitted to invest. Under the terms of a typical repurchase
agreement, a Fund would acquire an underlying debt instrument for a relatively
short period (usually not more than one week) subject to an obligation of the
seller to repurchase the instrument and the Fund to resell the instrument at a
fixed price and time, thereby determining the yield during the Fund's holding
period. This procedure results in a fixed rate of return insulated from market
fluctuations during such period. A repurchase agreement is subject to the risk
that the seller may fail to repurchase the security. Repurchase agreements may
be deemed under the 1940 Act to be loans collateralized by the underlying
securities. All repurchase agreements entered into by a Fund will be fully
collateralized at all times during the period of the agreement in that the value
of the underlying security will be at least equal to the amount of the loan,
including the accrued interest thereon, and the Fund or its custodian or
sub-custodian will have possession of the collateral, which the Board of
Trustees believes will give it a valid, perfected security interest in the
collateral. Whether a repurchase agreement is the purchase and sale of a
security or a collateralized loan has not been conclusively established. This
might become an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities would not be
owned by a Fund, but would only constitute collateral for the seller's
obligation to pay the repurchase price. Therefore, a Fund may suffer time delays
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and incur costs in connection with the disposition of the collateral. The Board
of Trustees believes that the collateral underlying repurchase agreements may be
more susceptible to claims of the seller's creditors than would be the case with
securities owned by a Fund. Repurchase agreements will give rise to income which
will not qualify as tax-exempt income when distributed by a Tax Free Fund.
Repurchase agreements maturing in more than seven days are treated as illiquid
for purposes of the Funds' restrictions on purchases of illiquid securities.
Repurchase agreements are also subject to the same risks described below with
respect to stand-by commitments.
Reverse Repurchase Agreements -- Reverse repurchase agreements involve
sales of portfolio securities of a Fund to member banks of the Federal Reserve
System or securities dealers believed creditworthy, concurrently with an
agreement by such Fund to repurchase the same securities at a later date at a
fixed price which is generally equal to the original sales price plus interest.
A Fund retains record ownership and the right to receive interest and principal
payments on the portfolio security involved.
High Quality Municipal Obligations -- Investments will be made in unrated
Municipal Obligations only if they are determined to be of comparable quality to
permissable rated investments on the basis of the advisers' credit evaluation of
the obligor or of the bank issuing a participation certificate, letter of credit
or guaranty, or insurance issued in support of the obligation. High Quality
instruments may produce a lower yield than would be available from less highly
rated instruments. The Board of Trustees has determined that Municipal
Obligations which are backed by the credit of the U.S. Government will be
considered to have a rating equivalent to Moody's Aaa.
If, subsequent to purchase by a Money Market Fund, (a) an issue of rated
Municipal Obligations ceases to be rated in the highest rating category (the two
highest categories in the case of the New York and California Tax Free Money
Market Funds) by at least two rating organizations (or one rating organization
if the instrument was rated by only one such organization) or the National Board
of Trustees determines that it is no longer of comparable quality or (b) the
Adviser becomes aware that any portfolio security not so highly rated or any
unrated security has been given a rating by any rating organization below the
rating organization's second highest rating category, the Board of Trustees will
reassess promptly whether such security presents minimal credit risk and will
cause such Money Market Fund to take such action as it determines is in its best
interest and that of its shareholders; provided that the reassessment required
by clause (b) is not required if the portfolio security is disposed of or
matures within five business days of the Adviser becoming aware of the new
rating and the Fund's Board is subsequently notified of the Adviser's actions.
To the extent that a rating given by Moody's, S&P or Fitch for Municipal
Obligations may change as a result of changes in such organizations or their
rating systems, the Funds will attempt to use comparable ratings as standards
for their investments in accordance with the investment policies contained in
the Prospectuses and this Statement of Additional Information. The ratings of
Moody's, S&P and Fitch represent their opinions as to the quality of the
Municipal Obligations which they undertake to rate. It should be emphasized,
however, that ratings are relative and subjective and are not absolute standards
of quality. Although these ratings may be an initial criterion for selection of
portfolio investments, the advisers also will evaluate these securities and the
creditworthiness of the issuers of such securities.
Forward Commitments -- In order to invest a Fund's assets immediately,
while awaiting delivery of securities purchased on a forward commitment basis,
short-term obligations that offer same-day settlement and earnings will normally
be purchased. Although, with respect to any Tax Free Fund, short-term
investments will normally be in tax-exempt securities or Municipal Obligations,
as the case may be, short-term taxable securities or obligations may be
purchased if suitable short-term tax-exempt securities or Municipal Obligations
are not available. When a commitment to purchase a security on a forward
commitment basis is made, procedures are established consistent with the General
Statement of Policy of the Securities and Exchange Commission concerning such
purchases. Since that policy currently recommends that an amount of the
respective Fund's assets equal to the
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amount of the purchase be held aside or segregated to be used to pay for the
commitment, a separate account of the Fund consisting of cash, cash equivalents
or high quality debt securities equal to the amount of the Fund's commitments
will be established at the Fund's custodian bank. For the purpose of determining
the adequacy of the securities in the account, the deposited securities will be
valued at market value. If the market value of such securities declines,
additional cash, cash equivalents or highly liquid securities will be placed in
the account daily so that the value of the account will equal the amount of such
commitments by the respective Fund.
Although it is not intended that such purchases would be made for
speculative purposes, purchases of securities on a forward commitment basis may
involve more risk than other types of purchases. Securities purchased on a
forward commitment basis and the securities held in the respective Fund's
portfolio are subject to changes in value based upon the public's perception of
the creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. Purchasing securities on a forward commitment basis can
involve the risk that the yields available in the market when the delivery takes
place may actually be higher or lower than those obtained in the transaction
itself. On the settlement date of the forward commitment transaction, the
respective Fund will meet its obligations from then available cash flow, sale of
securities held in the separate account, sale of other securities or, although
it would not normally expect to do so, from sale of the forward commitment
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). The sale of securities to meet such obligations may result
in the realization of capital gains or losses, which, for consideration by the
Tax Free Funds, are not exempt from federal, state or local taxation.
To the extent a Fund engages in forward commitment transactions, it will
do so for the purpose of acquiring securities consistent with its investment
objective and policies and not for the purpose of investment leverage, and
settlement of such transactions will be within 90 days from the trade date.
Illiquid Securities. For purposes of its limitation on investments in
illiquid securities, each Fund may elect to treat as liquid, in accordance with
procedures established by the Board of Trustees, certain investments in
restricted securities for which there may be a secondary market of qualified
institutional buyers as contemplated by Rule 144A under the Securities Act of
1933, as amended (the "Securities Act") and commercial obligations issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act.
Stand-by Commitments -- When a Fund purchases securities it may also
acquire stand-by commitments with respect to such securities. Under a stand-by
commitment, a bank or broker-dealer agrees to purchase at a Fund's option a
specified security at a specified price.
The amount payable to a Money Market Fund upon its exercise of a stand-by
commitment with respect to a Municipal Obligation normally would be (i) the
acquisition cost of the Municipal Obligation (excluding any accrued interest
paid by the Fund on the acquisition), less any amortized market premium or plus
any amortized market or original issue discount during the period the Fund owned
the security, plus (ii) all interest accrued on the security since the last
interest payment date during the period the security was owned by the Fund.
Absent unusual circumstances relating to a change in market, a Money Market Fund
would value the underlying Municipal Obligation at amortized cost. Accordingly,
the amount payable by a bank or dealer during the time a stand-by commitment is
exercisable would be substantially the same as the market value of the
underlying Municipal Obligation. The Money Market Funds value stand-by
commitments at zero for purposes of computing their net asset value per share.
The stand-by commitments that may be entered into by the Funds are subject
to certain risks, which include the ability of the issuer of the commitment to
pay for the securities at the time the commitment is exercised, the fact that
the commitment is not marketable by a Fund, and that the maturity of the
underlying security will generally be
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different from that of the commitment. Not more than 10% of the total assets of
a Money Market Fund will be invested in Municipal Obligations that are subject
to stand-by commitments from the same bank or broker-dealers.
Floating and Variable Rate Securities; Participation Certificates --
Floating and variable rate demand instruments permit the holder to demand
payment upon a specified number of days' notice of the unpaid principal balance
plus accrued interest either from the issuer or by drawing on a bank letter of
credit, a guarantee or insurance issued with respect to such instrument.
Investments by the Income Funds in floating or variable rate securities normally
will involve industrial development or revenue bonds that provide for a periodic
adjustment in the interest rate paid on the obligation and may, but need not,
permit the holder to demand payment as described above. While there is usually
no established secondary market for issues of these types of securities, the
dealer that sells an issue of such security frequently will also offer to
repurchase the securities at any time at a repurchase price which varies and may
be more or less than the amount the holder paid for them. The variable rate
demand instruments in which the Money Market Funds may invest are payable on
demand on not more than seven calendar days' notice.
The terms of these types of securities provide that interest rates are
adjustable at intervals ranging from daily to up to six months and the
adjustments are based upon the prime rate of a bank or other short-term rates,
such as Treasury Bills or LIBOR (London Interbank Offered Rate), as provided in
the respective instruments. The Funds will decide which variable rate securities
to purchase in accordance with procedures prescribed by Board of Trustees of the
Trust in order to minimize credit risks.
In the case of a Money Market Fund, the Board of Trustees may determine
that an unrated variable rate security meets the Fund's high quality criteria if
it is backed by a letter of credit or guarantee or is insured by an insurer that
meets such quality criteria, or on the basis of a credit evaluation of the
underlying obligor. If the credit of the obligor is of "high quality", no credit
support from a bank or other financial institution will be necessary. The Board
of Trustees will re-evaluate each unrated variable rate security on a quarterly
basis to determine that it continues to meet a Money Market Fund's high quality
criteria. If an instrument is ever deemed to fall below a Money Market Fund's
high quality standards, either it will be sold in the market or the demand
feature will be exercised.
The variable rate securities in which certain Funds may be invested
include participation certificates, issued by a bank, insurance company or other
financial institution, in variable rate securities owned by such institutions or
affiliated organizations ("Participation Certificates"). A Participation
Certificate gives a Fund an undivided interest in the variable rate security in
the proportion that the Fund's participation interest bears to the total
principal amount of the security and provides the demand feature described
below. Each Participation Certificate is backed by an irrevocable letter of
credit or guaranty of a bank (which may be the bank issuing the Participation
Certificate, a bank issuing a confirming letter of credit to that of the issuing
bank, or a bank serving as agent of the issuing bank with respect to the
possible repurchase of the certificate of participation) or insurance policy of
an insurance company that the Board of Trustees of the Trust has determined
meets the prescribed quality standards for a particular Fund.
A Fund has the right to sell the Participation Certificate back to the
institution and draw on the letter of credit or insurance on demand after the
prescribed notice period, for all or any part of the full principal amount of
the Fund's participation interest in the security, plus accrued interest. The
institutions issuing the Participation Certificates will retain a service and
letter of credit fee and a fee for providing the demand feature, in an amount
equal to the excess of the interest paid on the instruments over the negotiated
yield at which the Participation Certificates were purchased by a Fund. The
total fees generally range from 5% to 15% of the applicable prime rate or other
short-term rate index. With respect to insurance, a Fund will attempt to have
the issuer of the Participation Certificate bear the cost of the insurance,
although the Funds retain the option to purchase insurance if necessary.
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The advisers have been instructed by the Board of Trustees to monitor
continually the pricing, quality and liquidity of the variable rate securities
held by the Funds, including Participation Certificates, on the basis of
published financial information and reports of the rating agencies and other
bank analytical services to which the Funds may subscribe. Although these
instruments may be sold by a Fund, it is intended that they be held until
maturity. Participation Certificates will only be purchased by a Tax Free Fund
if, in the opinion of counsel to the issuer, interest income on such instruments
will be tax-exempt when distributed as dividends to shareholders of such Fund.
Past periods of high inflation, together with the fiscal measures adopted
to attempt to deal with it, have seen wide fluctuations in interest rates,
particularly "prime rates" charged by banks. While the value of the underlying
variable rate securities may change with changes in interest rates generally,
the variable rate nature of the underlying variable rate securities should
minimize changes in value of the instruments. Accordingly, as interest rates
decrease or increase, the potential for capital appreciation and the risk of
potential capital depreciation is less than would be the case with a portfolio
of fixed income securities. A Fund's portfolio may contain variable rate
securities on which stated minimum or maximum rates, or maximum rates set by
state law, limit the degree to which interest on such variable rate securities
may fluctuate; to the extent it does, increases or decreases in value may be
somewhat greater than would be the case without such limits. Because the
adjustment of interest rates on the variable rate securities is made in relation
to movements of the applicable banks' "prime rates" or other short-term rate
adjustment indices, the variable rate securities are not comparable to long-term
fixed rate securities. Accordingly, interest rates on the variable rate
securities may be higher or lower than current market rates for fixed rate
obligations of comparable quality with similar maturities.
The maturity of variable rate securities is deemed to be the longer of (i)
the notice period required before a Fund is entitled to receive payment of the
principal amount of the security upon demand or (ii) the period remaining until
the security's next interest rate adjustment. With respect to a Money Market
Fund, the maturity of a variable rate demand instrument will be determined in
the same manner for purposes of computing the Fund's dollar-weighted average
portfolio maturity. With respect to the Income Funds, if variable rate
securities are not redeemed through the demand feature, they mature on a
specified date which may range up to thirty years from the date of issuance.
Tender Option Variable Rate Certificates. The Money Market Funds may
invest in tender option bonds. A tender option bond is a synthetic floating rate
security issued when long term bonds are purchased in the secondary market and
are then deposited into a trust. Custodial receipts are then issued to
investors, such as the Funds, evidencing ownership interests in the trust. The
trust sets a floating rate on a daily or weekly basis which is established
through a remarketing agent. These types of derivatives, to be money market
eligible under Rule 2(a)-7, must have a liquidity facility in place which
provides additional comfort to the investors in case the remarketing fails. The
sponsor of the trust keeps the difference between the rate on the long term bond
and the rate on the short term floating rate security.
Supranational Obligations. Supranational organizations include
organizations such as The World Bank, which was chartered to finance development
projects in developing member countries; the European Community, which is a
twelve-nation organization engaged in cooperative economic activities; the
European Coal and Steel Community, which is an economic union of various
European nations steel and coal industries; and the Asian Development Bank,
which is an international development bank established to lend funds, promote
investment and provide technical assistance to member nations of the Asian and
Pacific regions.
Loans of Portfolio Securities -- Certain securities dealers who make
"short sales" or who wish to obtain particular securities for short periods may
seek to borrow them from institutional investors such as the Funds. Each Fund
(other than the Tax Free Funds) reserves the right to seek to increase its
income by lending its portfolio
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securities. Under present regulatory policies, including those of the Board of
Governors of the Federal Reserve System and the Securities and Exchange
Commission, such loans may be made only to member firms of the New York Stock
Exchange, and are required to be secured continuously by collateral in cash,
cash equivalents, or U.S. Government securities maintained on a current basis in
an amount at least equal to the market value of the securities loaned. Under a
loan, a Fund has the right to call a loan and obtain the securities loaned at
any time on five days' notice.
During the existence of a loan, a Fund continues to receive the equivalent
of the interest or dividends paid by the issuer on the securities loaned and
also receives compensation based on investment of the collateral. A Fund does
not, however, have the right to vote any securities having voting rights during
the existence of the loan, but can call the loan in anticipation of an important
vote to be taken among holders of the securities or of the giving or withholding
of their consent on a material matter affecting the investment.
As with other extensions of credit, there are risks of delay in recovery
or even loss of rights in the collateral if the borrower of the securities
experiences financial difficulty. However, the loans will be made only to
dealers deemed by a Fund to be of good standing, and when, in the judgment of
the Fund, the consideration that can be earned currently from securities loans
of this type justifies the attendant risk. In the event a Fund makes securities
loans, the value of the securities loaned would not exceed 30% of the value of
the Fund's total assets.
Additional Policies Regarding Derivative and Related Transactions
Introduction
As explained more fully below, the Income Funds may employ derivative and
related instruments as tools in the management of portfolio assets. Put briefly,
a "derivative" instrument may be considered a security or other instrument which
derives its value from the value or performance of other instruments or assets,
interest or currency exchange rates, or indexes. For instance, derivatives
include futures, options, forward contracts, structured notes and various other
over-the-counter instruments.
Like other investment tools or techniques, the impact of using derivatives
strategies or similar instruments depends to a great extent on how they are
used. Derivatives are generally used by portfolio managers in three ways: First,
to reduce risk by hedging (offsetting) an investment position. Second, to
substitute for another security particularly where it is quicker, easier and
less expensive to invest in derivatives. Lastly, to speculate or enhance
portfolio performance. When used prudently, derivatives can offer several
benefits, including easier and more effective hedging, lower transaction costs,
quicker investment and more profitable use of portfolio assets. However,
derivatives also have the potential to significantly magnify risks, thereby
leading to potentially greater losses for a Fund.
Each Income Fund may invest its assets in derivative and related
instruments subject only to the Fund's investment objective and policies and the
requirement that the Fund maintain segregated accounts consisting of liquid
assets, such as cash, U.S. Government securities, or other high-grade debt
obligations (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under such instruments with
respect to positions where there is no underlying portfolio asset so as to avoid
leveraging the Fund.
The value of some derivative or similar instruments in which the Income
Funds invest may be particularly sensitive to changes in prevailing interest
rates or other economic factors, and -- like other investments of the Funds --
the ability of a Fund to successfully utilize these instruments may depend in
part upon the ability of the advisers to forecast interest rates and other
economic factors correctly. If the advisers accurately forecast such factors and
has taken positions in derivative or similar instruments contrary to prevailing
market trends, the Funds could be
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exposed to the risk of a loss. The Funds might not employ any or all of the
strategies described herein, and no assurance can be given that any strategy
used will succeed.
Set forth below is an explanation of the various derivatives strategies
and related instruments the Funds may employ along with risks or special
attributes associated with them. This discussion is intended to supplement the
Funds' current prospectuses as well as provide useful information to prospective
investors.
Risk Factors
As explained more fully below and in the discussions of particular
strategies or instruments, there are a number of risks associated with the use
of derivatives and related instruments. There can be no guarantee that there
will be a correlation between price movements in a hedging vehicle and in the
portfolio assets being hedged. An incorrect correlation could result in a loss
on both the hedged assets in a Fund and the hedging vehicle so that the
portfolio return might have been greater had hedging not been attempted. This
risk is particularly acute in the case of "cross-hedges" between currencies. The
advisers may accurately forecast interest rates, market values or other economic
factors in utilizing a derivatives strategy. In such a case, the Fund may have
been in a better position had it not entered into such strategy. Hedging
strategies, while reducing risk of loss, can also reduce the opportunity for
gain. In other words, hedging usually limits both potential losses as well as
potential gains. Strategies not involving hedging may increase the risk to a
Fund. Certain strategies, such as yield enhancement, can have speculative
characteristics and may result in more risk to a Fund than hedging strategies
using the same instruments. There can be no assurance that a liquid market will
exist at a time when a Fund seeks to close out an option, futures contract or
other derivative or related position. Many exchanges and boards of trade limit
the amount of fluctuation permitted in option or futures contract prices during
a single day; once the daily limit has been reached on particular contract, no
trades may be made that day at a price beyond that limit. In addition, certain
instruments are relatively new and without a significant trading history. As a
result, there is no assurance that an active secondary market will develop or
continue to exist. Finally, over-the-counter instruments typically do not have a
liquid market. Lack of a liquid market for any reason may prevent a Fund from
liquidating an unfavorable position. Activities of large traders in the futures
and securities markets involving arbitrage, "program trading," and other
investment strategies may cause price distortions in these markets. In certain
instances, particularly those involving over-the-counter transactions, forward
contracts there is a greater potential that a counterparty or broker may default
or be unable to perform on its commitments. In the event of such a default, a
Fund may experience a loss.
Specific Uses and Strategies
Set forth below are explanations various strategies involving derivatives
and related instruments which may be used by the Income Funds.
Options on Securities and Securities Indexes. The Funds may PURCHASE, SELL
or EXERCISE call and put options on (i) securities, (ii) securities indexes, and
(iii) debt instruments.
Although in most cases these options will be exchange-traded, the Funds
may also purchase, sell or exercise over-the-counter options. Over-the-counter
options differ from exchange-traded options in that they are two-party contracts
with price and other terms negotiated between buyer and seller. As such,
over-the-counter options generally have much less market liquidity and carry the
risk of default or nonperformance by the other party.
One purpose of purchasing put options is to protect holdings in an
underlying or related security against a substantial decline in market value.
One purpose of purchasing call options is to protect against substantial
increases in prices of securities a Fund intends to purchase pending its ability
to invest in such securities in an orderly manner. A Fund may also use
combinations of options to minimize costs, gain exposure to markets or take
advantage of price
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disparities or market movements. For example, a Fund may sell put or call
options it has previously purchased or purchase put or call options it has
previously sold. These transactions may result in a net gain or loss depending
on whether the amount realized on the sale is more or less than the premium and
other transaction costs paid on the put or call option which is sold. A Fund may
write a call or put option in order to earn the related premium from such
transactions. Prior to exercise or expiration, an option may be closed out by an
offsetting purchase or sale of a similar option.
In addition to the general risk factors noted above, the purchase and
writing of options involve certain special risks. During the option period, a
fund writing a covered call (i.e., where the underlying securities are held by
the fund) has, in return for the premium on the option, given up the opportunity
to profit from a price increase in the underlying securities above the exercise
price, but has retained the risk of loss should the price of the underlying
securities decline. The writer of an option has no control over the time when it
may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver the underlying securities at the exercise price.
If a put or call option purchased by a Fund is not sold when it has
remaining value, and if the market price of the underlying security, in the case
of a put, remains equal to or greater than the exercise price or, in the case
of a call, remains less than or equal to the exercise price, such Fund will lose
its entire investment in the option. Also, where a put or call option on a
particular security is purchased to hedge against price movements in a related
security, the price of the put or call option may move more or less than the
price of the related security. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. Furthermore, if
trading restrictions or suspensions are imposed on the options markets, a Fund
may be unable to close out a position.
Futures Contracts and Options on Futures Contracts. The Funds may purchase
or sell (i) interest-rate futures contracts, (ii) futures contracts on specified
instruments, and (iii) options on these futures contracts ("futures options").
The futures contracts and futures options may be based on various
securities in which the Funds may invest such as foreign currencies,
certificates of deposit, Eurodollar time deposits, securities indices, economic
indices (such as the Consumer Price Indices compiled by the U.S. Department of
Labor) and other financial instruments and indices.
These instruments may be used to hedge portfolio positions and
transactions as well as to gain exposure to markets. For example, a Fund may
sell a futures contract -- or buy a futures option -- to protect against a
decline in value, or reduce the duration, of portfolio holdings. Likewise, these
instruments may be used where a Fund intends to acquire an instrument or enter
into a position. For example, a Fund may purchase a futures contract -- or buy a
futures option -- to gain immediate exposure in a market or otherwise offset
increases in the purchase price of securities or currencies to be acquired in
the future. Futures options may also be written to earn the related premiums.
When writing or purchasing options, the Funds may simultaneously enter
into other transactions involving futures contracts or futures options in order
to minimize costs, gain exposure to markets, or take advantage of price
disparities or market movements. Such strategies may entail additional risks in
certain instances. Funds may engage in cross-hedging by purchasing or selling
futures or options on a security or currency different from the security or
currency position being hedged to take advantage of relationships between the
two securities or currencies.
Investments in futures contracts and options thereon involve risks similar
to those associated with options transactions discussed above. The Funds will
only enter into futures contracts or options on futures contracts which
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are standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or quoted on an automated quotation system.
Forward Contracts. A Fund may also use forward contracts to hedge against
changes in interest-rates, increase exposure to a market or otherwise take
advantage of such changes. An interest-rate forward contract involves the
obligation to purchase or sell a specific debt instrument at a fixed price at a
future date.
Interest Rate Transactions. The Income Funds may employ interest rate
management techniques, including transactions in options (including yield curve
options), futures, options on futures, forward exchange contracts, and currency
and interest rate swaps.
An Income Fund will only enter into interest rate swaps on a net basis,
i.e., the two payment streams are netted out, with the Income Fund receiving or
paying, as the case may be, only the net amount of the two payments. Interest
rate swaps do not involve the delivery of securities, other underlying assets or
principal. Accordingly, the risk of loss with respect to interest rate swaps is
limited to the net amount of interest payments that an Income Fund is
contractually obligated to make. If the other party to and interest rate swap
defaults, an Income Fund's risk of loss consists of the net amount of interest
payments that the Fund is contractually entitled to receive. Since interest rate
swaps are individually negotiated, each Income Fund expects to achieve an
acceptable degree of correlation between its portfolio investments and its
interest rate swap position.
An Income Fund may enter into interest rate swaps to the maximum allowed
limits under applicable law. An Income Fund will typically use interest rate
swaps to shorten the effective duration of its portfolio. Interest rate swaps
involve the exchange by an Income Fund with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments.
Structured Products. The Income Funds may invest in interests in entities
organized and operated solely for the purpose of restructuring the investment
characteristics of certain debt obligations. This type of restructuring involves
the deposit with or purchase by an entity, such as a corporation or trust, or
specified instruments (such as commercial bank loans) and the issuance by that
entity of one or more classes of securities ("structured products") backed by,
or representing interests in, the underlying instruments. The cash flow on the
underlying instruments may be apportioned among the newly issued structured
products to create securities with different investment characteristics such as
varying maturities, payment priorities and interest rate provisions, and the
extent of the payments made with respect to structured products is dependent on
the extent of the cash flow on the underlying instruments. A Fund may invest in
structured products which represent derived investment positions based on
relationships among different markets or asset classes.
Income Funds may also invest in other types of structured products,
including, among others, inverse floaters, spread trades and notes linked by a
formula to the price of an underlying instrument. Inverse floaters have coupon
rates that vary inversely at a multiple of a designated floating rate (which
typically is determined by reference to an index rate, but may also be
determined through a dutch auction or a remarketing agent) (the "reference
rate"). As an example, inverse floaters may constitute a class of CMOs with a
coupon rate that moves inversely to a designated index, such as LIBOR (London
Interbank Offered Rate) or the cost of Funds Index. Any rise in the reference
rate of an inverse floater (as a consequence of an increase in interest rates)
causes a drop in the coupon rate while any drop in the reference rate of an
inverse floater causes an increase in the coupon rate. A spread trade is an
investment position relating to a difference in the prices or interest rates of
two securities where the value of the investment position is determined by
movements in the difference between the prices or interest rates, as the case
may be, of the respective securities. When an Income Fund invests in notes
linked to the price of an underlying instrument, the price of the underlying
security is determined by a multiple (based on a formula) of the price of such
underlying security. A structured product may be considered to be leveraged to
the extent its interest rate varies by
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a magnitude that exceeds the magnitude of the change in the index rate of
interest. Because they are linked to their underlying markets or securities,
investments in structured products generally are subject to greater volatility
than an investment directly in the underlying market or security. Total return
on the structured product is derived by linking return to one or more
characteristics of the underlying instrument. Because certain structured
products of the type in which the Income Fund anticipates it will invest may
involve no credit enhancement, the credit risk of those structured products
generally would be equivalent to that of the underlying instruments. An Income
Fund is permitted to invest in a class of structured products that is either
subordinated or unsubordinated to the right of payment of another class.
Subordinated structured products typically have higher yields and present
greater risks than unsubordinated structured products. Although an Income Fund's
purchase of subordinated structured products would have similar economic effect
to that of borrowing against the underlying securities, the purchase will not be
deemed to be leverage for purposes of an Income Fund's fundamental investment
limitation related to borrowing and leverage.
Certain issuers of structured products may be deemed to be "investment
companies" as defined in the Investment Company Act of 1940, as amended (the
"1940 Act"). As a result, an Income Fund's investments in these structured
products may be limited by the restrictions contained in the 1940 Act.
Structured products are typically sold in private placement transactions, and
there currently is no active trading market for structured products. As a
result, certain structured products in which the Income Funds invest may be
deemed illiquid and subject to their limitation on illiquid investments.
Investments in structured products generally are subject to greater
volatility than an investment directly in the underlying market or security. In
addition, because structured products are typically sold in private placement
transactions, there currently is no active trading market for structured
products.
Additional Restrictions on the Use of Futures and Option Contracts
Regulations of the CFTC require that the Income Funds enter into
transactions in futures contracts and options thereon for hedging purposes only,
in order to assure that they are not deemed to be a "commodity pools" under such
regulations. In particular, CFTC regulations require that all short futures
positions be entered into for the purpose of hedging the value of securities
held in an Income Fund's portfolio, and that all long futures positions either
constitute bona fide hedging transactions, as defined in such regulations, or
have a total value not in excess of an amount determined by reference to certain
cash and securities positions maintained for an Income Fund, and accrued profits
on such positions. In addition, an Income Fund may not purchase or sell such
instruments if, immediately thereafter, the sum of the amount of initial margin
deposits on its existing futures positions and premiums paid for options on
futures contracts would exceed 5% of the market value of the Income Fund's
total assets.
When an Income Fund purchases a futures contract, an amount of cash or
cash equivalents or high quality debt securities will be deposited in a
segregated account with such Fund's custodian so that the amount so segregated,
plus the initial deposit and variation margin held in the account of its broker,
will at all times equal the value of the futures contract, thereby insuring that
the use of such futures is unleveraged.
The Income Funds' ability to engage in the transactions described herein
may be limited by the current federal income tax requirement that a Fund derive
less than 30% of its gross income from the sale or other disposition of
securities held for less than three months.
In addition to the foregoing requirements, the Board of Trustees has
adopted an additional restriction on the use of futures contracts and options
thereon, requiring that the aggregate market value of the futures contracts held
by an Income Fund not exceed 50% of the market value of its total assets.
Neither this restriction nor any policy
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with respect to the above-referenced restrictions, would be changed by the Board
of Trustees without considering the policies and concerns of the various federal
and state regulatory agencies.
Investment Restrictions
The Funds have adopted the following investment restrictions which may not
be changed without approval by a "majority of the outstanding shares" of a Fund
which, as used in this Statement of Additional Information, means the vote of
the lesser of (i) 67% or more of the shares of a Fund present at a meeting, if
the holders of more than 50% of the outstanding shares of a Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of a Fund.
Each Fund may not:
(1) borrow money, except that each Fund may borrow money for
temporary or emergency purposes, or by engaging in reverse repurchase
transactions, in an amount not exceeding 33 1/3% of the value of its total
assets at the time when the loan is made and may pledge, mortgage or
hypothecate no more than 1/3 of its net assets to secure such borrowings.
