As filed via EDGAR with the Securities and Exchange Commission
on December 27, 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. 8 |X|
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 8 |X|
------------------------------
MUTUAL FUND TRUST
(Exact Name of Registrant as Specified in Charter)
101 Park Avenue,
New York, New York 10178
--------------------------------------------------
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code: (212) 492-1600
<TABLE>
<CAPTION>
<S> <C> <C>
Copies to:
George Martinez, Esq. Peter Eldridge, Esq Gary S. Schpero, Esq.
Mutual Fund Trust Chemical Bank Simpson Thacher & Bartlett
125 West 55th Street 270 Park Avenue 425 Lexington Avenue
New York, New York 10019 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:
|X| immediately upon filing pursuant to | | on ( ) pursuant to
paragraph (b) paragraph (b)
|_| 60 days after filing pursuant to |_| on ( ) pursuant to
paragraph (a)(1) paragraph (a)(1)
|_| 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,
1996 was filed on October 23, 1996.
<PAGE>
MUTUAL FUND TRUST
Registration Statement on Form N-1A
CROSS-REFERENCE SHEET
Pursuant to Rule 495(a) under the Securities Act of 1933
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; (About
Your Investment); Other Information Concerning
the Fund(s) *
(f) How Dividends and Distributions are Made; *
Tax Information; (How Distributions are Made;
Tax Information)
(g) How Dividends and Distributions are Made; Tax Matters
Tax Information; (How Distributions are Made;
Tax Information)
(h) How to Buy, Sell and Exchange Shares; (About Your
Investment); Other Information Concerning the Fund(s) *
7(a) How to Buy, Sell and Exchange Shares; Other *
Information Concerning the Fund(s)
(b) How the Fund(s) Value Their (its) 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
Trust and 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 Trust and Funds
15(a) * Not Applicable
(b) * Principal Holders
(c) * Principal Holders
16(a) Management Management of the Trust and 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 Trust and Funds
(c) Other Information Concerning Management of the Trust and Funds
the Fund(s)
(d) Management Management of the Trust and Funds
(e) * Not Applicable
(f) How to Buy, Sell and Exchange Shares; Management of the Trust and Funds
Other Information Concerning the Fund(s)
(g) * Not Applicable
(h) * Management of the Trust and Funds;
Independent Accountants
(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 Fund(s) Value Their (its) 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 Trust and Funds
(b) * Management of the Trust and 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>
[VISTA LOGO]
Vista[SM] Shares
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
INVESTMENT STRATEGY: CURRENT INCOME
December 27, 1996
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 December 27, 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.
THE VISTA TAX FREE, NEW YORK TAX FREE AND CALIFORNIA TAX FREE MONEY MARKET
FUNDS MAY EACH INVEST A SIGNIFICANT PERCENTAGE OF ITS ASSETS IN THE
SECURITIES OF A SINGLE ISSUER; ACCORDINGLY, AN INVESTMENT IN THESE FUNDS MAY
BE RISKIER THAN INVESTMENTS IN OTHER TYPES OF MONEY MARKET FUNDS.
1
<PAGE>
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Expense Summary 4
The expenses you pay on your Fund investment, including examples
Financial Highlights 6
The Funds' financial history
Fund Objectives and Investment Approach
Vista 100% U.S. Treasury Securities Money Market Fund 20
Vista Treasury Plus Money Market Fund 20
Vista Federal Money Market Fund 20
Vista U.S. Government Money Market Fund 21
Vista Cash Management Fund 21
Vista Tax Free Money Market Fund 21
Vista New York Tax Free Money Market Fund 22
Vista California Tax Free Money Market Fund 22
Common Investment Policies 23
Management 30
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management and Texas
Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares 31
How the Funds Value Their Shares 35
How Dividends and Distributions Are Made; Tax Information 36
How the Funds distribute their earnings, and tax treatment related
to those earnings
Other Information Concerning the Funds 37
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 40
How performance is determined, stated and/or advertised
</TABLE>
3
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in a Fund based on expenses
incurred in the most recent fiscal year by each Fund, other than Vista 100%
U.S. Treasury Securities Money Market Fund, and based on estimated expenses
for the current fiscal year for the Vista 100% U.S. Treasury Securities Money
Market Fund. The examples show the cumulative expenses attributable to a
hypothetical $1,000 investment over specified periods.
The table is provided to help you understand the expenses of investing in the
Funds and your share of the operating expenses that a 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 below, may be incurred
directly by customers of financial institutions in connection with an
investment in a Fund. The Funds understand that Shareholder Servicing Agents
may credit 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 a Fund with respect to those
accounts. See "Other Information Concerning the Funds."
<TABLE>
<CAPTION>
Vista
100%
U.S. Vista Vista
Treasury Treasury Vista U.S.
Securities Plus Federal Government Vista
Money Money Money Money Cash
Market Market Market Market Management
Fund Fund Fund Fund Fund
------- ------- ------- ------- ---------
Vista Vista Vista Vista Vista
Shares Shares Shares Shares Shares
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver of
fee, where indicated) 0.10% 0.10% 0.10% 0.10% 0.10%
12b-1 Fee ** 0.10% 0.10% 0.10% 0.10% n/a
Shareholder Servicing Fee (after estimated waiver of
fee, where indicated) 0.24%* 0.23%* 0.25%* 0.22%* 0.32%*
Other Expenses 0.15% 0.16% 0.25% 0.17% 0.17%
Total Fund Operating Expenses (after waivers of fees,
where indicated) 0.59%* 0.59%* 0.70%* 0.59%* 0.59%*
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return:
1 year $ 6 $ 6 $ 7 $ 6 $ 6
3 years 19 19 22 19 19
5 years -- 33 39 33 33
10 years -- 74 87 74 74
</TABLE>
[restubbed table]
<TABLE>
<CAPTION>
Vista
New Vista
Vista York California
Tax Tax Tax
Free Free Free
Money Money Money
Market Market Market
Fund Fund Fund
------- ------- -------
Vista Vista Vista
Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee (after estimated waiver of
fee, where indicated) 0.10% 0.10% 0.03%*
12b-1 Fee ** 0.10% 0.10% 0.10%
Shareholder Servicing Fee (after estimated waiver of
fee, where indicated) 0.21%* 0.21%* 0.15%*
Other Expenses 0.18% 0.18% 0.27%
Total Fund Operating Expenses (after waivers of fees,
where indicated) 0.59%* 0.59%* 0.55%*
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return:
1 year $ 6 $ 6 $ 6
3 years 19 19 18
5 years 33 33 31
10 years 74 74 69
</TABLE>
[end of restubbed table]
* 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 0.10% and
0.35%, respectively, for each such Fund, and Total Fund Operating Expenses
for 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 and Vista
California Tax Free Money Market Fund would be 0.70%, 0.71%, 0.82%, 0.72%,
0.62%, 0.73%, 0.73% and 0.82%, respectively. 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 commencing on
May 6, 1996 to the extent necessary to prevent Total Fund Operating Expenses
of Vista Shares of each Fund other than Vista Federal Money Market Fund and
Vista California Tax Free Money Market Fund from exceeding the amounts
indicated in the table. In addition, Chase has agreed to waive fees payable
to it and/or reimburse expenses for a two year period commencing on May 6,
1996 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 Fund, Vista Tax Free
Money Market Fund and Vista New York 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.
** Long-term shareholders in mutual funds with 12b-1 fees, such as holders of
Vista Shares of all Funds except Vista Cash Management 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.
4 and 5
<PAGE>
FINANCIAL HIGHLIGHTS
On May 3, 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 share outstanding
through May 3, 1996 and one Vista Share of the Vista 100% U.S. Treasury
Securities Money Market Fund outstanding for periods thereafter. 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 and the Fund's Annual Report to
Shareholders for the period ended August 31, 1996, which both are
incorporated by reference into the SAI. Shareholders may obtain a copy of
these annual reports 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 the period ended August 31,
1996 have been audited by Price Waterhouse LLP, independent accountants,
whose report thereon is included in the Fund's Annual Report to Shareholders.
Periods ended prior to December 1, 1995 were audited by other independent
accountants.
VISTA 100% U.S. TREASURY SECURITIES
MONEY MARKET FUND
<TABLE>
<CAPTION>
12/01/95** Year Ended 7/1/91*
through ----------------------------------------- through
8/31/96 11/30/95 11/30/94 11/30/93 11/30/92 11/30/91
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 1.00 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- ------ ------ ---- ---- -------
Income from Investment Operations:
Net Investment Income 0.035 0.050 0.033 0.026 0.033 0.021
-------- ------ ------ ---- ---- -------
Less Distributions:
Dividends from Net Investment Income 0.035 0.050 0.033 0.026 0.033 0.021
-------- ------ ------ ---- ---- -------
Net Asset Value, End of Period $ 1.00 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ====== ====== ==== ==== =======
Total Return 3.50% 5.15% 3.32% 2.62% 3.33% 2.58%
Ratios/Supplemental Data
Net Assets, End of Period (000
omitted) $1,671,603 $1,337,549 $1,024,125 $873,631 $383,688 $141,875
Ratio of Expenses to Average Net
Assets# 0.60% 0.58% 0.59% 0.58% 0.55% 0.45%
Ratio of Net Investment Income to
Average Net Assets# 4.58% 4.99% 3.26% 2.58% 3.28% 5.02%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets# 0.68% 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 # 4.50% 4.96% 3.23% 2.55% 3.16% 4.73%
</TABLE>
* Fund commenced operations on July 1, 1991.
** In 1996, the Fund changed its fiscal year end from November 30 to August 31.
# Short periods have been annualized.
6 and 7
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
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 period ended August 31, 1996,
which is incorporated by reference into the SAI. 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.
VISTA TREASURY PLUS MONEY MARKET FUND
<TABLE>
<CAPTION>
5/6/96*
through
8/31/96
---------
<S> <C>
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 1.00
---------
Income from Investment Operations:
Net Investment Income 0.015
---------
Less Dividends from Net Investment Income 0.015
---------
Net Asset Value, End of Period $ 1.00
=========
Total Return 1.50%
=========
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $1,382,184
Ratio of Expenses to Average Net Assets# 0.59%
Ratio of Net Investment Income to Average Net Assets# 4.63%
Ratio of Expenses without waivers and assumption of expenses to Average Net
Assets# 0.73%
Ratio of Net Investment Income without waivers and assumption of expenses to
Average Net Assets# 4.49%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
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,
1996, which is incorporated by reference into the SAI. 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.
VISTA FEDERAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 5/9/94*
ended ended through
8/31/96 8/31/95 8/31/94
---- ---- ------
<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 0.048 0.051 0.013
---- ---- ------
Total from Investment Operations 0.048 0.051 0.013
Less Distributions:
Dividends from Net Investment Income 0.048 0.051 0.013
---- ---- ------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
==== ==== ======
Total Return 4.83% 5.20% 1.26%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $352,934 $203,399 $19,955
Ratio of Expenses to Average Net Assets# 0.70% 0.69% 0.40%
Ratio of Net Investment Income to Average Net Assets# 4.79% 5.16% 4.36%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.93% 0.93% 1.02%
Ratio of Net Investment Income without waivers and
assumptions of expenses to Average Net Assets# 4.56% 4.92% 3.74%
</TABLE>
* Commencement of offering shares.
# Short periods 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,
1996, which is incorporated by reference into the SAI. 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.
VISTA U.S. GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 11/1/93 1/1/93*
ended ended through through
8/31/96 8/31/95 8/31/94+ 10/31/93
------ ---- ---- -------
<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 0.049 0.049 0.025 0.019
------ ---- ---- -------
Less Distributions:
Dividends from Net Investment Income 0.049 0.049 0.025 0.019
------ ---- ---- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ==== ==== =======
Total Return 4.97% 5.05% 2.48% 2.02%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $2,057,023 $341,336 $ 335,365 $ 323,498
Ratio of Expenses to Average Net Assets# 0.65% 0.80% 0.80% 0.82%
Ratio of Net Investment Income to Average
Net Assets# 4.83% 4.93% 2.94% 2.39%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets# 0.73% 0.80% 0.80% 0.82%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 4.75% 4.93% 2.94% 2.39%
</TABLE>
* Commencement of offering shares.
+ In 1994 the U.S. Government Money Market Fund changed its fiscal year-end
from October 31 to August 31.
# Short periods have been annualized.
10
<PAGE>
(This Page Intentionally Left Blank)
11
<PAGE>
FINANCIAL HIGHLIGHTS
On May 3, 1996, the 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 share (the accounting
survivor of the merger) outstanding through May 3, 1996 and one Vista Share
of the Vista Cash Management Fund outstanding for periods thereafter. 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 and the Fund's Annual Report to
Shareholders for the period ended August 31, 1996, which both are
incorporated by reference into the SAI. Shareholders may obtain a copy of
these annual reports 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 the period ended August 31,
1996 have been audited by Price Waterhouse LLP, independent accountants,
whose report thereon is included in the Fund's Annual Report to Shareholders.
Periods ended prior to December 1, 1995 were audited by other independent
accountants.
VISTA CASH MANAGEMENT FUND
<TABLE>
<CAPTION>
12/1/95** Year End
through -------------------------------------------
8/31/96 11/30/95 11/30/94 11/30/93 11/30/92
--------- -------- -------- -------- --------
<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 0.037 0.054 0.036 0.027 0.035
------ ------ ---- ---- -------
Less Distributions:
Dividends from Net Investment Income 0.037 0.054 0.036 0.027 0.035
------ ------ ---- ---- -------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
====== ====== ==== ==== =======
Total Return 3.69% 5.49% 3.62% 2.74% 3.51%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $1,621,212 $1,634,493 $990,045 $861,025 $560,173
Ratio of Expenses to Average Net Assets# 0.60% 0.58% 0.58% 0.61% 0.67%
Ratio of Net Investment Income to Average Net Assets# 4.91% 5.35% 3.62% 2.70% 3.41%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.63% 0.62% 0.62% 0.64% 0.72%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets # 4.88% 5.31% 3.58% 2.67% 3.36%
[restubbed table]
Year End 1/17/89*
----------------------- through
11/30/91 11/30/90 11/30/89
-------- -------- --------
Per Share Operating Performance
Net Asset Value, Beginning of Period $ 1.000 $ 1.000 $ 1.000
------- ------- -------
Income from Investment Operations:
Net Investment Income 0.059 0.077 0.076
------- ------- -------
Less Distributions:
Dividends from Net Investment Income 0.059 0.077 0.076
------- ------- -------
Net Asset Value, End of Period $ 1.000 $ 1.000 $ 1.000
======= ======= =======
Total Return 6.01% 7.94% 7.83%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $343,166 $196,103 $134,503
Ratio of Expenses to Average Net Assets# 0.67% 0.67% 0.67%
Ratio of Net Investment Income to Average Net Assets# 5.84% 7.65% 8.62%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.73% 0.73% 0.74%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets # 5.78% 7.59% 8.55%
</TABLE>
[end of restubbed table]
* Fund commenced operations January 17, 1989.