Any borrowings representing more than 5% of a Fund's total assets must be
repaid before the Fund may make additional investments;
(2) make loans, except that each Fund may: (i) purchase and hold
debt instruments (including without limitation, bonds, notes, debentures
or other obligations and certificates of deposit, bankers' acceptances and
fixed time deposits) in accordance with its investment objectives and
policies; (ii) enter into repurchase agreements with respect to portfolio
securities; and (iii) lend portfolio securities with a value not in excess
of one-third of the value of its total assets;
(3) purchase the securities of any issuer (other than securities
issued or guaranteed by the U.S. government or any of its agencies or
instrumentalities, or repurchase agreements secured thereby) if, as a
result, more than 25% of the Fund's total assets would be invested in the
securities of companies whose principal business activities are in the
same industry. Notwithstanding the foregoing, (i) with respect to a Fund's
permissible futures and options transactions in U.S. Government
securities, positions in options and futures shall not be subject to this
restriction; (ii) the Money Market Funds may invest more than 25% of their
total assets in obligations issued by banks, including U. S. banks; (iii)
New York Tax Free Money Market Fund, California Tax Free Money Market Fund
and Tax Free Money Market Fund may invest more than 25% of their
respective assets in municipal obligations secured by bank letters of
credit or guarantees, including participation certificates and (iv) more
than 25% of the assets of California Intermediate Tax Free Income Fund may
be invested in municipal obligations secured by bank letters of credit or
guarantees;
(4) purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments but this shall not
prevent a Fund from (i) purchasing or selling options and futures
contracts or from investing in securities or other instruments backed by
physical commodities or (ii) engaging in forward purchases or sales of
foreign currencies or securities;
(5) purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prevent a
Fund from investing in securities or other instruments backed by real
estate or securities of companies engaged in the real estate business).
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Investments by a Fund in securities backed by mortgages on real estate or
in marketable securities of companies engaged in such activities are not
hereby precluded;
(6) issue any senior security (as defined in the 1940 Act), except
that (a) a Fund may engage in transactions that may result in the issuance
of senior securities to the extent permitted under applicable regulations
and interpretations of the 1940 Act or an exemptive order; (b) a Fund may
acquire other securities, the acquisition of which may result in the
issuance of a senior security, to the extent permitted under applicable
regulations or interpretations of the 1940 Act; and (c) subject to the
restrictions set forth above, a Fund may borrow money as authorized by the
1940 Act. For purposes of this restriction, collateral arrangements with
respect to a Fund's permissible options and futures transactions,
including deposits of initial and variation margin, are not considered to
be the issuance of a senior security; or
(7) underwrite securities issued by other persons except insofar as
a Fund may technically be deemed to be an underwriter under the Securities
Act of 1933 in selling a portfolio security.
For purposes of investment restriction (5) above, real estate includes
Real Estate Limited Partnerships. For purposes of investment restriction (3)
above, industrial development bonds, where the payment of principal and interest
is the ultimate responsibility of companies within the same industry, are
grouped together as an "industry."
In addition, each Fund is subject to the following nonfundamental
investment restrictions which may be changed without shareholder approval:
(1) Each Fund other than the Tax Free Funds may not, with respect to
75% of its assets, hold more than 10% of the outstanding voting securities
of any issuer or invest more than 5% of its net assets in the securities
of any one issuer (other than government obligations); each Tax Free Fund
may not, with respect to 50% of its assets, hold more than 10% of the
outstanding voting securities of any issuer.
(2) Each Fund may not make short sales of securities, other than
short sales "against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use of
options, futures contracts and related options, in the manner otherwise
permitted by the investment restrictions, policies and investment program
of a Fund.
(3) Each Fund may not purchase or sell interests in oil,
gas or mineral leases.
(4) Each Income Fund may not invest more than 15% of its net assets
in illiquid securities; each Money Market Fund may not invest more than
10% of its net assets in illiquid securities.
(5) Each Fund may not write, purchase or sell any put or call option
or any combination thereof, provided that this shall not prevent (i) the
writing, purchasing or selling of puts, calls or combinations thereof with
respect to portfolio securities or (ii) with respect to a Fund's
permissible futures and options transactions, the writing, purchasing,
ownership, holding or selling of futures and options positions or of puts,
calls or combinations thereof with respect to futures.
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(6) Each Fund may invest up to 5% of its total assets in the
securities of any one investment company, but may not own more than 3% of
the securities of any one investment company or invest more than 10% of
its total assets in the securities of other investment companies.
Notwithstanding any other investment policy or restriction, a Fund may
seek to achieve its investment objective by investing all of its investable
assets in another investment company having substantially the same investment
objective and policies as the Fund.
It is the Trust's position that proprietary strips, such as CATS and
TIGRS, are United States Government securities. However, the Trust has been
advised that the staff of the Securities and Exchange Commission's Division of
Investment Management does not consider these to be United States Government
securities, as defined under the 1940 Act.
For purposes of the Funds' investment restrictions, the issuer of a
tax-exempt security is deemed to be the entity (public or private) ultimately
responsible for the payment of the principal of and interest on the security.
In order to permit the sale of its shares in certain states, a Fund may
make commitments more restrictive that the investment policies and limitations
described above and in the Prospectus. Should a Fund determine that any such
commitment is no longer in its best interests, it will revoke the commitment by
terminating sales of its shares in the state involved.
In order to comply with certain federal and state statutes and regulatory
policies, as a matter of operating policy, each Fund will not invest for the
purpose of exercising control or management.
If a percentage or rating restriction on investment or use of assets set
forth herein or in the Prospectus is adhered to at the time, later changes in
percentage or ratings resulting from any cause other than actions by a Fund will
not be considered a violation. If the value of a Fund's holdings of illiquid
securities at any time exceeds the percentage limitation applicable at the time
of acquisition due to subsequent fluctuations in value or other reasons, the
Board of Trustees will consider what actions, if any, are appropriate to
maintain adequate liquidity.
Portfolio Transactions and Brokerage Allocation
Specific decisions to purchase or sell securities for a Fund are made by a
portfolio manager who is an employee of the adviser or sub-adviser to such Fund
and who is appointed and supervised by senior officers of such adviser or
sub-adviser. Changes in the Funds' investments are reviewed by the Board of
Trustees. The Funds' portfolio managers may serve other clients of the advisers
in a similar capacity. Money market instruments are generally purchased in
principal transactions; thus, the Money Market Funds generally pay no brokerage
commissions.
It is intended that the Funds will be fully managed by buying and selling
securities, as well as holding securities to maturity. In managing the Funds,
their advisers seek to take advantage of market developments, yield disparities
and variations in the creditworthiness of issuers.
The frequency of an Income Fund's portfolio transactions -- the portfolio
turnover rate -- will vary from year to year depending upon market conditions.
Because a high turnover rate may increase transaction costs and the possibility
of taxable short-term gains, the advisers will weigh the added costs of
short-term investment against anticipated gains. For the fiscal year ended
October 31, 1993, the period from November 1, 1993 through August
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<PAGE>
31, 1994 and the fiscal year ended August 31, 1995, the annual rates of
portfolio turnover for the following Funds were as follows:
The Tax Free Income Fund: 149%, 258% and 233%, respectively;
The New York Tax Free Income Fund: 150%, 162% and 122%, respectively;
For the period July 16, 1993 through October 31, 1993, from November 1,
1993 through August 31, 1994 and the fiscal year ended August 31, 1995 the
California Intermediate Tax Free Income Fund had portfolio turnover rates of
40%, 93% and 94%, respectively.
Under the Advisory Agreement and the Sub-Advisory Agreements, the adviser
and sub-advisers shall use their best efforts to seek to execute portfolio
transactions at prices which, under the circumstances, result in total costs or
proceeds being the most favorable to the Funds. In assessing the best overall
terms available for any transaction, the adviser and sub-advisers consider all
factors they deem relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution capability of
the broker or dealer, research services provided to the adviser or sub-advisers,
and the reasonableness of the commissions, if any, both for the specific
transaction and on a continuing basis. The adviser and sub-advisers are not
required to obtain the lowest commission or the best net price for any Fund on
any particular transaction, and are not required to execute any order in a
fashion either preferential to any Fund relative to other accounts they manage
or otherwise materially adverse to such other accounts.
Debt securities are traded principally in the over-the-counter market
through dealers acting on their own account and not as brokers. In the case of
securities traded in the over-the-counter market (where no stated commissions
are paid but the prices include a dealer's markup or markdown), the adviser or
sub-adviser normally seeks to deal directly with the primary market makers
unless, in its opinion, best execution is available elsewhere. In the case of
securities purchased from underwriters, the cost of such securities generally
includes a fixed underwriting commission or concession. From time to time,
soliciting dealer fees are available to the adviser or sub- adviser on the
tender of the Funds' portfolio securities in so-called tender or exchange
offers. Such soliciting dealer fees are in effect recaptured for the Funds by
the adviser or sub-adviser. At present, no other recapture arrangements are in
effect.
Under the Advisory and Sub-Advisory Agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the adviser or sub-adviser may
cause the Funds to pay a broker-dealer which provides brokerage and research
services to the adviser or sub-adviser, the Funds and/or other accounts for
which they exercise investment discretion an amount of commission for effecting
a securities transaction for the Funds in excess of the amount other
broker-dealers would have charged for the transaction if they determine in good
faith that the total commission is reasonable in relation to the value of the
brokerage and research services provided by the executing broker-dealer viewed
in terms of either that particular transaction or their overall responsibilities
to accounts over which they exercise investment discretion. Not all of such
services are useful or of value in advising the Funds. The adviser and
sub-advisers report to the Board of Trustees regarding overall commissions paid
by the Funds and their reasonableness in relation to the benefits to the Funds.
The term "brokerage and research services" includes advice as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or of purchasers or sellers of securities,
furnishing analyses and reports concerning issues, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts,
and effecting securities transactions and performing functions incidental
thereto such as clearance and settlement.
Broker-dealers may be willing to furnish statistical, research and other
factual information or services ("Research") to the adviser or sub-adviser for
no consideration other than brokerage or underwriting commissions. Securities
may be bought or sold through such broker-dealers, but at present, unless
otherwise directed by the Funds,
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<PAGE>
a commission higher than one charged elsewhere will not be paid to such a firm
solely because it provided Research to the adviser or sub-adviser. The adviser's
or sub-advisers' investment management personnel will attempt to evaluate the
quality of Research provided by brokers. Results of this effort are sometimes
used by them as a consideration in the selection of brokers to execute portfolio
transactions. However, they would be unable to quantify the amount of
commissions which are paid as a result of such Research because a substantial
number of transactions are effected through brokers which provide Research but
which are selected principally because of their execution capabilities.
The management fees that the Funds pay to the adviser will not be reduced
as a consequence of the adviser's or sub-advisers' receipt of brokerage and
research services. To the extent the Funds' portfolio transactions are used to
obtain such services, the brokerage commissions paid by the Funds will exceed
those that might otherwise be paid, by an amount which cannot be presently
determined. Such services would be useful and of value to the adviser or
sub-advisers in serving one or more of the Funds and other clients and,
conversely, such services obtained by the placement of brokerage business of
other clients would be useful to the adviser and sub-advisers in carrying out
their obligations to the Funds. While such services are not expected to reduce
the expenses of the adviser or sub-advisers, they would, through use of the
services, avoid the additional expenses which would be incurred if it should
attempt to develop comparable information through its own staff.
In certain instances, there may be securities that are suitable for one or
more of the Funds as well as one or more of the adviser's or sub-advisers' other
clients. Investment decisions for the Funds and for their other clients are made
with a view to achieving their respective investment objectives. It may develop
that the same investment decision is made for more than one client or that a
particular security is bought or sold for only one client even though it might
be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling that same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. In executing portfolio transactions for a Fund, the
adviser or sub-advisers may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be sold
or purchased with those of other Funds or their other clients if, in the
adviser's or sub-advisers' reasonable judgment, such aggregation (i) will result
in an overall economic benefit to the Fund, taking into consideration the
advantageous selling or purchase price, brokerage commission and other expenses,
and trading requirements, and (ii) is not inconsistent with the policies set
forth in the Trust's registration statement and the Fund's Prospectus and
Statement of Additional Information. In such event, the adviser or a sub-
adviser will allocate the securities so purchased or sold, and the expenses
incurred in the transaction, in an equitable manner, consistent with its
fiduciary obligations to the Fund and such other clients. It is recognized that
in some cases this system could have a detrimental effect on the price or volume
of the security as far as a Fund is concerned. However, it is believed that the
ability of the Funds to participate in volume transactions will generally
produce better executions for the Funds.
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<PAGE>
PERFORMANCE INFORMATION
From time to time, a Fund may use hypothetical investment examples and
performance information in advertisements, shareholder reports or other
communications to shareholders. Because such performance information is based on
past investment results, it should not be considered as an indication or
representation of the performance of any classes of a Fund in the future. From
time to time, the performance and yield of classes of a Fund may be quoted and
compared to those of other mutual funds with similar investment objectives,
unmanaged investment accounts, including savings accounts, or other similar
products and to stock or other relevant indices or to rankings prepared by
independent services or other financial or industry publications that monitor
the performance of mutual funds. For example, the performance of a Fund or its
classes may be compared to data prepared by Lipper Analytical Services, Inc. or
Morningstar Mutual Funds on Disc, widely recognized independent services which
monitor the performance of mutual funds. Performance and yield data as reported
in national financial publications including, but not limited to, Money
Magazine, Forbes, Barron's, The Wall Street Journal and The New York Times, or
in local or regional publications, may also be used in comparing the performance
and yield of a Fund or its classes. Additionally, a Fund may, with proper
authorization, reprint articles written about such Fund and provide them to
prospective shareholders.
A Fund may provide period and average annual "total rates of return." The
"total rate of return" refers to the change in the value of an investment in a
Fund over a period (which period shall be stated in any advertisement or
communication with a shareholder) based on any change in net asset value per
share including the value of any shares purchased through the reinvestment of
any dividends or capital gains distributions declared during such period. For
Class A shares, the average annual total rate of return figures will assume
payment of the maximum initial sales load at the time of purchase. For Class B
shares, the average annual total rate of return figures will assume deduction of
the applicable contingent deferred sales charge imposed on a total redemption of
shares held for the period. One-, five-, and ten-year periods will be shown,
unless the class has been in existence for a shorter-period.
Unlike some bank deposits or other investments which pay a fixed yield for
a stated period of time, the yields and the net asset values (in the case of the
Income Funds) of the classes of shares of a Fund will vary based on interest
rates, the current market value of the securities held by a Fund and changes in
the Fund's expenses. The advisers, Shareholder Servicing Agent, the
Administrator, the Distributor and other service providers may voluntarily waive
a portion of their fees on a month-to-month basis. In addition, the Distributor
may assume a portion of a Fund's operating expenses on a month-to-month basis.
These actions would have the effect of increasing the net income (and therefore
the yield and total rate of return) of the classes of shares of a Fund during
the period such waivers are in effect. These factors and possible differences in
the methods used to calculate the yields and total rates of return should be
considered when comparing the yields or total rates of return of the classes of
shares of a Fund to yields and total rates of return published for other
investment companies and other investment vehicles (including different classes
of shares). The Trust is advised that certain Shareholder Servicing Agents may
credit to the accounts of their customers from whom they are already receiving
other fees amounts not exceeding the Shareholder Servicing Agent fees received,
which will have the effect of increasing the net return on the investment of
customers of those Shareholder Servicing Agents. Such customers may be able to
obtain through their Shareholder Servicing Agents quotations reflecting such
increased return.
In connection with the Hanover Reorganization, the Vista 100% U.S.
Treasury Securities Money Market Fund was established to receive the assets of
The 100% U.S. Treasury Securities Money Market Fund of Hanover, and the Vista
Cash Management Fund (formerly known as the Vista Global Money Market Fund),
which received the assets of The Cash Management Fund of Hanover, adopted the
financial history of The Cash Management Fund of Hanover. Performance results
presented by the Vista 100% U.S. Treasury Securities Money Market Fund and the
Vista Cash Management Fund will be based upon the performance of The 100% U.S.
Treasury Securities Money
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<PAGE>
Market Fund and The Cash Management Fund of Hanover, respectively, for periods
prior to the consummation of the Hanover Reorganization.
In connection with the Hanover Reorganization, the Vista 100% U.S.
Treasury Securities Money Market Fund was established to receive the assets of
The 100% U.S. Treasury Securities Money Market Fund of Hanover, and the Vista
Cash Management Fund (formerly known as the Vista Global Money Market Fund),
which received the assets of The Cash Management Fund of Hanover, adopted the
financial history of The Cash Management Fund of Hanover. Performance results
presented by the Vista 100% U.S. Treasury Securities Money Market Fund and the
Vista Cash Management Fund will be based upon the performance of The 100% U.S.
Treasury Securities Money Market Fund and The Cash Management Fund of Hanover,
respectively, for periods prior to the consummation of the Hanover
Reorganization.
Total Rate of Return
A Fund's or class's total rate of return for any period will be calculated
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains declared during such period
with respect to a share held at the beginning of such period and with respect to
shares purchased with such dividends and capital gains distributions, by (ii)
the public offering price per share on the first day of such period, and (b)
subtracting 1 from the result. The average annual rate of return quotation will
be calculated by (x) adding 1 to the period total rate of return quotation as
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
The average annual total rate of return figures for the Class A shares of
the following Funds, reflecting the initial investment and reinvested dividends
for the one and five year periods ended August 31, 1995, and for the period from
September 8, 1987 (commencement of business operations) to August 31, 1995, were
as follows:
The Tax Free Income Fund: 6.53%, 9.81% and 9.41%, respectively;
The New York Tax Free Income Fund: 6.82%, 9.01% and 8.86%, respectively.
Had the maximum sales charge of 4.50% been in effect, the average annual
total rate of return figures for the same periods would have been as follows:
The Tax Free Income Fund: 1.74%, 8.87% and 8.78%, respectively;
The New York Tax Free Income Fund: 2.01%, 8.01% and 8.24%, respectively.
The average rate of total return for the California Intermediate Tax Free
Income Fund for the one year period ended August 31, 1995 and from the inception
date of July 15, 1993 through August 31, 1995 was 7.55% and 4.23%, respectively.
Had the maximum sales charge of 4.50% been in effect, the average annual total
rate of return for the same periods would have been 2.71% and 2.00%,
respectively.
The average annual total rate of return figures for the Class B shares of
the following Funds, reflecting the initial investment and reinvested dividends
for the one year period ended August 31, 1995, and for the period from
commencement of business operations on November 4, 1993 to August 31, 1995 were
as follows:
The Tax Free Income Fund: 5.70% and 1.75%, respectively;
The New York Tax Free Income Fund: 5.99% and 2.61%, respectively.
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<PAGE>
The Funds may also from time to time include in advertisements or other
communications a total return figure that is not calculated according to the
formula set forth above in order to compare more accurately the performance of a
Fund with other measures of investment return.
Yield Quotations
Any current "yield" quotation for a class of shares of an Income Fund
shall consist of an annualized hypothetical yield, carried at least to the
nearest hundredth of one percent, based on a thirty calendar day period and
shall be calculated by (a) raising to the sixth power the sum of 1 plus the
quotient obtained by dividing the Fund's net investment income earned during the
period by the product of the average daily number of shares outstanding during
the period that were entitled to receive dividends and the maximum offering
price per share on the last day of the period, (b) subtracting 1 from the
result, and (c) multiplying the result by 2.
Any current "yield" for a class of shares of a Money Market Fund which is
used in such a manner as to be subject to the provisions of Rule 482(d) under
the Securities Act of 1933, as amended, shall consist of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a specific seven calendar day period and shall be calculated by
dividing the net change in the value of an account having a balance of one Share
at the beginning of the period by the value of the account at the beginning of
the period and multiplying the quotient by 365/7. For this purpose, the net
change in account value would reflect the value of additional Shares purchased
with dividends declared on the original Share and dividends declared on both the
original Share and any such additional Shares, but would not reflect any
realized gains or losses from the sale of securities or any unrealized
appreciation or depreciation on portfolio securities. In addition, any effective
yield quotation for a class of shares of a Money Market Fund so used shall be
calculated by compounding the current yield quotation for such period by
multiplying such quotation by 7/365, adding 1 to the product, raising the sum to
a power equal to 365/7, and subtracting 1 from the result. A portion of a Tax
Free Money Market Fund's income used in calculating such yields may be taxable.
Any taxable equivalent yield quotation of a class of shares of a Tax Free
Fund, whether or not it is a Money Market Fund, shall be calculated as follows.
If the entire current yield quotation for such period is tax-exempt, the tax
equivalent yield will be the current yield quotation (as determined in
accordance with the appropriate calculation described above) divided by 1 minus
a stated income tax rate or rates. If a portion of the current yield quotation
is not tax-exempt, the tax equivalent yield will be the sum of (a) that portion
of the yield which is tax-exempt divided by 1 minus a stated income tax rate or
rates and (b) the portion of the yield which is not tax-exempt.
CURRENT EFFECTIVE COMPOUND
ANNUALIZED YIELD ANNUALIZED YIELD
---------------- ------------------
AS OF 8/31/95 AS OF 8/31/95
U. S. Government Money Market Fund
Vista Shares 5.02% 5.15%
Premier Shares 5.27% 5.41%
Institutional Shares 5.54% 5.69%
Prime Money Market Fund
B Shares 4.43% 4.53%
Premier Shares 5.46% 5.61%
Institutional Shares 5.63% 5.79%
Federal Money Market Fund
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<PAGE>
Vista Shares 5.12% 5.25%
Premier Shares 5.32% 5.46%
Institutional Shares 5.50% 5.65%
Treasury Plus Money Market Fund
Vista Shares
Premier Shares 5.38% 5.33%
Institutional Shares 5.20% 5.52%
100% U.S. Treasury Securities Money Market Fund AS OF 11/30/95 AS OF 11/30/95
Vista Shares
Premier Shares
Institutional Shares
Cash Management Fund
Vista Shares
Premier Shares
Institutional Shares
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<PAGE>
CURRENT EFFECTIVE ANNUALIZED
ANNUALIZED COMPOUND TAX EQUIVALENT
YIELD ANNUALIZED YIELD *
YIELD
Tax Free Money
Market Fund
Vista Shares 2.96 3.01 4.91
Premier Shares 3.24 3.30 5.37
Institutional Shares 3.52 3.58 5.83
California Tax Free 3.12 3.17 5.80
Money Market Fund
New York Tax Free 2.81 2.85 5.28
Money Market Fund
THIRTY-DAY TAX EQUIVALENT
YIELD THIRTY-DAY YIELD*
Tax Free Income Fund:
Class A Shares 4.11 6.80
Class B Shares 3.56 5.89
New York Tax Free
Income Fund:
Class A Shares 4.41 8.29
Class B Shares 3.87 7.27
California
Intermediate Tax Free 4.63 8.61
Income Fund
- ---------------
* The annualized tax equivalent yields assume a federal income tax rate of
39.6% for the Tax Free Money Market Fund and Tax Free Income Fund, a combined
New York State, New York City and federal income tax rate of 46.80% for the New
York Tax Free Money Market Fund and New York Tax Free Income Fund and a combined
California State and federal income tax rate of 46.24% for the California Tax
Free Money Market Fund and California Intermediate Tax Free Income Fund.
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<PAGE>
Non-Standardized Performance Results
The chart below reflects the net change in the value of an assumed initial
investment of $10,000 in the following Funds for the period from the
commencement date of business for each such Fund (i.e., either September 8, 1987
for the Tax Free Income and New York Tax Free Income Funds or July 16, 1993 for
the California Intermediate Tax Free Income Fund.) The values reflect an
assumption that capital gain distributions and income dividends, if any, have
been accepted in additional Shares. From time to time, the Funds will provide
these performance results in addition to the total rate of return
quotations required by the Securities and Exchange Commission. As discussed more
fully in the Prospectus, neither these performance results, nor total rate of
return quotations, should be considered as representative of the performance of
the Funds in the future. These factors and the possible differences in the
methods used to calculate performance results and total rates of return should
be considered when comparing such performance results and total rate of return
quotations of the Funds with those published for other investment companies and
other investment vehicles.
Value of Value of Value of
Period Ended Initial $10,000 Capital Gains Reinvested Total
August 31, 1995 Investment Distributions Dividends Value
- -------------- --------------- ------------- --------- -----
The Tax Free Income Fund:
A Shares $11,850 $1,116 $ 7,541 $20,507
B Shares 9,424 125 827 10,376
The New York Tax Free
Income Fund:
A Shares 11,470 1,477 6,838 19,785
B Shares 9,422 242 856 10,520
The California Intermediate Tax
Free Fund 9,687 126 1,164 10,977
Had the maximum sales charge of 4.50% been in effect, the figures for the
same periods would have been as follows:
Value of Value of Value of
Period Ended Initial $10,000 Capital Gains Reinvested Total
August 31, 1995 Investment Distributions Dividends Value
- --------------- --------------- ------------- --------- -----
The Tax Free Income Fund:
A Shares $11,317 $1,066 $7,202 $19,585
B Shares 9,047 125 827 9,999
The New York Tax Free
Income Fund:
A Shares 10,954 1,410 6,531 18,895
B Shares 9,045 242 856 10,143
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The California Intermediate Tax
Free Fund 9,251 120 1,112 10,483
DETERMINATION OF NET ASSET VALUE
Each Fund determines its net asset value per Share each day (as of 12:00
noon, and 4:00 p.m. Eastern time or 4:15 p.m. for Funds holding options, in the
case of a Tax Free Income Fund during which the New York Stock Exchange is open
for trading (a "Fund Business Day")), by dividing the value of its net assets
(i.e., the value of its securities and other assets less its liabilities,
including expenses payable or accrued, which, in the case of funds with multiple
share classes, is apportioned between the classes, to obtain net assets by
class) by the number of its shares outstanding (by class, for multiple class
Funds) at the time the determination is made. Effective with the introduction of
certain automated share purchase programs, the net asset value of Funds
available through the programs will also be determined at 6:00 p.m., Eastern
time. As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. Purchases and
redemptions will be effected at the time of determination of net asset value
next following the receipt of any purchase or redemption order.
The Money Market Funds' portfolio securities are valued at their amortized
cost. Amortized cost valuation involves valuing an instrument at its cost and
thereafter accrediting discounts and amortizing premiums at a constant rate to
maturity. Pursuant to the rules of the Securities and Exchange Commission, the
Board of Trustees has established procedures to stabilize the net asset value of
each Money Market Fund at $1.00 per share. These procedures include a review of
the extent of any deviation of net asset value per share, based on available
market rates, from the $1.00 amortized cost price per share. If fluctuating
interest rates cause the market value of a Money Market Fund's portfolio to
approach a deviation of more than 1/2 of 1% from the value determined on the
basis of amortized cost, the Board of Trustees will consider what action, if
any, should be initiated. Such action may include redemption of shares in kind
(as described in greater detail below), selling portfolio securities prior to
maturity, reducing or withholding dividends and utilizing a net asset value per
share as determined by using available market quotations.
The Cash Management, the Federal Money Market Fund, the Tax Free Money
Market Fund, the New York Tax Free Money Market Fund, the California Tax Free
Money Market Fund and 100% U.S. Treasury Securities Money Market Fund will
maintain a dollar-weighted average portfolio maturity of 90 days or less. The
Prime Fund and the Treasury Plus Money Market Fund will maintain a
dollar-weighted average portfolio maturity of 60 days or less. None of the Money
Market Funds will purchase any instrument with a remaining maturity greater than
397 days or subject to a repurchase agreement having a duration of greater than
one year, will limit portfolio investments, including repurchase agreements, to
those U.S. dollar-denominated instruments that with respect to the Cash
Management Fund and the Tax Free Money Market Funds, are determined by the Board
of Trustees to present minimal credit risks and will comply with certain
reporting and recordkeeping procedures.
The Money Market Funds have established procedures to ensure that their
portfolio securities meet their high quality criteria.
Bonds and other fixed income securities (other than short-term
obligations) in a Fund's portfolio are valued on the basis of valuations
furnished by a pricing service, the use of which has been approved by the Board
of Trustees. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques that take
into account appropriate factors such as institutional-size trading in similar
groups
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<PAGE>
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations which mature in 60 days or less are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures and option contracts that are traded on commodities or securities
exchanges are normally valued at the settlement price on the exchange on which
they are traded. Portfolio securities (other than short-term obligations) for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Board of Trustees.
Interest income on long-term obligations in an Income Fund's portfolio is
determined on the basis of coupon interest accrued plus amortization of discount
(the difference between acquisition price and stated redemption price at
maturity) and premiums (the excess of purchase price over stated redemption
price at maturity). Interest income on short-term obligations is determined on
the basis of interest and discount accrued less amortization of premium.
PURCHASES, REDEMPTIONS AND EXCHANGES
The Fund has established certain procedures and restrictions, subject to
change from time to time, for purchase, redemption, and exchange orders,
including procedures for accepting telephone instructions and effecting
automatic investments and redemptions. The Fund's Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in this Prospectus are not available
until a completed and signed account application has been received by the
Transfer Agent. Telephone transaction privileges are made available to
shareholders automatically upon opening an account unless the privilege is
declined in section 6 of the Account Application.
Upon receipt of any instructions or inquiries by telephone from a
shareholder or, if held in a joint account, from either party, or from any
person claiming to be the shareholder, the Fund or its agent is authorized,
without notifying the shareholder or joint account parties, to carry out the
instructions or to respond to the inquiries, consistent with the service options
chosen by the shareholder or joint shareholders in his or their latest account
application or other written request for services, including purchasing,
exchanging, or redeeming shares of the Fund and depositing and withdrawing
monies from the bank account specified in the Bank Account Registration section
of the shareholder's latest account application or as otherwise properly
specified to the Fund in writing.
Subject to compliance with applicable regulations, each Fund has reserved
the right to pay the redemption price of its Shares, either totally or
partially, by a distribution in kind of portfolio securities (instead of cash).
The securities so distributed would be valued at the same amount as that
assigned to them in calculating the net asset value for the shares being sold.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash. The Trust has
filed an election under Rule 18f-1 committing to pay in cash all redemptions by
a shareholder of record up to amounts specified by the rule (approximately
$250,000).
Investors in Class A shares may qualify for reduced initial sales charges
by signing a statement of intention (the "Statement"). This enables the investor
to aggregate purchases of Class A shares in the Fund with purchases of Class A
shares of any other fund in the Trust (or if a Fund has only one class, shares
of such fund), including shares of any Vista money market Fund, acquired by
exchange, during a 13-month period. The sales charge is based on the total
amount to be invested in Class A shares during the 13-month period. All Class A
or other qualifying shares of these Funds currently owned by the investor will
be credited as purchases (at their current offering prices on the date the
Statement is signed) toward completion of the Statement. A 90-day back-dating
period can be used to include earlier purchases at the investor's cost. The
13-month period would then begin on the date of the first purchase during the
90-day period. No retroactive adjustment will be made if purchases exceed the
amount indicated
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in the Statement. A shareholder must notify the Transfer Agent or Distributor
whenever a purchase is being made pursuant to a Statement.
The adviser and sub-advisers report to the Board of Trustees regarding
overall commissions paid by the Funds and Portfolios and their reasonableness in
relation to the benefits to the Funds and Portfolios.
Under the Exchange Privilege, shares may be exchanged for shares of
another fund only if shares of the fund exchanged into are registered in the
state where the exchange is to be made. Shares of a Fund may only be exchanged
into another fund if the account registrations are identical. With respect to
exchanges from any Vista money market fund, shareholders must have acquired
their shares in such money market fund by exchange from one of the Vista
new-money market funds or the exchange will be done at relative net asset value
plus the appropriate sales charge. Any such exchange may create a gain or loss
to be recognized for federal income tax purposes. Normally, shares of the fund
to be acquired are purchased on the redemption date, but such purchase may be
delayed by either fund for up to five business days if a fund determines that it
would be disadvantaged by an immediate transfer of the proceeds.
The contingent deferred sales charge for Class B shares will be waived for
certain exchanges and for redemptions in connection with the Fund's systematic
withdrawal plan. In addition, subject to confirmation of a shareholder's status,
the contingent deferred sales charge will be waived for: (i) a total or partial
redemption made within one year of the death of the shareholder; (ii) a
redemption in connection with a Minimum Required Distribution form an IRA, Keogh
or custodial account under section 403(b) of the Internal Revenue Code, (iii)
redemptions made from an IRA, Keogh or custodial account under section 403(b) of
the Internal Revenue Code through an established Systematic Redemption Plan, as
described on page 10; (iv) distributions from a qualified plan upon retirement;
(v) a redemption resulting from an over-contribution to an IRA; and (vi) a
redemption of an account balance under $500.
Class B shares automatically convert to Class A shares (and thus are then
subject to the lower expenses borne by Class A shares) after a period of time
specified below has elapsed since the date of purchase (the "CDSC Period"),
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares attributable to the
Class B shares then converting. The conversion of Class B shares purchased on or
after May 6, 1996, will be effected at the relative net asset values per share
of the two classes on the first business day of the month following the eighth
anniversary of the original purchase. The conversion of Class B shares purchased
prior to May 6, 1996, will be effected at the relative net asset values per
share of the two classes on the first business day of the month following the
seventh anniversary of the original purchase. If any exchanges of Class B shares
during the CDSC Period occurred, the holding period for the shares exchanged
will be counted toward the CDSC Period. At the time of the conversion the net
asset value per share of the Class A shares may be higher or lower than the net
asset value per share of the Class B shares; as a result, depending on the
relative net asset values per share, a shareholder may receive fewer or more
Class A shares than the number of Class B shares converted. Due to the
conversion feature of Class B shares, certificates will not be issued and all
shares will be held in book entry form.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in
the respective Fund's Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussions here and in each Fund's Prospectus are not intended as substitutes
for careful tax planning.
Qualification as a Regulated Investment Company
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Each Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, each Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(i.e., the excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. Distributions by a Fund made during the taxable
year or, under specified circumstances, within twelve months after the close of
the taxable year, will be considered distributions of income and gains of the
taxable year and can therefore satisfy the Distribution Requirement. Because
certain Funds invest all of their assets in Portfolios which will be classified
as partnerships for federal income tax purposes, such Funds will be deemed to
own a proportionate share of the income of the Portfolio into which each
contributes all of its assets for purposes of determining whether such Funds
satisfy the Distribution Requirement and the other requirements necessary to
qualify as a regulated investment company (e.g., Income Requirement (hereinafter
defined), etc.).
In addition to satisfying the Distribution Requirement, a regulated
investment company must: (1) derive at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans, gains
from the sale or other disposition of stock or securities or foreign currencies
(to the extent such currency gains are directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies (the "Income Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain gains on designated hedging
transactions that are offset by realized or unrealized losses on offsetting
positions) from the sale or other disposition of stock, securities or foreign
currencies (or options, futures or forward contracts thereon) held for less than
three months (the "Short-Short Gain Test"). For purposes of these calculations,
gross income includes tax-exempt income. However, foreign currency gains,
including those derived from options, futures and forwards, will not in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, a Fund may have to limit
the sale of appreciated securities that it has held for less than three months.
However, the Short-Short Gain Test will not prevent a Fund from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded for this purpose. Interest
(including original issue discount) received by a Fund at maturity or upon the
disposition of a security held for less than three months will not be treated as
gross income derived from the sale or other disposition of such security within
the meaning of the Short-Short Gain Test. However, income that is attributable
to realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
In general, gain or loss recognized by a Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation (including a municipal obligation) purchased by
a Fund at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of the
market discount which accrued during the period of time the Fund held the debt
obligation.
Further, the Code also treats as ordinary income, a portion of the capital
gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of a Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
such Fund and a contemporaneous contract to sell substantially identical
property in the future; (2) the transaction is a straddle within the meaning of
Section 1092 of the Code; (3) the transaction is one that was marketed or sold
to such Fund on the basis that it would have the economic characteristics of a
loan but the interest-like return would be taxed as capital gain; or (4)
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the transaction is described as a conversion transaction in the Treasury
Regulations. The amount of the gain recharacterized generally will not exceed
the amount of the interest that would have accrued on the net investment for the
relevant period at a yield equal to 120% of the federal long-term, mid-term, or
short-term rate, depending upon the type of instrument at issue, reduced by an
amount equal to: (1) prior inclusions of ordinary income items from the
conversion transaction; and (2) the capitalized interest on acquisition
indebtedness under Code Section 263(g). Built-in losses will be preserved where
a Fund has a built-in loss with respect to property that becomes a part of a
conversion transaction. No authority exists that indicates that the converted
character of the income will not be passed to a Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if: (1) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (2) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto); or (3) the asset is stock and the Fund
grants an in-the- money qualified covered call option with respect thereto.
However, for purposes of the Short-Short Gain Test, the holding period of the
asset disposed of may be reduced only in the case of clause (1) above. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by a Fund will commence on the date it is written and end on the date it lapses
or the date a closing transaction is entered into. Accordingly, a Fund may be
limited in its ability to write options which expire within three months and to
enter into closing transactions at a gain within three months of the writing of
options.
Transactions that may be engaged in by certain of the Funds (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. A Fund, however,
may elect not to have this special tax treatment apply to Section 1256 contracts
that are part of a "mixed straddle" with other investments of the Fund that are
not Section 1256 contracts. The Internal Revenue Service (the "IRS") has held in
several private rulings that gains arising from Section 1256 contracts will be
treated for purposes of the Short-Short Gain Test as being derived from
securities held for not less than three months if the gains arise as a result of
a constructive sale under Code Section 1256.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
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In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and as to which the Fund does not hold more than 10% of the
outstanding voting securities of such issuer), and no more than 25% of the value
of its total assets may be invested in the securities of any one issuer (other
than U.S. Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument. For purposes of asset diversification
testing, obligations issued or guaranteed by agencies or instrumentalities of
the U.S. Government such as the Federal Agricultural Mortgage Corporation, the
Farm Credit System Financial Assistance Corporation, a Federal Home Loan Bank,
the Federal Home Loan Mortgage Association, the Government National Mortgage
Corporation, and the Student Loan Marketing Association are treated as U.S.
Government Securities.
If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
ordinary taxable income for the calendar year and 98% of capital gain net income
for the one-year period ended on October 31 of such calendar year (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election"))(Tax-exempt
interest on municipal obligations is not subject to the excise tax). The balance
of such income must be distributed during the next calendar year. For the
foregoing purposes, a regulated investment company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated investment company shall: (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year; and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Fund intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that a Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes, but they will not qualify for the 70% dividends-received deduction
for corporate
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shareholders of a Fund. Dividends paid on Class A and Class B shares are
calculated at the same time. In general, dividends on Class B shares are
expected to be lower than those on Class A shares due to the higher distribution
expenses borne by the Class B shares. Dividends may also differ between classes
as a result of differences in other class specific expenses.
A Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. Each Fund currently intends to distribute any such
amounts. If net capital gain is distributed and designated as a capital gain
dividend, it will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares.
Conversely, if a Fund elects to retain its net capital gain, the Fund will
be taxed thereon (except to the extent of any available capital loss carryovers)
at the 35% corporate tax rate. If a Fund elects to retain its net capital gain,
it is expected that the Fund also will elect to have shareholders of record on
the last day of its taxable year treated as if each received a distribution of
his pro rata share of such gain, with the result that each shareholder will be
required to report his pro rata share of such gain on his tax return as
long-term capital gain, will receive a refundable tax credit for his pro rata
share of tax paid by the Fund on the gain, and will increase the tax basis for
his shares by an amount equal to the deemed distribution less the tax credit.
Each Tax Free Fund intends to qualify to pay exempt-interest dividends by
satisfying the requirement that at the close of each quarter of the Tax Free
Fund's taxable year at least 50% of the its total assets consists of tax-exempt
municipal obligations. Distributions from a Tax Free Fund will constitute
exempt-interest dividends to the extent of its tax-exempt interest income (net
of expenses and amortized bond premium). Exempt-interest dividends distributed
to shareholders of a Tax Free Fund are excluded from gross income for federal
income tax purposes. However, shareholders required to file a federal income tax
return will be required to report the receipt of exempt-interest dividends on
their returns. Moreover, while exempt-interest dividends are excluded from gross
income for federal income tax purposes, they may be subject to alternative
minimum tax ("AMT") in certain circumstances and may have other collateral tax
consequences as discussed below. Distributions by a Tax Free Fund of any
investment company taxable income or of any net capital gain will be taxable to
shareholders as discussed above.
AMT is imposed in addition to, but only to the extent it exceeds, the
regular tax and is computed at a maximum marginal rate of 28% for noncorporate
taxpayers and 20% for corporate taxpayers on the excess of the taxpayer's
alternative minimum taxable income ("AMTI") over an exemption amount. In
addition, under the Superfund Amendments and Reauthorization Act of 1986, a tax
is imposed for taxable years beginning after 1986 and before 1996 at the rate of
0.12% on the excess of a corporate taxpayer's AMTI (determined without regard to
the deduction for this tax and the AMT net operating loss deduction) over $2
million. Exempt-interest dividends derived from certain "private activity"
municipal obligations issued after August 7, 1986 will generally constitute an
item of tax preference includable in AMTI for both corporate and noncorporate
taxpayers. In addition, exempt-interest dividends derived from all municipal
obligations, regardless of the date of issue, must be included in adjusted
current earnings, which are used in computing an additional corporate preference
item (i.e., 75% of the excess of a corporate taxpayer's adjusted current
earnings over its AMTI (determined without regard to this item and the AMT net
operating loss deduction)) includable in AMTI.
Exempt-interest dividends must be taken into account in computing the
portion, if any, of social security or railroad retirement benefits that must be
included in an individual shareholder's gross income and subject to federal
income tax. Further, a shareholder of a Tax Free Fund is denied a deduction for
interest on indebtedness incurred or continued to purchase or carry shares of
the Fund. Moreover, a shareholder who is (or is related to) a "substantial user"
of a facility financed by industrial development bonds held by a Tax Free Fund
will likely be subject to tax on dividends paid by the Tax Free Fund which are
derived from interest on such bonds. Receipt of
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exempt-interest dividends may result in other collateral federal income tax
consequences to certain taxpayers, including financial institutions, property
and casualty insurance companies and foreign corporations engaged in a trade or
business in the United States. Prospective investors should consult their own
tax advisers as to such consequences.
Investment income that may be received by certain of the Funds from
sources within foreign countries may be subject to foreign taxes withheld at the
source. The United States has entered into tax treaties with many foreign
countries which entitle any such Fund to a reduced rate of, or exemption from,
taxes on such income. It is impossible to determine the effective rate of
foreign tax in advance since the amount of any such Fund's assets to be invested
in various countries is not known.
Distributions by a Fund that do not constitute ordinary income dividends,
exempt-interest dividends or capital gain dividends will be treated as a return
of capital to the extent of (and in reduction of) the shareholder's tax basis in
his shares; any excess will be treated as gain from the sale of his shares, as
discussed below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
A Fund will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of ordinary income dividends and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder (1) who has provided
either an incorrect tax identification number or no number at all, (2) who is
subject to backup withholding by the IRS for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Fund that it is not subject to backup withholding or that it is a corporation or
other "exempt recipient."
Sale or Redemption of Shares
Each Money Market Fund seeks to maintain a stable net asset value of $1.00
per share; however, there can be no assurance that the Fund will do this. In
such a case and any other case involving the other Funds, a shareholder will
recognize gain or loss on the sale or redemption of shares of a Fund in an
amount equal to the difference between the proceeds of the sale or redemption
and the shareholder's adjusted tax basis in the shares. All or a portion of any
loss so recognized may be disallowed if the shareholder purchases other shares
of the Fund within 30 days before or after the sale or redemption. In general,
any gain or loss arising from (or treated as arising from) the sale or
redemption of shares of a Fund will be considered capital gain or loss and will
be long-term capital gain or loss if the shares were held for longer than one
year. However, any capital loss arising from the sale or redemption of shares
held for six months or less will be disallowed to the extent of the amount of
exempt-interest dividends received on such shares and (to the extent not
disallowed) will be treated as a long-term capital loss to
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the extent of the amount of capital gain dividends received on such shares. For
this purpose, the special holding period rules of Code Section 246(c)(3) and (4)
(discussed above in connection with the dividends-received deduction for
corporations) generally will apply in determining the holding period of shares.
Long-term capital gains of noncorporate taxpayers are currently taxed at a
maximum rate 11.6% lower than the maximum rate applicable to ordinary income.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of a Fund,
(2) disposes of such shares less than 91 days after they are acquired and (3)
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
Although the Funds generally retains the right to pay the redemption price
of shares in kind with securities (instead of cash) the Trust has filed an
election under Rule 18f-1 of the Investment Company Act of 1940, as amended (the
"1940 Act"), committing to pay in cash all redemptions by a shareholder of
record up to the amounts specified in the rule (approximately $250,000).
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a nonresident
alien individual, foreign trust or estate, foreign corporation, or foreign
partnership ("foreign shareholder"), depends on whether the income from a Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Fund is not effectively connected with a U.S. trade
or business carried on by a foreign shareholder, ordinary income dividends paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) upon the gross amount of the dividend. Such a foreign
shareholder would generally be exempt from U.S. federal income tax on gains
realized on the sale of shares of the Fund, capital gain dividends and
exempt-interest dividends and amounts retained by the Fund that are designated
as undistributed capital gains.
If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)
unless such shareholders furnish the Fund with proper notification of its
foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
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The foregoing general discussion of U.S. federal income tax consequences
is based on the Code and the Treasury Regulations issued thereunder as in effect
on the date of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends,
exempt-interest dividends and capital gain dividends from regulated investment
companies often differ from the rules for U.S. federal income taxation described
above. Shareholders are urged to consult their tax advisers as to the
consequences of these and other state and local tax rules affecting investment
in a Fund.
MANAGEMENT OF THE FUNDS
Trustees and Officers of the Trust
The Trustees and officers and their principal occupations for at least the
past five years are set forth below. Their titles may have varied during that
period. Asterisks indicate those Trustees and officers that are "interested
persons" (as defined in the 1940 Act). Unless otherwise indicated below, the
address of each officer is 125 W. 55th Street, New York, New York 10019.
Trustees
FERGUS REID, III* - Chairman of the Board of Trustees; Chairman and Chief
Executive Officer, Lumelite Corporation, since September 1985. Address: 700
River Road, Cos Cob, Connecticut 06807.
RICHARD E. TEN HAKEN - Former District Superintendent of Schools, Monroe No.
2 and Orleans Counties, New York; Chairman of the Finance and the Audit and
Accounting Committees, Member of the Executive Committee; and Chairman of
the Board and President, New York State Teachers' Retirement System.
Address: 4 Barnfield Road, Pittsford, New York 14534.
WILLIAM J. ARMSTRONG - Vice President and Treasurer, Ingersoll-Rand Company
(Woodcliff Lake, New Jersey). Address: 49 Aspen Way, Upper Saddle River,
New Jersey 07458.
JOHN R.H. BLUM - Retired; formerly a Partner in the law firm of Richards,
O'Neil & Allegaert; Commissioner of Agriculture - State of Connecticut, 1992
- - 1995 Address: 322 Main Street, Lakeville, Connecticut 06039-0448.
JOSEPH J. HARKINS - Retired; formerly Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He has been employed by Chase in numerous capacities and offices since
1954. Director of Blessings Corporation, Jefferson Insurance Company of New
York, Monticello Insurance Company and Nationar. Address: 257 Plantation
Circle South, Ponte Vedra South, Ponte Vedra Beach, Florida 32082.
H. RICHARD VARTABEDIAN* - President of the Trust; Consultant, Republic Bank
of New York; formerly, Senior Investment Officer, Division Executive of the
Investment Management Division of The Chase Manhattan Bank, N.A., 1980-1991.
Address: P.O. Box 296, Beach Road, Hendrick's Head, Southport, Maine 04576.
STUART W. CRAGIN, Jr. - Retired; formerly President, Fairfield Testing
Laboratory, Inc. He has previously served in a variety of marketing,
manufacturing and general management positions with Union Camp Corp., Trinity
Paper & Plastics Corp., and Canover Industries. Address: 652 Glenbrook Road,
Stamford, Connecticut 06906.
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<PAGE>
IRVING L. THODE - Retired; formerly Vice President of Quotron Systems. He
has previously served in a number of executive positions with Control Data
Corp., including President of its Latin American Operations, and General
Manager of its Data Services business. Address: 80 Perkins Road, Greenwich,
Connecticut 06830.
W. PERRY NEFF* - Independent Financial Consultant; Director of North America
Life Assurance Co., Petroleum & Resources Corp. and The Adams Express Co.;
Formerly, Director, Chairman and President of The Hanover Investment Funds,
Inc. and Hanover Funds, Inc. Address: RR 1 Box 102A, Weston, Vermont 05181.
ROLAND R. EPPLEY, JR. - Retired; formerly President and Chief Executive
Officer, Eastern States Bankcard Association Inc. (1971-1988); Director,
Janel Hydraulics, Inc.; Formerly, Director and Vice Chairman, The Hanover
Funds, Inc. Address: 105 Coventry Place, Palm Beach Gardens, Florida 33418.
W.D. MACCALLAN - Director of The Adams Express Co., The Hanover Investment
Funds, Inc. and Petroleum & Resources Corp.; formerly Chairman of the Board
and Chief Executive Officer of The Adams Express Co. and Petroleum &
Resources Corp.; Formerly, Director, The Hanover Investment Funds, Inc. and
The Hanover Funds, Inc.
The Board of Trustees of the Trust presently has an Audit Committee. The
members of the Audit Committee are Messrs. Ten Haken (Chairman), Blum,
Armstrong, Harkins, Reid, and Thode, Cragin, and Vartabedian. The function of
the Audit Committee is to recommend independent auditors and monitor accounting
and financial matters.
The Audit Committee met two times during the fiscal period ended August
31, 1995.
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the adviser or sub-adviser is compensated for his or her services
according to a fee schedule which recognizes the fact that each Trustee also
serves as a Trustee of other investment companies advised by the adviser or
sub-adviser. Each Trustee receives a fee, allocated among all investment
companies for which the Trustee serves, which consists of an annual retainer
component and a meeting fee component. Effective August 21, 1995, each Trustee
of the Vista Funds receives a quarterly retainer of $12,000 and an additional
per meeting fee of $1,500. Members of committees receive a meeting fee only if
the committee meeting is held on a day other than a day on which a regularly
scheduled meeting is held. Prior to August 21, 1995, the annual retainer was
$36,000 and the per-meeting fee was $1,000. The Chairman of the Trustees, Fergus
Reid, has and continues to receive a 50% increment over regular Trustee total
compensation for serving as Chairman and Trustee for all the investment
companies advised by the adviser or sub-adviser.
Effective August 21, 1995, the Trustees also instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not an
employee of any of the Portfolios, the adviser or sub-adviser, administrator or
distributor or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board of Trustees. Pursuant to the Plan, the normal
retirement date is the date on which the eligible Trustee has attained age 65
and has completed at least five years of continuous service with one or more of
the investment companies advised by the adviser or sub-adviser (collectively,
the "Covered Funds"). Each eligible Trustee is entitled to receive from the
Covered Funds an annual benefit commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to 10% of the
highest annual compensation received from the Covered Funds multiplied by the
number of such Trustee's years of service (not in excess of 10 years) completed
with respect to any of the Covered Funds. Such benefit is payable to each
eligible Trustee in monthly installments for the life of the Trustee.
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<PAGE>
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1995 for each Trustee of the Trust
(Mesrrs. Neff, Eppley and MacCallan were elected as Trustees on [ ], 1996 and
therefore received no compensation in the period):
<TABLE>
<CAPTION>
U.S. Global Tax Fee Prime New York California
Government Money Money Money Tax Free Tax Free
Money Market Market Market Money Money
Market Fund Fund Fund Market Market
Fund ---- ---- ---- Fund Fund
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, $12,789.94 $10,079.61 $4,097.69 $2,974.65 $3,453.60 $531.54
Trustee
Richard E. Ten Haken, 8,526.62 6,713.78 2,731.79 1,983.08 2,362.41 354.38
Trustee
William J. Armstrong, 8,526.62 6,713.78 2,731.79 1,983.08 2,362.41 354.38
Trustee
John R.H. Blum, 8,306.57 6,575.89 2,687.12 1,948.80 2,303.73 347.07
Trustee
Joseph J. Harkins, 8,526.62 6,713.78 2,731.79 1,983.08 2,362.41 354.38
Trustee
H. Richard 8,526.62 6,713.78 2,731.79 1,983.08 2,362.41 354.38
Vartabedian, Trustee
Stuart W. Cragin, 8,536.29 6,521.36 2,655.31 1,942.65 2,302.01 344.80
Jr., Trustee
Irving L. Thode, 8,536.29 6,521.36 2,655.31 1,942.65 2,302.01 344.80
Trustee
W. Perry Neff, Trustee 0 0 0 0 0 0
Roland R. Eppley, 0 0 0 0 0 0
Trustee
W.D. MacCallan 0 0 0 0 0 0
</TABLE>
<TABLE>
<CAPTION>
Federal Treasury New York Tax Free California
Money Plus Tax Free Income Intermediate
Market Fund Money Income Fund Fund Tax Free
----------- Market Fund ----------- ---- Fund
----------- ----
<S> <C> <C> <C> <C> <C>
Fergus Reid, III, $3,377.47 $489.54 $1,052.32 $971.82 $314.23
Trustee
Richard E. Ten 2,251.63 326.37 701.55 647.85 209.49
Haken, Trustee
William J. 2,251.63 326.37 701.55 647.85 209.49
Armstrong, Trustee
John R.H. Blum, 2,187.37 323.30 685.48 633.77 204.80
Trustee
Joseph J. Harkins, 2,251.63 326.37 701.55 647.85 209.49
Trustee
H. Richard 2,251.63 326.37 701.55 647.85 209.49
Vartabedian, Trustee
Stuart W. Cragin, 2,243.38 323.47 683.69 629.99 209.49
Jr., Trustee
Irving L. Thode, 2,243.38 323.47 683.69 629.99 209.49
Trustee
W. Perry Neff, 0 0 0 0 0
Trustee
Roland R. Eppley, 0 0 0 0 0
Trustee
W.D. MacCallan 0 0 0 0 0
</TABLE>
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<PAGE>
Pension or Total
Retirement Compensation
Benefits Accrued from
as Fund Expenses "Fund
Complex"(1)
Fergus Reid, 0 $78,456.65
III, Trustee
Richard E. Ten 0 52,304.39
Haken, Trustee
William J. 0 46,632.34
Armstrong,
Trustee
John R.H. Blum, 0 51,304.37
Trustee
Joseph J. 0 52,304.39
Harkins, Trustee
H. Richard 0 74,804.44
Vartabedian,
Trustee
Stuart W. 0 52,304.39
Cragin, Jr.,
Trustee
Irving L. Thode, 0 52,304.39
Trustee
W. Perry Neff, 0 0
Trustee
Roland R. 0 0
Eppley, Trustee
W.D. MacCallan, 0 0
Trustee
(1) Data reflects total compensation earned during the period January 1, 1995
to December 31, 1995 for service as a Trustee to all Funds advised by the
adviser.
Vista Funds Retirement Plan for Eligible Trustees
Effective August 21, 1995, the Trustees also instituted a Retirement Plan
for Eligible Trustees (the "Plan") pursuant to which each Trustee (who is not an
employee of any of the Funds, the adviser, administrator or distributor or any
of their affiliates) may be entitled to certain benefits upon retirement from
the Board of Trustees. Pursuant to the Plan, the normal retirement date is the
date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the adviser or sub-adviser (collectively, the "Covered
Funds"). Each Eligible Trustee is entitled to receive from the Covered Funds an
annual benefit commencing on the first day of the calendar quarter coincident
with or following his date of retirement equal to 10% of the highest annual
compensation received from the Covered Funds multiplied by the number of such
Trustee's years of service (not in excess of 10 years) completed with respect to
any of the Covered Funds. Such benefit is payable to each eligible Trustee in
monthly installments for the life of the Trustee.
Set forth below in the table below are the estimated annual benefits
payable to an eligible Trustee upon retirement assuming various compensation and
years of service classifications. The estimated credited years of service for
Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian, Cragin, and
Thode are 11, 11, 8, 11, 5, 3, 3 and 3 respectively.
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<PAGE>
Highest Annual Compensation Paid by All Vista Funds
---------------------------------------------------
40,000 45,000 50,000 55,000
Years of Estimated Annual Benefits Upon Retirement
Service -----------------------------------------
-------
10 40,000 45,000 50,000 55,000
9 36,000 40,500 45,000 49,500
8 32,000 36,000 40,000 44,000
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which
each Trustee (who is not an employee of any of the Funds, the Adviser,
Administrator or Distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustees' fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination of
service). The deferred amounts are deemed invested in shares of the Fund on
whose Board the Trustee sits. The deferred amounts are paid out in a lump sum or
over a period of several years as elected by the Trustee at the time of
deferral. If a deferring Trustee dies prior to the distribution of amounts held
in the deferral account, the balance of the deferral account will be distributed
to the Trustee's designated beneficiary in a single lump sum payment as soon as
practicable after such deferring Trustee's death. The following Eligible
Trustees have executed a deferred compensation agreement for the 1996 calendar
year: Messrs. Tom Haken, Thode and Vartabedian.
Officers
MARTIN DEAN* - Treasurer and Assistant Secretary of the Trust; BISYS Fund
Services, Inc., Manager, Financial Reporting and Control.
ANN BERGIN* - Secretary; Senior Vice President and Director of Legal and
Compliance Services, BISYS Fund Services, Inc., Vista Broker-Dealer
Services, Inc.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust, unless, as to liability to the Trust or its shareholders, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices or with
respect to any matter unless it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best interest
of the Trust. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination based upon a
review of readily available facts, by vote of a majority of disinterested
Trustees or in a written opinion of independent counsel, that such officers or
Trustees have not engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties.
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<PAGE>
The Funds pay no direct remuneration to any officer of the Trust. As of
August 31, 1995, the Trustees and officers as a group owned of record less than
1% of each Fund's outstanding shares, all of which were acquired for investment
purposes. For the fiscal year ended August 31, 1995, the Trust paid to its
disinterested Trustees fees and expenses for all meetings of the Board and any
committees attended in the aggregate amount of approximately $250,682 which
amount is then apportioned between the Funds comprising the Trust.
Adviser or Sub-Adviser
The adviser acts as investment adviser to the Funds pursuant to an
Investment Advisory Agreement, dated as of __________, 1996 (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
Chase makes investment decisions for the Funds. For its services under the
Investment Advisory Agreements, Chase is entitled to receive an annual fee
computed daily and paid monthly at an annual rate equal to 0.10% of each Fund's
average daily net assets. However, Chase may, from time to time, voluntarily
waive all or a portion of its fees payable under the Investment Advisory
Agreements Pursuant to the terms of the Advisory Agreement, the Adviser provides
the Funds with such investment advice and supervision as it deems necessary for
the proper supervision of the Funds' investments. The adviser continuously
provides investment programs and determines from time to time what securities
shall be purchased, sold or exchanged and what portion of the Funds' assets
shall be held uninvested. The adviser or sub-adviser furnishes, at its own
expense, all services, facilities and personnel necessary in connection with
managing the investments and effecting portfolio transactions for the Funds. The
Advisory Agreement for the Funds will continue in effect from year to year only
if such continuance is specifically approved at least annually by the Board of
Trustees or by vote of a majority of a Fund's outstanding voting securities and
by a majority of the Trustees who are not parties to the Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on such Advisory Agreement.
Under the Advisory Agreement, the adviser or sub-adviser may utilize the
specialized portfolio skills of all its various affiliates, thereby providing
the Funds with greater opportunities and flexibility in accessing investment
expertise.
Pursuant to the terms of the Advisory Agreement, the adviser or
sub-adviser is permitted to render services to others. The Advisory Agreement is
terminable without penalty by the Trust on behalf of the Funds on not more than
60 days', nor less than 30 days', written notice when authorized either by a
majority vote of a Fund's shareholders or by a vote of a majority of the Board
of Trustees of the Trust, or by the adviser or sub-adviser on not more than 60
days', nor less than 30 days', written notice, and will automatically terminate
in the event of its "assignment" (as defined in the 1940 Act). The Advisory
Agreement provides that the adviser or sub-adviser under such Agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for wilful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties thereunder.
In the event the operating expenses of the Funds, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to the Funds imposed by the securities laws or regulations thereunder
of any state in which the shares of the Funds are qualified for sale, as such
limitations may be raised or lowered from time to time, the adviser or
sub-adviser shall reduce its advisory fee (which fee is described below) to the
extent of its share of such excess expenses. The amount of any such reduction to
be borne by the adviser or sub-adviser shall be deducted from the monthly
advisory fee otherwise payable with respect to the Funds during such fiscal
year; and if such amounts should exceed the monthly fee, the adviser or
sub-adviser shall pay to a Fund its share of such excess expenses no later than
the last day of the first month of the next succeeding fiscal year.
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<PAGE>
Under an investment advisory agreement between the Trust, on behalf of the
Funds, and Chase, Chase may delegate a portion of its responsibilities to a
sub-adviser. In addition, the investment advisory agreement provides that Chase
may render services through its own employees or the employees of one or more
affiliated companies that are qualified to act as an investment adviser of the
Fund and are under the common control of Chase as long as all such persons are
functioning as part of an organized group of persons, managed by authorized
officers of Chase. Chase, on behalf of the Funds (other than the Cash Management
Fund and the Tax Free Money Market Fund), has entered into an investment
sub-advisory agreement (the "Sub-Advisory Agreement") with Chase Asset
Management, Inc. ("CAM") With respect to the day to day management of the Funds,
under the sub-advisory agreement, the sub-adviser makes decisions concerning,
and places all orders for, purchases and sales of securities and helps maintain
the records relating to such purchases and sales. The sub-adviser may, in its
discretion, provide such services through its own employees or the employees of
one or more affiliated companies that are qualified to act as an investment
adviser to the Company under applicable laws and are under the common control of
Chase; provided that (i) all persons, when providing services under the
sub-advisory agreement, are functioning as part of an organized group of
persons, and (ii) such organized group of persons is managed at all times by
authorized officers of the sub-adviser. This arrangement will not result in the
payment of additional fees by the Funds. For its services under such
Sub-Investment Advisory Agreement, CAM will be entitled to receive, with respect
to each such Fund, such compensation, payable by the adviser out of its advisory
fee, as shall be agreed to from time to time between the adviser and CAM.