** In 1996, the Fund changed its fiscal year end from November 30 to August 31.
# Short periods have been annualized.
12 and 13
<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,
1996, which is incorporated by reference into the SAI. Shareholders can
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.
VISTA TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 11/1/93 Year End 9/4/87*
ended ended through ----------------------------------------------------- through
8/31/96 8/31/95 8/31/94+ 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
------- ------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <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 $ 1.00 $ 1.00 $ 1.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income 0.029 0.029 0.015 0.019 0.028 0.043 0.054 0.056 0.045 0.007
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income 0.029 0.029 0.015 0.019 0.028 0.043 0.054 0.056 0.045 0.007
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total Return 2.92% 2.99% 1.54% 1.90% 2.79% 4.37% 5.47% 5.76% 4.61% 4.50%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) $574,115 $166,915 $121,710 $160,497 $145,241 $115,770 $112,770 $107,534 $116,260 $133,177
Ratio of Expenses to
Average Net Assets# 0.69% 0.86% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of Net Investment Income to
Average Net Assets# 2.89% 2.96% 1.82% 1.88% 2.70% 4.27% 5.33% 5.59% 4.47% 4.47%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# 0.80% 0.94% 0.85% 0.91% 0.98% 0.99% 0.97% 1.01% 1.02% 1.18%
Ratio of Net Investment Income without
waivers and assumption of expenses
to Average Net Assets# 2.78% 2.87% 1.82% 1.83% 2.57% 4.13% 5.21% 5.43% 4.30% 4.15%
</TABLE>
* Commencement of offering shares.
+ In 1994 the Tax Free Money Market Fund changed its fiscal year-end from
October 31 to August 31.
# Short periods have been annualized.
14 and 15
<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,
1996, which is incorporated by reference into the SAI. Shareholders can
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.
VISTA NEW YORK TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 11/1/93 Year End 9/4/87*
ended ended through ------------------------------------------------------ through
8/31/96 8/31/95 8/31/94+ 10/31/93 10/31/92 10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
------- ------- -------- -------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <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 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.028 0.028 0.015 0.017 0.025 0.038 0.050 0.051 0.043 0.009
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income 0.028 0.028 0.015 0.017 0.025 0.038 0.050 0.051 0.043 0.009
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
Total Return 2.85% 2.88% 1.48% 1.75% 2.53% 3.87% 5.02% 5.28% 4.50% 4.71%
Ratios/Supplemental Data:
Net Assets, End of Period
(000 omitted) $890,413 $378,400 $365,669 $300,425 $285,889 $230,855 $251,897 $252,201 $230,639 $ 2,385
Ratio of Expenses to
Average Net Assets# 0.74% 0.86% 0.85% 0.85% 0.85% 0.85% 0.83% 0.81% 0.78% 0.25%
Ratio of Net Investment Income to
Average Net Assets# 2.79% 2.84% 1.77% 1.72% 2.48% 3.83% 4.91% 5.15% 4.26% 4.71%
Ratio of Expenses without waivers
and assumption of expenses to
Average Net Assets# 0.83% 0.95% 0.85% 0.89% 0.92% 0.92% 0.91% 0.95% 1.10% 1.50%
Ratio of Net Investment Income
without waivers and assumption
of expenses to Average Net Assets# 2.70% 2.75% 1.77% 1.68% 2.41% 3.76% 4.83% 5.01% 3.94% 3.46%
</TABLE>
* Commencement of operations.
+ In 1994 the New York Tax Free Money Market Fund changed its fiscal year-
end from October 31 to August 31.
# Short periods have been annualized.
16 and 17
<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,
1996, which is incorporated by reference into the SAI. Shareholders can
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 CALIFORNIA TAX FREE MONEY MARKET FUND FUND
<TABLE>
<CAPTION>
Year Year 11/1/93 Year 3/4/92*
ended ended through ended through
8/31/96 8/31/95 8/31/94+ 10/31/93 10/31/92
------- ------- -------- -------- --------
<S> <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
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.030 0.033 0.018 0.023 0.019
------- ------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income 0.030 0.033 0.018 0.023 0.019
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= ======= =======
Total Return 3.06% 3.32% 1.82% 2.30% 2.89%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $42,819 $58,315 $64,423 $45,346 $44,643
Ratio of Expenses to Average Net Assets# 0.56% 0.48% 0.46% 0.42% 0.06%
Ratio of Net Investment Income to Average Net
Assets# 3.03% 3.25% 2.17% 2.26% 2.86%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 1.02% 1.07% 0.94% 1.02% 1.23%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 2.57% 2.66% 1.69% 1.66% 1.69%
</TABLE>
* Commencement of operations.
+ In 1994 the California Tax Free Money Market Fund changed its fiscal year-
end from October 31 to August 31.
# Short periods have been annualized.
18 and 19
<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. Income on direct
investments in U.S. Treasury securities 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.
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 obligations issued or guaranteed by the U.S.
Treasury. 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, and 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. Due to state income tax
considerations, the Fund will not enter into repurchase agreements.
- ------------------------------------------------------------------------------
Shareholders of the above Funds that reside in a 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 Dividends and Distributions are Made; Tax Information."
20
<PAGE>
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, or agencies or instrumentalities of the U.S.
Government, and in repurchase agreements collateralized by these obligations.
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.
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 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 "Additional 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
21
<PAGE>
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 "Additional 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 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 "Additional Investment Policies of
the Tax Free Funds"). As a fundamental policy, the Fund will invest 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
22
<PAGE>
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
In lieu of investing directly, each 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
applicable Fund.
Each Fund seeks to maintain a net asset value of $1.00 per share.
The Funds invest only in U.S. dollar-denominated 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 Trust. 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 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. Each
Fund other than the Tax Free Funds is classified as a "diversified" fund
under federal securities law.
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.
23
<PAGE>
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 in an amount
equal to 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 delivery at a future date, 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
24
<PAGE>
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 stripped obligations (i.e., separately traded principal and
interest components of securities) where the underlying obligations are
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 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 floating or variable rate nature of these investments, a 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, a Fund's yield may increase and it may have reduced risk of
capital depreciation. Demand features on certain floating or variable rate
securities may obligate a 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 floating or 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%
25
<PAGE>
of its total assets in shares of other money market funds when consistent
with its investment objective and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other money market funds.
PORTFOLIO TURNOVER. It is intended that the Funds will be fully managed by
buying and selling securities, as well as holding securities to maturity. The
frequency of the Funds' portfolio transactions will vary from year to year.
In managing a Fund, the Fund's advisers will seek to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. More frequent turnover will generally result in higher transactions
costs, including dealer mark-ups.
Additional Investment Policies of Vista Cash Management Fund
Vista Cash Management Fund may also invest in the following instruments, when
consistent with its overall objective 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.
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 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 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.
26
<PAGE>
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. These 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 on which,
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 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
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legislative body. The characteristics and methods of enforcement of general
obligation securities vary according to the law applicable to the particular
issuer. 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 revenue obligation securities, the credit quality of which is
directly related to the private user of the facilities.
From time to time, each 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 a 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 in which the Fund may
invest 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. Each Tax
Free Fund will limit investments in non- appropriation leases to 10% of its
assets. Although "non-appropriation" lease obligations are secured by the
leased property, disposition of the property in the event of foreclosure
might prove difficult. Certain investments in municipal lease obligations may
be illiquid.
Limiting Investment Risks
Specific regulations and investment restrictions help the Funds limit
investment risks for their shareholders. These regulations and restrictions
prohibit each Fund from: (a) with certain limited exceptions, investing more
than 5% of its 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, obligations of
states, cities, municipalities or other public authorities, as well as
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 each Fund's investment objective, restriction (c) above
and investment policies designated as fundamental above or in the SAI, the
Funds' investment
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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 is permitted to invest any portion of
its assets in obligations of domestic banks (including their foreign
branches), and in obligations of 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 industry. 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 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. 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.
banks (including their foreign branches), and may also invest in Municipal
Obligations backed by foreign institutions. These investments are subject to
the considerations
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discussed in the preceding paragraphs relating to Vista Cash Management Fund.
Changes in the credit quality of banks or other financial institutions
backing these Funds' Municipal Obligations could cause losses to these Funds
and affect their share price. Credit enhancements which are supplied by
foreign or domestic banks are not subject to federal deposit insurance.
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 to factors affecting such states and their municipal
issuers. The New York and California Tax Free Money Market Funds will be
particularly susceptible to factors affecting the State of New York, the
State of California, and their respective municipal issuers. Because the New
York Tax Free Money Market Fund and the California Tax Free Money Market Fund
are concentrated in securities issued by their respective states or entities
within those states, investments in these Funds may be riskier than an
investment in other types of money market funds. 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 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
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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 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 each Fund other than the Vista Cash Management Fund
and the Vista Tax Free Money Market 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 each of these Funds
on a day-to-day basis. For these services, CAM is entitled to receive a fee,
payable by Chase from its advisory fee, at an annual rate equal to 0.03% of
each such Fund's average daily net assets. 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.
Texas Commerce Bank, National Association ("TCB") is the sub- investment
adviser to the Vista Cash Management Fund and the Vista Tax Free Money Market
Fund pursuant to a Sub-Investment Advisory Agreement between Chase and TCB.
TCB has been in the investment counselling business since 1987 and is
ultimately controlled and owned by The Chase Manhattan Corporation. TCB makes
investment decisions for the Vista Cash Management Fund and the Vista Tax
Free Money Market Fund on a day-to-day basis. For these services, TCB is
entitled to receive a fee, payable by Chase from its advisory fee, at an
annual rate equal to 0.03% of each such Fund's average daily net assets. TCB
is located at 600 Travis, Houston, Texas 77002.
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,
SEP-IRAs and the Systematic Investment Plan) 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 Funds' distributor (at 1-800-34-VISTA), or through the Systematic
Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, credit cards and cash will not be accepted.
When purchases are made by check, redemptions will not be allowed until
clearance of the purchase check, which may take 15
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calendar days or longer. In addition, redemption of shares purchased through
ACH will not be allowed until clearance of your payment, which may take 7
business days or longer. 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 a Fund. For purchases
by wire, if federal funds are not received by the Vista Service Center by
4:00 Eastern time on the day of the purchase order, the order will be
canceled.
Federal regulations require that each investor provide a certified Taxpayer
Identification Number upon opening an account.
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 transaction through automatic periodic
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 and a deposit slip or voided
check 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 by 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 in proper form on any
business day during which the Federal Reserve Bank of New York and the New
York Stock Exchange are open for business ("Fund Business Day"). To receive
that day's dividend, the Vista Service Center or your investment
representative or shareholder servicing agent must generally receive your
order prior to a Fund's Cut-off Time. The Funds' Cut-off Times (Eastern time)
are as follows:
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Vista 100% U.S. Treasury
Securities Money Market Fund Noon
Tax Free Funds Noon
Vista Federal Money Market Fund 2:00 p.m.
Vista U.S. Government Money Market
Fund 2:00 p.m.
Vista Cash Management Fund 2:00 p.m.
Vista Treasury Plus Money Market
Fund 4:00 p.m.
Each Fund reserves the right to set an earlier Cut-off Time on any Fund
Business Day on which the Public Securities Association ("PSA") recommends an
early close to trading on the U.S. Government securities market. Generally,
such earlier Cut-off Time will be noon (Eastern time). The PSA is the trade
association that represents securities firms and banks that underwrite, trade
and sell debt securities, both domestically and internationally. 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., Eastern time on any Fund Business Day
will not be accepted and executed on the same day except at the Funds'
discretion. Orders received and not accepted after a Fund's Cut-off Time will
be considered received prior to the Fund's Cut-off Time on the following Fund
Business Day and processed accordingly. Orders for shares are accepted by
each Fund after funds are converted to federal funds. Orders paid by check
and received before a Fund's Cut-off Time will generally be available for the
purchase of shares the following Fund Business Day. The Funds reserve the
right to reject any purchase order.
How to Sell Shares
You can sell your Fund shares on any Fund Business Day either directly or
through your investment representative or shareholder servicing agent. A Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
SELLING SHARES DIRECTLY TO A 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.
A Fund may require 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.
A Fund generally sends you payment for your shares the Fund Business Day
after your request is received in proper form, provided your request is
received by the Vista Service Center prior to the Fund's Cut-off Time, and
assuming the Fund has collected payment of the purchase price of your shares.
Under unusual circumstances, the Funds 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 from your
account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone
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redemption requests in excess of $25,000 will only be made by wire to a bank
account on record with the Funds. Unless an investor indicates otherwise on
the account application, the Funds 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
Funds with his or her account registration and address as it appears on the
Funds' 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, a Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither a Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. 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. You can make regular withdrawals of $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a Systematic Withdrawal Plan. Call the Vista Service
Center at 1-800- 34-VISTA for complete instructions.
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.
INVOLUNTARY REDEMPTION OF ACCOUNTS. Each Fund may involuntary redeem your
shares if the aggregate net asset value of the shares in your account is less
than $500 or if you purchase through the Systematic Investment Plan and fail
to meet that Fund's investment minimum within a twelve month period. 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
charge, subject to any minimum investment requirement. Not all Vista funds
offer all classes of shares. The prospectus of the other Vista fund into
which shares are being
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exchanged should be read carefully and retained for future reference.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. 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 Funds, the Funds
reserve 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 each class of shares of each Fund is currently
determined daily as of 4:00 p.m., Eastern time on each Fund Business Day by
dividing the net assets of a Fund attributable to such class by the number of
shares of such class outstanding at the time the determination is made.
Effective with the anticipated introduction of certain automated share
purchase programs, the net asset value of shares of each class 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 Investment 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 a Fund would
receive if the instrument were sold. It is anticipated that the net asset
value of each share of each Fund will remain constant at $1.00 and the 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
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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 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 a
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 or by ACH to a
pre-established bank account, 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 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 any net
long-term capital gains would 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
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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 FUNDS
Distribution Plans
The Funds' distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. Each Fund
other than the Vista Cash Management Fund has adopted a Rule 12b-1
distribution plan which provides that such Fund will pay distribution fees at
annual rates of up to 0.10% of the average daily net assets attributable to
its Vista Shares. There is no distribution plan for the Vista 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. Some activities intended
to promote the sale of Vista Shares will be conducted generally by the Vista
Family of Funds, and activities intended to promote a Fund's Vista Shares may
also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; an occasional meal, ticket to a sporting
event or theater for entertainment for broker-dealers and their guests; and
payment for 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 0.35% 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
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Fair Practice) does not exceed 0.25% 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 Trust to do so) credit to the accounts of their customers
from whom they are already receiving other fees amounts not exceeding such
other fees or the fees for their services as shareholder servicing agents.
For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on
specified minimum balance requirements, such as reduced or no fees for
certain banking services or preferred rates on loans and deposits. Chase and
certain broker- dealers and other shareholder servicing agents may, at their
own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to
their customers that invest in the Vista Funds.
Chase and/or VFD may from time to time, at their own expense out of
compensation retained by them from the Fund or other sources available to
them, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to an
additional 0.10% annually of the average net assets of the Fund attributable
to shares of the Fund held by customers of such shareholder servicing agents.
Such compensation does not represent an additional expense to the Fund or its
shareholders, since it will be paid by Chase and/or VFD.
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.
VFD provides certain sub- administrative services to each Fund pursuant to a
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. VFD 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
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of the Trust. VFD is located at 101 Park Avenue, New York, New York 10178.
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 Funds' custodian for all services to the Funds, including
safekeeping of funds and securities and maintaining required books and
accounts; expenses of preparing and mailing reports to investors and to
government offices and commissions; expenses of meetings of investors; fees
and expenses of independent accountants, of legal counsel and of any transfer
agent, registrar or dividend disbursing agent of the Trust; insurance
premiums; and expenses of calculating the net asset value of, and the net
income on, shares of the Funds. Shareholder servicing and distribution fees
are allocated to specific classes of the Funds. In addition, the Funds may
allocate transfer agency and certain other expenses by class. Service
providers to a 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 a 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 may issue multiple classes of shares. This Prospectus relates only
to Vista Shares of the Funds. Certain Funds offer other
39
<PAGE>
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 would 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 Funds that are offered. Any person entitled to
receive compensation for selling or servicing shares of a Fund may receive
different levels of compensation with respect to one class of shares over
another.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required
to hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
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 Tax Free Fund can then be compared to the yield of a taxable money
market fund. Tax equivalent yields can be quoted on either a "yield" or
"effective yield" basis.
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
40
<PAGE>
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.
41
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VMM-1-1296X
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VMM-1-1296C
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VMM-1-1296
<PAGE>
[VISTA LOGO]
PREMIER[SM] SHARES
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
-------------------------------------------
INVESTMENT STRATEGY: CURRENT INCOME
-------------------------------------------
December 27, 1996
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 December 27, 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>
(This Page Intentionally Left Blank)
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................ 4
The expenses you pay on your Fund investment, including examples
Financial Highlights ....................................................... 6
The Funds' financial history
Fund Objectives and Investment Approach
Vista 100% U.S. Treasury Securities Money Market Fund ..................... 18
Vista Treasury Plus Money Market Fund ..................................... 18
Vista Federal Money Market Fund ........................................... 18
Vista U.S. Government Money Market Fund ................................... 19
Vista Cash Management Fund ................................................ 19
Vista Prime Money Market Fund ............................................. 19
Vista Tax Free Money Market Fund .......................................... 20
Common Investment Policies ................................................. 20
Management ................................................................. 28
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management
and Texas Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares ....................................... 29
How the Funds Value Their Shares ........................................... 32
How Dividends and Distributions Are Made; Tax Information .................. 33
How the Funds distribute their earnings, and tax treatment
related to those earnings
Other Information Concerning the Funds ..................................... 34
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information .................................................... 37
How performance is determined, stated and/or advertised
3
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in a Fund based on expenses incurred
in the most recent fiscal year by each Fund, other than Vista 100% U.S. Treasury
Securities Money Market Fund, and based on estimated expenses for the current
fiscal year for the Vista 100% U.S. Treasury Securities Money Market Fund. The
examples show the cumulative expenses attributable to a hypothetical $1,000
investment over specified periods.
The table is provided to help you understand the expenses of investing in the
Funds and your share of the operating expenses that a 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 below, may be incurred
directly by customers of financial institutions in connection with an investment
in a Fund. The Funds understand 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 a Fund with respect to those accounts. See "Other
Information Concerning the Funds."
<TABLE>
<CAPTION>
Vista
100%
U.S. Vista Vista
Treasury Treasury Vista U.S. Vista Vista
Securities Plus Federal Government Vista Prime Tax Free
Money Money Money Money Cash Money Money
Market Market Market Market Management Market Market
Fund Fund Fund Fund Fund Fund Fund
---------- --------- ---------- ---------- ---------- -------- ---------
Premier Premier Premier Premier Premier Premier Premier
Shares Shares Shares Shares Shares Shares Shares
---------- --------- ---------- ---------- ---------- -------- ---------
<C> <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 fee, where
indicated) 0.00%** 0.25% 0.23%** 0.20%** 0.24%** 0.18%** 0.25%
Other Expenses 0.45% 0.16% 0.17% 0.15% 0.16% 0.17% 0.18%
Total Fund Operating Expenses
(after waivers of fees, where indicated) 0.55%** 0.51% 0.50%** 0.55%** 0.50%** 0.45%** 0.53%
Examples
Your investment of $1,000 would incur the
following expenses, assuming 5% annual return:
1 year $ 6 $ 5 $ 5 $ 6 $ 5 $ 5 $ 5
3 years 18 16 16 18 16 14 17
5 years -- 29 28 31 28 25 30
10 years -- 64 63 69 63 57 66
</TABLE>
*Long-term shareholders in mutual funds with 12b-1 fees, such as holders of
Premier Shares of Vista U.S. Government Money Market 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.
**Reflects current waiver arrangements 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 each such Fund, and Total Fund
Operating Expenses for Vista 100% U.S. Treasury Securities Money Market Fund,
Vista Federal Money Market Fund, Vista U.S. Government Money Market Fund,
Vista Cash Management Fund and Vista Prime Money Market Fund would be 0.80%,
0.52%, 0.60%, 0.51% and 0.52%, respectively.
4 & 5
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Premier 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 period ended August 31, 1996, which
is incorporated by reference into the SAI. 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.
VISTA 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
6/3/96*
through
8/31/96
-------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $1.00
-----
Income from Investment Operations:
Net Investment Income .011
-----
Less Distributions:
Dividends from Net Investment Income .011
-----
Net Asset Value, End of Period $1.00
=====
TOTAL RETURN 1.11%
=====
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 227
Ratio of Expenses to Average Net Assets# 0.42%
Ratio of Net Investment Income to Average Net
Assets# 3.45%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.42%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 3.45%
* Commencement of offering shares.
# Short periods have been annualized.
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, 1996,
which is incorporated by reference into the SAI. 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.
VISTA TREASURY PLUS MONEY MARKET FUND
<TABLE>
<CAPTION>
Year ended 4/22/94*
----------------- through
8/31/96 8/31/95 8/31/94
------- ------ -------
<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 0.050 0.050 0.014
------- ------ ------
Less Distributions:
Dividends from Net Investment Income 0.050 0.050 0.014
------- ------ ------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======= ====== ======
TOTAL RETURN 5.07% 5.17% 1.37%
======= ====== ======
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $106,011 $18,572 $ 36
Ratio of Expenses to Average Net Assets# 0.52% 0.50% 0.49%
Ratio of Net Investment Income to Average Net
Assets# 4.85% 5.23% 3.85%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.63% 1.57% 0.89%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 4.74% 4.16% 3.46%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
7
<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, 1996,
which is incorporated by reference into the SAI. 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.
VISTA FEDERAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Year ended 4/22/94*
------------------- through
8/31/96 8/31/95 8/31/94
------- ------- -------
<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 0.050 0.053 0.015
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income 0.050 0.053 0.015
-------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======== ======== ========
TOTAL RETURN 5.14% 5.40% 1.47%
Ratios/Supplemental Data:
Net Assets, end of Period (000 omitted) $248,757 $148,512 $55,768
Ratio of Expenses to Average Net Assets# 0.50% 0.49% 0.35%
Ratio of Net Investment Income to Average Net
Assets# 4.99% 5.32% 4.38%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.52% 0.59% 0.74%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 4.97% 5.22% 4.00%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
8
<PAGE>
(This Page Intentionally Left Blank)
9
<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, 1996,
which is incorporated by reference into the SAI. 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, 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, 1992 were audited by other
independent accountants.
VISTA U.S. GOVERNMENT MONEY MARKET FUND(1)
<TABLE>
<CAPTION>
Year Ended 11/1/93
------------------- through
8/31/96 8/31/95 8/31/94+++
-------- ------- ----------
<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 0.050 0.052 0.027
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income 0.050 0.052 0.027
-------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======== ======== ========
TOTAL RETURN 5.15% 5.31% 2.70%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $801,665 $763,609 $545,999
Ratio of Expenses to Average Net
Assets+ 0.55% 0.55% 0.55%
Ratio of Net Income to Average
Net Assets+ 5.04% 5.22% 3.13%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets+ 0.59% 0.59% 0.61%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets+ 5.00% 5.18% 3.07%
<CAPTION>
Year 7/1/92 Year Ended
Ended through ----------------------------------
10/31/93 10/31/92* 6/30/92 6/30/91 6/30/90(2)
---------- --------- ------- -------- -----------
<S> <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
---------- --------- ------- -------- -------
Income from Investment Operations:
Net Investment Income 0.027 0.010 0.041(3) 0.068 0.075
---------- --------- ------- -------- -------
Less Distributions:
Dividends from Net Investment Income 0.027 0.010 0.041(3) 0.068 0.075
---------- --------- ------- -------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ======== ======== =======
TOTAL RETURN 2.70% 0.98% 4.68% 6.91% 8.13%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $1,609,704 $108,505 $78,795 $193,308 $63,774
Ratio of Expenses to Average Net
Assets+ 0.55% 0.58% 0.57% 0.57% 0.72%
Ratio of Net Income to Average
Net Assets+ 2.66% 2.87% 4.10% 6.76% 7.46%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets+ 0.67% 0.70% 0.64% 0.65% --
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets+ 2.54% 2.75% 4.03% 6.68% --
</TABLE>
10 & 11
<PAGE>
VISTA U.S. GOVERNMENT MONEY MARKET FUND(1)
<TABLE>
<CAPTION>
Year Ended
---------------------------------------
9/30/89 9/30/88 9/30/87 9/30/86
------- ------- ------- -------
<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 0.083 0.065 0.058 0.062
------- ------- ------- -------
Less Distributions:
Dividends from Net Investment Income 0.083 0.065 0.058 0.062
------- ------- ------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== =======
TOTAL RETURN 6.34% 6.54% 5.78% 6.24%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $84,752 $79,541 $82,068 $86,475
Ratio of Expenses to Average Net Assets+ 0.70% 0.67% 0.64% 0.68%
Ratio of Net Income to Average Net
Assets+ 8.31% 6.54% 5.78% 6.24%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets+ -- -- -- --
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets+ -- -- -- --
</TABLE>
+ Short periods 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 October 28, 1994. 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) Includes $0.001 short-term capital gain per share.
12 & 13
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Premier 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 period ended August 31, 1996, which
is incorporated by reference into the SAI. 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.
VISTA CASH MANAGEMENT FUND
5/6/96*
through
8/31/96
---------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 1.00
Income from Investment Operations:
Net Investment Income 0.016
Less Dividends from Net Investment Income
0.016
Net Asset Value, End of Period $ 1.00
========
TOTAL RETURN 1.61%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $433,302
Ratio of Expenses to Average Net Assets# 0.50%
Ratio of Net Investment Income to Average Net
Assets# 4.93%
Ratio of Expenses without waivers and assumption of
expenses to Average Net Assets# 0.52%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 4.91%
* Commencement of offering shares.
# Short periods have been annualized.
14
<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, 1996,
which is incorporated by reference into the SAI. 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.
VISTA PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
Year ended 11/15/93*
------------------------- through
8/31/96 8/31/95 ` 8/31/94+
-------- -------- --------
<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 0.052 0.053 0.027
Net Realized Loss on Securities -- (0.003) --
-------- -------- --------
Total Income from Investment Operations 0.052 0.050 0.027
Voluntary Capital Contribution -- 0.003 --
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income 0.052 0.053 0.027
-------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======== ======== ========
Total Return (1) 5.32% 5.44% 2.75%
Ratios/Supplemental Data:
Net Assets, end of Period (000 omitted) $418,736 $ 62,737 $ 73,253
Ratio of Expenses to Average Net Assets# 0.45% 0.45% 0.45%
Ratio of Net Investment Income to Average
Net Assets# 5.18% 5.24% 3.15%
Ratio of Expenses without waivers and
assumption of expenses to Average Net
Assets# 0.51% 0.65% 0.56%
Ratio of Net Investment Income without
waivers and assumption of expenses to
Average Net Assets# 5.12% 5.04% 3.04%
</TABLE>
* Commencement of operations.