Texas Commerce Bank, National Association ("TCB") is the sub-investment
adviser to the Cash Management Fund and the Tax Free Money Market Fund pursuant
to separate Sub-Investment Advisory Agreements between Chase and TCB. Under the
Sub-Investment Advisory Agreements, TCB will make investment decisions for, and
be responsible for the day-to-day management of, the Cash Management Fund and
Tax Free Money Market Fund. For its services under the Sub-Investment Advisory
Agreement relating to each of the Cash Management Fund and Tax Free Market Fund
TCB will be entitled to receive such compensation, payable by the Adviser out of
its advisory fee, as shall be agreed to from time to time between the Adviser
and TCB.
The adviser, a wholly-owned subsidiary of The Chase Manhattan Corporation,
a registered bank holding company, is a commercial bank offering a wide range of
banking and investment services to customers throughout the United States and
around the world. The Chase Manhattan Corporation is the entity resulting from
the merger of The Chase Manhattan Corporation into Chemical Banking Corporation
on _____________, 1996. Chemical Banking Corporation was thereupon renamed The
Chase Manhattan Corporation. The adviser, including its predecessor
organizations, has over 100 years of money management experience and renders
investment advisory services to others. Also included among the adviser's
accounts are commingled trust funds and a broad spectrum of individual trust and
investment management portfolios. These accounts have varying investment
objectives.
CAM is a wholly-owned operating subsidiary of the Adviser. CAM is
registered with the Securities and Exchange Commission as an investment adviser
and was formed for the purpose of providing discretionary investment advisory
services to institutional clients and to consolidate Chase's investment
management function, and the same individuals who serve as portfolio managers
for CAM also serve as portfolio managers for Chase.
TCB has been in the investment counselling business since 1987 and is
ultimately controlled and owned by Chase Manhattan Corporation. TCB renders
investment advice to a wide variety of corporations, pension plans, foundations,
trusts and individuals.
In consideration of the services provided by the adviser pursuant to the
Advisory Agreements, each Fund pays an investment advisory fee computed daily
and paid monthly based on a rate equal to a specified percentage (0.10% for the
Money Market Funds and 0.30% for each of the New York Tax Free Income Fund, the
Tax Free
-41-
<PAGE>
Income Fund, and the California Intermediate Tax Free Income Fund) with respect
to each Fund's average daily net assets, on an annualized basis for such Fund's
then-current fiscal year.
For the fiscal years ended October 31, 1993, the period from November 1,
1993 through August 31, 1994, and the year ended August 31, 1995, Chase was paid
or accrued the following investment advisory fees with respect to the following
Funds, and voluntarily waived the amounts in parentheses following such fees
with respect to each such period:
Tax Free Money Market Fund: $486,073 ($17,981), $371,535, and $440,282,
respectively;
New York Tax Free Money Market Fund: $454,872 ($22,825), $279,493 and
$381,647 respectively;
Tax Free Income Fund: $127,952 ($127,952), $252,244 ($219,741) and
$307,093 ($287,095) respectively;
New York Tax Free Income Fund: $267,793 ($118,398), $288,134 ($172,770)
and $333,493 ($219,772), respectively.
For the period April 18, 1994 through August 31, 1994, Chase was paid or
accrued investment advisory fees, and voluntarily waived the amounts in
parentheses, $32,325 ($31,465) and $6,249 ($5,890) for the Federal Money Market
Fund, the Treasury Plus Money Market Fund, respectively. For the year ended
August 31, 1995, Chase was paid or accrued advisory fees, and voluntarily waived
the amounts in parentheses, $389,075 ($118,975) and $22,663 for the Federal
Money Market Fund and the Treasury Money Market Fund, respectively.
For the period November 15, 1993 through August 31, 1994, and the year
ended August 31, 1995, Chase was paid or accrued investment advisory fees, and
voluntarily waived the amounts in parentheses, $234,255 ($76,970) and $352,679
($216,306), respectively, for the Prime Money Market Fund.
For the period October 31, 1993 through August 31, 1994, and for the year
ended August 31, 1995, Chase was paid or accrued investment advisory fees, and
voluntarily waived the amounts in parentheses, $100,182 ($100,182) and $102,004
($102,004) for the California Intermediate Tax Free Income Fund.
For the fiscal period ended October 31, 1992, 1993, and the period from
November 1, 1993 through August 31, 1994, Chase was paid or accrued investment
advisory fees with respect to the California Tax Free Money Market Fund and
voluntarily waived the amount in parentheses following such fees: $22,640
($22,640), $74,175 ($67,313) and $47,854 ($43,069). For the year ended August
31, 1995, Chase was paid or accrued investment advisory fees, and voluntarily
waived the amounts in parentheses $55,870 ($44,112) for the California Tax Free
Money Market Fund.
For the period November 1, 1993 through August 31, 1994, and for the year
ended August 31, 1995, Chase was paid or accrued investment advisory fees with
respect to the U.S. Government Money Market Fund: of $887,334 and $1,440,186,
respectively.
Administrator
Pursuant to an Administration Agreement, dated _________, 1996 for each of
the Funds (the "Administration Agreement"), Chase serves as administrator of the
Trust. Chase and provide certain administrative services to the Trust,
including, among other responsibilities, coordinating the negotiation of
contracts and fees with, and the monitoring of performance and billing of, the
Trust's independent contractors and agents; preparation for signature by an
officer of the Trust of all documents required to be filed for compliance by the
Trust with applicable laws and regulations excluding those of the securities
laws of various states; arranging for the computation of
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<PAGE>
performance data, including net asset value and yield; responding to shareholder
inquiries; and arranging for the maintenance of books and records of the Trust
and providing, at its own expense, office facilities, equipment and personnel
necessary to carry out its duties. The administrator does not have any
responsibility or authority for the management of the Funds the determination of
investment policy, or for any matter pertaining to the distribution of Fund
shares.
Under the administration agreements Chase render administrative services
to others. The administration agreements will continue in effect from year to
year with respect to each Fund only if such continuance is specifically approved
at least annually by the Board of Trustees or by vote of a majority of such
Fund's outstanding voting securities and, in either case, by a majority of the
Trustees who are not parties to the administration agreement or "interested
persons" (as defined in the 1940 Act) of any such party. The administration
agreements are terminable without penalty by the Trust on behalf of each Fund on
60 days' written notice when authorized either by a majority vote of such Fund's
shareholders or by vote of a majority of the Board of Trustees, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust, or by the Administrator on 60 days' written notice, and
will automatically terminate in the event of its "assignment" (as defined in the
1940 Act). The administration agreements also provide that neither Chase nor
their personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Funds, except
for willful misfeasance, bad faith or gross negligence in the performance of its
or their duties or by reason of reckless disregard of its or their obligations
and duties under the administration agreements.
In addition, the administration agreements provide that, in the event the
operating expenses of any Fund, including all investment advisory,
administration and sub-administration fees, but excluding brokerage commissions
and fees, taxes, interest and extraordinary expenses such as litigation, for any
fiscal year exceed the most restrictive expense limitation applicable to that
Fund imposed by the securities laws or regulations thereunder of any state in
which the shares of such Fund are qualified for sale, as such limitations may be
raised or lowered from time to time, Chase shall reduce its administration fee
(which fee is described below) to the extent of its share of such excess
expenses. The amount of any such reduction to be borne by Chase shall be
deducted from the monthly administration fee otherwise payable to Chase during
such fiscal year; and if such amounts should exceed the monthly fee, Chase shall
pay to such Fund its share of such excess expenses no later than the last day of
the first month of the next succeeding fiscal year.
In consideration of the services provided by Chase pursuant to the
administration agreements, the Administrator receives from each Fund a fee
computed daily and paid monthly at an annual rate equal to 0.10% of each of the
Fund's average daily net assets, on an annualized basis for the Fund's
then-current fiscal year. Chase may voluntarily waive a portion of the fees
payable to it with respect to each Fund on a month-to-month basis.
For the fiscal years ended October 31, 1992 and 1993, and the period from
November 1, 1993 through August 31, 1994, and the year ended August 31, 1995,
Chase was paid or accrued the following administration fees and voluntarily
waived the amounts in parentheses following such fees:
U.S. Government Money Market Fund: $564,610 ($24,783), $1,040,090,
$443,694 and $720,093;
Tax Free Money Market Fund: $197,227 ($30,601), $324,048 ($22,244),
$185,769 and $220,141;
New York Tax Free Money Market Fund: $277,855 ($24,360), $303,249
($15,216), $139,747 and $190,823;
Tax Free Income Fund: $9,919 ($9,919), $42,651 ($42,651), $84,082
($68,719) and $102,364 ($64,572);
New York Tax Free Income Fund: $34,704 ($24,262), $89,264 ($39,466),
$96,046 ($61,425) and $111,164 ($81,265);
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<PAGE>
For the period November 15, 1993 through August 31, 1994, and the year
ended August 31, 1995, Chase was paid or accrued administration fees, and
voluntarily waived the amounts in parentheses, $117,129 ($18,992) and $176,340
($88,982), respectively for the Prime Money Market Fund.
For the period April 18, 1994 through August 31, 1994, and the year ended
August 31, 1995, Chase was paid or accrued administration fees, and voluntarily
waived the amounts in parentheses, $16,161 ($3,123), $194,538 (61,243) for the
Federal Money Market Fund and $3,123 ($2,944), $11,331($11,331) for the Treasury
Plus Money Market Fund, respectively.
For the fiscal period ended October 31, 1992, 1993, and the period from
November 1, 1993 through August 31, 1994, and the year ended August 31, 1995,
Chase was paid or accrued the following administration fees with respect to the
California Tax Free Money Market Fund and voluntarily waived the amounts in
parentheses: $15,094 ($15,094), $49,449 ($44,875), $23,926 ($19,141), and
$27,935 ($21,527), respectively.
For the period November 1, 1993 through August 31, 1994, and the year
ended August 31, 1995, Chase was paid or accrued administration fees, and
voluntarily waived the amounts in parentheses $33,394 ($33,394) and $34,001
($34,001) for the California Intermediate Tax Free Income Fund, respectively.
Distributor
Distribution Plan
The Trust has adopted separate plans of distribution pursuant to Rule
12b-1 under the 1940 Act (a "Distribution Plan") including Distribution Plans on
behalf of the Class A shares of the Tax Free Income Fund and the New York Tax
Free Income Fund, the shares of the California Intermediate Tax Free Fund and
the Vista Shares of the Tax Free Money Market Funds (except the Cash Management
Fund) which provides that each of the Funds shall pay a distribution fee (the
"Distribution Fee"), including payments to the Distributor, at an annual rate
not to exceed 0.25% of its shares with respect to Class A shares of the Tax Free
Income Fund and the New York Tax Free Income Fund, 0.25% of its shares with
respect to the shares of the California Intermediate Tax Free Fund and .10% of
its Shares with respect to the Vista Shares of the Tax Free Money Market Funds'
average daily net assets for distribution services including. There is no
distribution plan for the Cash Management Fund. The Distributor may use all or
any portion of such Distribution Fee to pay for Fund expenses of printing
prospectuses and reports used for sales purposes, expenses of the preparation
and printing of sales literature and other such distribution-related expenses.
As noted above the Class B shareholders will pay a distribution fee of
0.75% of average daily net assets under a Rule 12b-1 Distribution Plan. The
Distributor currently expects to pay sales commissions to a dealer at the time
of sale of Class B shares of up to [4.00%] of the purchase price of the shares
sold by such dealer. The principal underwriter will use its own fund or funds
facilitated by the Distributor (which may be borrowed or otherwise financed) to
pay such amounts. Because the Distributor will receive a maximum of 0.75% of
average daily net assets represented by Class B shares it will take the
Distributor several years to recoup the sales commissions paid to dealers and
other sales expenses.
Because of the 0.75% limitation on the compensation paid to the
Distributor during such fiscal year, a large portion of the commissions
attributable to sales of Class B shares will be accrued and paid by the Fund to
the Distributor in fiscal years subsequent to the years in which the Class B
shares are sold.
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No class of shares of a Fund will make payments or be liable for any
distribution expenses incurred by the other class of shares of such Fund. In
addition, the Trustees also have adopted a separate Distribution Plan in
accordance with Rule 12b-1 under the 1940 Act which provides that the Vista
Shares and the Premier Shares U.S. Government Fund shall pay up to 0.10% of its
annual net assets for certain expenses associated with the distribution of its
shares. This Distribution Plan does not provide for reimbursement of any
overhead expenses.
The Institutional Shares of the Money Market Funds have no distribution
plan.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to exceed
0.25% annualized of the asset value of Class A shares, 0.25% annualized of the
average net asset value of the Class B shares, or 0.25% annualized of the
average daily net asset value of the shares of the California Intermediate Tax
Free Fund maintained in the Fund by such broker-dealers' customers. Trail or
maintenance commissions will be paid to broker-dealers beginning the 13th month
following the purchase of such shares. Since the distribution fees are not
directly tied to expenses, the amount of distribution fees paid by the Fund
during any year may be more or less than actual expenses incurred pursuant to
the Distribution Plans. For this reason, this type of distribution fee
arrangement is characterized by the staff of the Securities and Exchange
Commission as being of the "compensation variety" (in contrast to
"reimbursement" arrangements by which a distributor's compensation is directly
linked to its expenses). With respect to Class B shares because of the 0.75%
annual limitation on the compensation paid to the Distributor during a fiscal
year, compensation relating to a large portion of the commissions attributable
to sales of Class B shares in any one year will be paid by the Fund to the
Distributor in fiscal years subsequent thereto. However, the Shares are not
liable for any distribution expenses incurred in excess of the Distribution Fee
paid. In determining whether to purchase Class B shares, investors should
consider that daily compensation payments could continue until the Distributor
has been fully reimbursed for the commissions paid on sales of Class B shares.
Each class of shares is entitled to exclusive voting rights with respect
to matters concerning its Distribution Plan.
Each Distribution Plan provides that it will continue in effect
indefinitely if such continuance is specifically approved at least annually by a
vote of both a majority of the Trustees and a majority of the Trustees who are
not "interested persons" (as defined in the 1940 Act) of the Trust and who have
no direct or indirect financial interest in the operation of the Distribution
Plan or in any agreement related to such Plan ("Qualified Trustees"). The
continuance of each Distribution Plan was most recently approved on December 16,
1991. Each Distribution Plan requires that the Trust shall provide to the Board
of Trustees, and the Board of Trustees shall review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Distribution Plan. Each Distribution Plan further provides that the selection
and nomination of Qualified Trustees shall be committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. Each
Distribution Plan may be terminated at any time by a vote of a majority of the
Qualified Trustees or, with respect to a particular Fund, by vote of a majority
of the outstanding voting Shares of such Fund (as defined in the 1940 Act). Each
Distribution Plan may not be amended to increase materially the amount of
permitted expenses thereunder without the approval of shareholders and may not
be materially amended in any case without a vote of the majority of both the
Trustees and the Qualified Trustees. Each of the Funds will preserve copies of
any plan, agreement or report made pursuant to the Distribution Plan for a
period of not less than six years from the date of the Distribution Plan, and
for the first two years such copies will be preserved in an easily accessible
place.
For the fiscal year ended August 31, 1995, the Distributor was paid or
accrued the following Basic Distribution Fees and voluntarily waived the amounts
in parenthesis following such fees with respect to the Shares of each Fund:
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U.S. Government Money Market Fund - Vista Shares: $326,670;
Prime Money Market Fund - B Shares: $30,239;
Federal Fund - Vista Shares: $141,875 ($8,314);
Tax Free Money Market Fund - Vista Shares: $293,807($291,652);
New York Tax Free Money Market Fund - Vista Shares: $763,294
($333,341);
California Tax Free Money Market Fund: $139,675 ($69,435);
Tax Free Income Fund - A Shares: $223,990 ($44,798);
Tax Free Income Fund - B Shares: $95,763;
New York Tax Free Income Fund - A Shares: $256,481 ($51,296);
New York Tax Free Income Fund - B Shares: $64,290;
California Intermediate Fund:$85,003 ($78,626);
With respect to the Vista Shares of the New York Tax Free Money Market
Fund, the Basic Distribution Fee of $153,687 accrued or paid to the Distributor
was allocated as follows: printing postage and handling - $32,874 sales
compensation - $94,210; advertising and administrative filings - $26,572;
With respect to the Vista Shares of the Tax Free Money Market Fund, the
Basic Distribution Fee of $240,582 accrued or paid to the Distributor was
allocated as follows: printing postage and handling - $51,460; sales
compensation - $147,477; advertising & administrative filings - $41,597;
With respect to the Shares of the California Tax Free Money Market Fund,
the Basic Distribution Fee of $41,525 accrued or paid to the Distributor was
allocated as follows: printing postage and handling - $8,882; sales compensation
- - $25,455; advertising & administrative filings - $7,180;
With respect to the A Shares of the Tax Free Income Fund, the Basic
Distribution Fee of $179,192 accrued or paid to the Distributor was allocated as
follows: printing postage and handling - $38,329; sales compensation - $109,845;
advertising & administrative filings - $30,982;
With respect to the A Shares of the New York Tax Free Income Fund, the
Basic Distribution Fee of $205,185; accrued or paid to the Distributor was
allocated as follows: printing postage and handling - $43,889; sales
compensation - $125,778; advertising & administrative filings - $35,476;
With respect to Shares of the California Intermediate Tax Free Income
Fund, the Basic Distribution Fee of $6,404 accrued or paid to the Distributor
was allocated as follows: printing postage and handling - $1,370; sales
compensation - $3,926; advertising & administrative filings - $1,107;
With respect to the Vista Shares of the U.S. Government Money Market Fund,
the Basic Distribution Fee of $397,175 accrued or paid to the Distributor was
allocated as follows: printing postage and handling - $84,956; sales
compensation - $243,468; advertising & administrative filings - $68,672.
For the fiscal period ended August 31, 1995, the Distributor was paid or
accrued the following Basic Distribution Fees and voluntarily waived the amounts
in parenthesis following such fees with respect to the Premier Shares of the
following Fund:
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The Tax Free Money Market Fund: $258,709 ($86,321);
The U.S. Government Money Market Fund: $684,952;
With respect to the Premier Shares of the Tax Free Money Market Fund, the
Basic Distribution Fee of $258,709 accrued or paid to the Distributor was
allocated as follows: printing postage and handling - $55,338; sales
compensation - $158,589; advertising & administrative filings - $44,731
With respect to the Premier Shares of the U.S. Government Money Market
Fund, the Basic Distribution Fee of $684,952 accrued or paid to the Distributor
was allocated as follows: printing postage and handling - $146,511; sales
compensation - $419,876; advertising & administrative filings - $118,428
There is no 12b-1 Distribution Plan for any Class of the Treasury Money
Market Fund and the Cash Management Fund, while only the Vista Shares of the
Federal Money Market and the B Shares of the Prime Money Market Fund have 12B-1
Distribution Plans.
Distribution and Sub-Administration Agreement
The Trust has entered into a Distribution and Sub-Administration Agreement
dated August 24, 1995 (prior to such date, the Distributor served the Trust
pursuant to a contract dated August 23, 1994 (April 15, 1994 with respect to the
Treasury Fund and Federal Fund)) (the "Distribution Agreement"), with the
Distributor, pursuant to which the Distributor acts as the Funds' exclusive
underwriter, provides certain administration services and promotes and arranges
for the sale of each of the Shares. The Distributor is a wholly-owned subsidiary
of BISYS Fund Services, Inc. The Distribution Agreement provides that the
Distributor will bear the expenses of printing, distributing and filing
prospectuses and statements of additional information and reports used for sales
purposes, and of preparing and printing sales literature and advertisements not
paid for by the Distribution Plan. The Trust pays for all of the expenses for
qualification of the shares of each Fund for sale in connection with the public
offering of such shares, and all legal expenses in connection therewith. In
addition, pursuant to the Distribution Agreement, the Distributor provides
certain sub-administration services to the Trust, including providing officers,
clerical staff and office space.
The Distribution Agreement is currently in effect and will continue in
effect with respect to each Fund only if such continuance is specifically
approved at least annually by the Board of Trustees or by vote of a majority of
such Fund's outstanding voting securities and, in either case, by a majority of
the Trustees who are not parties to the Distribution Agreement or "interested
persons" (as defined in the 1940 Act) of any such party. The Distribution
Agreement is terminable without penalty by the Trust on behalf of each Fund on
60 days' written notice when authorized either by a majority vote of such Fund's
shareholders or by vote of a majority of the Board of Trustees of the Trust,
including a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust, or by the Distributor on 60 days' written
notice, and will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act). The Distribution Agreement also provides that neither
the Distributor nor its personnel shall be liable for any act or omission in the
course of, or connected with, rendering services under the Distribution
Agreement, except for willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations or duties.
In the event the operating expenses of any Fund, including all investment
advisory, administration and sub-administration fees, but excluding brokerage
commissions and fees, taxes, interest and extraordinary expenses such as
litigation, for any fiscal year exceed the most restrictive expense limitation
applicable to that Fund imposed by the securities laws or regulations thereunder
of any state in which the shares of such Fund are qualified for sale, as such
limitations may be raised or lowered from time to time, the Distributor shall
reduce its sub-administration
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fee with respect to such Fund (which fee is described below) to the extent of
its share of such excess expenses. The amount of any such reduction to be borne
by the Distributor shall be deducted from the monthly sub-administration fee
otherwise payable with respect to such Fund during such fiscal year; and if such
amounts should exceed the monthly fee, the Distributor shall pay to such Fund
its share of such excess expenses no later than the last day of the first month
of the next succeeding fiscal year.
In consideration of the sub-administration services provided by the
Distributor pursuant to the Distribution Agreement, the Distributor receives an
annual fee, payable monthly, of 0.05% of the net assets of each Fund. The
Distributor may voluntarily agree to from time to time waive a portion of the
fees payable to it under the Distribution Agreement with respect to each Fund on
a month-to-month basis. For the fiscal years ended October 31, 1992, 1993,the
period November 1, 1993 through August 31, 1994 and for the year ended August
31, 1995, the following sub-administration fees under the Distribution
Agreement, and voluntarily waived the amounts in parentheses following such
fees:
The Tax Free Money Market Fund: $98,614 ($15,299), $162,025 ($11,123),
$185,769 and $220,141;
The New York Tax Free Money Market Fund: $138,928 ($12,180), $151,622
($7,608), $139,747 and $190,823;
The Tax Free Income Fund - A Shares: $4,960 ($4,960), $21,325
($21,325), $42,041 ($2,137) and $44,798;
The Tax Free Income Fund - B Shares:$6,384;
The New York Tax Free Income Fund - A Shares: $17,364 ($12,131) ,
$44,633 ($19,733), $48,024 and $51,439;
The New York Tax Free Income Fund - B Shares: $4,286;
The California Intermediate Tax Free Income Fund: $16,096 and $17,001
($17,001).
For the fiscal period ended October 31, 1992, the California Tax Free
Money Market Fund paid the Distributor voluntarily waived its entire fee of
$7,547 For the fiscal year ended October 31, 1993 the Distributor was paid or
accrued $24,726 and voluntarily waived $22,438. For the fiscal period from
November 1, 1993 through August 31, 1994 the Distributor was paid or accrued
$23,926. For the year ended August 31, 1995,the Distributor was paid $27,935.
For the fiscal period from November 15, 1993 through August 31, 1994 the
Prime Money Market Fund paid or accrued $117,129, For the year ended August 31,
1995, the Distributor was paid or accrued $176,342 of sub-administration fee
for the Prime Money Market Fund.
For the fiscal period from April 18, 1994 through August 31, 1994 the
Federal Money Market Fund and the Treasury Money Market Fund paid or accrued
$16,161 and $3,123 and voluntarily waived $15,733 and $2,944, respectively. For
the year ended August 31, 1995, the Federal Money Market Fund paid or accrued
$194,538 and voluntarily waived $9,048, For the year ended August 31, 1995, the
Treasury Plus Money Market Fund paid or accrued $11,325 and voluntarily waived
$11,331.
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For the fiscal year November 1, 1993 through August 31, 1994, the U.S.
Government Money Market Fund paid or accrued distribution and sub-administration
fees of $443,694. For the year ended August 31, 1995, the U.S. Government Money
Market Fund was paid or accrued $720,093.
Shareholder Servicing Agents, Transfer Agent and Custodian
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent to provide certain services
including but not limited to the following: answer customer inquiries regarding
account status and history, the manner in which purchases and redemptions of
shares may be effected for the Fund as to which the Shareholder Servicing Agent
is so acting and certain other matters pertaining to the Fund; assist
shareholders in designating and changing dividend options, account designations
and addresses; provide necessary personnel and facilities to establish and
maintain shareholder accounts and records; assist in processing purchase and
redemption transactions; arrange for the wiring of funds; transmit and receive
funds in connection with customer orders to purchase or redeem shares; verify
and guarantee shareholder signatures in connection with redemption orders and
transfers and changes in shareholder-designated accounts; furnish (either
separately or on an integrated basis with other reports sent to a shareholder by
a Shareholder Servicing Agent) quarterly and year-end statements and
confirmations of purchases and redemptions; transmit, on behalf of the Fund,
proxy statements, annual reports, updated prospectuses and other communications
to shareholders of the Fund; receive, tabulate and transmit to the Fund proxies
executed by shareholders with respect to meetings of shareholders of the Fund;
and provide such other related services as the Fund or a shareholder may
request. Shareholder servicing agents may be required to register pursuant to
state securities law.
The fees relating to acting as liaison to shareholders and providing
personal services to shareholders will not exceed, on an annualized basis, 0.25%
of the average daily net assets of each of the Shares of the Income Funds, the
California Intermediate Tax Free Fund and the Premier Shares of the Tax Free
Money Market Funds represented by shares owned during the period for which
payment is being made by investors with whom such Shareholder Servicing Agent
maintains a servicing relationship. Each Shareholder Servicing Agent may
voluntarily agree from time to time to waive a portion of the fees payable to it
under its Servicing Agreement with respect to each Fund on a month-to-month
basis. For the fiscal years ended October 31, 1992 and 1993, and the period
November 1, 1993 through August 31, 1994, and the year ended August 31, 1995,
fees payable to the Shareholder Servicing Agents (all of which currently are
related parties) and the amounts voluntarily waived for each such period (as
indicated in parentheses), were as follows:
Tax Free Income Fund: $39,677 ($39,677), $111,375 ($111,375), $196,918
($169,386), and; $223,990 ($179,192), respectively;
Tax Free Income Fund - B Shares: $13,286 and $31,921;
New York Tax Free Income Fund: $138,522 ($96,882), $240,920
($107,693), $233,498 ($179,364) and $256,481 ($205,185), respectively;
New York Tax Free Income Fund - B Shares: $6,613 and 21,430;
California Intermediate Tax Free Income Fund: $83,485 ($83,485) and
$85,003 ($85,003).
For the fiscal years ended October 31, 1992 and 1993, and the period
November 1, 1993 through August 31, 1994 and the year ended August 31, 1995,
fees payable by the Premier Shares to the Shareholder Servicing Agents and the
amounts voluntarily waived for each such period (as indicated in parentheses),
were as follows:
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Tax Free Money Market Fund: $126,852 ($73,048), $328,100 ($245,074),
$353,240 ($226,331) and $344,945 ($131,039) respectively.
The Trust has also entered into a shareholder servicing agreement with
each Shareholder Servicing Agent, on behalf of the Vista Shares of the Tax Free
Money Market Funds, to provide certain services for a fee which will not exceed,
on an annualized basis, 0.35% of the average daily net assets of each of the
Premier Shares represented by shares owned during the period for which payment
is being made by investors with whom such Shareholder Servicing Agent maintains
a servicing relationship. However, each Shareholder Servicing Agent has
voluntarily agreed to waive a portion of the fees payable to it under its
Servicing Agreement on a month-to-month basis.
U.S. Government Money Market Fund - Vista Shares: $713,799, $816,674;
Cash Management Fund - Vista Shares: $550,995 ($50,574), $348,428
($98,796);
Tax Free Money Market Fund - Vista Shares: $531,208 ($85,012),
$636,438 ($41,182), $312,937, and $367,259, respectively;
California Tax Free Money Market Fund - Vista Shares: (for the period
ended October 31, only) $149,182 ($113,952), $119,635 ($119,635) and
$139,675 ($139,675), respectively;
New York Tax Free Money Market Fund - Vista Shares: $1,111,429
($97,440), $931,475 ($51,107), $698,735 and $954,117, respectively;
For the fiscal years ended October 31, 1993, and the period November 1,
1993 through August 31, 1994 and the year ended August 31, 1995, fees payable
by the Premier Shares to the Shareholder Servicing Agents and the amounts
voluntarily waived for each such period (as indicated in parentheses), were
as follows: U.S. Government Money Market Fund: $745,518, $518,682 and
$684,952.
For the year ended August 31, 1994, the Prime Money Market Fund - Premier
Shares and B Shares paid or accrued Shareholder Servicing Fees of $217,100 and
$687, respectively. For the year ended August 31, 1995, the Prime Money Market
Fund - Premier Shares and B Shares paid or accrued Shareholder Servicing Fees of
$82,617 ($72,534) and $10,080 ($5,488), respectively.
For the year ended August 31, 1995, the Federal Money Market Fund and the
Treasury Money Market Fund - Premier Shares were paid or accrued and voluntarily
waived Shareholder Servicing Fees of $109,180 ($15,790) and $2,971 ($2,971),
respectively.
There is no Shareholder Servicing Agent, and thus no shareholder servicing
fees, for the Institutional Shares of the Money Market Funds.
The Trust has also entered into a Transfer Agency Agreement with DST
Systems, Inc. ("DST") pursuant to which IFTC acts as transfer agent for the
Trust. Pursuant to a Custodian Agreement, Chase acts as the custodian of the
assets of each Fund for which Chase receives compensation as is from time to
time agreed upon by Chase. For additional information, see "Shareholder
Servicing Agents, Transfer Agent and Custodian" in the Prospectus.
In certain circumstances Shareholder Servicing Agents may be required to
register as dealers under state law.