+In 1994 Prime Money Market changed its fiscal year-end from October 31 to
August 31.
# Short periods have been annualized.
15
<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, 1996,
which is incorporated by reference into the SAI. 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.
VISTA TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 11/1/93 Year Ended 7/18/90*
Ended Ended through ---------------------------------- through
8/31/96 8/31/95 8/31/94+++ 10/31/93 10/31/92 10/31/91 10/31/90
-------- -------- ---------- -------- -------- -------- --------
<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 0.031 0.032 0.018 0.022 0.031 0.046 0.002
-------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income 0.031 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 $ 1.00
======== ======== ======== ======== ======== ======== ========
Total Return 3.12% 3.29% 1.79% 2.21% 3.09% 4.68% 6.82%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $145,221 $148,436 $229,306 $225,791 $ 87,027 $ 19,174 $ 11,320
Ratio of Expenses to Average Net
Assets+ 0.58% 0.56% 0.55% 0.55% 0.55% 0.55% 0.55%
Ratio of Net Investment Income to
Average Net Assets+ 3.08% 3.21% 2.11% 2.16% 2.92% 4.39% 6.82%
Ratio of Expenses without waivers and
assumption of expenses to Average
Net Assets+ 0.73% 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+ 2.92% 2.93% 1.89% 1.92% 2.71% 4.12% 6.66%
</TABLE>
* Commencement of offering shares.
+ Short periods have been annualized.
+++ In 1994 the Tax Free Money Market Fund changed its fiscal year-end from
October 31 to August 31.
16 & 17
<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. Income on direct investments in U.S.
Treasury securities 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.
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
obligations issued or guaranteed by the U.S. Treasury. 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, and 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. Due to
state income tax considerations, the Fund will not enter into repurchase
agreements.
- --------------------------------------------------------------------------------
Shareholders of the above Funds that reside in a 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 Dividends and Distributions are Made; Tax Information."
18
<PAGE>
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 or agencies or instrumentalities of the U.S.
Government, and in repurchase agreements collateralized by these obligations.
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.
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 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
19
<PAGE>
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 "Additional Investment
Policies of Vista Tax Free Money Market 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.
COMMON INVESTMENT
POLICIES
- --------
In lieu of investing directly, each 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
applicable Fund.
Each Fund seeks to maintain a net asset value of $1.00 per share.
The Funds invest only in U.S. dollar-denominated 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 Trust. 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.
20
<PAGE>
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 is classified as a "non-diversified" fund under
federal securities law. This Fund's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Fund were
diversified. Each Fund other than the Vista Tax Free Money Market Fund is
classified as a "diversified" fund under federal securities laws.
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 practice, 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 Vista Tax Free Money
Market Fund also has the ability to lend portfolio securities in an amount equal
to 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 delivery at a future date, 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.
21
<PAGE>
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 stripped obligations (i.e., separately traded principal and interest
components of securities) where the underlying obligations are 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 Vista
Tax Free Money Market 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 securities
in which Vista
22
<PAGE>
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 floating or variable rate nature of these investments, a 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, a Fund's yield may increase and it may have reduced
risk of capital depreciation. Demand features on certain floating or variable
rate securities may obligate a 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 floating or 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 when consistent with its investment objective and
policies, subject to applicable regulatory limitations. Additional fees may be
charged by other money market funds.
PORTFOLIO TURNOVER. It is intended that the Funds will be fully managed by
buying and selling securities, as well as holding securities to maturity. The
frequency of the Funds' portfolio transactions will vary from year to year. In
managing a Fund, the Fund's advisers will seek to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. More frequent turnover will generally result in higher transactions
costs, including dealer mark-ups.
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 also 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.
23
<PAGE>
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 they 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 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 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. These 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).
24
<PAGE>
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 invests 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 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. 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 revenue 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 in which the Fund may invest 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. Although "non- appropriation" lease
obligations are
25
<PAGE>
secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. Certain investments in municipal lease
obligations may be illiquid.
LIMITING INVESTMENT RISKS
Specific regulations and investment restrictions help the Funds limit investment
risks for their shareholders. These regulations and restrictions prohibit each
Fund from: (a) with certain limited exceptions, investing more than 5% of its
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 Money Market Fund, obligations of states, cities, municipalities or
other public authorities, as well as 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 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 are
permitted to invest any portion of their assets in obligations of domestic banks
(including their foreign branches), and in obligations of 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 industry. 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
26
<PAGE>
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 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. 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. banks
(including their foreign branches), and may also invest in Municipal Obligations
backed by 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. Changes in the credit quality
of banks or other financial institutions backing the Fund's Municipal
Obligations could cause losses to the Fund and affect their share price. Credit
enhancements which are supplied by foreign or domestic banks are not subject to
federal deposit insurance.
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 the Fund 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 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 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
27
<PAGE>
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 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 each Fund other than the Vista Cash Management Fund
and the Vista Tax Free Money Market 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 each of these Funds on a day-to-day
basis. For these services, CAM is entitled to receive a fee, payable by Chase
from its advisory fee, at an annual rate equal to 0.03% of each such Fund's
average daily net assets. 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.
Texas Commerce Bank, National Association ("TCB") is the sub- investment adviser
to the Vista Cash Management Fund and the Vista Tax Free Money Market Fund
pursuant to a Sub-Investment Advisory Agreement between Chase and TCB. TCB has
been in the investment counselling business since 1987 and is ultimately
controlled and owned by The Chase Manhattan Corporation. TCB makes investment
decisions for the Vista Cash Management Fund and the Vista Tax Free Money Market
Fund on a day-to-day basis. For these services, TCB is entitled to receive a
fee, payable by Chase from its advisory fee, at an annual rate equal to 0.03% of
each such Fund's average daily net assets. TCB is located at 600 Travis,
Houston, Texas 77002.
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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, credit cards and cash will not be accepted.
When purchases are made by check, redemptions will not be allowed until
clearance of the purchase check, which may take 15 calendar days or longer. In
addition, redemption of shares purchased through ACH will not be allowed until
clearance of your payment, which may take 7 business days or longer. 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 a 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 transaction through automatic periodic 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 and a deposit slip or voided check to the Vista Service
Center. Call the Vista Service Center at 1-800-622-4273 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 by 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 in proper form on any
business day during
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which the Federal Reserve Bank of New York and the New York Stock Exchange are
open for business ("Fund Business Day"). To receive that day's dividend, the
Vista Service Center or your investment representative or shareholder servicing
agent must generally receive your order prior to a Fund's Cut-off Time. The
Funds' Cut-off Times (Eastern time) are as follows:
Vista 100% U.S. Treasury
Securities Money Market Fund Noon
Vista Tax Free Money Market
Fund Noon
Vista Federal Money Market
Fund 2:00 p.m.
Vista U.S. Government Money
Market Fund 2:00 p.m.
Vista Cash Management Fund 2:00 p.m.
Vista Prime Money Market Fund 2:00 p.m.
Vista Treasury Plus Money
Market Fund 4:00 p.m.
Each Fund reserves the right to set an earlier Cut-off Time on any Fund Business
Day on which the Public Securities Association ("PSA") recommends an early close
to trading on the U.S. Government securities market. Generally, such earlier
Cut-off Time will be noon (Eastern time). The PSA is the trade association that
represents securities firms and banks that underwrite, trade and sell debt
securities, both domestically and internationally. 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., Eastern time on any Fund Business Day will not be accepted
and executed on the same day except at the Funds' discretion. Orders received
and not accepted after a Fund's Cut-off Time will be considered received prior
to the Fund's Cut-off Time on the following Fund Business Day and processed
accordingly. Orders for shares are accepted by each Fund after funds are
converted to federal funds. Orders paid by check and received before a Fund's
Cut-off Time will generally be available for the purchase of shares the
following Fund Business Day. For purchases by wire, if federal funds are not
received by the Vista Service Center by 4:00 Eastern time on the day of the
purchase order, the order will be canceled. 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 Fund shares on any Fund Business Day either directly or
through your investment representative or shareholder servicing agent. A Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
SELLING SHARES DIRECTLY TO A 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. In order to allow the
advisers to most effectively manage the Funds, investors are urged to make
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redemption requests as early in the day as possible.
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. A Fund may
require 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.
A Fund generally sends you payment for your shares the Fund Business Day after
your request is received in proper form, provided your request is received by
the Vista Service Center prior to the Fund's Cut-off Time, and assuming the Fund
has collected payment of the purchase price of your shares. Under unusual
circumstances, the Funds 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 from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Funds. Unless an
investor indicates otherwise on the account application, the Funds 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 Funds with his or her account registration
and address as it appears on the Funds' 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, a Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither a Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. 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.
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.
INVOLUNTARY REDEMPTION OF ACCOUNTS. Each Fund may involuntary redeem your
shares if the aggregate net asset value of the shares
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in your account is less than $100,000 or if you purchase through the Systematic
Investment Plan and fail to meet that Fund's investment minimum within a twelve
month period. 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,
subject to any minimum investment requirement. 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.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. 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 Funds, the Funds reserve
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 each class of shares of each Fund is currently determined
daily as of 4:00 p.m., Eastern time on each Fund Business Day by dividing the
net assets of a Fund attributable to such class by the number of shares of such
class outstanding at the time the determination is made. Effective with the
anticipated introduction of certain automated share purchase programs, the net
asset value of shares of each class 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 Investment 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
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than the price a Fund would receive if the instrument were sold. It is
anticipated that the net asset value of each share of each Fund will remain
constant at $1.00 and the 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 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 a
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 or by ACH to a pre-established bank
account, 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 any net
long-term capital gains would be taxable as such, regardless
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<PAGE>
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 FUNDS
- --------------------
DISTRIBUTION ARRANGEMENTS
The Funds' distributor is Vista Fund Distributors, Inc. ("VFD"). VFD 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% of
the average daily net assets attributable to its 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. Some
activities intended to promote the sale of Premier Shares of Vista U.S.
Government Money Market Fund will be conducted generally by the Vista Family of
Funds, and activities intended to promote the Fund's Premier Shares may also
benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater for entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
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,
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<PAGE>
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 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 Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as shareholder servicing agents.
For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on specified
minimum balance requirements, such as reduced or no fees for certain banking
services or preferred rates on loans and deposits. Chase and certain broker-
dealers and other shareholder servicing agents may, at their own expense,
provide gifts, such as computer software packages, guides and books related to
investment or additional Fund shares valued up to $250 to their customers that
invest in the Vista Funds.
Chase and/or VFD may from time to time, at their own expense out of compensation
retained by them from the Fund or other sources available to them, make
additional payments to certain selected dealers or other shareholder servicing
agents for performing administrative services for their customers. These
services include maintaining account records, processing orders to purchase,
redeem and exchange Fund shares and responding to certain customer inquiries.
The amount of such compensation may be up to an additional 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such shareholder servicing agents. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it will
be paid by Chase and/or VFD.
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.
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VFD provides certain sub-administrative services to each Fund pursuant to a
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. VFD 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. VFD is located at 101 Park
Avenue, New York, New York 10178.
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 Funds' custodian
for all services to the Funds, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Funds. Shareholder servicing and
distribution fees are allocated to specific classes of the Funds. In addition,
the Funds may allocate transfer agency and certain other expenses by class.
Service providers to a 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 a Fund generally vote together except when
required
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<PAGE>
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 1-800-622-4273
to obtain additional information about other classes of shares of the Funds that
are offered. Any person entitled to receive compensation for selling or
servicing shares of a Fund may receive different levels of compensation with
respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
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 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 a tax free fund's yield. The tax
equivalent yield of the Vista Tax Free Money
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<PAGE>
Market Fund can then be compared to the yield of a taxable money market fund.
Tax equivalent yields can be quoted on either a "yield" or "effective yield"
basis.
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>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VPMM-1-1296X
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VPMM-1-1296C
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VPMM-1-1296
<PAGE>
[VISTA LOGO]
INSTITUTIONAL[SM] SHARES
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
-------------------------------------------
INVESTMENT STRATEGY: CURRENT INCOME
-------------------------------------------
December 27, 1996
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 December 27, 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.
1
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2
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TABLE OF CONTENTS
Expense Summary ............................................................ 4
The expenses you pay on your Fund investment, including examples
Financial Highlights ....................................................... 6
The Funds' financial history
Fund Objectives and Investment Approach
Vista 100% U.S. Treasury Securities Money Market Fund ..................... 13
Vista Treasury Plus Money Market Fund ..................................... 13
Vista Federal Money Market Fund ........................................... 13
Vista U.S. Government Money Market Fund ................................... 14
Vista Cash Management Fund ................................................ 14
Vista Prime Money Market Fund ............................................. 14
Vista Tax Free Money Market Fund .......................................... 15
Common Investment Policies ................................................. 15
Management ................................................................. 23
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management and
Texas Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares ....................................... 23
How the Funds Value Their Shares ........................................... 26
How Dividends and Distributions Are Made; Tax Information .................. 27
How the Funds distribute their earnings, and tax treatment
related to those earnings
Other Information Concerning the Funds ..................................... 28
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information .................................................... 30
How performance is determined, stated and/or advertised
3
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in a Fund based on expenses incurred
in the most recent fiscal year by each Fund, other than Vista 100% U.S. Treasury
Securities Money Market Fund, and based on estimated expenses for the current
fiscal year for the Vista 100% U.S. Treasury Securities Money Market Fund. The
examples show the cumulative expenses attributable to a hypothetical $1,000
investment over specified periods.
The table is provided to help you understand the expenses of investing in the
Funds and your share of the operating expenses that a 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 below, may be incurred
directly by customers of financial institutions in connection with an
investment in a Fund.