INDEPENDENT ACCOUNTANTS
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The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended August 31, 1995, have
been so incorporated by reference in reliance on the reports of Price Waterhouse
LLP, 1177 Avenue of the Americas, New York, New York 10036, independent
accountants of the Funds, given on the authority of said firm as experts in
accounting and auditing. Price Waterhouse provides the Funds with audit
services, tax return preparation, and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission.
GENERAL INFORMATION
Description of Shares, Voting Rights and Liabilities
Mutual Fund Trust is an open-end, management investment company organized
as Massachusetts business trust under the laws of the Commonwealth of
Massachusetts on February 4, 1994. Because certain of the Funds comprising the
Trust are "non-diversified", more than 5% of any of the assets of any such Fund
may be invested in the obligations of any single issuer, which may make the
value of the shares in such a Fund more susceptible to certain risks than shares
of a diversified mutual fund. The fiscal year-end of the Funds in the Trust is
August 31.
The Trust currently consists of 12 Funds of shares of beneficial interest
without par value. With respect to the Money Market Funds and certain of the
Income Funds, the Trust may offer more than one class of shares. The Trust has
reserved the right to create and issue additional series or classes. Each share
of a series or class represents an equal proportionate interest in that series
or class with each other share of that series or class. The shares of each
series or class participate equally in the earnings, dividends and assets of the
particular series or class. Expenses of the Trust which are not attributable to
a specific series or class are allocated amount all the series in a manner
believed by management of the Trust to be fair and equitable. Shares have no
pre-emptive or conversion rights. Shares when issued are fully paid and
non-assessable, except as set forth below. Shareholders are entitled to one vote
for each share held. Shares of each series or class generally vote together,
except when required under Federal Securities laws to vote separately on matters
that may affect a particular class, such as the approval of distribution plans
for a particular class. With respect to shares purchased through a Shareholder
Servicing Agent and, in the event written proxy instructions are not received by
the Fund or its designated agent prior to a shareholder meeting at which a proxy
is to be voted and the shareholder does not attend the meeting in person, the
Shareholder Servicing Agent for such shareholder will be authorized pursuant to
an applicable agreement with the shareholder to vote the shareholder's
outstanding shares in the same proportion as the votes cast by other Fund
shareholders represented at the meeting in person or by proxy.
Shareholders of the Vista Shares, Premier Shares and Institutional Shares
of the Money Market Funds bear the fees and expenses described herein. The fees
paid by the Vista Shares to the Distributor and Shareholder Servicing Agent
under the distribution plans and shareholder servicing arrangements for
distribution expenses and shareholder services provided to investors by the
Distributor and Shareholder Servicing Agents generally are more than the
respective fees paid under distribution plans and shareholder servicing
arrangements adopted for the Premier Shares. The Institutional Shares pay no
distribution or Shareholder Servicing fee. As a result, at any given time, the
net yield on the Shares will be approximately .15% to .30% lower than the yield
on the Premier Shares and approximately 30% to 50% lower than the yield on the
Vista Shares. Standardized yield quotations will be computed separately for each
class of shares of a Fund.
The Vista Tax Free Income Fund and Vista New York Tax Free Income Fund
offer both Class A and Class B shares. The classes of shares have several
different attributes relating to sales charges and expenses.
Class A shares are sold at net asset value plus an initial sales charge of
up to a maximum of 4.50% of the public offering price. Class B shares have no
initial sales charge; however, a contingent deferred sales charge will
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be imposed on redemptions made within six years of purchase. The amount of this
contingent deferred sales charge will be 5.00% of the redemption proceeds on
redemptions in the first year after purchase, declining to zero for redemptions
made more than six years after purchase. However, this contingent deferred sales
charge will not apply to redemptions of shares representing capital appreciation
on Fund assets and reinvestment of dividends or capital distributions.
Approximately eight years after purchase, Class B shares will automatically
convert to Class A shares.
In general, absent waivers, Class A and Class B shares each have an annual
shareholder servicing fee of 0.25% of average daily net assets. In addition,
absent waivers, Class A has an annual distribution fee under Rule 12b-1 of 0.25%
of average daily net assets, while Class B has an annual distribution fee under
Rule 12b-1 of 0.75% of average daily net assets. Moreover, expenses borne by
each class may differ slightly because of the allocation of other class-specific
expenses. For example, a higher transfer agency fee may be imposed on Class B
shares than on Class A shares. The relative impact of initial sales charges,
contingent deferred sales charges, and ongoing annual expenses will depend on
the length of time a share is held.
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of shares rather than another.
The Trust is not required to hold annual meetings of shareholders but will
hold special meetings of shareholders of a series or class when, in the judgment
of the Trustees, it is necessary or desirable to submit matters for a
shareholder vote. Shareholders have, under certain circumstances, the right to
communicate with other shareholders in connection with requesting a meeting of
shareholders for the purpose of removing one or more Trustees. Shareholders also
have, in certain circumstances, the right to remove one or more Trustees without
a meeting. No material amendment may be made to the Trust's Declaration of Trust
without the affirmative vote of the holders of a majority of the outstanding
shares of each portfolio affected by the amendment. The Trust's Declaration of
Trust provides that, at any meeting of shareholders of the Trust or of any
series or class, a Shareholder Servicing Agent may vote any shares as to which
such Shareholder Servicing Agent is the agent of record and which are not
represented in person or by proxy at the meeting, proportionately in accordance
with the votes cast by holders of all shares of that portfolio otherwise
represented at the meeting in person or by proxy as to which such Shareholder
Servicing Agent is the agent of record. Any shares so voted by a Shareholder
Servicing Agent will be deemed represented at the meeting for purposes of quorum
requirements. Shares have no preemptive or conversion rights. Shares, when
issued, are fully paid and non-assessable, except as set forth below. Any series
or class may be terminated (i) upon the merger or consolidation with, or the
sale or disposition of all or substantially all of its assets to, another
entity, if approved by the vote of the holders of two-thirds of its outstanding
shares, except that if the Board of Trustees recommends such merger,
consolidation or sale or disposition of assets, the approval by vote of the
holders of a majority of the series' or class' outstanding shares will be
sufficient, or (ii) by the vote of the holders of a majority of its outstanding
shares, or (iii) by the Board of Trustees by written notice to the series' or
class' shareholders. Unless each series and class is so terminated, the Trust
will continue indefinitely.
Certificates are issued only upon the written request of a shareholder,
subject to the policies of the investor's Shareholder Servicing Agent, but the
Trust will not issue a stock certificate with respect to shares that may be
redeemed through expedited or automated procedures established by a Shareholder
Servicing Agent.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust also provides that the Trust shall
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder
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incurring financial loss on account of shareholder liability is limited to
circumstances in which both inadequate insurance existed and the Trust itself
was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
Principal Holders
As of ___________, 1996, the following persons owned beneficially,
directly or indirectly, 5% or more of the outstanding shares of the following
classes or Funds:
VISTA US GOVERNMENT MONEY MARKET FUND - VISTA SHARES
CUDD & COMPANY %
OMNIBUS ACCOUNT # 1
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK N/A %
METROPOLITAN COMMUNITY BANK
ATTN: JOHN MOLLOY
PROOF & CONTROL
1985 MARCUS AVENUE - 2
NEW HYDE PARK, NY 11042-1081
VISTA US GOVERNMENT MONEY MARKET FUND - PREMIER SHARES
CHASE MANHATTAN BANK N/A %
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
NATIONAL FINANCIAL SERV CORP %
-53-
<PAGE>
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
200 LIBERTY STREET
NEW YORK, NY 10281-1003
PENLIN & CO %
CHASE LINCOLN FIRST BANK
ATTN: P. WHALEN
PO BOX 1412
ROCHESTER, N Y 14603-1412
VISTA US GOVERNMENT MONEY MARKET FUND - INTERNATIONAL SHARES
CHASE MANHATTAN BANK NA %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
CHASE MANHATTAN BANK N/A %
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
CUDD & COMPANY %
OMNIBUS ACCOUNT #1
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
VISTA CASH MANAGEMENT FUND - VISTA SHARES
FIRST FIDELITY BANK N/A NJ %
ATTN: ELEANOR ELLIS
BROAD & WALNUT STS
2 1/2 WITHERSPOON
PHILADELPHIA PA 19109
CHASE MANHATTAN BANK N/A %
METROPOLITAN COMMUNITY BANK
ATTN: JOHN MOLLOY
PROOF & CONTROL
1985 MARCUS AVENUE -2
NEW HYDE PARK, NY 11042-1081
-54-
<PAGE>
VISTA CASH MANAGEMENT FUND - PREMIER SHARES
CHASE MANHATTAN BANK N/A %
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
NATIONAL FINANCIAL SERV CORP %
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
200 LIBERTY STREET
NEW YORK, NY 10281-1003
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
CUDD & COMPANY %
OMNIBUS ACCOUNT # 1
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
VISTA CASH MANAGEMENT FUND - INSTITUTIONAL SHARES
CONTINENTAL AIRLINES INC %
2929 ALLEN PARKWAY SUITE 1576
HOUSTON, TX 77019-2197
CUDD & COMPANY %
OMNIBUS ACCOUNT # 1
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK N/A %
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METROTECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
-55-
<PAGE>
CARRIERS ILA CFS TRUST FUND %
C/O CCC INC
ONE EVERTRUST PLAZA
JERSEY CITY, NJ 07302-3051
MANHATTAN PREPAID HEALTH SERVICE %
PLAN INC
475 RIVERSIDE DR STE 1220
NEW YORK, NY 10115-0122
VISTA PRIME MONEY MARKET - PREMIER SHARES
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
VISTA PRIME MONEY MARKET FUND - INSTITUTIONAL SHARES
CHASE MANHATTAN BANK N/A %
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METROTECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
CONTINENTAL AIRLINES INC %
2929 ALLEN PARKWAY SUITE 1576
HOUSTON, TX 77019-2197
VISTA FEDERAL MONEY MARKET FUND - VISTA SHARES
BLANCHARD GROUP OF FUNDS %
C/O FEDERATED SERVICES COMPANY
FEDERATED INVESTORS TOWER
ATTN: RECON AND CONTROL -24 CCT
PITTSBURGH, PA 15222
CHASE MANHATTAN BANK N/A %
METROPOLITAN COMMUNITY BANK
-56-
<PAGE>
ATTN: JOHN MOLLOY
PROOF & CONTROL
1985 MARCUS AVENUE -2
NEW HYDE PARK, NY 11042-1081
VISTA FEDERAL MONEY MARKET FUND - PREMIER SHARES
NATIONAL FINANCIAL SERV CORP %
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
200 LIBERTY STREET
NEW YORK, NY 10281-1003
CHASE MANHATTAN BANK N/A %
SPECIAL ACTIVITY AC FOR EXCLUSIVE
BENEFIT OF CPA CUSTOMERS OF CMB NA
PROOF & CONTROL/ATTN: JOHN MOLLOY
1985 MARCUS AVENUE -2
NEW HYDE PARK, NY 11042-1081
VISTA FEDERAL MONEY MARKET FUND - INSTITUTIONAL SHARES
CUDD & COMPANY %
OMNIBUS ACCOUNT # 1
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
HEALTH MANAGEMENT SYSTEMS INC %
ATTN: SCOTT REMLEY
401 PARK AVENUE SOUTH 4TH FLOOR
NEW YORK, NY 10016-8808
-57-
<PAGE>
VISTA TREASURY PLUS MONEY MARKET FUND - PREMIER SHARES
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
PHOTRONICS INCORPORATED %
ATTN: ROBERT J. BOLLO
15 SECOR ROAD
BROOKFIELD, CT 06804-3937
VISTA TREASURY PLUS MONEY MARKET FUND - INSTITUTIONAL SHARES
CHASE MANHATTAN BANK N/A %
GSS AS AGENT
RAY DEJESUS
770 BROADWAY 13TH FLOOR
NEW YORK, NY 10003-9522
TRENWICK AMERICA REINSURANCE CORP %
TRENWICH C/O LISA STALOWICZ
METRO CENTER ONE STATION PLACE
STANFORD, CT 06902
VISTA TAX FREE MONEY MARKET FUND - VISTA SHARES
CUDD & COMPANY %
OMNIBUS ACCOUNT # 1
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK N/A %
SPECIAL ACTIVITY AC FOR EXCLUSIVE
BENEFIT OF CPA CUSTOMERS OF CMB NA
PROOF & CONTROL/ATTN: JOHN MOLLOY
1985 MARCUS AVENUE - 2
NEW HYDE PARK, NY 11042-1081
VISTA TAX FREE MONEY MARKET FUND - PREMIER SHARES
CUDD & COMPANY %
CHASE MANHATTAN BANK N/A
PTIS DIV
-58-
<PAGE>
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
NATIONAL FINANCIAL SERV CORP %
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
200 LIBERTY STREET
NEW YORK, NY 10281-1003
1976 ACC TRUST %
RS LAUDER TTEE
FBO JANE LAUDER
C/O JAMES M GRIFFIN
767 FIFTH AVENUE
NEW YORK, NY 10153-0001
VISTA TAX FREE MONEY MARKET FUND - INSTITUTIONAL SHARES
CUDD & COMPANY %
OMNIBUS ACCOUNT # 1
PTIS DIV
35 FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK N/A TTEE %
FBO BUTLER COUNTY (TEXACO REF & MKG)
TR INDENTURE DATED SEP 15 94
ATTN: VALERIE DUNBAR TREASURERS OFC
4 CHASE METRO TECH CENTER 3RD FLOOR
BROOKLYN, NY 11245-0001
ROBERT PLAN CORPORATION %
100 CHARLES LINDBERGH BLVD
UNIONDALE, NY 11553-3631
VISTA NEW YORK TAX FREE MONEY MARKET FUND
CUDD & COMPANY %
C/O CHASE MANHATTAN BANK
PTIS DIV
1211 AVENUE OF THE AMERICAS 35TH FLOOR
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK N/A %
METROPOLITAN COMMUNITY BANK
ATTN: JOHN MOLLOY
PROOF & CONTROL
-59-
<PAGE>
1985 MARCUS AVENUE -2
NEW HYDE PARK, NY 11042-1081
CHASE MANHATTAN BANK N/A %
SPECIAL ACTIVITY AC FOR EXCLUSIVE
BENEFIT OF CPA CUSTOMERS OF CMB NA
PROOF & CONTROL / ATTN: JOHN MOLLOY
1985 MARCUS AVENUE -2
NEW HYDE PARK, NY 11042-1081
NATIONAL FINANCIAL SERV CORP %
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
200 LIBERTY STREET
NEW YORK, NY 10281-10003
VISTA NEW YORK TAX FREE INCOME FUND - A SHARES
CUDD & COMPANY %
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK, NY 10036-8701
VISTA NEW YORK TAX FREE INCOME FUND - CLASS B
JEANE B MAHONY %
38 HUTCHINSON BLVD
SCARSDALE, NY 10583-6524
VISTA CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
MERRILL LYNCH PIERCE FENNER & SMITH %
MUTUAL FUND OPERATIONS
ATTN: BOOK ENTRY
4800 DEER LAKE DRIVE EAST 3RD FLOOR
JACKSONVILLE, FL 32246-6484
VISTA CALIFORNIA TAX FREE MONEY MARKET FUND
CUDD & COMPANY %
C/O CHASE MANHATTAN BANK
PTIS DIV
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
-60-
<PAGE>
UNION BANK OF SWITZERLAND NY %
ATTN: ANDREW FOX VP
299 PARK AVENUE 40TH FLOOR
NEW YORK, NY 10171-0026
NATIONAL FINANCIAL SERV CORP %
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
200 LIBERTY STREET
NEW YORK, NY 10281-1003
-61-
<PAGE>
Financial Statements
The financial statements for the fiscal period ended August 31, 1995 for
the Funds are incorporated herein by reference from the Funds' Annual Reports to
Shareholders.
Specimen Computations of Offering Prices Per Share
New York Tax Free Income Fund (specimen computations)
- -----------------------------
Net Asset Value and Redemption Price per Share of Beneficial
Interest at August 31, 1995 $11.47
Maximum Offering Price per Share ($ 11.47 divided by .955)
(reduced on purchases of $100,000 or more) $12.01
New York Tax Free Income Fund - B Shares (specimen computations)
- -----------------------------
Net Asset Value and Redemption Price per Share of Beneficial
Interest at August 31, 1995 $11.41
Tax Free Income Fund (specimen computations)
- ---------------------
Net Asset Value and Redemption Price per Share of Beneficial
Interest at August 31, 1995 $11.85
Maximum Offering Price per Share ($11.85 divided by .955)
(reduced on purchases of $100,000 or more) $12.41
Tax Free Income Fund - B Shares (specimen computations)
- --------------------
Net Asset Value and Redemption Price per Share of Beneficial
Interest at August 31, 1995 $11.77
California Intermediate Tax Free Income Fund (specimen computations)
- --------------------------------------------
Net Asset Value and Redemption Price per Share of Beneficial
Interest at August 31, 1995 $9.89
Maximum Offering Price per Share ($ 9.89 divided by .955)
(reduced on purchases of $100,000 or more) $10.36
The Shares of the Money Market Funds are offered for sale at Net Asset
Value.
-62-
<PAGE>
APPENDIX A
DESCRIPTION OF MUNICIPAL OBLIGATIONS
Description of Ratings*
The ratings of Moody's and Standard & Poor's represent their opinions as
to the quality of various Municipal Obligations. It should be emphasized,
however, that ratings are not absolute standards of quality. Consequently,
Municipal Obligations with the same maturity, coupon and rating may have
different yields while Municipal Obligations of the same maturity and coupon
with different ratings may have the same yield.
Description of Moody's
four highest municipal 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 edge." Interest payments are protected by a large or 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.
Description of Moody's two highest ratings
of state and municipal notes:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. Factors affecting
the liquidity of the borrower and short-term cyclical elements are critical in
short-term ratings, while other factors of major importance in bond risk,
long-term secular trends for example, may be less important over the short run.
Symbols used are as follows:
MIG-1 -- Notes bearing this designation are of the best quality, enjoying
strong protection from established cash flows of funds for their servicing or
from established and broad-based access to the market for refinancing, or both.
- --------
* As described by the rating agencies. Ratings are generally given to
securities at the time of issuance. While the rating agencies may from
time to time revise such ratings, they undertake no obligation to do so.
A-1
<PAGE>
MIG-2 -- Notes bearing this designation are of high quality, with margins
of protection ample although not so large as in the preceding group.
A-2
<PAGE>
Description of Standard & Poor's four highest municipal bond ratings:
AAA -- Bonds rated AAA have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB -- Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit 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.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
Description of Standard & Poor's
ratings of municipal notes and tax-exempt demand bonds:
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes. Notes due in 3 years or less will likely receive a
note rating. Notes maturing beyond 3 years will most likely receive a long-term
debt rating. The following criteria will be used in making that assessment.
-- Amortization schedule (the larger the final maturity relative to other
maturities the more likely it will be treated as a note).
-- Source of Payment (the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note).
Note rating symbols are as follows:
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 (+) designation.
SP-2 --Satisfactory capacity to pay principal and interest.
SP-3 --Speculative capacity to pay principal and interest.
Standard & Poor's assigns "dual" ratings to all long-term debt issues that
have as part of their provisions a demand or double feature.
The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1+"). For the newer "demand notes," S&P's note
rating symbols, combined with the commercial paper symbols, are used (for
example, "SP-1+/A-1+").
A-3
<PAGE>
Description of Standard & Poor's
two highest commercial paper ratings:
A -- Issues assigned this highest rating are regarded as having the
greatest capacity for timely payment. Issues in this category are delineated
with the numbers 1, 2 and 3 to indicate the relative degree of safety.
A-1 -- This designation indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics will be denoted with a plus (+) sign
designation.
A-2 -- Capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as high as for issues
designated A-1.
Description of Moody's
two highest commercial paper ratings:
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. Moody's employs three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2 and Prime-3.
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: (1)
leading market positions in well-established industries; (2) high rates of
return on funds employed; (3) conservative capitalization structures with
moderate reliance on debt and ample asset protection; (4) broad margins in
earnings coverage of fixed financial charges and high internal cash generation;
and (5) well-established access to a range of financial markets and assured
sources of alternate liquidity.
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.
Description of Fitch's ratings of municipal notes
and tax-exempt demand bonds
Municipal Bond Ratings
The ratings represent Fitch's assessment of the issuer's ability to meet
the obligations of a specific debt issue or class of debt. The ratings take into
consideration special features of the issuer, its relationship to other
obligations of the issuer, the current financial condition and operative
performance of the issuer and of any guarantor, as well as the political and
economic environment that might affect the issuer's financial strength and
credit quality.
AAA--Bonds rated AAA are considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds rated AA are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay principal is
very strong, although not quite as strong as bonds rated AAA. Because bonds
rated in the AAA and AA categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is generally
rated F-1.
A-4
<PAGE>
Short-Term Ratings
Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of up to three years, including commercial
paper, certificates of deposit, medium-term notes, and municipal and investment
notes.
Although the credit analysis is similar to Fitch's bond rating analysis,
the short-term rating places greater emphasis than bond ratings on the existence
of liquidity necessary to meet the issuer's obligations in a timely manner.
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 satisfactory
degree of assurance for timely payments, but the margin of safety is not as
great as the F-1+ and F-1 categories.
A-5
<PAGE>
APPENDIX B
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO INVESTING IN
NEW YORK MUNICIPAL OBLIGATIONS
ADDITIONAL INFORMATION CONCERNING NEW YORK ISSUERS
As described in the Prospectuses, the New York Tax Free Money Market Fund
and New York Tax Free Income Fund invest substantially in New York municipal
securities. In addition, the specific New York municipal securities in which the
Funds will invest will change from time to time. The Funds are therefore
susceptible to political, economic, regulatory or other factors affecting
issuers of New York municipal securities. The following information constitutes
only a brief summary of a number of the complex factors which may affect issuers
of New York municipal securities and does not purport to be a complete or
exhaustive description of all adverse conditions to which issuers of New York
municipal securities may be subject. Such information is derived from official
statements utilized in connection with the issuance of New York municipal
securities, as well as from other publicly available documents. Such information
has not been independently verified by the Funds, and the Funds assume no
responsibility for the completeness or accuracy of such information.
Additionally, many factors, including national, economic, social and
environmental policies and conditions, which are not within the control of such
issuers, could have a material adverse impact on the financial condition of such
issuers. The Funds cannot predict whether or to what extent such factors or
other factors may affect the issuers of New York municipal securities, the
market value or marketability of such securities or the ability of the
respective issuers of such securities acquired by the Funds to pay interest on
or principal of such securities. The creditworthiness of obligations issued by
local New York issuers may be unrelated to the creditworthiness of obligations
issued by the State of New York, and there is no responsibility on the part of
the State of New York to make payments on such local obligations. There may be
specific factors that are applicable in connection with investment in the
obligations of particular issuers located within New York, and it is possible
the Funds will invest in obligations of particular issuers as to which such
specific factors are applicable. However, the information set forth below is
intended only as a general summary and not as a discussion of any specific
factors that may affect any particular issuer of New York municipal securities.
The portfolios of the Funds may include municipal securities issued by New
York State (the "State"), by its various public bodies (the "Agencies") and/or
by other entities located within the State, including the City of New York (the
"City") and political subdivisions thereof and/or their agencies.
New York State
The financial condition of the State and certain of its Agencies and
municipalities, particularly the City, could affect the market values and
marketability of New York Municipal Obligations which may be held by the Fund.
The following information constitutes only a brief summary, does not purport to
be a complete description, and is based on information drawn from official
statements relating to securities offerings of the State, the City and the
Municipal Assistance Corporation for the City of New York ("MAC") available as
of the date of this Statement of Additional Information. While the Fund has not
independently verified such information, it has no reason to believe that such
information is not correct in all material respects.
A national recession commenced in mid-1990. The downturn continued through
the remainder of the 1990-91 fiscal year, and was followed by a period of weak
economic growth during the remainder of the 1991 calendar year. For the calendar
year 1992, the national economy continued to recover, although at a rate below
all post-war recoveries. The recession was more severe in the State than in
other parts of the nation, owing to a significant retrenchment in the financial
services industry, cutbacks in defense spending, and an overbuilt real estate
market. The State economy remained in recession until 1993, when employment
growth resumed. Since early 1993, the State has gained approximately 100,000
jobs. The State's economic forecast calls for employment to increase in 1994 and
1995. Employment growth will moderate in 1995 when the pace of national economic
growth is projected to slacken and entire industries adjust to changing markets
and State's economy absorbs the full impact of these developments. Personal
income is estimated to increase by 5.3% in 1994, and a more moderate rate in
1995.
B-1
<PAGE>
The State's budget for the 1994-95 fiscal year was enacted by the
Legislature on June 7, 1994, more than two months after the start of the fiscal
year. Prior to adoption of the budget, the Legislature enacted appropriations
for disbursements considered to be necessary for State operations and other
purposes, including all necessary appropriations for debt service. The State
Financial Plan for 1994-95 fiscal year was formulated on June 16, 1994 and is
based on the State's budget as enacted by the Legislature and signed into law by
the Governor.
The State Financial Plan is based upon forecasts of national and State
economic activity. Economic forecasts have frequently failed to predict
accurately the time and magnitude of changes in the national and the State
economies. Many uncertainties exist in forecasts of both the national and State
economies, including consumer attitudes toward spending, Federal financial and
monetary policies, the availability of credit and the condition of the world
economy, which could have an adverse effect on the State. There can be no
assurance that the State economy will not experience worse-than-predicted
results in the 1994-95 fiscal year, with corresponding material and adverse
effects on the State's projections of receipts and disbursements.
The State issued its first update to the GAAP-basis Financial Plan for the
State's 1994-95 fiscal year on September 1, 1994. In the September GAAP-basis
update, the Division of the Budget projected a General Fund Operating deficit of
$690 million. The prior projection of the 1994-95 GAAP-basis State Financial
Plan, issued in February 1994 as part of the 1994-95 Executive Budget (the
"February 1994 Projection"), projected an operating surplus in the General Fund
of $7 million.
In the February 1994 projection, General Fund operating results over the
1993-94 and 1994-95 fiscal year projection period were anticipated to reduce the
accumulated deficit by $256 million. The impact of the reported results for the
State's 1993-94 fiscal year and the revised projection on the accumulated
deficit is substantially the same. Combining the $914 million operating surplus
for the State's 1993-94 fiscal year with the projected $690 million operating
deficit for the 1994-95 fiscal year results in an anticipated $224 million
reduction in the accumulated deficit.
Total revenues in the General Fund are projected at $32.825 billion,
consisting of $30.783 billion in tax revenues and $2.042 billion in
miscellaneous revenue. Personal income tax revenue is projected to reach $17.712
billion, or nearly 58% of total tax revenue. User taxes and fees are projected
to total $6.561 billion, or nearly 21% of total taxes. Business taxes are
projected at $5.442 billion, or 18%, while revenue from other taxes is projected
at $1.068 billion or 3% of total tax revenue. Total expenditures in the General
Fund are projected at $33.633 billion, including $23.778 billion for grants to
local governments, $8.033 billion for State operations, $1.807 billion for
general State charges, and $15 million for debt service. Compared to the
projections made in February, expenditures for grants to local governments are
substantially increased, while expenditures for State operations are reduced.
There can be no assurance that the State will not face substantial
potential budget gaps in future years resulting from a significant disparity
between tax revenues projected from a lower recurring receipts base and the
spending required to maintain State programs at current levels. To address any
potential budgetary imbalance, the State may need to take significant actions to
align recurring receipts and disbursements in future fiscal years.
On June 6, 1990, Moody's changed its ratings on all the State's
outstanding general obligation bonds from A1 to A. On March 26, 1990 and January
13, 1992, S&P changed its ratings on all of the State's outstanding general
obligation bonds from AA- to A and from A to A-, respectively. Ratings reflect
only the respective views of such organizations, and their concerns about the
financial condition of New York State and City, the debt load of the State and
City and any economic uncertainties about the region. There is no assurance that
a particular rating will continue for any given period of time or that any such
rating will not be revised downward or withdrawn entirely if, in the judgment of
the agency originally establishing the rating, circumstances so warrant.
(1) The State, Agencies and Other Municipalities. During the mid-1970s,
some of the Agencies and municipalities (in particular, the City) faced
extraordinary financial difficulties, which affected the State's own financial
condition. These events, including a default on short-term notes issued by the
New York State Urban Development Corporation ("UDC") in February 1975, which
default was cured shortly thereafter, and a continuation
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of the financial difficulties of the City, created substantial investor
resistance to securities issued by the State and by some of its municipalities
and Agencies. For a time, in late 1975 and early 1976, these difficulties
resulted in a virtual closing of public credit markets for State and many State
related securities.
In response to the financial problems confronting it, the State developed
and implemented programs for its 1977 fiscal year that included the adoption of
a balanced budget on a cash basis (a deficit of $92 million that actually
resulted was financed by issuing notes that were paid during the first quarter
of the State's 1978 fiscal year). In addition, legislation was enacted limiting
the occurrence of additional so-called "moral obligation" and certain other
Agency debt, which legislation does not, however, apply to MAC debt.
State Financial Results
New York State's financial operations have improved during recent fiscal
years. During the period 1989-90 through 1991-92, the State incurred General
Fund operating deficits that were closed with receipts from the issuance of tax
and revenue anticipation notes ("TRANs"). First, the national recession, and
then the lingering economic slowdown in the New York and regional economy,
resulted in repeated shortfalls in receipts and three budget deficits. For its
1992-93 and 1993-94 fiscal years, the State recorded balanced budgets on a cash
basis, with substantial fund balances in each year as described below.
On July 29, 1994, the Office of the State Comptroller issued the General
Purpose Financial Statements of the State of New York for the 1993-94 fiscal
year. The Statements were prepared on GAAP-basis and were independently audited
in accordance with generally accepted auditing standards. The State's Combined
Balance Sheet as of March 31, 1994 showed an accumulated surplus in its combined
governmental funds of $370 million, reflecting liabilities of $13.219 billion
and assets of $13.589 billion. This accumulated Governmental Funds surplus
includes a $1.637 billion accumulated deficit in the General Fund, as well as
accumulated surpluses in the Special Revenue and Debt Service fund types and a
$622 million accumulated deficit in the Capital Projects fund type.
The State completed its 1993-94 fiscal year with a combined Governmental
Funds operating surplus of $1.051 billion, which included an operating surplus
in the General Fund of $914 million, in the Special Revenue Funds of $149
million and in the Debt Service Funds of $23 million, and an operating deficit
in the Capital Projects Funds of $35 million. The following table updates Table
6 of the Annual Information Statement.
The State reported a General Fund operating surplus of $914 million for
the 1993-94 fiscal year, as compared to an operating surplus of $2.065 billion
for the prior fiscal year. The 1993-94 fiscal year surplus reflects several
major factors, including the cash basis surplus recorded in 1993-94, the use of
$671 million of the 1992-93 surplus to fund operating expenses in 1993-94, net
proceeds of $575 million in bonds issued by the Local Government Assistance
Corporation, and the accumulation of $265 million balance in the Contingency
Reserve Fund. Revenues increased $543 million (1.7%) over prior fiscal year
revenues with the largest increase occurring in personal income taxes.