<TABLE>
<CAPTION>
Vista 100%
U.S. Vista
Treasury Treasury Vista
Securities Plus Federal
Money Money Money
Market Market Market
Fund Fund Fund
------------- ------------- -------------
Institutional Institutional Institutional
Shares Shares Shares
------------- ------------- -------------
<S> <C> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee 0.10% 0.10% 0.10%
12b-1 Fee n/a n/a n/a
Shareholder Servicing Fee n/a n/a n/a
Other Expenses 0.17% 0.16% 0.17%
Total Fund Operating Expenses 0.27% 0.26% 0.27%
Examples
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return:
1 year $ 3 $ 3 $ 3
3 years 9 8 9
5 years -- 15 15
10 years -- 33 34
</TABLE>
<TABLE>
<CAPTION>
Vista U.S. Vista Vista Vista
Government Cash Prime Tax Free
Money Manage- Money Money
Market ment Market Market
Fund Fund Fund Fund
------------- ------------- ------------- -------------
Institutional Institutional Institutional Institutional
Shares Shares Shares Shares
------------- ------------- ------------- -------------
<S> <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%
12b-1 Fee n/a n/a n/a n/a
Shareholder Servicing Fee n/a n/a n/a n/a
Other Expenses 0.14% 0.14% 0.15% 0.17%
Total Fund Operating Expenses 0.24% 0.24% 0.25% 0.27%
Examples
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return:
1 year $ 2 $ 2 $ 3 $ 3
3 years 8 8 8 9
5 years 14 14 14 15
10 years 31 31 32 34
</TABLE>
4 & 5
<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 period ended August 31, 1996, which
is incorporated by reference into the SAI. Shareholders may obtain a copy of
this annual report by contacting the Fund. 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.
VISTA 100% U.S. TREASURY SECURITIES MONEY MARKET FUND
6/3/96*
through
8/31/96
-------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 1.00
Income from Investment Operations:
Net Investment Income 0.012
Less Distributions:
Dividends from net investment income $ 0.12
======
Net Asset Value, End of Period $ 1.00
TOTAL RETURN 1.23%
======
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $ 1
Ratio of Expenses to Average Net Assets# 0.21%
Ratio of Net Investment Income to Average Net Assets# 3.65%
Ratio of Expenses without waivers and assumption of expenses
to Average Net Assets# 0.21%
Ratio of Net Investment Income without waivers and assumption
of Expenses to Average Net Assets# 3.65%
* Commencement of offering shares.
# Short periods have been annualized.
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, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain a copy
of this annual report by contacting the Fund. 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.
VISTA TREASURY PLUS MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 4/20/94*
ended ended through
8/31/96 8/31/95 8/31/95
--------- ------- -------
<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 0.052 0.053 0.014
--------- ------- -------
Less Distributions:
Dividends from Net Investment Income 0.052 0.053 0.014
--------- ------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
========= ======= =======
Total Return 5.29% 5.36% 1.45%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $188,513 $17,636 $14,976
Ratio of Expenses to Average Net Assets# 0.30% 0.32% 0.32%
Ratio of Net Investment Income to Average Net
Assets# 5.11% 5.21% 3.93%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 0.38% 0.89% 0.53%
Ratio of Net Investment Income without waivers and
assumption of Expenses to Average Net Assets# 5.03% 4.64% 3.72%
</TABLE>
* Commencement of operations.
# Short periods have been annualized.
7
<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, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain a copy
of this annual report by contacting the Fund. 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.
VISTA FEDERAL MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 4/20/94*
ended ended through
8/31/96 8/31/95 8/31/94
--------- --------- ---------
<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 0.052 0.054 0.015
--------- --------- ---------
Less Distributions:
Dividends from Net Investment Income 0.052 0.054 0.015
--------- --------- ---------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
========= ========= =========
Total Return 5.35% 5.57% 1.54%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $141,312 $113,591 $117,364
Ratio of Expenses to Average Net Assets# 0.30% 0.31% 0.30%
Ratio of Net Investment Income to Average Net
Assets# 5.20% 5.45% 4.26%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 0.30% 0.37% 0.49%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 5.20% 5.39% 4.06%
</TABLE>
* Commencement of operations.
# Short periods have been annualized.
8
<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, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain obtain
a copy of this annual report by contacting the Fund. 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.
VISTA U.S. GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 12/10/93*
ended ended through
8/31/96 8/31/95 8/31/94+
----------- --------- ---------
<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 0.053 0.055 0.026
----------- --------- ---------
Less Distributions:
Dividends from net investment income 0.053 0.055 0.026
----------- --------- ---------
Net Asset Value, End of Period $1.00 $1.00 $ 1.00
=========== ========= =========
TOTAL RETURN 5.45% 5.60% 2.61%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $1,181,763 $466,083 $212,810
Ratio of Expenses to Average Net Assets# 0.27% 0.27% 0.27%
Ratio of Net Investment Income to Average Net
Asset# 5.30% 5.58% 3.81%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets# 0.27% 0.28% 0.27%
Ratio of Net Investment Income without waivers and
assumption of Expenses to Average Net Assets# 5.30% 5.57% 3.81%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
9
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
The table set forth below provides selected per share data and ratios for one
Institutional 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 period ended August 31, 1996, which
is incorporated by reference into the SAI. Shareholders may obtain a copy of
this annual report by contacting the Fund. 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.
VISTA CASH MANAGEMENT FUND
5/6/96*
through
8/31/96
---------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 1.00
Income from Investment Operations:
Net Investment Income 0.017
Less Distributions:
Dividends from Net Investment Income 0.017
Net Asset Value, End of Period $ 1.00
=========
TOTAL RETURN 1.69%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $657,002
Ratio of Expenses to Average Net Assets# 0.25%
Ratio of Net Investment Income to Average Net Asset# 5.22%
Ratio of Expenses without waivers and assumption of
expenses
to Average Net Assets# 0.25%
Ratio of Net Investment Income without waivers and
assumption
of Expenses to Average Net Assets# 5.22%
* Commencement of offering shares.
# Short periods have been annualized.
10
<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, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain a copy
of this annual report by contacting the Fund. 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
VISTA PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 4/26/94*
ended ended through
8/31/96 8/31/95 8/31/94+
-------- -------- -------
<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 0.054 0.055 0.014
Net Gains or (Losses) in Securities
(both realized and unrealized) -- (0.003) --
-------- -------- -------
Total from Investment Operations 0.054 0.052 0.014
-------- -------- -------
Voluntary Capital Contribution -- 0.003 --
-------- -------- -------
Less Distributions:
Dividends from Net Investment Income 0.054 0.055 0.014
-------- -------- -------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======== ======== =======
TOTAL RETURN 5.51% 5.62% 1.50%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $724,544 $185,640 $57,961
Ratio of Expenses to Average Net Assets# 0.26% 0.27% 0.27%
Ratio of Net Investment Income to Average Net Assets# 5.33% 5.57% 4.21%
Ratio of Expenses without waivers and assumption of
expenses
to Average Net Assets# 0.26% 0.35% 0.37%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 5.33% 5.49% 4.11%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
11
<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, 1996,
which is incorporated by reference into the SAI. Shareholders may obtain a copy
of this annual report by contacting the Fund. 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.
VISTA TAX FREE MONEY MARKET FUND
<TABLE>
<CAPTION>
Year Year 11/1/93*
ended ended through
8/31/96 8/31/95 8/31/94+
-------- -------- --------
<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 0.034 0.035 0.019
-------- -------- --------
Less Distributions:
Dividends from Net Investment Income 0.034 0.035 0.019
-------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======== ======== =======
Total Return 3.40% 3.53% 1.95%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $148,536 $108,494 $110,332
Ratio of Expenses to Average Net Assets# 0.31% 0.33% 0.34%
Ratio of Net Investment Income to Average Net
Assets# 3.33% 3.46% 2.38%
Ratio of Expenses without waivers and assumption
of expenses
to Average Net Assets# 0.31% 0.34% 0.34%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 3.33% 3.45% 2.38%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
12
<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. Income on direct investments in U.S.
Treasury securities 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.
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
obligations issued or guaranteed by the U.S. Treasury. 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, and 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. Due to
state income tax considerations, the Fund will not enter into repurchase
agreements.
- --------------------------------------------------------------------------------
Shareholders of the above Funds that reside in a 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 Dividends and Distributions are Made; Tax Information."
13
<PAGE>
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, or agencies or instrumentalities of the U.S.
Government, and in repurchase agreements collateralized by these obligations.
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.
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 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;
14
<PAGE>
(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 "Additional Investment
Policies of Vista Tax Free Money Market 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.
COMMON INVESTMENT
POLICIES
- --------
In lieu of investing directly, each 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
applicable Fund.
Each Fund seeks to maintain a net asset value of $1.00 per share.
The Funds invest only in U.S. dollar-denominated 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 Trust. 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
15
<PAGE>
uninvested cash reserves, which would adversely affect its yield.
Vista Tax Free Money Market Fund is classified as a "non-diversified" fund under
federal securities law. This Fund's assets may be more concentrated in the
securities of any single issuer or group of issuers than if the Fund were
diversified. Each Fund other than the Vista Tax Free Money Market Fund is
classified as a "diversified" fund under federal securities laws.
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 Vista Tax Free Money
Market Fund also has the ability to lend portfolio securities in an amount equal
to 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 delivery at a future date, 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
16
<PAGE>
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 stripped obligations (i.e., separately traded principal and interest
components of securities) where the underlying obligations are 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 Vista
Tax Free Money Market 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 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
17
<PAGE>
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 floating or variable rate nature of these investments, a 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, a Fund's yield may increase and it may have reduced risk of capital
depreciation. Demand features on certain floating or variable rate securities
may obligate a 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 floating or 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 when consistent with its investment objective and
policies, subject to applicable regulatory limitations. Additional fees may be
charged by other money market funds.
PORTFOLIO TURNOVER. It is intended that the Funds will be fully managed by
buying and selling securities, as well as holding securities to maturity. The
frequency of the Funds' portfolio transactions will vary from year to year. In
managing a Fund, the Fund's advisers will seek to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. More frequent turnover will generally result in higher transactions
costs, including dealer mark-ups.
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 also 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
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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 they 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 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 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. These 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
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<PAGE>
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 invests 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 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. 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 revenue 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 in which the Fund may invest 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. Although "non-appropriation"
lease obligations are secured by the leased property, disposition of the
property in the event of foreclosure might prove difficult. Certain investments
in municipal lease obligations may be illiquid.
LIMITING INVESTMENT RISKS
Specific regulations and investment restrictions help the Funds limit
investment risks for their shareholders. These regulations and
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restrictions prohibit each Fund from: (a) with certain limited exceptions,
investing more than 5% of its 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, obligations of states, cities, municipalities or other public
authorities, as well as 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 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 are
permitted to invest any portion of their assets in obligations of domestic banks
(including their foreign branches), and in obligations of 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 industry. 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
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foreign governmental and private issuers involve investment risks in addition to
those of 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. 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. banks
(including their foreign branches), and may also invest in Municipal Obligations
backed by 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. Changes in the credit quality
of banks or other financial institutions backing the Fund's Municipal
Obligations could cause losses to the Fund and affect its share price. Credit
enhancements which are supplied by foreign or domestic banks are not subject to
federal deposit insurance.
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 the Fund 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 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 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
22
<PAGE>
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 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 each Fund other than the Vista Cash Management Fund
and the Vista Tax Free Money Market 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 each of these Funds on a day-to-day
basis. For these services, CAM is entitled to receive a fee, payable by Chase
from its advisory fee, at an annual rate equal to 0.03% of each such Fund's
average daily net assets. 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.
Texas Commerce Bank, National Association ("TCB") is the sub-investment adviser
to the Vista Cash Management Fund and the Vista Tax Free Money Market Fund
pursuant to a Sub-Investment Advisory Agreement between Chase and TCB. TCB has
been in the investment counselling business since 1987 and is ultimately
controlled and owned by The Chase Manhattan Corporation. TCB makes investment
decisions for the Vista Cash Management Fund and the Vista Tax Free Money Market
Fund on a day-to-day basis. For these services, TCB is entitled to receive a
fee, payable by Chase from its advisory fee, at an annual rate equal to 0.03% of
each such Fund's average daily net assets. TCB is located at 600 Travis,
Houston, Texas 77002.
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 and the New York Stock
Exchange are open for business ("Fund Business Day"). Qualified investors are
defined as institutions, trusts, partnerships,
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<PAGE>
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 without a sales load at the net asset value next
determined after the Vista Service Center receives your order in proper form on
any Fund Business Day. To receive that day's dividend, the Vista Service Center
or Dealer must generally receive your order prior to a Fund's Cut-off Time. The
Funds' Cut-off Times (Eastern time) are as follows:
Vista 100% U.S. Treasury
Securities Money Market Fund Noon
Vista Tax Free Money Market Fund Noon
Vista Federal Money Market Fund 2:00 p.m.
Vista U.S. Government Money
Market Fund 2:00 p.m.
Vista Cash Management Fund 2:00 p.m.
Vista Prime Money Market Fund 2:00 p.m.
Vista Treasury Plus Money Market
Fund 4:00 p.m.
Each Fund reserves the right to set an earlier Cut-off Time on any Fund Business
Day on which the Public Securities Association ("PSA") recommends an early close
to trading on the U.S. Government securities market. Generally, such earlier
Cut-off Time will be noon (Eastern time). The PSA is the trade association that
represents securities firms and banks that underwrite, trade and sell debt
securities, both domestically and internationally. Orders received for shares
after a Fund's Cut-off Time and prior to 4:00 p.m., Eastern time on any Fund
Business Day will not be accepted and executed on the same day except at the
Funds' discretion. Orders received and not accepted after a Fund's Cut-off Time
will be considered received prior to the Fund's Cut-off Time on the following
Fund Business Day and processed accordingly. 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.
All purchases of Institutional Shares must be paid for by federal funds wire. If
federal funds are not received by the Vista Service Center by 4:00 Eastern time
on the day of the purchase order, the order will be canceled. 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
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<PAGE>
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 request
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 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 allow the advisers to most effectively manage the Funds, investors
are urged to make redemption requests as early in the day as possible.
Payment for redemption requests received in proper form prior to a Fund's
Cut-off Time but no later than 2:00 p.m., Eastern 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 or 2:00 p.m.,
Eastern time is normally made in federal funds wired to the redeeming
shareholder on the next Fund Business Day. Under unusual circumstances, the
Funds 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 from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Funds. Unless an
investor indicates otherwise on the account application, the Funds 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 Funds with his or her account registration
and address as it appears on the Funds' 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, a Fund may be liable for any losses due to
unauthorized or fraudulent instructions. An investor agrees, however, that to
the extent permitted by applicable law, neither a Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. 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
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<PAGE>
Privilege may be modified or terminated without notice.