Expenditures increased $1.659 billion (5.6%) over the prior fiscal year, with
the largest increase occurring in State aid for social services programs.
The State ended its 1993-94 fiscal year with a balance of $1.140 billion
in the tax refund reserve account, $265 million in its Contingency Reserve Fund
and $134 million in its tax stabilization reserve fund. These fund balances were
primarily the result of an improving national economy, State employment growth,
tax collections that exceeded earlier projections and disbursements that were
below expectations. Deposits to the personal income tax refund reserve have the
effect of reducing reported personal income tax receipts in the fiscal year when
made and withdrawals from such reserve increase receipts in the fiscal year when
made. The balance in the tax reserve account will be used to pay taxpayer
refunds, rather than drawing from 1994-95 receipts.
Of the $1.140 billion deposited in the tax refund reserve account, $1.026
billion was available for budgetary planning purposes in the 1994-95 fiscal
year. The remaining $114 million will be redeposited in the tax refund reserve
account at the end of the State's 1994-95 fiscal year to continue the process of
restructuring the State's cash flow as part of the New York Local Government
Assistance Corporation ("LGAC") program. The balance in the
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contingency reserve fund will be used to meet the cost of litigation facing the
State. The tax stabilization reserve fund may be used only in the event of an
unanticipated General Fund cash-basis deficit during the 1994-95 fiscal year.
Before the deposit of $1.140 billion in the tax refund reserve account,
General Fund receipts in 1993-94 exceeded those originally projected when the
State Financial Plan for the year was formulated on April 16, 1993 by $1.002
billion. Greater-than-expected receipts in the personal income tax, the bank
tax, the corporation franchise tax and the estate tax accounted for most of this
variance, and more than offset weaker-than-projected collections from the sales
and use tax and miscellaneous receipts. Collections from individual taxes were
affected by various factors including changes in Federal business laws,
sustained profitability of banks, strong performance of securities firms, and
higher-than-expected consumption of tobacco products following price cuts.
The higher receipts resulted, in part, because the New York economy
performed better than forecasted. Employment growth started in the first quarter
of the State's 1993-94 year, and although this lagged the national economic
recovery, the growth in New York began earlier than forecasted. The New York
economy exhibited signs of strength in the service sector, in construction, and
in trade. Long Island, and the Mid-Hudson Valley continued to lag the rest of
the State in economic growth. Approximately 100,000 jobs are believed to have
been added during the 1993-94 fiscal year.
Disbursements and transfer from the General Fund were $303 million below
the level projected in April 1993, an amount that would have been $423 million
had the State not accelerated the payment of Medicaid billings, which in the
April 1993 State Financial Plan were planned to be deferred into the 1994-95
fiscal year. Compared to the estimates included in the State Financial Plan
formulated in April 1993, disbursements were lower for Medicaid, capital
projects, and debt service (due to refundings). In addition, $114 million of
school and payments were funded from the proceeds of LGAC bonds. Disbursements
were higher-than-expected for general support for public schools. The State also
made the first of six required payments to the State of Delaware related to the
settlement of Delaware's litigation against the State regarding the disposition
of abandoned property receipts.
During the 1993-94 fiscal year, the State also established and funded a
Contingency Reserve Fund ("CRF") as a way to assist the State in financing the
cost of litigation affecting the State. The CRF was initially funded with a
transfer of $100 million attributable to the positive margin recorded in the
1992-93 fiscal year. In addition, the State augmented this initial deposit with
$132 million on debt service savings attributable to the refinancing of State
and public authority bonds during 1993-94. A year-end transfer of $36 million
was also made to the CRF, which, after a disbursement for authorized fund
purposes, brought the CRF balance at the end of 1993-94 to $265 million. This
amount was $165 million higher than the amount originally targeted for this
reserve fund.
For its 1992-93 fiscal year the State had a balanced budget on a cash
basis with a positive margin of $671 million in the General Fund that was
deposited in the refund reserve account.
After reflecting a 1992-93 year-end deposit to the refund reserve account
of $671 million, reported 1992-93 General Fund receipts were $45 million higher
than originally projected in April 1992. If not for that year-end transaction,
which had the effect of reducing 1992-93 receipts by $671 million and making
those receipts available in 1993-94, General Fund receipts would have been $716
million higher than originally projected.
The favorable performance was primarily attributable to personal income
tax collections that were more than $700 million higher than originally
projected (before reflecting the refund reserve transaction). The withholding
and estimated payment components of the personal income tax exceeded original
estimates by more than $800 million combined, reflecting both stronger economic
activity, particularly at year's end, and the tax-induced one-time acceleration
of income into 1992. Modest shortfalls were experienced in other components of
the income tax.
There were large, but largely offsetting, variances in other categories.
Significantly higher-than-projected business tax collections and the receipt of
unbudgeted payments from the Medical Malpractice Insurance Association and the
New York Racing Association approximately offset the loss of an anticipated $200
million Federal
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reimbursement, the loss of certain budgeted hospital differential revenue as a
result of unfavorable court decisions, and shortfalls in certain miscellaneous
revenue sources.
Disbursements and transfers to other funds totaled $30.829 billion, an
increase of $45 million above projections in April 1992. After adjusting for the
impact of a $150 million payment from the Medical Malpractice Insurance
Association to health insurers made pursuant to legislation passed in January
1993, actual disbursements were $105 million lower than projected. This
reduction primarily reflected higher-than-anticipated costs for educational
programs, as offset by lower costs in virtually all other categories of
spending, including Medicaid, local health programs, agency operations, fringe
benefits, capital projects and debt service.
During its 1989-90, 1990-91 and 1991-92 fiscal years, the State incurred
cash-basis operating deficits in the General Fund of $775 million, $1.081
billion and $575 million, respectively, prior to the issuance of short-term tax
and revenue anticipation notes ("TRANs"), owing to lower-than-projected
receipts.
Governmental Funds
The principal operating fund of the State is the General Fund. It receives
all State income that is not required by law to be deposited in another fund.
General Fund receipts, including transfers from other funds, totalled $32.229
billion in the State's 1993-94 fiscal year. General Fund receipts in the State's
1994-95 fiscal year are estimated in the State Financial Plan at $34.321
billion. Including transfers to other funds, total General Fund disbursements in
the 1993-94 fiscal year were $31.897 billion, and are estimated to total $34.248
billion in the State's 1994-95 fiscal year.
The Special Revenue Funds account for State receipts from specific sources
that are legally restricted in use to specified purposes and include all moneys
received from the Federal government. Total receipts in Special Revenue Funds
are projected at $24.598 billion in the State's 1994-95 fiscal year. Federal
grants are projected to account for 75% of the total projected receipts in
Special Revenue Funds in the State's 1994-95 fiscal year.
Disbursements from Special Revenue Funds are projected to be $24.982
billion for the State's 1994-95 fiscal year. Grants to local governments
disbursed from this fund type are projected to account for 75% of disbursements
from this fund for the 1994-95 fiscal year.
The Capital Projects Funds are used to finance the acquisition and
construction of major capital facilities and to aid local government units and
Agencies in financing capital constructions. Federal grants for capital
projects, largely highway-related, are projected to account for 33% of the
$3.233 billion in total projected receipts in Capital Projects Funds in the
State's 1994-95 fiscal year. Total disbursements for capital projects are
projected to be $3.730 billion during the State's 1994-95 fiscal year. Of total
disbursements from Capital Projects Funds, approximately 54% is for various
transportation purposes, including highways and mass transportation facilities;
4% is for programs of the Department of Correctional Services and other public
protection activities; 16% is for health and mental hygiene facilities; 13% is
for environmental and recreational programs; 5% is for educational programs; and
5% is for housing and economic development programs. The balance is for the
maintenance of State office facilities and various other capital programs.
The Debt Service Funds serve to fulfill State debt service on long-term
general obligation State debt and other State lease/purchase and contractual
obligation financing commitments. Total receipts in Debt Service Funds are
projected to reach $2.318 billion in the State's 1994-95 fiscal year. Total
disbursements from Debt Service Funds for debt service, lease/purchase and
contractual obligation financing commitments are projected to be $2.246 billion
for the 1994-95 fiscal year.
State Borrowing Plan
The State issued $850 million in TRANs on May 4, 1993 to fund its
day-to-day operations and certain local assistance payments to its
municipalities and school districts. All of these TRANs matured on December 31,
1993.
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The State anticipates that its 1994-95 borrowings for capital purposes
will consist of approximately $374 million in general obligation bonds
(including $140 million for the purpose of redeeming outstanding bond
anticipation notes) and $140 million in new commercial paper issuances. The
Legislature has authorized the issuance of up to $69 million in certificates of
participation for real property and equipment acquisitions during the State's
1994-95 fiscal year. The projections of the State regarding its borrowings for
the 1994-95 fiscal year may change if actual receipts fall short of State
projections or if other circumstances require.
In addition, the LGAC is authorized to provide net proceeds of $315
million during the 1994-95 fiscal year to make payments to local governmental
units, otherwise made by the State, reduces the State's future liabilities.
State Agencies
The fiscal stability of the State is related, at least in part, to the
fiscal stability of its localities and various of its Agencies. Various Agencies
have issued bonds secured, in part, by non-binding statutory provisions for
State appropriations to maintain various debt service reserve funds established
for such bonds (commonly referred to as "moral obligation" provisions).
At September 30, 1993, there were 18 Agencies that had outstanding debt of
$100 million or more. The aggregate outstanding debt, including refunding bonds,
of these 18 Agencies was $63.5 billion as of September 30, 1993. As of March 31,
1994, aggregate Agency debt outstanding as State-supported debt was $21.1
billion and as State-related was $29.4 billion. Debt service on the outstanding
Agency obligations normally is paid out of revenues generated by the Agencies'
projects or programs, but in recent years the State has provided special
financial assistance, in some cases on a recurring basis, to certain Agencies
for operating and other expenses and for debt service pursuant to moral
obligation indebtedness provisions or otherwise. Additional assistance is
expected to continue to be required in future years.
Several Agencies have experienced financial difficulties in the past.
Certain Agencies continue to experience financial difficulties requiring
financial assistance from the State. Failure of the State to appropriate
necessary amounts or to take other action to permit certain Agencies to meet
their obligations could result in a default by one or more of such Agencies. If
a default were to occur, it would likely have a significant effect on the
marketability of obligations of the State and the Agencies. These Agencies are
discussed below.
The New York State Housing Finance Agency ("HFA") provides financing for
multifamily housing, State University construction, hospital and nursing home
development, and other programs. In general, HFA depends upon mortgagors in the
housing programs it finances to generate sufficient funds from rental income,
subsidies and other payments to meet their respective mortgage repayment
obligations to HFA, which provide the principal source of funds for the payment
of debt service on HFA bonds, as well as to meet operating and maintenance costs
of the projects financed. From January 1, 1976 through March 31, 1987, the State
was called upon to appropriate a total of $162.8 million to make up deficiencies
in the debt service reserve funds of HFA pursuant to moral obligation
provisions. The State has not been called upon to make such payments since the
1986-87 fiscal year and no payments are anticipated during the 1993-94 fiscal
year.
UDC has experienced, and expects to continue to experience, financial
difficulties with the housing programs it had undertaken prior to 1975, because
a substantial number of these housing program mortgagors are unable to make full
payments on their mortgage loans. Through a subsidiary, UDC is currently
attempting to increase its rate of collection by accelerating its program of
foreclosures and by entering into settlement agreements. UDC has been, and will
remain, dependent upon the State for appropriations to meet its operating
expenses. The State also has appropriated money to assist in the curing of a
default by UDC on notes which did not contain the State's moral obligation
provision.
The Metropolitan Transportation Authority (the "MTA") oversees New York
City's subway and bus lines by its affiliates, the New York City Transit
Authority and the Manhattan and Bronx Surface Transit Operating Authority
(collectively, the "TA"). Through MTA's subsidiaries, the Long Island Rail Road
Company, the Metro-
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North Commuter Railroad Company and the Metropolitan Suburban Bus Authority, the
MTA operates certain commuter rail and bus lines in the New York metropolitan
area. In addition, the Staten Island Rapid Transit Authority, an MTA subsidiary,
operates a rapid transit line on Staten Island. Through its affiliated agency,
the Triborough Bridge and Tunnel Authority (the "TBTA"), the MTA operates
certain toll bridges and tunnels. Because fare revenues are not sufficient to
finance the mass transit portion of these operations, the MTA has depended and
will continue to depend for operating support upon a system of State, local
government and TBTA support and, to the extent available, Federal operating
assistance, including loans, grants and operating subsidies.
The TA and the commuter railroads, which are on a calendar fiscal year,
ended 1993 with their budgets balanced on a cash basis. The TA had a closing
cash balance of approximately $39 million.
Over the past several years the State has enacted several taxes --
including a surcharge on the profits of banks, insurance corporations and
general business corporations doing business in the 12-county region (the
"Metropolitan Transportation Region") served by the MTA and a special .25%
regional sales and use tax -- that provide additional revenue for mass transit
purposes, including assistance to the MTA. The surcharge, which expires in
November 1995, yielded $533 million in calendar year 1993, of which the MTA was
entitled to receive approximately 90%, or approximately $480 million.
For 1994, the TA projects that it will end the year with $77.6 million
cash surplus. For the 1994-95 State fiscal year, total State assistance to the
MTA is estimated at $1.3 billion.
A subway fire on December 28, 1990 and a subway derailment on August 28,
1991, each of which caused fatalities and many injuries, have given rise to
substantial claims for damages against the TA and the City.
In 1981, the State Legislature authorized procedures for the adoption,
approval and amendment of a five-year plan for the capital program designed to
upgrade the performance of the MTA's transportation systems and to supplement,
replace and rehabilitate facilities and equipment, and also granted certain
additional bonding authorization therefor.
On April 5, 1993, the Legislature approved, and the Governor subsequently
signed into law, legislation authorizing a five-year $9.56 billion capital plan
for the MTA for 1992-1996. The MTA has submitted a 1992-1996 Capital Program
based on this legislation for the approval of the MTA Capital Program Review
Board (the "CPRB"), as State law requires. On July 1, 1993, the CPRB indicated
that it was withholding approval pending the resolution of certain related
issues. If approved, the 1992-1996 Capital Program would succeed two previous
five-year capital programs of the periods covering 1982-1986 and 1987-1991. The
1987-1991 Capital Program totalled approximately $8.0 billion, including $6.2
billion for TA capital projects.
The 1992-1996 Capital Program would supersede a one-year program adopted
in 1992. State budget legislation for the 1992-93 fiscal year had required the
MTA to submit a one-year program for 1992 instead of a five-year program. The
one-year program, which contained $1.635 billion of projects for transit and
commuter facilities combined, was approved by the CPRB in May 1992, but the
five-year program for 1992-1996, required to be submitted subsequently by the
MTA as an amendment to the one-year plan, was disapproved without prejudice by
the CPRB in December 1992.
There can be no assurance that such governmental actions will be taken,
that sources currently identified will not be decreased or eliminated, or that
the 1992-1996 Capital Program will not be delayed or reduced. If the MTA capital
program is delayed or reduced because of funding shortfalls or other factors,
ridership and fare revenues may decline, which could, among other things, impair
the MTA's ability to meet its operating expenses without additional State
assistance.
The cities, towns, villages and school districts of the State are
political subdivisions of the State with the powers granted by the State
Constitution and statutes. As the sovereign, the State retains broad powers and
responsibilities with respect to the government, finances and welfare of these
political subdivisions, especially in
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education and social services. In recent years the State has been called upon to
provide added financial assistance to certain localities.
Other Localities
Certain localities in addition to the City could have financial problems
leading to requests for additional State assistance during the State's 1994-95
fiscal year and thereafter. The potential impact on the State of such actions by
localities is not included in the projections of the State receipts and
disbursements in the State's 1994-95 fiscal year.
Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1992, the total indebtedness of all localities in
the State, other than the City, was approximately $15.7 billion. A small portion
(approximately $71.6 million) of this indebtedness represented borrowing to
finance budgetary deficits and was issued pursuant to enabling State
legislation. State law requires the Comptroller to review and make
recommendations concerning the budget of those local government units other than
the City authorized by State law to issue debt to finance deficits during the
period that such deficit financing is outstanding. Seventeen localities had
outstanding indebtedness for deficit financing at the close of their fiscal year
ending in 1992.
Certain proposed Federal expenditure reductions would reduce, or in some
cases eliminate, Federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities to
increase local revenues to sustain those expenditures. If the State, the City or
any of the Agencies were to suffer serious financial difficulties jeopardizing
their respective access to the public credit markets, the marketability of notes
and bonds issued by localities within the State could be adversely affected.
Localities also face anticipated and potential problems resulting from certain
pending litigation, judicial decisions and long-range economic trends. The
longer-range, potential problems of declining city population, increasing
expenditures and other economic trends could adversely affect localities and
require increasing State assistance in the future.
Because of significant fiscal difficulties experienced from time to time
by the City of Yonkers, a Financial Control Board was created by the State in
1984 to oversee Yonkers' fiscal affairs. Future actions taken by the Governor or
the State Legislature to assist Yonkers in this crisis could result in the
allocation of State resources in amounts that cannot yet be determined.
Certain litigation pending against the State or its officers or employees
could have a substantial or long-term effect on State finances. Among the more
significant of these litigations are those that involve: (i) the validity and
fairness of agreements and treaties by which various Indian tribes transferred
title to the State of approximately six million acres of land in central New
York; (ii) certain aspects of the State's Medicaid rates and regulations,
including reimbursements to providers of mandatory and optional Medicaid
services; (iii) contamination in the Love Canal area of Niagara Falls; (iv) a
challenge to the State's practice of reimbursing certain Office of Mental Health
patient-care expenses with clients' Social Security benefits; (v) a challenge to
the methods by which the State reimburses localities for the administrative
costs of food stamp programs; (vi) a challenge to the State's possession of
certain funds taken pursuant to the State's Abandoned Property law; (vii)
alleged responsibility of State officials to assist in remedying racial
segregation in the City of Yonkers; (viii) an action, in which the State is a
third party defendant, for injunctive or other appropriate relief, concerning
liability for the maintenance of stone groins constructed along certain areas of
Long Island's shoreline; (ix) actions challenging the constitutionality of
legislation enacted during the 1990 legislative session which changed the
actuarial funding methods for determining contributions to State employee
retirement systems; (x) an action against State and City officials alleging that
the present level of shelter allowance for public assistance recipients is
inadequate under statutory standards to maintain proper housing; (xi) an action
challenging legislation enacted in 1990 which had the effect of deferring
certain employer contributions to the State Teachers' Retirement Systems and
reducing State aid to school districts by a like amount; (xii) a challenge to
the constitutionality of financing programs of the Thruway Authority authorized
by Chapters 166 and 410 of the Laws of 1991 (described below in this Part);
(xiii) a challenge to the constitutionality of financing programs of the
Metropolitan Transportation Authority and the Thruway Authority authorized by
Chapter 56 of the Laws of 1993 (described below in this Part); (xiv) challenges
to the delay by the State Department of Social Services
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in making two one-week Medicaid payments to the service providers; (xv)
challenges by commercial insurers, employee welfare benefit plans, and health
maintenance organizations to provisions of Section 2807-c of the Public Health
Law which impose 13%, 11% and 9% surcharges on inpatient hospital bills and a
bad debt and charity care allowance on all hospital bills paid by such entities;
(xvi) challenges to the promulgation of the State's proposed procedure to
determine the eligibility for and nature of home care services for Medicaid
recipients; (xvii) a challenge to State implementation of a program which
reduces Medicaid benefits to certain home-relief recipients; and (xviii)
challenges to the rationality and retroactive application of State regulations
recalibrating nursing home Medicaid rates.
Adverse developments or decisions in such cases could affect the ability
of the State to maintain a balanced 1994-95 State Financial Plan.
New York City
In the mid-1970's, the City had large accumulated past deficits and until
recently was not able to generate sufficient tax and other ongoing revenues to
cover expenses in each fiscal year. However, the City's operating results for
the fiscal year ending June 30, 1993 were balanced in accordance with GAAP, the
eleventh consecutive year in which the City achieved balanced operating results
in accordance with GAAP. The City's ability to maintain balanced operating
results in future years is subject to numerous contingencies and future
developments.
The City's economy, whose rate of growth slowed substantially over the
past three years, is currently in recession. During the 1990 and 1991 fiscal
years, as a result of the slowing economy, the City has experienced significant
shortfalls in almost all of its major tax sources and increases in social
services costs, and has been required to take actions to close substantial
budget gaps in order to maintain balanced budgets in accordance with the
Financial Plan.
In 1975, the City became unable to market its securities and entered a
period of extraordinary financial difficulties. In response to this crisis, the
State created MAC to provide financing assistance to the City and also enacted
the New York State Financial Emergency Act for the City of New York (the
"Emergency Act") which, among other things, created the Financial Control Board
(the "Control Board") to oversee the City's financial affairs and facilitate its
return to the public credit markets. The State also established the Office of
the State Deputy Comptroller ("OSDC") to assist the Control Board in exercising
its powers and responsibilities. On June 30, 1986, the Control Board's powers of
approval over the City Financial Plan were suspended pursuant to the Emergency
Act. However, the Control Board, MAC and OSDC continue to exercise various
monitoring functions relating to the City's financial condition. The City
prepares and operates under a four-year financial plan which is submitted
annually to the Control Board for review and which the City periodically
updates.
The City's independently audited operating results for each of its fiscal
years from 1981 through 1993 show a General Fund surplus reported in accordance
with GAAP. The City has eliminated the cumulative deficit in its net General
Fund position. In addition, the City's financial statements for the 1993 fiscal
year received an unqualified opinion from the City's independent auditors, the
eleventh consecutive year the City has received such an opinion.
In August 1993, the City adopted and submitted to the Control Board for
its review a four-year Financial Plan covering fiscal years 1994 through 1997
(the "Financial Plan"). The Financial Plan was based on the City's fiscal year
1994 expense budget adopted June 14, 1993 as well as certain changes
incorporated subsequent to the budget adoption process. On November 23, 1993,
the City adopted and submitted to the Control Board for its review a first
quarter modification to the Financial Plan (the "November Modification")
incorporating various re-estimates of revenues and expenditures. For fiscal year
1994, the November Modification includes additional resources stemming primarily
from the City Comptroller's fiscal year 1993 annual audit, savings from a
reduction in prior years' accrued expenditures, and higher State and Federal aid
resulting from claims by the City for reimbursement of various social services
costs. These resources were used to fund new needs in the November Modification
including higher costs in the uniformed agencies, at the Board of Education (the
"BoE") and for certain social services, the unlikelihood of the sale of the
Off-Track Betting Corporation (the "OTB"), and lower estimates of
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miscellaneous and other revenues. After taking these adjustments into account,
the November Modification projects a balanced budget for fiscal year 1994, based
upon revenues of $31,585 billion. For fiscal years 1995, 1996 and 1997, the
November Modification projects budget gaps of $1.730 billion, $2.513 billion and
$2.699 billion, respectively. These gaps are higher by about $450 million in
fiscal year 1995 and by about $700 million in each of fiscal years 1996 and 1997
than in the Financial Plan, primarily on account of the nonrecurring value of
the fiscal year 1994 revenue adjustments, the loss of certain one-time resources
funding BoE fiscal year 1994 spending needs, and the reclassification of
anticipated State aid from the baseline revenue estimates to the gap-closing
program. To offset these larger gaps, the November Modification relies on
additional City, State and other actions.
On December 1, 1993, a three-member panel appointed by the Mayor to
address City structural budget imbalance released a report setting forth its
findings and recommendations. In its report, the panel noted that budget
imbalance is likely to be greater than the City now projects by $255 million in
fiscal year 1995, rising to nearly $1.5 billion in fiscal year 1997. The report
provided a number of options that the City should consider in addressing the
structural balance issue such as severe cuts in City-funded personnel levels,
increases in residential property taxes and the sales tax, and the imposition of
bridge tolls and solid waste collection fees. The report also noted that
additional State actions will be required in many instances to allow the City to
cut its budget without grave damage to basic services.
On December 21, 1993, OSDC issued a report reviewing the November
Modification. The report noted that while the outlook for fiscal year 1994 has
improved since August, it will be necessary for the City to manage its budget
aggressively in order to stay on course for budget balance this year. For fiscal
years 1995 through 1997, the report expressed concern that the gaps identified
by the City in the November Modification are the largest as a percentage of
City-fund revenues that the City has faced at this point in the fiscal year
since budget balance in accordance with GAAP was first achieved in fiscal year
1981.
On December 21, 1993, the staff of the Control Board issued its report on
the November Modification. The report states that the plan is now more realistic
in terms of the gaps it portrays and the solutions it offers. However, the
solutions are mostly limited to fiscal year 1994 while the gap for fiscal year
1995 has been increased by $450 million. Beginning in fiscal year 1995, budget
gaps average over $1 billion annually. Therefore, the staff recommends that
prompt action to replace many current-year one-shots with recurring savings is
critical.
On February 2, 1994, the Mayor presented to the City Council and the
Control Board a mid-year modification to the Financial Plan (the "February
Modification"). The February Modification projects a balanced budget for fiscal
year 1994, based upon revenues of $31.735 billion, including a general reserve
of $81 million. For fiscal years 1995, 1996 and 1997, the February Modification
projects gaps of $2.261 billion, $3.167 billion and $3.253 billion,
respectively, and assumes no wage and salary increases beyond the expiration of
current labor agreements which expire in fiscal years 1995 and 1996. These gaps
have grown since November by about $530 million in fiscal year 1995, and $650
million and $550 million in fiscal years 1996 and 1997, respectively, owing in
large part to lower estimates of real property tax revenues. To close the budget
gap projected for fiscal year 1995, the February Modification includes a
gap-closing program that consists of the following major elements: (i) an agency
program of $1.048 billion; (ii) fringe benefit and pension savings of $400
million; (iii) an intergovernmental aid package of $400 million; (iv) a work
force reduction program of $144 million; and (v) the assumption of a $234
million surplus roll from fiscal year 1994. Implementation of many of the
gap-closing initiatives requires the cooperation of the municipal labor unions,
the City Council and the State and Federal governments. The February
Modification also includes a tax reduction program, with most of the financial
impact affecting the later years of the Plan period.
The City requires certain amounts of financing for seasonal and capital
spending purposes. The City has issued $1.75 billion of notes for seasonal
financial purposes during the 1994 fiscal year. The City's capital financing
program projects long-term financing requirements of approximately $17 billion
for the City's fiscal years 1995 through 1998 for the construction and
rehabilitation of the City's infrastructure and other fixed assets. The major
capital requirement includes expenditures for the City's water supply system,
and waste disposal systems, roads,
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bridges, mass transit, schools and housing. In addition, the City and the
Municipal Water Finance Authority have issued about $1.8 billion in refunding
bonds in the 1994 fiscal year.
State Economic Trends
The City accounts for approximately 41% of the State's population and
personal income, and the City's financial health affects the State in numerous
ways. The State has long been one of the wealthiest states in the nation. For
decades, however, the State economy has grown more slowly than that of the
nation as a whole, resulting in the gradual erosion of its relative economic
affluence. The causes of this relative decline are varied and complex, in many
cases involving national and international developments beyond the State's
control. In recent years, the State's economic position has improved in a manner
consistent with that of the Northeast as a whole.
Part of the reason for the long-term relative decline in the State's
economy has been attributed to the combined State and local tax burden, which is
among the highest in the United States. The burdens of State and local taxation,
in combination with many other causes of regional economic dislocation, may have
contributed to the decision of businesses and individuals to relocate outside,
or not locate within, the State. In 1987, the State enacted a major personal
income tax reduction and reform program and also reduced the tax rate on
corporation income. In addition, the State has provided various tax incentives
to encourage business relocation and expansion. The State, however, in its
1989-90, 1990-91 and 1991-92 fiscal years substantially increased taxes and fees
to help close projected budget gaps in those years, and in 1990-91, 1991-92 and
1992-93 delayed and restructured the remainder of the personal income tax
reduction program originally enacted in 1987. Under legislation proposed with
the 1993-94 budget, the rules for calculating tax liability for the 1993 tax
year will be the same as those for the 1992 tax year (deferring for a fourth
year a previously scheduled tax reduction), and the tax reduction program will
be frozen at current rates. Also, in July 1991 State legislation was enacted to
phase out the benefit of graduated income tax tables for taxpayers with adjusted
gross income above $100,000.
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APPENDIX C
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO INVESTING
IN CALIFORNIA MUNICIPAL OBLIGATIONS
Overview
As described in the Prospectus, the California Tax Free Money Market Fund
and California Intermediate Tax Free Income Fund invest substantially in
California Municipal securities. From mid-1990 to late 1993, the State of
California (the "State") suffered a recession with the worst economic, fiscal
and budget conditions since the 1930s. Construction, manufacturing (especially
aerospace), and financial services, among others, were all severely affected.
Job losses were the worst of any post-war recession. Employment levels
stabilized by late 1993 and steady growth occurred in 1994 and is expected to
continue in 1995, but pre-recession job levels are not expected to be reached
until late 1996. Economic indicators show a steady recovery underway in the
State since the start of 1994.
The recession seriously affected State tax revenues, which basically
mirror economic conditions. It also caused increased expenditures for health and
welfare programs. The State has also been facing a structural imbalance in its
budget with the largest programs supported by the General Fund, K-12 schools and
community colleges, health and welfare, and corrections, growing at rates higher
than the growth rates for the principal revenue sources of the State General
Fund. As a result, the State experienced recurring budget deficits in the late
1980s and early 1990s. The State Controller reports that expenditures exceeded
revenues for four of the five fiscal years ending with 1991-92; revenues and
expenditures were equal in 1992-93, and the State had an operating surplus of
$1.1 billion in 1993-94. However, at June 30, 1994, according to the Department
of Finance, the State's Special Fund for Economic Uncertainties still had an
accumulated deficit, on a budget basis, of approximately $1.5 billion.
The accumulated budget deficits over the past several years, together with
expenditures for school funding which have not been reflected in the budget, and
reduction of available internal borrowable funds, have combined to significantly
deplete the State's cash resources to pay its ongoing expenses. In order to meet
its cash needs, the State has had to rely for several years on a series of
external borrowings, including borrowings past the end of a fiscal year. Such
borrowings are expected to continue in future fiscal years. To meet its cash
flow needs in the 1994-95 Fiscal Year, the State has issued, in July and August,
1994, $4.0 billion of revenue anticipation warrants which mature on April 25,
1996, and $3.0 billion of revenue anticipation notes maturing on June 28, 1995.
On July 15, 1994, all three of the rating agencies rating the State's
long-term debt lowered their ratings of the State's general obligation bonds.
Moody's Investors Service lowered its rating from "Aa" to "A1," Standard &
Poor's Ratings Group lowered its rating from "A+" to "A" and termed its outlook
as "stable," and Fitch Investors Service lowered its rating from "AA" to "A."
The 1994-95 Fiscal Year Budget (as updated in the January 10, 1995
Governor's Budget) is projected to have $42.2 billion of General Fund revenues
and transfers and $41.7 billion of budgeted expenditures. In addition, the
1994-95 Budget Act anticipates deferring retirement of about $1 billion of the
accumulated budget deficit to the 1995-96 Fiscal Year when it is intended to be
fully retired by June 30, 1996.
The Governor's Budget for 1995-96 proposes General Fund revenues and
transfers of $42.5 billion and expenditures of $41.7 billion, which would leave
a balance of approximately $92 million in the budget reserve, the Special Fund
for Economic Uncertainties, at June 30, 1996 after repayment of the accumulated
budget deficits. The Budget Proposal is based on a number of assumptions,
including receipt of $830 million from the federal government to offset costs of
undocumented and refugee immigrants.
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Orange County Bankruptcy
On December 6, 1994, Orange County, California (the "County"), together
with its pooled investment funds (the "Funds") filed for protection under
Chapter 9 of the federal Bankruptcy Code, after reports that the Funds had
suffered significant market losses in their investments, causing a liquidity
crisis for the Funds and the County. More than 180 other public entities, most
of which, but not all, are located in the County, were also depositors in the
Funds. As of mid-January, 1995, following a restructuring of most of the Funds'
assets to increase their liquidity and reduce their exposure to interest rate
increases, the County estimated the Funds' loss at about $1.69 billion, or 22%
of their initial deposits of approximately $7.5 billion. Many of the entities
which deposited moneys in the Funds, including the County, are facing cash flow
difficulties because of the bankruptcy filing and may be required to reduce
programs or capital projects. This may also affect their ability to meet their
outstanding obligations.
The State has no existing obligation with respect to any outstanding
obligations or securities of the County or any of the other participating
entities. However, in the event the County is unable to maintain county
administered State programs because of insufficient resources, it may be
necessary for the State to intervene, but the state cannot presently predict
what, if any, action may occur. At this time, it appears that school districts
may have collectively lost up to $230 million from the amounts they had on
deposit in the Funds. Under existing legal precedent, the State is obligated to
intervene when a school district's fiscal problems would otherwise deny its
students basic educational quality. The State is not presently able to predict
whether any school districts will face insolvency because of their participation
in the Funds, and if so, the potential amount or form of aid which the State may
have to provide. The Governor has called a special session of the Legislature
which is expected to consider various responses to the Orange County situation.
Budget Adjustment Law
The State's cash flow management plan for the 1994-95 Fiscal Year included
the issuance of $4.0 billion of revenue anticipation warrants on July 26, 1994,
to mature on April 25, 1996, as part of a two-year plan to retire the
accumulated State budget deficit.
Because preparation of cash flow estimates for the 1995-96 Fiscal Year is
necessarily more imprecise than for the current fiscal year and entails greater
risks of variance from assumptions, and because the Governor's two-year budget
plan assumes receipt of a large amount of federal aid in the 1995-96 Fiscal Year
for immigration-related costs which is uncertain, the Legislature enacted a
backup budget adjustment mechanism to mitigate possible deviations from
projected revenues, expenditures or internal borrowable resources which might
reduce available cash resources during the two-year plan, so as to assure
repayment of the warrants.
Pursuant to Section 12467 of the California Government Code, enacted by
Chapter 135, Statutes of 1994 (the "Budget Adjustment Law"), the State
Controller was required on November 15, 1994, in connection with the Legislative
Analyst's Office, to review the cash flow projections for the General Fund on
June 30, 1995 and compare them to the projections for the 1994-95 Fiscal Year
included in the Official Statement dated July 20, 1994 for the 1994 Revenue
Anticipation Warrants, Series C and D. If the State Controller's report
identified a decrease in the unused borrowable resources on June 30, 1995 of
more than $430,000,000, then the "1995 cash shortfall" would be the amount of
the difference that exceeded $430,000,000. On or before February 15, 1995,
legislation would have to be enacted providing for sufficient General Fund
expenditure reductions, revenue increases, or both, to offset said 1995 cash
shortfall. If such legislation was not enacted, within five days thereafter the
Director of Finance would have to reduce all General Fund appropriations for the
1994-95 Fiscal Year, except certain appropriations required by the State
Constitution and federal law (the "Required Appropriations"), by the percentage
equal to the ratio of said 1995 cash shortfall to total remaining General Fund
appropriations for the 1994-95 Fiscal Year, excluding the Required
Appropriations. On November 15, 1994, the State Controller issued a report which
stated that there would not be any implementation of the Budget Adjustment Law
in the 1994-95 Fiscal Year.
Furthermore, the Director of Finance is required to include updated
cash-flow statements for the 1994-95 and 1995-96 Fiscal Years in the May
revision to the 1995-96 Fiscal Year budget proposal. By June 1, 1995, the
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State Controller must concur with these updated statements or provide a revised
estimate of the cash condition of the General Fund for the 1994-95 and the
1995-96 Fiscal Years. For the 1995-96 Fiscal Year, the intent of Chapter 135 is
to prohibit any external borrowing as of June 30, 1996, thereby requiring the
State to rely solely on internal borrowable resources, expenditure reductions or
revenue increases to eliminate any projected cash flow shortfall.
On October 15, 1995, the State Controller will, in conjunction with the
Legislative Analyst's Office, review the estimated cash condition of the General
Fund for the 1995-96 Fiscal Year. The "1996 cash shortfall" shall be the amount
necessary to bring the balance of unused borrowable resources on June 30, 1996
to zero. On or before December 1, 1995, legislation must be enacted providing
for sufficient General Fund expenditure reductions, revenue increases, or both,
to offset any such 1996 cash shortfall identified by the State Controller. If
such legislation is not enacted, within five days thereafter the Director of
Finance must reduce all General Fund appropriations for the 1995-96 Fiscal Year
except the Required Appropriations, by the percentage equal to the ratio of said
1996 cash shortfall to total remaining General Fund appropriations for the
1995-96 Fiscal Year, excluding the Required Appropriations.
The General Fund
The moneys of the State are segregated into the General Fund and
approximately 600 Special Funds. The General Fund consists of revenues received
by the State Treasury and not required by law to be credited to any other fund,
as well as earnings from the investment of State moneys not allocable to another
fund. The General Fund is the principal operating fund for the majority of
governmental activities and is the depository of most of the major revenue
sources of the State. The General Fund may be expended as a consequence of
appropriation measures enacted by the Legislature and approved by the Governor,
as well as appropriations pursuant to various constitutional authorizations and
initiative statutes.
The Special Fund for Economic Uncertainties
The Special Fund for Economic Uncertainties ("SFEU") is funded with
General Fund revenues and was established to protect the State from unforeseen
reduced levels of revenues and/or unanticipated expenditure increases. Amounts
in the SFEU may be transferred by the State Controller as necessary to meet cash
needs of the General Fund. The State Controller is required to return moneys so
transferred without payment of interest as soon as there are sufficient moneys
in the General Fund.
The legislation creating the SFEU contains a continuing appropriation from
the General Fund authorizing the State Controller to transfer to the SFEU, as of
the end of each fiscal year, the lesser of (i) the unencumbered balance in the
General Fund and (ii) the difference between the State's "appropriations subject
to limitation" for the fiscal year then ended and its "appropriations limit" as
defined in Section 8 of Article XIII B of the State Constitution and established
in the Budget Act for that fiscal year, as jointly estimated by the State's
Legislative Analyst's Office and the Department of Finance.
Inter-Fund Borrowings
General Fund
Inter-fund borrowing has been used for many years to meet temporary
imbalances of receipts and disbursements in the General Fund. As of June 30,
1994, the General Fund had outstanding loans in the aggregate principal amount
of $5.2 billion, which consisted of $4.0 billion of internal loans to the
General Fund from the SFEU and other Special Funds and $1.2 billion of external
loans represented by the 1994 Revenue Anticipation Warrants, Series A which
matured on December 21, 1994.
Other Special Funds
In the event the General Fund is or will be exhausted, the State
Controller is required to notify the Governor and the Pooled Money Investment
Board (the "PMB," consisting of the State Director of Finance, the State
Treasurer
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and the State Controller). The Governor may then order the State Controller to
direct the transfer of all or any part of the moneys not needed in Special Funds
to the General Fund from such Special Funds, as determined by the PMIB. All
money so transferred must be returned to the Special Fund from which it was
transferred as soon as there is sufficient money in the General Fund to do so.
Transfers cannot be made from a Special Fund which will interfere with the
object for which such Special Fund was created. Furthermore, transfers may not
be made from the Central Valley Water Project Construction Fund, the Central
Valley Water Project Revenue Fund, the California Water Resources Development
Bond Fund and certain other bond funds, retirement funds and trust and agency
funds. When moneys transferred to the General Fund in any fiscal year from any
Special Fund pursuant to the inter-fund borrowing mechanism exceed ten percent
of the total additions to surplus available for appropriation as shown in the
statement of operations of the preceding fiscal year as set forth in the annual
report of the State Controller, interest must be paid on such excess at a rate
determined by the PMIB to be the current earning rate of the Pooled Money
Investment Account.
Any reduction in internal borrowable resources may increase the State's
reliance on external borrowing to meet its cash flow requirements.
State Appropriations Limit
The State is subject to an annual appropriations limit imposed by Article
XIII B of the State Constitution (the "Appropriations Limit"). Article XIII B
prohibits the State from spending "appropriations subject to limitation" in
excess of the Appropriations Limit. Article XIII B, originally adopted in 1979,
was modified substantially by Propositions 98 and 111 in 1988 and 1990,
respectively. See "Proposition 98" below. "Appropriations subject to
limitation," with respect to the State, are authorizations to spend "proceeds of
taxes," which consist of tax revenues, and certain other funds, including
proceeds from regulatory licenses, user charges or other fees to the extent that
such proceeds exceed "the cost reasonably borne by that entity in providing the
regulation, product or service," but "proceeds of taxes" exclude most state
subventions to local governments, tax refunds and some benefit payments such as
unemployment insurance. No limit is imposed on appropriations of funds which are
not "proceeds of taxes," such as reasonable user charges or fees and certain
other non-tax funds.
Not included in the Appropriations Limit are appropriations for the debt
service costs of Bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government and, pursuant to Proposition 111,
appropriations for qualified capital outlay project and appropriations of
revenues derived from any increase in gasoline taxes and motor vehicle weight
fees above January 1, 1990 levels. In addition, a number of recent initiatives
were structured or proposed to create new tax revenues dedicated to certain
specific uses, with such new taxes expressly exempted from the Article XIII B
limits (e.g., increased cigarette and tobacco taxes enacted by Proposition 99 in
1988). The Appropriations Limit may also be exceeded in cases of emergency.
However, unless the emergency arises from civil disturbance or natural disaster
declared by the Governor, and the appropriations are approved by two-thirds of
the Legislature, the Appropriations Limit for the next three years must be
reduced by the amount of the excess.
The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in State per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The measurement of change in population is a blended average
of statewide overall population growth, and change in attendance at local school
and community college ("K-14") districts. As amended by Proposition 111, the
Appropriations Limit is tested over consecutive two-year periods. Any excess of
the aggregate "proceeds of taxes" received over such two-year period above the
combined Appropriations Limits for those two years is divided equally between
transfers to K-14 districts and refunds to taxpayers.
As originally enacted in 1979, the State's Appropriations Limit was based
on 1978-79 Fiscal Year authorizations to expend proceeds of taxes and was
adjusted annually to reflect changes in cost-of-living and population (using
different definitions, which were modified by Proposition 111). Starting in the
1991-92 Fiscal Year, the State's Appropriations Limit was recalculated by taking
the actual 1986-87 Fiscal Year limit, and applying
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the annual adjustments as if Proposition 111 had been in effect. This
recalculation resulted in an increase of $1 billion to the State's
Appropriations Limit in the 1990-91 Fiscal Year. The Legislature has enacted
legislation to implement Article XIII B which defines certain terms used in
Article XIII B and sets forth the methods for determining the Appropriations
Limit. California Government Code Section 7912 requires an estimate of the
Appropriations Limit to be included in the Governor's Budget, and thereafter to
be subject to the budget process and established in the Budget Act.
The following table shows the State's Appropriations Limit for the past
four fiscal years and the current fiscal year.
State Appropriations Limit
(Millions)
<TABLE>
<CAPTION>
Fiscal Years
-------------------------------------------------------------
1990-91 1991-92 1992-93 1993-94 1994-95*
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
State Appropriations Limit $ 32,703 $ 34,233 $ 35,010 $ 36,599 $ 37,554
Appropriations Subject to Limit (25,191) (30,426) (27,474) (30,050) (31,501)
--------- --------- --------- --------- --------
Amount (over)/Under Limit $ 7,512 $ 3,807 $ 7,536 $ 6,549 $ 6,053
</TABLE>
- --------------
* Estimated
SOURCE: State of California, Department of Finance.
Proposition 98
General
On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level and the operation of the
State Appropriations Limit, primarily by guaranteeing K-14 schools a minimum
share of General Fund revenues.
1995-96 Fiscal Year
The 1995-96 Governor's Budget adjusts the 1993-94 minimum guarantee to
reflect changes in enrollment and inflation, and 1993-94 Proposition 98
appropriations are increased to $14.1 billion, primarily to reflect changes in
the statutory continuous appropriation for apportionments. The revised
appropriations now exceed the minimum guarantee by $32 million. This
appropriation level still provides per-pupil funding of $4,225.
The 1994-95 Proposition 98 minimum guarantee has also been adjusted for
changes in factors described above, and is now calculated to be $14.9 billion.
Within the minimum guarantee, the dollars per pupil have been maintained at the
prior year's level; consequently, the 1994-95 minimum guarantee now includes a
loan repayment of $135 million, and the per-pupil funding increases to $4,231.
The 1995-96 Governor's Budget proposes to appropriate $15.9 billion of
Proposition 98 funds to K-14 to meet the guarantee level. Included within the
guarantee is a loan repayment of $379 million for the combined outstanding loans
of $1.76 billion. Funding per pupil is estimated to increase by $61 over 1994-95
to $4,292.
Sources of Tax Revenues
The following is a summary of the State's major revenue sources.
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Personal Income Tax
The California personal income tax, which in 1993-94 contributed about 44
percent of General Fund revenues, is closely modeled after the federal income
tax law. It is imposed on net taxable income (gross income less exclusions and
deductions). The tax is progressive with rates ranging from 1 to 11 percent.
Personal, dependent, and other credits are allowed against the gross tax
liability. In addition, taxpayers may be subject to an alternative minimum tax
("AMT") which is much like the federal AMT. Legislation enacted in July 1991
added two new marginal tax rates, at 10 percent and 11 percent, effective for
tax years 1991 through 1995. After 1995, the maximum personal income tax rate is
scheduled to return to 9.3 percent, and the AMT rate is scheduled to drop from
8.5 percent to 7 percent.
The personal income tax is adjusted annually by the change in the consumer
price index to prevent taxpayers from being pushed into higher tax brackets
without a real increase in income.
The 1995-96 Governor's Budget proposes to extend the 10 and 11 percent tax
rates and 8.5 percent AMT rate and to reduce the tax rates for all taxpayers by
15 percent, to be phased in over a three-year period beginning in 1996. The
rates would be reduced by 5 percent in 1996, 10 percent in 1997, and 15 percent
in subsequent years from the 1995 rates. When fully implemented, the highest
marginal tax rate would be 9.3 percent and the AMT rate would be 7 percent.
Sales Tax
The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Sales tax accounted for about 35
percent of General Fund revenue in 1993-94. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas,
electricity and water. Other exemptions provide relief for a variety of sales
ranging from custom computer software to aircraft.
The breakdown of the 7.25 percent rate currently imposed on a statewide
basis is:
_____ 5.00 percent represents the regular State tax rate.
_____ 2.00 percent is for cities and counties.
_____ 0.25 percent is for county transit systems.
Legislation in July 1991 raised the sales tax by 1.25 percent to its
current level. One-half percent was a permanent addition to counties, but with
the money earmarked to trust funds to pay for health and welfare programs whose
administration was transferred to counties. This tax increase will be cancelled
if a court rules that such transfer and tax increase violate any constitutional
requirements. One-half percent of the State tax rate was scheduled to terminate
after June 30, 1993; however, it was extended until December 31, 1993 and
allocated to local agencies for public safety programs. As a result, the 0.5
percent sales tax has not been General Fund revenue since July 1, 1993. Voters
in a special election on November 2, 1993 approved a constitutional amendment to
permanently extend this 0.5 percent sales tax for local law enforcement.
After 1993, 0.25 percent of the State tax rate may be terminated upon
certification by the Director of Finance that the balance in the budget reserve
for two consecutive years will exceed 4 percent of General Fund revenues. The
0.25 percent rate can be reinstated if the Director of Finance subsequently
determines that the reserve will not exceed 4 percent of General Fund revenues.
The 1995-96 Governor's Budget proposes a further restructuring of the
current statewide sales tax distribution. This proposal, while not raising the
existing 7.25 percent rate, would transfer an additional 0.22 percent from the
State to counties to assist the counties in paying for their increased share of
welfare and social services.
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Bank and Corporation Tax
Bank and corporation tax revenues, which comprised about 12 percent of
General Fund revenue in 1993-94, are derived from the following taxes:
1. The franchise tax and the corporate income tax are levied at a
9.3 percent rate on profits. The former is imposed on corporations for the
privilege of doing business in California, while the latter is imposed on
corporations which do not do business in California but which derive income from
California sources.
2. Banks and other financial corporations pay an additional tax at
the rate of approximately 1.7 percent on their net income. This tax is in lieu
of all other State and local taxes except those on real property, motor vehicles
and business licenses.
The 1995-96 Governor's Budget proposes a 15 percent reduction in the bank
and corporation tax rate, to be phased in over a three-year period beginning in
1996. The 9.3 percent rate would be reduced to 8.84 percent in 1996, 8.37
percent in 1997, and 7.91 percent in 1998.
Insurance Tax
The majority of insurance written in California is subject to a 2.35
percent gross premium tax. For insurers, this premium tax takes the place of all
other State and local taxes except those on real property and motor vehicles.
Exceptions to the 2.35 percent rate are certain pension and profit-sharing plans
which are taxed at the lesser rate of 0.50 percent, surplus lines and
nonadmitted insurance at 3 percent, and ocean marine insurers at 5 percent of
underwriting profits. Insurance taxes comprised approximately 3 percent of
General Fund revenues in 1993-94.
In November 1988, voters approved Proposition 103, which mandated
reductions and rebates for certain property and casualty insurance premiums. The
measure also directed the State Board of Equalization to adjust the gross
premiums tax rate to compensate for any resultant decrease in insurance tax
revenue through the 1990 tax year. As a result, the State Board of Equalization
increased the gross premiums tax rate from 2.35 percent to 2.37 percent for the
1989 tax year, and to 2.46 percent for the 1990 tax year. For 1991 and beyond,
the rate returned to 2.35 percent. In August 1991, the Insurance Commissioner
ordered insurers to begin rebating approximately $2.5 billion of premiums to
consumers. Some of these rebates are being challenged in the courts. However,
pursuant to Chapter 1248, Statutes of 1993, which prohibits insurers from
seeking reimbursement from the State of premium taxes paid during the rollback
period, the rebates will not impact State revenues.
Other Taxes
Other revenue sources for the General Fund include: Estate, Inheritance
and Gift Taxes, Cigarette Taxes, Alcoholic Beverage Taxes and Horse Racing
Revenues. These other sources total approximately 3 percent of General Fund
Revenues.
Special Fund Revenues
The California Constitution, codes and statutes specify the uses of
certain revenue. Such receipts are accounted for in various Special Funds. In
general, Special Fund revenues comprise three categories of income:
1. Receipts from tax levies which are allocated to specified
functions, such as motor vehicle taxes and fees and certain taxes on tobacco
products.
2. Charges for special services to specific functions, including
such items as business and professional license fees.
3. Rental royalties and other receipts designated for particular
purposes (e.g., oil and gas royalties).
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Motor vehicle related taxes and fees accounted for about 57 percent of all
Special Fund revenue in 1993-94. Principal sources of this income are motor
vehicle fuel taxes, registration and weight fees and vehicle license fees. The
1994-95 Budget Act projects that during the 1994-95 Fiscal Year, $7.3 billion
will be derived from the ownership or operation of motor vehicles. About $4.0
billion of this revenue will be returned to local governments. The remainder
will be available for various State programs related to transportation and
services to vehicle owners. These estimates (as well as those shown below in the
table "COMPARATIVE YIELD OF STATE TAXES _____ ALL FUNDS") include the additional
fees and taxes derived from the passage of Proposition 111 in June 1990.
On November 8, 1988 voters approved Proposition 99, which imposed, as of
January 1, 1989, an additional 25 cents per pack excise tax on cigarettes, and a
new, equivalent excise tax on other tobacco products. The initiative requires
that funds from this tax be allocated to health related, environmental, and
educational programs. Legislation enacted in 1993 added an additional 2 cents
per pack excise tax for the purpose of funding breast cancer research.
CURRENT STATE BUDGETS
The discussion below of the 1994-95 and 1995-96 Fiscal Year budgets and
the table under "Summary of State Revenues and Expenditures" below are based on
estimates and projections of revenues and expenditures for the current fiscal
year and must not be construed as statements of fact. These estimates and
projections are based upon various assumptions which may be affected by numerous
factors, including future economic conditions in the State and the nation, and
there can be no assurance that the estimates will be achieved.
1994-95 Fiscal Year
Background
The 1994-95 Fiscal Year represented the fourth consecutive year the
Governor and Legislature were faced with a very difficult budget environment to
produce a balanced budget. Many program cuts and budgetary adjustments had
already been made in the last three years. The Governor's Budget Proposal, as
updated in May and June 1994, recognized that the accumulated deficit could not
be repaid in one year, and proposed a two-year solution. The budget proposal set
forth revenue and expenditure forecasts and revenue and expenditure proposals
which result in operating surpluses for the budget for both 1994-95 and 1995-96,
and lead to the elimination of the accumulated budget deficit, estimated at
about $1.7 billion at June 30, 1994, by June 30, 1996.
1994-95 Budget Act
Revenues. The 1994-95 Budget Act, signed by the Governor on July 8, 1994,
projected revenues and transfers of $41.9 billion, $2.1 billion higher than
revenues in 1993-94. This reflected the Administration's forecast of an
improving economy. Also included in this figure was the projected receipt of
about $360 million from the federal government to reimburse the State's cost of
incarcerating undocumented immigrants, most of which eventually was not received
(see "Subsequent Developments"). The Legislature failed to act on a proposal in
the January 1994-95 Governor's Budget to undertake an expansion of the transfer
of certain programs to counties, which would also have transferred to counties
0.5 percent of the State's current sales tax.
The 1994-95 Budget Act projected Special Fund revenues of $12.1 billion, a
decrease of 2.4 percent from 1993-94 estimated revenues.
Expenditures. The 1994-95 Budget Act projected General Fund expenditures
of $40.9 billion, an increase of $1.6 billion over the 1993-94 Fiscal Year. The
1994-95 Budget Act also projected Special Fund expenditures of $12.3 billion, a
4.7 percent decrease from the 1993-94 Fiscal Year estimated expenditures.
The 1994-95 Budget Act contained no tax increases. Under legislation
enacted for the 1993-94 Budget Act, the renters' tax credit was suspended for
two years (1993 and 1994). A ballot proposition to permanently restore
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<PAGE>
the renters' tax credit after this year failed at the June 1994 election. The
Legislature enacted a further one-year suspension of the renters' tax credit,
for 1995, saving about $390 million in the 1995-96 Fiscal Year.
The 1994-95 Budget Act assumed that the State would use a cash flow
borrowing program in 1994-95 which combined one-year notes and two-year
warrants, which have now been issued. Issuance of the warrants allows the State
to defer repayment of approximately $1.0 billion of its accumulated budget
deficit into the 1995-96 Fiscal Year. The Budget Adjustment Law, described
above, enacted along with the 1994-95 Budget Act is designed to ensure that the
warrants will be repaid in the 1995-96 Fiscal Year.
Subsequent Developments
The 1995-96 Governor's Budget, issued January 10, 1995, contains a
reforecast of revenues and expenditures for the 1994-95 Fiscal Year. The
Department of Finance Bulletin for February 1995 reports that General Fund
revenues for January were $240 million above the 1995-96 Governor's Budget
forecast of $4,025 million. The largest component of the increase is
attributable to cash flow factors in the sales and use tax, which were $297
million above the month's forecast of $809 million. Additionally, personal
income tax receipts were $80 million below the month's forecast of $2,845
million, and bank and corporation receipts were $28 million below the month's
forecast of $211 million. Neither loss is considered significant at this time.
Finally, miscellaneous revenues were $42 million above the month's forecast of
$160 million. Most of the surplus is attributable to "other revenues," which are
a composite of many minor revenues. At this time, the gains in miscellaneous
revenues appear to be related to cash flow and are not considered permanent.
Initial analysis of the federal Fiscal Year 1995 budget by the Department
of Finance indicates that about $98 million was appropriated for California to
offset costs of incarceration of undocumented and refugee immigrants, less than
the $356 million which was assumed in the State's 1994-95 Budget Act. Because of
timing considerations in applying for these federal funds, the Department
estimates that about $33 million of these funds will be received during the
State's 1994-94 Fiscal Year, with the balance received in the following fiscal
year. It does not appear that the federal budget contains any of the additional
$400 million in funding for refugee assistance and health costs which were also
assumed in the 1994-95 Budget Act, but the Department expects the State to
continue its efforts to obtain some or all of these federal funds.
Budget Adjustment Law
Pursuant to the Budget Adjustment Law (the "Law"), the State Controller is
required to make a report by November 15, 1994 on whether the projected cash
resources for the General Fund as of June 30, 1995 will decrease more than $430
million from the amount projected by the State in its Official Statement in July
1994 for the sale of $4,000,000,000 of Revenue Anticipation Warrants. On
November 15, 1994, the State Controller issued the report on the State's cash
position required by the Budget Adjustment Law. The report indicated that the
cash position of the General Fund on June 30, 1995 would be $581 million better
than was estimated in the July 1994 cash flow projections and, therefore, no
budget adjustment procedures will be invoked for the 1994-95 Fiscal Year. As
explained earlier, the Law would only be implemented if the State Controller
estimated that borrowable resources on June 30, 1995 would be at least $430
million lower than projected.
The State Controller's report identified a number of factors which have
led to the improved cash position of the State. Estimated revenues and transfers
for the 1994-95 Fiscal Year other than federal reimbursement for immigration
costs were up about $650 million. The largest portion of this was in higher bank
and corporation tax receipts, but all major tax sources were above original
projections. However, most of the federal immigration aid revenues projected in
connection with the 1994-95 Budget Act and in the July 1994 cash flows will not
be received, as indicated above, leaving a net increase in revenues of $322
million.
On the expenditure side, the State Controller reported that estimated
reduced caseload growth in health and welfare programs, reduced school
enrollment growth, and an accounting adjustment reducing a transfer from the
General Fund to the Special Fund for Economic Uncertainties resulted in overall
General Fund expenditure reductions
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(again before adjusting for federal aid) of $672 million. However, the July 1994
cash flows projected that General Fund health and welfare and education
expenditures would be offset by the anticipated receipt of $407 million in
federal aid for illegal immigrant costs. The State Controller now estimates that
none of these funds will be received, so the net reduction in General Fund
expenditures is $265 million.
Finally, the State Controller indicated that a review of balances in
special funds available for internal borrowing resulted in an estimated
reduction of such borrowable resources of $6 million. The combination of these
factors results in the estimated improvement of the General Fund's cash position
of $581 million. The State Controller's revised cash flow projections for
1994-95 have allocated this improvement to two line items: an increase from $0
to $427 million in the estimated ending cash balance of the General Fund on June
30, 1995, and an increase in unused borrowable resources of $154 million.
The State Controller's report indicated that there was no anticipated cash
impact in the 1994-95 Fiscal Year for recent initiatives on "three strikes"
criminal penalties and illegal immigration which were approved by voters on
November 8, 1994. At a hearing before a committee of the Legislature on November
15, 1994, both the Legislative Analyst and the Department of Finance concurred
in the reasonableness of the State Controller's report. (The Legislative Analyst
had issued a preliminary analysis on November 1, 1994 which reached a conclusion
very close to that of the State Controller.) The State Controller's report makes
no projections about whether the Law may have to be implemented in 1995-96.
However, both the State Controller and the Legislative Analyst in the November
15 hearing noted that the July 1994 cash flows for the 1995-96 Fiscal Year place
continued reliance on large amounts of federal assistance for immigration costs,
which did not materialize this year, indicating significant budget pressures for
next year. (See "Revenue and Expenditure Assumptions" below.) The Department of
Finance indicated that the budgetary issues identified in the hearing would be
addressed in the Governor's Budget proposal for the 1995-96 Fiscal Year.
1995-96 Fiscal Year
1995-96 Budget Proposal ___ As described earlier, for the first time in
four years, the State enters the upcoming fiscal year with strengthening
revenues based on an improving economy. On January 10, 1995, the Governor
presented his 1995-96 Fiscal Year Budget Proposal (the "Proposed Budget"). The
Proposed Budget estimates General Fund revenues and transfers of $42.5 billion
(an increase of 0.2 percent over 1994-95). This nominal increase from the
1994-95 Fiscal Year reflects the Governor's realignment proposal and the first
year of his tax cut proposal (see principal features of the Proposed Budget
below for further discussions). Without these two proposals, General Fund
revenues would be projected at approximately $43.8 billion, or an increase of
3.3 percent over 1994-95. Expenditures are estimated at $41.7 billion
(essentially unchanged from 1994-95). Special Fund revenues are estimated at
$13.5 billion (10.7 percent higher than 1994-95) and Special Fund expenditures
are estimated at $13.8 billion (12.2 percent higher than 1994-95). The Proposed
Budget projects that the General Fund will end the fiscal year at June 30, 1996
with a budget surplus in the Special Fund for Economic Uncertainties of about
$92 million, or less than 1 percent of General Fund expenditures, and will have
repaid all of the accumulated budget deficits.
As noted earlier, the 1995-96 Budget will be subject to the Budget
Adjustment or "Trigger" legislation enacted in June 1994. The Proposed Budget
contains a cash flow projection (based on all the assumptions described above)
which shows about $1 billion of unused borrowable resources at June 30, 1996,
providing this amount of "cushion" before the budget "trigger" would have to be
invoked.