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.
INVOLUNTARY REDEMPTION OF ACCOUNTS. Each Fund may involuntarily 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, subject to any minimum investment requirement. 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.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. 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 Funds, the Funds reserve
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 each class of shares of each Fund is currently determined
daily as of 4:00 p.m., Eastern time on each Fund Business Day by dividing the
net assets of a Fund attributable to such class by the number of shares of such
class 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 shares of each class of Funds available through
the program will also be determined as of 6:00 p.m.,
26
<PAGE>
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 Investment 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 a Fund would receive if the
instrument were sold. It is anticipated that the net asset value of each share
of each Fund will remain constant at $1.00 and the 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 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 a
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 or by ACH to a pre-established bank
account, 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
27
<PAGE>
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 any net
long-term capital gains would 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 FUNDS
- --------------------
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 Fund Distributors, Inc. ("VFD") acts as the Funds' sub-administrator and
distributor. VFD is a subsidiary of The BISYS Group, Inc. and is unaffiliated
with Chase. For the sub-administrative services it performs, VFD is entitled to
receive a fee from each Fund at an annual rate equal to 0.05% of the Fund's
average daily net assets. VFD 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. VFD is located at 101 Park
Avenue, New York, New York 10178.
Chase and/or VFD may from time to time, at their own expense out of compensation
retained by them from the Fund or other sources available to them, make
additional payments to certain selected dealers or other shareholder servicing
agents for performing administrative services for their customers. These
services include maintaining account records, processing orders to purchase,
redeem and exchange Fund shares and responding to certain customer inquiries.
The amount of such compensation may be up to an additional 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such shareholder servicing agents. Such compensation does not
represent an additional expense to the Fund
28
<PAGE>
or its shareholders, since it will be paid by Chase and/or VFD.
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 Funds' custodian
for all services to the Funds, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Funds. Shareholder servicing and
distribution fees are allocated to specific classes of the Funds. In addition,
the Funds may allocate transfer agency and certain other expenses by class.
Service providers to a 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 a 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
29
<PAGE>
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-
622-4273 to obtain additional information about other classes of shares of the
Funds that are offered. Any person entitled to receive compensation for selling
or servicing shares of a Fund may receive different levels of compensation with
respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
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 yield. The tax
equivalent yield of the Vista Tax Free Money Market Fund can then be compared to
the yield of a taxable money market fund. Tax equivalent yields can be quoted on
either a "yield" or "effective yield" basis.
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
30
<PAGE>
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.
31
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VINS-1-1296X
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VINS-1-1296C
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VINS-1-1296
<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA[SM] PRIME MONEY MARKET FUND
Class B Shares
-----------------------------------
Investment Strategy: Current Income
-----------------------------------
December 27, 1996
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 December 27, 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 Class B shares of the Fund are 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 FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK-- INCLUDING POSSIBLE LOSS OF
PRINCIPAL. 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.
1
<PAGE>
2
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................ 4
The expenses you pay on your Fund investment, including examples
Financial Highlights ....................................................... 5
The Fund's financial history
Fund Objective and Investment Approach ..................................... 6
Other Investment Practices ................................................. 6
Management ................................................................. 11
Chase Manhattan Bank, the Fund's adviser; Chase Asset
Management, the Fund's sub-adviser
About Your Investment ...................................................... 11
How to Buy, Sell and Exchange Shares ....................................... 12
How the Fund Values Its Shares ............................................. 15
How Dividends and Distributions Are Made; Tax Information 15 How the Fund
distributes its earnings, and tax treatment related to those earnings
Other Information Concerning the Funds ..................................... 16
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information .................................................... 19
How performance is determined, stated and/or advertised
3
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your 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>
<S> <C>
Shareholder Transaction Expenses
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)*** 0.22%
Other Expenses (after estimated waiver and reimbursement)*** 0.40%
----
Total Fund Operating Expenses (after waiver of fee and expense reimbursement) *** 1.47%
====
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Example
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 $160
Assuming no redemptions $15 $46 $ 80 $160
</TABLE>
* 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.
***Reflects current fee waiver and expense subsidy arrangements to maintain
Total Fund Operating Expenses at the level indicated in the table above.
Absent such arrangements, the Shareholder Servicing Fee would be 0.25%, and
Total Fund Operating Expenses would be 1.50%.
+Assumes deduction at the time of redemption of the maximum applicable
deferred sales charge.
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 example
should not be considered a representation 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 one
Class B 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, 1996,
which is incorporated by reference into the SAI. 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>
Class B Shares
--------------------------------------
Year Year 4/21/94*
ended ended through
8/31/96 8/31/95 8/31/94+
------- ------- --------
<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 0.042 0.043 0.011
Net Realized Loss on Securities -- (0.003) --
------- ------- ------
Total Income from Investment Operations 0.042 0.040 0.011
------- ------- ------
Voluntary Capital Contribution -- 0.003 --
------- ------- ------
Less Distributions:
Dividends from Net Investment Income 0.042 0.043 0.011
------- ------- ------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
======= ======= ======
Total Return 4.25% 4.37% 1.11%
Ratios/Supplemental Data:
Net Assets, End of Period (000 omitted) $15,667 $4,880 $1,452
Ratio of Expenses to Average Net Assets # 1.47% 1.47% 1.47%
Ratio of Net Investment Income to Average Net Assets # 4.17% 4.33% 2.96%
Ratio of Expenses without waivers and assumption of
expenses to
Average Net Assets # 1.71% 2.53% 1.67%
Ratio of Net Investment Income without waivers and
assumption of
expenses to Average Net Assets # 3.93% 3.27% 2.76%
</TABLE>
* Commencement of offering shares.
+In 1994 the Prime Money Market Fund changed its fiscal year-end from
October 31 to August 31.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVE 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.
In lieu of investing directly, 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.
The Fund is classified as a "diversified" fund under federal securities law.
OTHER INVESTMENT
PRACTICES
- ---------
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund invests only in U.S. dollar-denominated 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 Trust. 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.
6
<PAGE>
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 objective 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.
REPURCHASE AGREEMENTS, SECURITIES LOANS AND FORWARD COMMITMENTS. The Fund may
enter into agreements to purchase and resell securities at an agreed-upon price
and time. The Fund also has the ability to lend portfolio securities in an
amount equal to not more than 30% of its total assets to generate additional
income. These transactions must be fully collateralized at all times. The Fund
may purchase securities for delivery at a future date, 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
7
<PAGE>
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 stripped obligations (i.e., separately traded principal and interest
components of securities) where the underlying obligations are 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 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 floating or 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 floating
or 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 when consistent with its investment
objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other money market funds.
8
<PAGE>
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 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. These 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.
PORTFOLIO TURNOVER. It is intended that the Fund will be fully managed by buying
and selling securities, as well as holding securities to maturity. The frequency
of the Fund's portfolio transactions will vary from year to year. In managing
the Fund, the Fund's advisers will seek to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. More frequent turnover will generally result in higher transactions
costs, including dealer mark-ups.
LIMITING INVESTMENT RISKS Specific regulations and investment restrictions
help the Fund limit
9
<PAGE>
investment risks for shareholders. These regulations and restrictions prohibit
the Fund from: (a) with certain limited exceptions, investing more than 5% of
its 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 these
and other investment policies 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. For certain other risks associated with the Fund's additional
investment activities, see the above discussion of those activities.
The Fund is permitted to invest any portion of its assets in obligations of
domestic banks (including their foreign branches), and in obligations of 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 industry. 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. There may be less publicly available information concerning
foreign issuers there may be difficulties in obtaining or
10
<PAGE>
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 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 0.10% 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 is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.03% of the Fund's average daily net
assets. 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.
ABOUT YOUR INVESTMENT
- ---------------------
Investors should be aware that Class B shares of the Fund are made available
only for purposes of exchanges from Class B shares of other Vista funds. 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 an exchange into
the Fund.
Class B shares automatically convert into Class A shares, based on relative net
asset value, at the beginning of the ninth year. 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 "Other Information Concerning the Fund."
11
<PAGE>
HOW TO BUY, SELL AND EXCHANGE SHARES
- ------------------------------------
HOW TO BUY SHARES
Class B shares of the Fund may only be acquired via exchange from the same class
of another Vista fund and only if the account registrations are identical. Class
B shares of the Fund are sold by the Fund's distributor without an initial sales
load at the net asset value next determined after your exchange order is
received in proper form on any business day during which the Federal Reserve
Bank of New York and the New York Stock Exchange are open for business ("Fund
Business Day"). To receive that day's dividend, the Vista Service Center or your
investment representative or shareholder servicing agent must generally receive
your order prior to the Fund's Cut-off Time, which is 2:00 p.m., Eastern time.
The Fund reserves the right to set an earlier Cut-off Time on any Fund Business
Day on which the Public Securities Association ("PSA") recommends an early close
to trading on the U.S. Government Securities market. Generally, such earlier
Cut-Off Time will be noon (Eastern time). The PSA is the trade association that
represents securities firms and banks that underwrite, trade and sell debt
securities, both domestically and internationally. Orders for shares received
after the Fund's Cut-off Time and prior to 4:00 p.m., Eastern time on any Fund
Business Day will not be accepted and executed on the same day except at the
Fund's discretion. Orders received and not accepted after the Fund's Cut-off
Time will be considered received prior to the Fund's Cut-off Time on the
following Fund Business Day and processed accordingly. The Fund reserves the
right to reject any purchase order.
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 below. For other shares, the
amount of the charge is determined as a percentage of the lesser of the current
market value or purchase price 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 shares held for the
longest period of time. As a result, the CDSC imposed should be the lowest
possible rate. 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 further
information on how sales charges are calculated if you exchange your shares, see
"How to Exchange Your Shares."
The CDSC will be waived on redemption of Class B 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,
provided that the Class B account had a minimum balance of $20,000 at the time
the systematic withdrawal plan was established. The SAI contains additional
information about CDSC waivers.
12
<PAGE>
HOW TO SELL SHARES
You can sell your Fund shares on any Fund Business Day either directly or
through your investment representative or shareholder servicing agent. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
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 applicable
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
may require 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 in proper form, provided your request is received by
the Vista Service Center prior to the Fund's Cut-off Time, and assuming the Fund
has collected payment of the purchase price of your shares. 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 from your
account unless you have notified the Vista Service Center of an address change
within the preceding 30 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Fund. 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. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will be
liable for any loss, liability, cost or expense arising out of any redemption
request, including any fraudulent or unauthorized request. 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.
13
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN. Make regular withdrawals of $100 or more monthly,
quarterly or semi-annually. Call the Vista Service Center at 1-800-34-VISTA
for complete instructions.
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 Fund's Cut-off Time to receive that
day's net asset value. Your representative will be responsible for furnishing
all necessary documentation to the Vista Service Center.
INVOLUNTARY REDEMPTION OF ACCOUNTS. 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. 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, subject to any
minimum investment requirement. 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 a 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.
A Telephone Exchange Privilege is currently available. Call the Vista Service
Center for procedures for telephone transactions. 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 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
14
<PAGE>
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 each class of the Fund's shares is currently determined
daily as of 4:00 p.m., Eastern time on each Fund Business Day by dividing the
net assets of the Fund attributable to such class by the number of shares of
such class outstanding at the time the determination is made. Effective with the
anticipated introduction of certain automated share purchase programs, the net
asset value of shares of each class of the Fund will also be determined as of
6:00 p.m., Eastern time on each Fund Business Day if the Fund is available
through these programs.
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 "Other Investment Practices." 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 the Fund will employ specific investment
policies and procedures to accomplish this result, although no assurance can be
given that it 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 the 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 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 or by ACH to a pre-established bank
account, 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,
15
<PAGE>
amortization of any market premium on the portfolio assets of the Fund, and
the accrued expenses of 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 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 any net long-term capital gains would 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 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 Fund Distributors, Inc. ("VFD"). VFD 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% of the average daily net assets
attributable to its 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. Some
activities intended to promote the sale of Class B shares will be conducted
generally by the Vista Family of Funds, and activities intended to promote the
Fund's Class B shares may also benefit the Fund's other shares and other Vista
funds.
16
<PAGE>
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista Funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater for entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and educational meetings within and outside the U.S.
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 0.25% 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.
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 Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as shareholder servicing agents. For shareholders
that bank with Chase, Chase may aggregate investments in the Vista Funds with
balances held in the Vista Funds with balances held in Chase bank accounts for
purposes of determining eligibility for certain bank privileges that are based
on specified minimum balance requirements, such as reduced or no fees for
certain banking services or preferred rates on loans and deposits. Chase and
certain broker-dealers and other shareholder servicing agents may, at their own
expense, provide gifts, such as computer software packages, guides and books
related to investment or additional Fund shares valued up to $250 to their
customers that invest in the Vista Funds.
Chase and/or VFD may from time to time, at their own expense out of compensation
retained by them from the Fund or other sources available to them, make
additional payments to certain selected dealers or other shareholder servicing
agents for performing administrative services for their
17
<PAGE>
customers. These services include maintaining account records, processing orders
to purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to an additional 0.10%
annually of the average net assets of the Fund attributable to shares of the
Fund held by customers of such shareholder servicing agents. Such compensation
does not represent an additional expense to the Fund or its shareholders, since
it will be paid by Chase and/or VFD.
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.
VFD provides certain sub-
administrative services to the Fund pursuant to a
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. VFD 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. VFD is located at 101 Park
Avenue, New York, New York 10178.
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
18
<PAGE>
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.
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 this class. 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 business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
PERFORMANCE INFORMATION
- -----------------------
The Fund may advertise its annualized "yield" and its "effective yield".
Annualized "yield" is
19
<PAGE>
determined by assuming that income generated by an investment in the 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.
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.