However, a report issued by the Legislative Analyst on January 20, 1995
notes that the Proposed Budget (and hence the margin of cushion under the
"trigger") is subject to a number of major risks, including receipt of the
expected federal immigration aid and other federal actions to allow health and
welfare cuts, and the outcome of several lawsuits concerning previous budget
actions which the State has lost at the trial court level, and which are under
appeal. This Analyst's Report also estimates that, despite more favorable
revenues, the two-year budget estimates made in July 1994 are about $2 billion
out of balance, principally because federal immigration aid appears likely to be
much lower than previously estimated. This shortfall is much smaller than the
State has faced in recent
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<PAGE>
years, and has been addressed in the Governor's Budget.
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<PAGE>
PART C
<PAGE>
MUTUAL FUND TRUST
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
List all financial statements and exhibits filed as part of the
Registration Statement for the Vista Funds of Mutual Fund Trust filed herein as
part of this post-effective amendment.
(a) Financial statements:
In Part A: Financial Highlights.
In Part B: Financial Statements and the Reports thereon
for the Vista Funds filed herein for the fiscal
year ended August 31, 1995 are incorporated into
Part B from the 1995 Annual Reports to Shareholders
for all Funds included as Exhibit 12 to Post-Effective
Amendment No. 3 of the Registrant filed on October 31,
1995.
In Part C: None.
(b) Exhibits:
Exhibit
Number
- -------
1 Declaration of Trust. (1)
2 By-laws. (1)
3 None.
4 Specimen share certificate. (4)
5(a) Form of Investment Advisory Agreement. (1) and (3)
5(b) Form of Interim Investment Advisory Agreement.(6)
5(c) Form of Proposed Investment Advisory Agreement.(6)
5(d) Form of Proposed Investment Subadvisory Agreement between The Chase
Manhattan Bank and Chase Asset Management, Inc.(6)
5(e) Form of Proposed Investment Sub-Advisory Agreement between The
Chase Manhattan Bank and [Chase Asset Management/Texas Commerce
Bank, National Association]. (7)
5(f) Form of Administration Agreement. (1) and (3)
5(g) Form of Administration Agreement.(6)
6(a) Form of Distribution and Sub-Administration Agreement. (1)
6(b) Distribution and Sub-Administration Agreement dated August 21,
1995.(6)
7(a) Retirement Plan for Eligible Trustees.(6)
7(b) Deferred Compensation Plan for Eligible Trustees.(6)
8(a) Form of Custodian Agreement. (1)
8(b) None.
9(a) Form of Transfer Agency Agreement. (1)
9(b) Form of Shareholder Servicing Agreement. (1)
9(c) Form of Shareholder Servicing Agreement. (6)
9(d) Agreement and Plan of Reorganization and Liquidation.(6)
10(a) Opinion of Reid & Priest re: Legality of Securities being
Registered. (2)
11(a) Consent of Price Waterhouse LLP. (7)
11(b) Consent of KPMG Peat Marwick LLP. (7)
12 None.
13 N/A.
14 None.
15(a) Forms of Rule 12b-1 Distribution Plans including Selected Dealer
Agreements and Shareholder Service Agreements. (1) and (3)
15(b) Form of Proposed Rule 12b-1 Distribution Plan (including forms of
Selected Dealer Agreement and Shareholder Servicing Agreement).(6)
16. Schedule for Computation of Each Performance Quotation.(6)
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<PAGE>
17. Financial Data Schedule. (8)
18. Form of Rule 18f-3 Multi-Class Plan. (6)
- -------------------
(1) Filed as an Exhibit to the Registration Statement on Form N-1A of the
Registrant (File No. 33-75250) as filed with the Securities and Exchange
Commission on February 14, 1994.
(2) Filed as an Exhibit to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of the Registrant (File No. 33-75250) as filed with
the Securities and Exchange Commission on April 18, 1994.
(3) Filed as an Exhibit to Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of the Registrant (File No. 33-75250) as filed with
the Securities and Exchange Commission on August 29, 1994.
(4) Filed as an Exhibit to Post-Effective Amendment No. 2 to the Registration
Statement on Form N-1A of the Registrant (File No. 33-75250) as filed with
the Securities and Exchange Commission on October 28, 1994.
(5) Filed as an Exhibit to Post-Effective Amendment No. 3 to the Registration
Statement on Form N-1A of the Registrant (File No. 33- 75250) as filed
with the Securities and Exchange Commission on October 31, 1995.
(6) Filed as an Exhibit to the Registration Statement on Form N-1A of the
Registrant as filed with the Securities and Exchange Commission on
December 28, 1995.
(7) Filed herein.
(8) To be filed by amendment.
ITEM 25. Persons Controlled by or Under Common
Control with Registrant
Not applicable
ITEM 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Series January 31, 1996
--------------- -----------------
None
Vista Premier Institution Class A Class B
Shares Shares Shares Shares Shares
------ ------ ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Vista(SM) Treasury Plus
Money Market Fund N/A 30 28 N/A N/A
Vista(SM) Federal Money
Market Fund 8,401 214 16 N/A N/A
Vista(SM) U.S. Government
Money Market Fund 4,226 502 122 N/A N/A
Vista(SM) Cash Management
Fund 3,303 380 66 N/A N/A
Vista(SM) Prime Money
Market Fund N/A 103 38 N/A 243
Vista(SM) Tax Free Money
Market Fund 642 205 35 N/A N/A
Vista(SM) California Tax Free
Money Market Fund 74 N/A N/A N/A N/A
Vista(SM) New York Tax Free
Money Market Fund 3,913 N/A N/A N/A N/A
Vista(SM) 100% U.S. Treasury
Securities Money Market Fund 0 0 0 N/A N/A
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
Vista Premier Institution Class A Class B
Shares Shares Shares Shares Shares
------ ------ ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Vista(SM) Tax Free Income
Fund 3,138 N/A N/A N/A 606
Vista(SM) New York Tax Free
Income Fund 3,024 N/A N/A N/A 465
Vista(SM) California Intermediate
Tax Free Income Fund 700 N/A N/A N/A N/A
</TABLE>
ITEM 27. Indemnification
Reference is hereby made to Article V of the Registrant's Declaration
of Trust.
The Trustees and officers of the Registrant and the personnel of the
Registrant's investment adviser, administrator and distributor are insured
under an errors and omissions liability insurance policy. The Registrant and
its officers are also insured under the fidelity bond required by Rule 17g-1
under the Investment Company Act of 1940.
Under the terms of the Registrant's Declaration of Trust, the
Registrant may indemnify any person who was or is a Trustee, officer or
employee of the Registrant to the maximum extent permitted by law; provided,
however, that any such indemnification (unless ordered by a court) shall be
made by the Registrant only as authorized in the specific case upon a
determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Trustees, by a
majority vote of a quorum which consists of Trustees who are neither in Section
2(a)(19) of the Investment Company Act of 1940, nor parties to the proceeding,
or (ii) if the required quorum is not obtainable or, if a quorum of such
Trustees so directs, by independent legal counsel in a written opinion. No
indemnification will be provided by the Registrant to any Trustee or officer of
the Registrant for any liability to the Registrant or shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
Insofar as the conditional advancing of indemnification monies for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (i) the advances must
be limited to amounts used, or to be used, for the preparation or presentation
of a defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise
by, or on behalf of, the recipient to repay that amount of the advance which
exceeds that amount to which it is ultimately determined that he is entitled to
receive from the Registrant by reason of indemnification; and (iii) (a) such
promise must be secured by a surety bond, other suitable insurance or an
equivalent form of security which assures that any repayments may be obtained
by the Registrant without delay or litigation, which bond, insurance or other
form of security must be provided by the recipient of the advance, or (b) a
majority of a quorum of the Registrant's disinterested, non-party Trustees, or
an independent legal counsel in a written opinion, shall determine, based upon
a review of readily available facts, that the recipient of the advance
ultimately will be found entitled to indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against
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<PAGE>
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of it counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
ITEM 28 Business and Other Connections of Investment Adviser
The Chase Manhattan Bank, N.A. (the "Adviser") is a commercial bank
providing a wide range of banking and investment services.
To the knowledge of the Registrant, none of the Directors or
executive officers of the Adviser, except those described below, are or have
been, at any time during the past two years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
Directors and executive officers of the Adviser also hold or have held various
positions with bank and non-bank affiliates of the Adviser, including its
parent, The Chase Manhattan Corporation. Each Director listed below is also a
Director of The Chase Manhattan Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
Thomas G. Labreque Chairman of the Board, Chairman, Chief Executive Officer
Chief Executive Officer and a Director of The Chase
and Director Manhattan Corporation and a
Director of AMAX, Inc.
Richard J. Boyle Vice Chairman of the Vice Chairman of the Board and a
Board and Director Director of The Chase Manhattan
Corporation and Trustee of
Prudential Realty Trust
Robert R. Douglass Vice Chairman of the Vice Chairman of the Board and a
Board and Director Director of The Chase Manhattan
Corporation and Trustee of HRE
Properties
Joan Ganz Cooney Director Chairman of the Executive
Committee of the Board of
Trustees, formerly Chief Executive
Officer of Children's Television
Workshop and a Director of each
of Johnson & Johnson,
Metropolitan Life Insurance
Company and Xerox Corporation
Edward S. Finkelstein Director Retired Chairman and Chief
Executive Officer and Director of
R.H. Macy & Co., Inc. and a
Director of Time Warner Inc.
</TABLE>
C-4
<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
H. Laurance Fuller Director Chairman, President, Chief
Executive Officer and Director of
Amoco Corporation and Director of
Abbott Laboratories
Howard C. Kauffman Director Retired President of Exxon
Corporation and a Director of each
of Pfizer Inc. and Ryder System,
Inc.
Paul W. MacAvoy Director Dean of Yale School of
Organization and Management
David T. McLaughlin Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of each
of ARCO Chemical Company and
Westinghouse Electric Corporation
Edmund T. Pratt, Jr. Director Chairman Emeritus, formerly
Chairman and Chief Executive
Officer, of Pfizer Inc. and a
Director of each of Pfizer, Inc.,
Celgene Corp., General Motors
Corporation and International Paper
Company
Henry B. Schacht Director Chairman and Chief Executive
Officer of Cummins Engine
Company, Inc. and a Director of
each of American Telephone and
Telegraph Company and CBS Inc.
A. Alfred Taubman Director Chairman and Director, formerly
also Chief Executive Officer, of
The Taubman Company, Inc.,
majority shareholder and Chairman
of Sotheby's Holdings, Inc., owner
of Woodward & Lothrop, Inc. and
its subsidiary, John Wanamaker,
and Chairman of A&W
Restaurants, Inc. and a Director of
R.H. Macy & Co., Inc.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
Donald H. Trautlein Director President and Chief Executive
Officer of The Aspen Institute,
Chairman of Standard Fuse
Corporation and a Director of
each of ARCO Chemical
Company and Westinghouse
Electric Corporation
Kay R. Whitmore Director Chairman of the Board,
President and Chief Executive
Officer and Director of Eastman
Kodak Company
</TABLE>
ITEM 29. Principal Underwriters
(a) Vista Broker-Dealer Services, Inc., a wholly-owned subsidiary of
The BISYS Group, Inc. is the underwriter for the Registrant.
(b) The following are the Directors and officers of Vista
Broker-Dealer Services, Inc., a wholly-owned subsidiary of The BISYS Group,
Inc. The principal business address of each of these persons, with the
exception of Mr. Spicer, is 125 West 55th Street, New York, New York 10022. The
principal business address of Mr. Spicer is One Bush Street, San Francisco,
California 94104.
<TABLE>
<CAPTION>
Position and Offices Position and Offices
Name with Distributor with the Registrant
- ---- -------------------- --------------------
<S> <C> <C>
William B. Blundin Director Chief Executive Officer None
Richard E. Stierwalt Director Chief Operating Officer None
Timothy M. Spicer Director Chairman of the Board None
Joseph Kissel President None
George Martinez Chief Compliance Officer Secretary and
and Secretary Assistant Treasurer
</TABLE>
(c) Not applicable
ITEM 30. Location of Accounts and Records
The accounts and records of the Registrant are located, in whole or
in part, at the office of the Registrant and the following locations:
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<PAGE>
Name Address
---- -------
Vista Broker-Dealer Services, Inc. a wholly-owned 125 West 55th Street
subsidiary of The BISYS Group, Inc. (distributor) New York, NY 10022
DST Systems, Inc. (transfer agent) 21 W. 10th Street
Kansas City, MO 64105
The Chase Manhattan Bank, N.A. (investment adviser 1211 Avenue of the
and custodian) Americas
New York, NY 10036
The Chase Manhattan Bank, N.A. (administrator) One Chase Square
Rochester, NY 14363
ITEM 31. Management Services
Not applicable
ITEM 32. Undertakings
(1) Registrant undertakes that its trustees shall promptly call a
meeting of shareholders of the Trust for the purpose of voting upon the
question of removal of any such trustee or trustees when requested in writing
so to do by the record holders of not less than 10 per centum of the
outstanding shares of the Trust. In addition, the Registrant shall, in certain
circumstances, give such shareholders assistance in communicating with other
shareholders of a fund as required by Section 16(c) of the Investment Company
Act of 1940.
(2) The Registrant, on behalf of the Funds, undertakes, provided the
information required by Item 5A is contained in the latest annual report to
shareholders, to furnish to each person to whom a prospectus has been
delivered, upon their request and without charge, a copy of the Registrant's
latest annual report to shareholders.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant duly caused this Pre-Effective
Amendment to its Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and the
State of New York on the 5th day of March, 1996.
MUTUAL FUND TRUST
By /s/ H. Richard Vartabedian
------------------------------
H. Richard Vartabedian
President
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Fergus Reid, III Chairman and Trustee March 5, 1996
- -----------------------------
Fergus Reid, III
/s/ William J. Armstrong Trustee March 5, 1996
- -----------------------------
William J. Armstrong
/s/ John R.H. Blum Trustee March 5, 1996
- -----------------------------
John R.H. Blum
/s/ Joseph J. Harkins Trustee March 5, 1996
- -----------------------------
Joseph J. Harkins
/s/ Richard E. Ten Haken Trustee March 5, 1996
- -----------------------------
Richard E. Ten Haken
/s/ H. Richard Vartebedian Trustee March 5, 1996
- -----------------------------
H. Richard Vartebedian
/s/ Irving L. Thodie Trustee March 5, 1996
- -----------------------------
Irving L. Thodie
/s/ Stuart W. Cragin Trustee March 5, 1996
- -----------------------------
Stuart W. Cragin
/s/ Martin R. Dean Treasurer and March 5, 1996
- ----------------------------- Principal Financial
Martin R. Dean Officer
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<PAGE>
As filed with the Securities and Exchange Commission on March 7, 1996.
File No. 811-8358
Registration No. 33-75250
Securities and Exchange Commission
Washington, D.C. 20549
EXHIBITS
filed with
Post-Effective Amendment No. 5
to the
Registration Statement
on
FORM N-1A
MUTUAL FUND TRUST
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
5(e) Form of Proposed Investment Sub-Advisory Agreement between The
Chase Manhattan Bank and [Chase Asset Management/Texas Commerce
Bank, National Association]
11(a) Consent of Price Waterhouse LLP.
11(b) Consent of KPMG Peat Marwick LLP.
Exhibit 5(e)
Form of Proposed Investment
Sub-Advisory Agreement between The Chase
Manhattan Bank and [Chase Asset Management/
Texas Commerce Bank, National Association].
<PAGE>
FORM OF
PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
[CHASE ASSET MANAGEMENT/TEXAS
COMMERCE BANK, NATIONAL ASSOCIATION]
AGREEMENT made as of the ____ day of ______________, 1996, by and between The
Chase Manhattan Bank, a New York State chartered bank (the "Adviser"), and
[Chase Asset Management, Inc./Texas Commerce Bank, National Association], a
[type of entity] (the "Sub- Adviser").
WHEREAS, the Adviser provides investment advisory services to the
series of Mutual Fund Trust, a Massachusetts business trust (the "Trust"), which
is registered as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), pursuant to an Investment
Advisory Agreement dated the same date hereof (the "Advisory Agreement"); and
WHEREAS, the Sub-Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the series of the Trust
listed on Schedule A (each, a "Fund" and collectively, the "Funds"), and the
Sub-Adviser represents that it is willing and possesses legal authority to so
furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Funds for the period and on the
terms set forth in this Agreement. The Sub-Adviser accepts
such appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its
discretion, provide such services through its own employees
or the employees of one or more affiliated companies that are
qualified to act as an investment subadviser to the Funds
under
<PAGE>
applicable laws and are under the control of The Chase
Manhattan Corporation, the parent of the Sub-Adviser; provided
that (i) all persons, when providing services hereunder, are
functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by
authorized officers of the Sub-Adviser.
2. Delivery of Documents. The Adviser has delivered to the
Sub-Adviser copies of each of the following documents along with all amendments
thereto through the date hereof, and will promptly deliver to it all future
amendments and supplements thereto, if any:
(a) the Trust's Declaration of Trust;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing
the execution and delivery of the Advisory Agreement and this
Agreement;
(d) the most recent Post-Effective Amendment to the Trust's
Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act, on Form N-1A as
filed with the Securities and Exchange Commission (the
"Commission");
(e) Notification of Registration of the Trust under the 1940 Act
on Form N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of
Additional Information of the Funds.
3. Investment Advisory Services.
(a) Management of the Funds. The Sub-Adviser hereby undertakes to
act as investment subadviser to the Funds. The Sub-Adviser
shall regularly provide investment advice to the Funds and
continuously supervise the investment and reinvestment of
cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) obtain and evaluate pertinent economic, statistical
and financial data, as well as other significant
events and developments, which affect the economy
generally, the Funds' investment programs, and the
issuers of securities included in the Funds'
portfolios and the industries in which they engage,
or which may relate to securities or other
investments which the Sub-Adviser may deem desirable
for inclusion in a Fund's portfolio;
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<PAGE>
(ii) determine which issuers and securities shall be
included in the portfolio of each Fund;
(iii) furnish a continuous investment program for each
Fund;
(iv) in its discretion, and without prior consultation,
buy, sell, lend and otherwise trade any stocks, bonds
and other securities and investment instruments on
behalf of each Fund; and
(v) take, on behalf of each Fund, all actions the
Sub-Adviser may deem necessary in order to carry into
effect such investment program and the Sub-Adviser's
functions as provided above, including the making of
appropriate periodic reports to the Adviser and the
Trust's Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided
in: (i) each Fund's Prospectus and Statement of Additional
Information as revised and in effect from time to time; (ii)
the Trust's Declaration of Trust, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940
Act; (iv) other applicable laws; and (v) such other
investment policies, procedures and/or limitations as may be
adopted by the Trust or the Adviser with respect to a Fund
and provided to the Sub-Adviser in writing. The Sub-Adviser
agrees to use reasonable efforts to manage each Fund so that
it will qualify, and continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, and regulations issued thereunder
(the "Code"), except as may be authorized to the contrary by
the Trust's Board of Trustees. The management of the Funds by
the Sub-Adviser shall at all times be subject to the review
of the Adviser and the Trust's Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the
Sub-Adviser shall keep each Fund's books and records required
to be maintained by, or on behalf of, the Funds with respect
to subadvisory services rendered hereunder. The Sub-Adviser
agrees that all records which it maintains for a Fund are the
property of the Fund and it will promptly surrender any of
such records to the Fund upon the Fund's request. The
Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a- 2 under the 1940 Act any such records
of the Fund required to be preserved by such Rule.
(d) Reports, Evaluations and other services. The Sub-Adviser
shall furnish reports, evaluations, information or analyses
to the Adviser and the Trust with respect to the Funds and in
connection with the Sub-Adviser's services hereunder as the
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<PAGE>
Adviser and/or the Trust's Board of Trustees may request from
time to time or as the Sub-Adviser may otherwise deem to be
desirable. The Sub-Adviser shall make recommendations to the
Adviser and the Trust's Board of Trustees with respect to the
Trust's policies, and shall carry out such policies as are
adopted by the Board of Trustees. The Sub-Adviser may, subject
to review by the Adviser, furnish such other services as the
Sub-Adviser shall from time to time determine to be necessary
or useful to perform its obligations under this Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place
all orders for the purchase and sale of portfolio securities
for each Fund with brokers or dealers selected by the
Sub-Adviser, which may include brokers or dealers affiliated
with the Adviser or the Sub-Adviser to the extent permitted
by the 1940 Act and the Trust's policies and procedures
applicable to the Funds. The Sub-Adviser shall use its best
efforts to seek to execute portfolio transactions at prices
which, under the circumstances, result in total costs or
proceeds being the most favorable to the Funds. In assessing
the best overall terms available for any transaction, the
Sub- Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the
price of the security, the financial condition and execution
capability of the broker or dealer, research services
provided to the Sub- Adviser, and the reasonableness of the
commission, if any, both for the specific transaction and on
a continuing basis. In no event shall the Sub-Adviser be
under any duty to obtain the lowest commission or the best
net price for any Fund on any particular transaction, nor
shall the Sub-Adviser be under any duty to execute any order
in a fashion either preferential to any Fund relative to
other accounts managed by the Sub-Adviser or otherwise
materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or
dealers qualified to execute a particular transaction,
brokers or dealers may be selected who also provide brokerage
and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the
Sub-Adviser, the Funds, and/or the other accounts over which
the Sub-Adviser exercises investment discretion. The
Sub-Adviser is authorized to pay a broker or dealer who
provides such brokerage and research services a commission
for executing a portfolio transaction for a Fund which is in
excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the Sub-
Adviser determines in good faith that the total commission is
reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed
in terms of either that particular transaction or the overall
responsibilities of the Sub-Adviser with respect to accounts
over which it exercises investment discretion. The
Sub-Adviser shall report to the Board of Trustees of the
Trust regarding overall commissions paid by the Funds and
their reasonableness in relation to their benefits to the
Funds.
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<PAGE>
(g) Aggregation of Securities Transactions. In executing
portfolio transactions for a Fund, the Sub-Adviser may, to
the extent permitted by applicable laws and regulations, but
shall not be obligated to, aggregate the securities to be
sold or purchased with those of other Funds or its other
clients if, in the Sub-Adviser's reasonable judgment, such
aggregation (i) will result in an overall economic benefit to
the Fund, taking into consideration the advantageous selling
or purchase price, brokerage commission and other expenses,
and trading requirements, and (ii) is not inconsistent with
the policies set forth in the Trust's registration statement
and the Fund's Prospectus and Statement of Additional
Information. In such event, the Sub-Adviser will allocate the
securities so purchased or sold, and the expenses incurred in
the transaction, in an equitable manner, consistent with its
fiduciary obligations to the Fund and such other clients.
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser
as follows:
(i) The Sub-Adviser is a corporation duly organized and
in good standing under the laws of the State of [New
York] and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii) The Sub-Adviser is registered as an investment
adviser with the Commission under the Advisers Act,
and is registered or licensed as an investment
adviser under the laws of all applicable
jurisdictions. The Sub- Adviser shall maintain such
registrations or licenses in effect at all times
during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best
judgment and effort to the Adviser in carrying out
the Sub-Adviser's obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser
as follows:
(i) The Adviser is a state chartered bank duly organized
and in good standing under the laws of the State of
New York and is fully authorized to enter into this
Agreement and carry out its duties and obligations
hereunder.
(ii) The Trust has been duly organized as a business trust
under the laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company with
the Commission under the 1940 Act, and shares of the
each Fund are registered for offer and sale to the
public under the 1933 Act and all applicable state
securities
- 5 -
<PAGE>
laws where currently sold. Such registrations will be
kept in effect during the term of this Agreement.
5. Compensation. (a) As compensation for the services which the
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, with
respect to each Fund, the Adviser shall pay to the Sub-Adviser (or cause to be
paid by the Trust directly to the Sub- Adviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate to be determined between the parties hereto from time to time, as a
percentage of the average daily net assets of the Fund during the preceding
month (computed in the manner set forth in the Fund's most recent Prospectus and
Statement of Additional Information). Average daily net assets shall be based
upon determinations of net assets made as of the close of business on each
business day throughout such month. The fee for any partial month shall be
calculated on a proportionate basis, based upon average daily net assets for
such partial month.
(b) The Sub-Adviser shall have the right, but not the
obligation, to voluntarily waive any portion of the sub-advisory fee from time
to time. Any such voluntary waiver will be irrevocable and determined in advance
of rendering sub-investment advisory services by the Sub-Adviser, and shall be
in writing and signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to,
each Fund in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Fund, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Sub-Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more of such expense limitations be applicable
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Sub-Adviser's fee shall be applicable.
For the purposes of this paragraph, the Sub-Adviser's share of any excess
expenses shall be computed by multiplying such excess expenses by a fraction,
the numerator of which is the amount of the investment advisory fee which would
otherwise be payable to the Sub-Adviser for such fiscal year were it not for
this subsection 5(b) and the denominator of which is the sum of all investment
advisory and administrative fees which would otherwise be payable by the Fund
were it not for the expense limitation provisions of any investment advisory or
administrative agreement to which the Fund is a party.
6. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the Trust or
the Adviser are or may be or become interested in the Sub-Adviser as directors,
officers or otherwise and that directors, officers and
- 6 -
<PAGE>
shareholders of the Sub-Adviser are or may be or become similarly interested
in the Trust or the Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the
Funds.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability. The
services of the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other agreements
with the Funds, the Trust or the Adviser for providing additional services to
the Funds, the Trust or the Adviser which are not covered by this Agreement, and
to receive additional compensation for such services. In the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of obligations or
duties hereunder on the part of the Sub-Adviser, or a breach of fiduciary duty
with respect to receipt of compensation, neither the Sub-Adviser nor any of its
directors, officers, shareholders, agents, or employees shall be liable or
responsible to the Adviser, the Trust, the Funds or to any shareholder of the
Funds for any error of judgment or mistake of law or for any act or omission in
the course of, or connected with, rendering services hereunder or for any loss
suffered by the Adviser, the Trust, a Fund, or any shareholder of a Fund in
connection with the performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date hereof (the "Effective Date") provided that it
shall have been approved by a majority of the outstanding voting securities of
each Fund, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force until two years from
the Effective Date and shall continue in effect from year to
year thereafter as to each Fund for successive annual
periods, provided such continuance is specifically approved
at least annually (i) by a vote of the majority of the
Trustees of the Trust who are not parties to this Agreement
or interested persons of any such party, cast in person at a
meeting called for the purpose of voting on such approval,
and (ii) by a vote of the Board of Trustees of the Trust or a
majority of the outstanding voting securities of the Fund.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any
party to this Agreement, cast in person at a meeting called
for the purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement as to any
Fund(s) at any time on sixty (60) days'
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<PAGE>
prior written notice to the other, without payment of any
penalty. A termination of the Sub-Adviser may be effected as
to any particular Fund by the Adviser, by a vote of the
Trust's Board of Trustees, or by vote of a majority of the
outstanding voting securities of the Fund. This Agreement
shall terminate automatically in the event of its assignment
or in the event of the termination of the Advisory Agreement.
10. Limitation of Liability of Trustees and Shareholders. The
Sub-Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Trust" and "Trustees of Mutual Fund Trust"
refer, respectively, to the trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under the Declaration of
Trust, to which reference is hereby made and a copy of which is on file at the
office of the Secretary of State of the State of Massachusetts, such reference
being inclusive of any and all amendments thereto so filed or hereafter filed.
The obligations of "Mutual Fund Trust" entered into in the name or on behalf
thereof by any of the Trustees, representatives or agents are made not
individually, but in such capacities and are not binding upon any of the
Trustees, shareholders or representatives of the Trust personally, but bind only
the assets of the Trust, and all persons dealing with the Trust or a Fund must
look solely to the assets of the Trust or Fund for the enforcement of any claims
against the Trust or Fund.
11. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
12. Independent Contractor. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the Trust
from time to time, have no authority to act for or represent a Fund in any way
or otherwise be deemed an agent of a Fund.
13. Structure of Agreement. The Adviser and Sub-Adviser are entering
into this Agreement with regard to the respective Funds severally and not
jointly. The responsibilities and benefits set forth in this Agreement shall be
deemed to be effective as between the Adviser and Sub-Adviser in connection with
each Fund severally and not jointly. This Agreement is intended to govern only
the relationships between the Adviser, on the one hand, and the Sub-Adviser, on
the other hand, and is not intended to and shall not govern (i) the relationship
between the Adviser or Sub-Adviser and any Fund, or (ii) the relationships among
the respective Funds.
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<PAGE>
14. Governing Law. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the
provisions of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Adviser hereunder
by the Sub- Adviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at ___________________________________________________
_______________________ or at such other address or to such individual as shall
be so specified by the Adviser to the Sub- Adviser. Notices of any kind to be
given to the Sub-Adviser hereunder by the Adviser shall be in writing and shall
be duly given if mailed or delivered to the Sub-Adviser at ____________________
______________________________________________________ or at such other address
or to such individual as shall be so specified by the Sub-Adviser to the
Adviser. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
[Subadvisor] CHASE MANHATTAN BANK
By: By:
------------------------- -------------------------
Name: Name:
Title: Title:
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<PAGE>
Schedule A
Fund:
-----
1. Vista California Tax Free Money Market Fund
2. Vista New York Tax Free Money Market Fund
3. Vista U.S. Government Money Market Fund
4. Vista Federal Money Market Fund
5. Vista U.S. Treasury Money Market Fund
6. Vista 100% U.S. Treasury Securities Money Market Fund
7. Vista Prime Money Market Fund
8. Vista Tax Free Income Fund
9. Vista New York Tax Free Income Fund
10. Vista California Intermediate Tax Free Income Fund
11. Vista New York Tax Free Income Fund
12. Vista Tax Free Income Fund
13. Vista U.S. Treasury Income Fund
14. Vista U.S. Government Securities Fund
[Schedule for Chase Asset Management, Inc.]
i
<PAGE>
Schedule A
Fund:
-----
1. Vista Cash Management Fund
2. Vista Tax Free Money Market Fund
[Schedule for Texas Commerce Bank, National Association]
ii
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 3 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated October 13, 1995, relating to the financial
statements and selected per share data and ratios for a share of beneficial
interest outstanding appearing in the August 31, 1995 Annual Report to
Shareholders of Growth and Income Portfolio, Capital Growth Portfolio,
International Equity Portfolio, Asset Allocation Portfolio, U.S. Treasury
Income Portfolio (subsequently renamed U.S. Government Income Portfolio) and
Money Market Portfolio (separately managed portfolios of Mutual Fund Variable
Annuity Trust), which are also incorporated by reference into the Registration
Statement. We also consent to the reference to us under the heading
"Independent Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 4, 1996
Independent Auditors' Consent
To the Shareholders and Board of Directors of The Hanover Funds, Inc.:
We consent to the use of our report dated January 19, 1996 with respect to The
100% U.S. Treasury Securities Money Market Fund and The Cash Management Fund
incorporated herein by reference and to the references to our Firm under the
headings "Financial Highlights" in the Prospectuses.
/s/ KPMG Peat Marwick LLP
New York, New York
March 7, 1996