20
<PAGE>
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<PAGE>
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<PAGE>
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<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VPRMB-1-1296X
<PAGE>
December 27, 1996
PROSPECTUS
VISTA(SM) U.S. GOVERNMENT MONEY MARKET FUND
Vista(SM) Shares
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 Fund in its December 27, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call 1-800-LIPPER9. 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 NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO MAINTAIN
A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK--INCLUDING POSSIBLE LOSS OF
PRINCIPAL. 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
<TABLE>
<CAPTION>
<S> <C>
Expense Summary ............................................................................. 3
The expenses you pay on your Fund investment, including examples
Financial Highlights ........................................................................ 4
The Fund's financial history
Fund Objective and Investment Approach ...................................................... 5
Investment Policies ......................................................................... 5
Management .................................................................................. 7
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management, the Fund's sub-adviser
How to Buy, Sell and Exchange Shares ........................................................ 8
Exchange Feature ............................................................................ 11
How the Fund Values its Shares .............................................................. 12
How Dividends and Distributions Are Made; Tax Information ................................... 13
How the Fund distributes its earnings, and tax treatment related to those earnings
Other Information Concerning the Fund ....................................................... 14
Distribution plans, shareholder servicing agents, administration, custodian, expenses and
organization
Performance Information ..................................................................... 17
How performance is determined, stated and/or advertised
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The
following table summarizes your costs from investing in the Fund based on
expenses incurred in the most recent fiscal year by the Fund. The examples show
the cumulative expenses attributable to a hypothetical $1,000 investment over
specified periods.
Vista
Shares
-------
Annual Fund Operating
Expenses (as a percentage of average net assets)
Investment Advisory Fee .............................. 0.10%
12b-1 Fee * .......................................... 0.10%
Shareholder Servicing Fee (after estimated waiver
of fee)** .......................................... 0.22%
Other Expenses ....................................... 0.17%
Total Fund Operating Expenses (after waivers of
fees)** ............................................ 0.59%
Example
Your investment of $1,000 would incur the following expenses, assuming 5%
annual return:
1 year ........................... $ 6
3 years .......................... 19
5 years .......................... 33
10 years ......................... 74
- ----------
* Long-term shareholders in mutual funds with 12b-1 fees, such as holders of
Vista Shares 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.
** Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the levels indicated in the table above. Absent such waiver,
the Shareholder Servicing Fee would be 0.35%, and Total Fund Operating
Expenses would be 0.72%. 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 commencing on May 6,
1996 to the extent necessary to prevent Total Fund Operating Expenses of
Vista Shares of the Fund from exceeding the amount indicated in the table.
In addition, Chase has agreed to waive fees payable to it and/or reimburse
expenses for a two year period commencing on May 6, 1996 to the extent
necessary to prevent Total Fund Operating Expenses for Vista Shares of the
Fund from exceeding 0.76% of average net assets during such period.
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 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."
3
<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,
1996, which is incorporated by reference into the SAI. 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, 1177 Avenue of the Americas,
New York, N.Y. 10036, whose report thereon is included in the Annual Report
to Shareholders.
<TABLE>
<CAPTION>
Year Year 11/1/93 1/1/93*
ended ended through through
8/31/96 8/31/95 8/31/94+ 10/31/93
--------- ------- ------- ---------
<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 0.049 0.049 0.025 0.019
---------- -------- -------- --------
Less Distributions:
Dividends from Net Investment Income 0.049 0.049 0.025 0.019
---------- -------- -------- --------
Net Asset Value, End of Period $1.00 $ 1.00 $ 1.00 $ 1.00
========== ======== ======== ========
Total Return 4.97% 5.05% 2.48% 2.02%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $2,057,023 $341,336 $335,365 $323,498
Ratio of Expenses to Average Net Assets# 0.65% 0.80% 0.80% 0.82%
Ratio of Net Investment Income to Average Net
Assets# 4.83% 4.93% 2.94% 2.39%
Ratio of Expenses without waivers and assumption
of expenses to Average Net Assets# 0.73% 0.80% 0.80% 0.82%
Ratio of Net Investment Income without waivers and
assumption of expenses to Average Net Assets# 4.75% 4.93% 2.94% 2.39%
</TABLE>
- ----------
* Commencement of offering shares.
+ In 1994 the Fund changed its fiscal year-end from October 31 to August 31.
# Short periods have been annualized.
4
<PAGE>
FUND OBJECTIVE AND INVESTMENT APPROACH
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, or agencies or instrumentalities of the U.S.
Government, and in repurchase agreements collateralized by these obligations.
The dollar weighted average maturity of the Fund will be 60 days or less.
INVESTMENT POLICIES
As a matter of fundamental policy, 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.
The Fund seeks to maintain a net asset value of $1.00 per share.
The Fund invests only in U.S. dollar-denominated 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 Trust. 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 purchase 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.
There can be no assurance that the Fund will achieve its investment
objective.
Other Investment Practices
The Fund 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. 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.
Repurchase Agreements, Securities Loans and Forward Commitments. The Fund
may enter into agreements to purchase and resell securities at an agreed-upon
price and time. The Fund also has
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the ability to lend portfolio securities in an amount equal to not more than
30% of its total assets to generate additional income. These transactions
must be fully collateralized at all times. The Fund may purchase securities
for delivery at a future date, 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.
STRIPS and Zero Coupon Obligations. The Fund may invest up to 20% of its
total assets in stripped obligations (i.e., separately traded principal and
interest components of securities) where the underlying obligations are
backed by the full faith and credit of the U.S. Government, including
instruments known as "STRIPS". 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. 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. Demand
features on certain floating or 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 when consistent with its
investment objective and policies, subject to applicable regulatory
limitations. Additional fees may be charged by other money market funds.
Portfolio Turnover. It is intended that the Fund will be fully managed by
buying and selling securities, as well as holding securities to maturity. The
frequency of the Fund's portfolio transactions will vary from year to year.
In managing the Fund, the Fund's advisers will seek to take advantage of
market developments, yield disparities and variations in the creditworthiness
of issuers. More frequent turnover will generally result in higher
transactions costs, including dealer mark-ups.
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Limiting Investment Risks
Specific regulations and investment restrictions help the Fund limit
investment risks for its shareholders. These regulations and restrictions
prohibit the Fund from 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). A complete description of other investment
policies is included in the SAI. Except for the Fund's investment objective,
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
General. 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. For a discussion of certain other risks
associated with the Fund's additional investment activities, see "Other
Investment Practices."
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 0.10% 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 is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.03% of the Fund's average
daily net assets. 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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HOW TO BUY, SELL AND EXCHANGE SHARES
How to Buy Shares
A Fund account can be opened through Lipper & Co. LLP with as little as
$2,500 ($1,000 for IRAs, SEP-IRAs and the Systematic Investment Plan).
Initial Investments by Mail
Shares of the Fund may be purchased by completing and signing an account
application and mailing it, together with a check payable to "Lipper Mutual
Funds", to:
Lipper Mutual Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
When purchases are made by check, redemptions will not be allowed until
clearance or the purchase check, which may take 15 calendar days or longer.
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.
Initial Investment by Wire
Shares of the Fund may also be purchased by wiring Federal Funds to the
Fund's custodian (see instructions below). In order to insure prompt
crediting of the Federal Funds wire, it is important to follow these steps:
(a) The investor must telephone Chase Global Funds Service Co. ("CGFSC")
(toll-free 1-800-LIPPER9) and provide name, address, telephone number, social
security or tax I.D. number, the Fund and class of shares to be purchased,
the amount being wired and the name of the bank wiring the funds. (Investors
with existing accounts should also notify CGFSC prior to wiring funds). An
account number will then be provided:
(b) The investor must instruct his or her bank to wire the specified
amount to the Fund's custodian as follows:
The Chase Manhattan Bank
New York, N.Y. 10003
ABA # 0210-0002-1
DDA Acct. #910-2-753168
F/B/O Lipper Mutual Funds
Ref: Vista U.S. Government Money Market
Account Number______
Account Name ______
(c) The investor must forward a completed and signed account application
to CGFSC and mail a carbon copy of the account application (manually signed)
to CGFSC at the address set forth above under "Initial Investments by Mail"
as soon as possible. It is important that investors forward the account
application to CGFSC in a timely manner, since shares of the Fund will not be
redeemed, exchanged or transferred until CGFSC receives the shareholder's
account application. Federal Funds purchases will be accepted only on days on
which both the NYSE and the Fund's custodian are open for business.
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Additional Investments
An investor may add to his or her account by purchasing additional shares
of the same class of the Fund's shares by mailing a check to CGFSC (payable
to "Lipper Mutual Funds") at its address set forth above under "Initial
Investments by Mail" or by wiring funds to the Fund's custodian using the
procedures set forth above under "Initial Investment by Wire." You may make
an additional investment at any time with as little as $100. It is important
that the account number, account name, and the Fund and class of shares to be
purchased are specified on the check or wire to ensure proper crediting to
the investor's account.
In order to ensure that wire orders are invested promptly, investors are
requested to notify CGFSC prior to the wire date. Mail orders must include
the "Invest by Mail" stub which accompanies each Fund's confirmation
statement.
The Systematic Investment Plan
CGFSC offers investors the ability to make regular investments of $100 or
more per transaction through automatic periodic deduction from a bank savings
or checking account. Investors electing to start this Systematic Investment
Plan when opening an account should complete the appropriate section of the
account application. Existing shareholders may begin the Plan at any time by
sending a signed letter with signature guarantee and a deposit slip or voided
check to CGFSC. Investors may call CGFSC at 1-800-LIPPER9 for complete
instructions.
Processing of Purchase Orders
Shares are sold without a sales load at the net asset value next
determined after the Fund's distributor receives an order in proper form on
any business day during which the Federal Reserve Bank of New York and the
New York Stock Exchange are open for business (a "Fund Business Day"). In
order for an investor to receive that day's dividend, CGFSC must generally
receive the purchase order prior to 2:00 p.m., Eastern time (the Fund's
Cut-off Time). The Fund intends to reject any purchase orders which are
received on any Fund Business Day on which the Public Securities Association
("PSA") recommends an early close to trading on the U.S. Government
securities market. The PSA is the trade association that represents
securities firms and banks that underwrite, trade and sell debt securities,
both domestically and internationally. Orders for shares received and
accepted prior to 2:00 p.m. will be entitled to all dividends declared on
that day. Orders received for shares after 2:00 p.m. and prior to 4:00 p.m.,
Eastern time on any Fund Business Day will not be accepted and executed on
the same day except at the Fund's discretion. Orders received and not
accepted after 2:00 p.m. will be considered received prior to 2:00 p.m. on
the following Fund Business Day and processed accordingly.
Orders for shares are accepted by the Fund after funds are converted to
Federal Funds. Orders paid by check and received before 2:00 p.m. will
generally be available for the purchase of shares the following Fund Business
Day. The Fund reserves the right to reject any purchase order.
How to Sell Shares
Investors may redeem Fund shares on any Fund Business Day either through
Lipper & Co. LLP or CGFSC. The Fund will only forward redemption payments on
shares for which it has collected payment. The price an investor receives is
the next net asset value calculated after a redemption request is received in
proper form.
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<PAGE>
Redemption through Lipper & Co., LLP
Redemption requests may be made through Lipper & Co. LLP. The investment
representative will be responsible for furnishing all necessary documentation
to CGFSC located at 73 Tremont Street, Boston, MA 02208.
Redemption by Mail
Redemption requests also may be mailed to CGFSC at the following address:
Lipper Mutual Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, Massachusetts 02208-2798
A mailed request to redeem shares must include the following:
(a) A letter of instruction or a stock assignment specifying the number of
shares or dollar amount to be redeemed, as well as the Fund and class being
redeemed, signed by all registered owners of the shares in the exact names in
which they are registered;
(b) Any required signature guarantees (see "Signature Guarantees" below);
and
(c) Other supporting legal documents in the case of estates, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.
Shareholders who are uncertain of the requirements for redemption should
call 1-800-LIPPER9.
Signature Guarantee
To protect investors, the Fund and CGFSC from fraud, signature guarantees
are required for certain redemptions. Signature guarantees are required for
redemptions where the proceeds are to be sent to someone other than the
registered shareholder(s) or the registered address. The purpose of signature
guarantees is to verify the identity of the party who has authorized a
redemption.
Signatures must be guaranteed by an "eligible guarantor institution" as
defined in Rule 17Ad-15 under the Exchange Act. Eligible guarantor
institutions include banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. A complete definition of eligible guarantor
institutions is available from CGFSC. Broker-dealers guaranteeing signatures
must be a member of a clearing corporation or maintain net capital of at
least $100,000. Credit unions must be authorized to issue signature
guarantees. Signature guarantees will be accepted from any eligible guarantor
institution which participates in a signature guarantee program.
The signature guarantee must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
must specify the total number of shares, Fund and class of shares to be
redeemed; or (3) on all stock certificates tendered for redemption (in the
event that all shares being redeemed are held in certificated form).
Redemption by Telephone
Provided that an investor has previously established a telephone
redemption privilege when completing an account application, a request for
redemption of shares may be made by calling CGFSC at 1-800-LIPPER9 and
requesting that redemption proceeds be mailed to the investor or wired to his
or her bank. If an investor selects a telephone redemption privilege, the
investor authorizes CGFSC to act on telephone instructions from any person
representing himself or herself to be the investor or the investor's
investment representative and
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<PAGE>
reasonably believed by CGFSC to be genuine. The Fund will require CGFSC to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, it may be liable for any losses due to unauthorized
or fraudulent instructions. An investor agrees, however, that to the extent
permitted by applicable law, neither the Fund nor its agents nor CGFSC will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fradulent or unauthorized request. For
information, consult CGFSC at 1-800-LIPPER9. When redeeming shares by
telephone, an investor must have ready his or her name and account number, as
well as Fund name, Social Security number or tax I.D. number and account
address.
To change the name of the commercial bank or the account designated to
receive redemption proceeds, a written request must be sent to CGFSC at its
address set forth above under "Redemption by Mail." Requests to change the
bank or account must be signed by each shareholder and each signature must be
guaranteed. Please contact 1-800-LIPPER9 for further details. The telephone
redemption privilege may be modified or terminated without notice.
Systematic Withdrawal Plan
CGFSC offers investors the ability to make regular withdrawls of $100 or
more monthly, quarterly or semiannually. A minimum account balance of $5,000
is required to establish a Systematic Withdrawl Plan. Call CGFSC at
1-800-LIPPER9 for complete instructions.
Processing of Redemption Orders
The Fund generally sends payment for an investor's shares on the Fund
Business Day after the investor's request is received in proper form,
provided that the investor's request is received by Fund prior to 2:00 p.m.,
and assuming that the Fund has collected payment of the purchase price of
such investor's shares. Under unusual circumstances, the Fund may suspend
redemptions, or postpone payment for more than seven business days, as
permitted by federal securities laws.
Involuntary Redemption of Accounts
An investor's shares may be redeemed involuntarily if the aggregate net
asset value of the shares in the investor's account is less than $500 or if
the investor purchases through the Systematic Investment Plan and fails to
meet the required investment minimum within a twelve month period. In the
event of any such redemption, an investor will receive at least 60 days'
notice prior to the redemption.
EXCHANGE FEATURE
CGFSC makes available to investors an exchange feature which allows
investors to purchase, in exchange for shares of the Fund, shares of certain
other funds in the Lipper Group of Funds, to the extent such shares are
offered for sale in the investor's state of residence and the purchase meets
the minimum investment and other eligibility requirements of the fund into
which the investor is exchanging. If an investor wishes to use the exchange
feature, he or she should consult his or her investment representative or
CGFSC to determine if the feature is available and whether any other
conditions are imposed on its use. The discussion of the exchange feature in
this Prospectus supersedes the discussion of the exchange privilege in the
SAI for investors purchasing shares through Lipper Mutual Funds.
To use the exchange feature, an investor or his or her investment
representative acting on his or her behalf must give exchange instructions to
CGFSC by mail, or by telephone if the investor has previously established the
telephone exchange privilege, as further described below. Shares will be
exchanged at the next determined net asset value by effecting a redemption of
shares of the Fund and a purchase of shares of the exchange fund. No fees are
charged in connection with the exchange feature.
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<PAGE>
Before any exchange, an investor must obtain and should carefully review a
copy of the current prospectus of the fund into which he or she wishes to
exchange and should retain such copy for future reference.
Exchanges may be subject to limitations as to amounts or frequency, and to
other restrictions established by CGFSC to assure that exchanges do not
disadvantage any of the funds in the Lipper Group of Funds or their
shareholders. Shares held in broker "street name" may not be exchanged by
mail or telephone; an investor must contact his or her investment
representative to exchange such shares. CGFSC reserves the right to reject
any exchange request in whole or in part. The exchange feature may be
modified or terminated at any time.
The exchange of shares of one fund for shares of another is treated for
federal income tax purposes as a sale of the shares given in exchange by the
shareholder and, therefore, an exchanging shareholder may realize a taxable
gain or loss.
Exchange by Mail
In order to exchange shares by mail, an investor must include in the
exchange request his or her account number for his or her current fund, the
name of his or her current fund and the class which he or she wishes to
exchange from, the name of the fund into which he or she wishes to exchange,
and the documents described in the procedures set forth above under
"Redemption of Shares--Redemption by Mail." The request to exchange shares
must be sent to:
Lipper Mutual Funds
c/o Chase Global Funds Services Company
P.O. Box 2798
Boston, MA 02208-2798
HOW THE FUND VALUES ITS SHARES
The net asset value of each class of shares of the Fund is currently
determined daily as of 4:00 p.m., Eastern time on each Fund Business Day by
dividing the net assets of the Fund attributable to such class by the number
of shares of such class outstanding at the time the determination is made.
Effective with the anticipated introduction of certain automated share
purchase programs, the net asset value of shares of each class 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 Investment 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 of the Fund will remain constant at $1.00 and the
Fund 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 the 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.
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<PAGE>
HOW DIVIDENDS AND DISTRIBUTIONS ARE MADE; TAX INFORMATION
The net investment income of each class of shares of the Fund is declared
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 or by ACH to a
pre-established bank account, 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.
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. Distributions by the
Fund of any net long-term capital gains would 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 Fund on your particular tax situation
(including possible liability for state and local taxes and, for foreign
shareholders, U.S. withholding taxes).
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<PAGE>
OTHER INFORMATION CONCERNING THE FUND
Distribution Plans
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Fund
has adopted a Rule 12b-1 distribution plan which provides that the Fund will
pay distribution fees at annual rates of up to 0.10% of the average daily net
assets attributable to its Vista Shares. 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. Some activities intended to promote the sale of Vista Shares will
be conducted generally by the Vista Family of Funds, and activities intended
to promote the Fund's Vista Shares may also benefit the Fund's other shares
and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet
specified sales targets for one or more Vista funds. These incentives may
include gifts of up to $100 per person annually; an occasional meal, ticket
to a sporting event or theater 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 0.35% of the
average daily net assets of the Vista 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. 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 0.25% of the average
annual net assets attributable to the Vista Shares of the 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 Trust to do so) credit to the accounts of their customers
from whom they are already receiving other fees amounts not exceeding such
other fees or the fees for their services as shareholder servicing agents.
For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on
specified minimum balance requirements, such as reduced or no fees for
certain banking services or preferred rates on loans and deposits. Chase and
certain broker-dealers and other shareholder servicing agents may, at their
own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to
their customers that invest in the Vista Funds.
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<PAGE>
Chase may from time to time, at its own expense, provide compensation to
certain selected dealers for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to 0.10%
annually of the average net assets of the Fund attributable to shares of such
Fund held by customers of such selected dealers. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it
will be paid by Chase.
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.
VFD provides certain sub-administrative services to the Fund pursuant to a
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. VFD 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. VFD is located
at 101 Park Avenue, New York, New York 10178.
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.
Transfer Agent
The Fund's Transfer Agent and Dividend Paying Agent is DST Systems, Inc.,
which is located at 210 West 10th Street, Kansas City, MO 64105.
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. The share of a series or class represents an equal
proportionate
15
<PAGE>
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 a 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.
The Fund may issue multiple classes of shares. This Prospectus relates
only to Vista Shares of the Fund. 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 would
affect the relative performance of the different classes. Investors may call
1-800-348-4782 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 business and affairs of the Trust are managed under the general
direction and supervision of the Trust's Board of Trustees. The Trust is not
required to hold annual meetings of shareholders but will hold special
meetings of shareholders of 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.
16
<PAGE>
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 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.
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.
17
<PAGE>
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<PAGE>
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<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA(SM) FEDERAL MONEY MARKET FUND
VISTA(SM) CASH MANAGEMENT FUND
VISTA(SM) SHARES
-----------------------------------
INVESTMENT STRATEGY: CURRENT INCOME
-----------------------------------
December 27, 1996
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 December 27, 1996 Statement of Additional
Information, as amended periodically (the "SAI"). For a free copy of the SAI,
call Chase Global Funds Services Company at 1-800-344- 3092. 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 ............................................................ 3
The expenses you pay on your Fund investment, including examples
Financial Highlights ....................................................... 4
The Funds' financial history
Fund Objectives and Investment Approach
Vista Federal Money Market Fund ........................................... 6
Vista Cash Management Fund ................................................ 6
Common Investment Policies ................................................. 6
Management ................................................................. 11
Chase Manhattan Bank, the Funds' adviser; Chase Asset Management
and Texas Commerce Bank, the Funds' sub-advisers
How to Buy, Sell and Exchange Shares ....................................... 12
How the Funds Value their Shares ........................................... 17
How Dividends and Distributions Are Made; Tax Information .................. 18
How the Funds distribute their earnings, and tax treatment related
to those earnings
Other Information Concerning the Funds ..................................... 19
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information .................................................... 22
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 costs from investing in a Fund based on expenses incurred
in the most recent fiscal year by each Fund. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over specified
periods.
<TABLE>
<CAPTION>
Vista Federal Vista Cash
Money Market Fund Management Fund
------------------- ------------------
Vista Shares Vista Shares
<S> <C> <C>
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fee 0.10% 0.10%
12b-1 Fee * 0.10% n/a
Shareholder Servicing Fee (after estimated
waiver of fee)** 0.25% 0.32%
Other Expenses 0.25% 0.17%
Total Fund Operating Expenses (after waivers
of fees)** 0.70% 0.59%
Examples
Your investment of $1,000 would incur the
following expenses, assuming 5% annual return:
1 Year $ 7 $ 6
3 years 22 19
5 years 39 33
10 years 87 74
</TABLE>
*Long-term shareholders in mutual funds with 12b-1 fees, such as holders of
Vista Shares of the Vista Federal Money Market 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.
**Reflects current waiver arrangements to maintain Total Fund Operating Expenses
at the levels indicated in the table above. Absent such waivers, the
Shareholder Servicing Fee would be 0.35% for Vista Federal Money Market Fund
and Vista Cash Management Fund, and Total Fund Operating Expenses would be
0.80% and 0.62%, respectively. Total Fund Operating Expenses for Vista Shares
of the Vista Cash Management Fund reflect the agreement by Chase voluntarily
to waive fees payable to it and/or reimburse expenses for a period of at least
one year commencing on May 6, 1996 to the extent necessary to prevent Total
Fund Operating Expenses from exceeding the amount indicated in the table. In
addition, Chase has agreed to waive fees payable to it and/or reimburse
expenses for a two year period commencing on May 6, 1996 to the extent
necessary to prevent Total Fund Operating Expenses for Vista Shares of the
Vista Cash Management Fund from exceeding 0.72% of average net assets during
such period.
The table is provided to help you understand the expenses of investing in the
Funds and your share of the operating expenses that a 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 a Fund. The Funds understand that Shareholder Servicing Agents may credit 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 a Fund with respect to those accounts. See "Other
Information Concerning the Funds."
3
<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, 1996,
which is incorporated by reference into the SAI. 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, located at 1177 Avenue of Americas, New York, NY 10036
whose report thereon is included in the Annual Report to Shareholders.
FEDERAL MONEY MARKET FUND
-------------------------
<TABLE>
<CAPTION>
Vista Shares
----------------------------
Year Year 5/9/94*
ended ended through
8/31/96 8/31/95 8/31/94
----- ----- ------
<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 0.048 0.051 0.013
----- ----- ------
Total from Investment Operations 0.048 0.051 0.013
Less Distributions:
Dividends from Net Investment Income 0.048 0.051 0.013
----- ----- ------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00
===== ===== ======
Total Return 4.83% 5.20% 1.26%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $352,934 $203,399 $19,955
Ratio of Expenses to Average Net Assets# 0.70% 0.69% 0.40%
Ratio of Net Investment Income to Average Net Assets# 4.79% 5.16% 4.36%
Ratio of Expenses without waivers and assumption of expenses to
Average Net Assets# 0.93% 0.93% 1.02%
Ratio of Net Investment Income without waivers and assumptions
of expenses to Average Net Assets# 4.56% 4.92% 3.74%
</TABLE>
* Commencement of offering shares.
# Short periods have been annualized.
4
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
On May 3, 1996, the 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 share (the accounting survivor of
the merger) outstanding through May 3, 1996 and one Vista Share of the Vista
Cash Management Fund outstanding for periods thereafter. 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 and the Fund's Annual Report to Shareholders for the
period ended August 31, 1996, which are both incorporated by reference into the
SAI. Shareholders may obtain a copy of these annual reports 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 the
period ended August 31, 1996 has been audited by Price Waterhouse LLP,
independent accountants, whose report thereon is included in the Fund's Annual
Report to Shareholders. Periods ended prior to December 1, 1995 were audited by
other independent accountants.
CASH MANAGEMENT FUND
--------------------
<TABLE>
<CAPTION>
12/1/95** Year Ended 1/17/89*
through ---------------------------------------------------------------------- through
8/31/96 11/30/95 11/30/94 11/30/93 11/30/92 11/30/91 11/30/90 11/30/89*
---------- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <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 $ 1.00
---------- ---------- -------- -------- -------- -------- -------- --------
Income from Investment
Operations:
Net Investment Income 0.037 0.054 0.036 0.027 0.035 0.059 0.077 0.076
---------- ---------- -------- -------- -------- -------- -------- --------
Less Distributions:
Dividends from Net
Investment Income 0.037 0.054 0.036 0.027 0.035 0.059 0.077 0.076
---------- ---------- -------- -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ======== ======== ======== ======== ======== ========
Total Return 3.69% 5.49% 3.62% 2.74% 3.51% 6.01% 7.94% 7.83%
Ratios/Supplemental Data
Net Assets, End of Period
(000 omitted) $1,621,212 $1,634,493 $990,045 $861,025 $560,173 $343,166 $196,103 $134,503
Ratio of Expenses to
Average Net Assets# 0.60% 0.58% 0.58% 0.61% 0.67% 0.67% 0.67% 0.67%
Ratio of Net Investment
Income to Average
Net Assets# 4.91% 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# 0.63% 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 4.88% 5.31% 3.58% 2.67% 3.36% 5.78% 7.59% 8.55%
</TABLE>
* Fund commenced operations January 17, 1989.
** In 1996, the Fund changed its fiscal year end from November 30 to August 31.
# Short periods have been annualized.
5
<PAGE>
FUND OBJECTIVES AND
INVESTMENT APPROACH
- -------------------
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, and 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. Due to
state income tax considerations, the Fund will not enter into repurchase
agreements.
Shareholders of the Fund that reside in a 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 Dividends and Distributions are Made; Tax Information."
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 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.
COMMON INVESTMENT
POLICIES
- --------
In lieu of investing directly, each 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
applicable Fund.
6
<PAGE>
Each Fund seeks to maintain a net asset value of $1.00 per share.
The Funds invest only in U.S. dollar-denominated 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 Trust. 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.
Each Fund is classified as a "diversified" fund under federal securities law.
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 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. The Vista Cash
Management Fund may enter into agreements to purchase and resell
securities at an agreed-
7
<PAGE>
upon price and time. Each Fund also has the ability to lend portfolio securities
in an amount equal to 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 delivery at a future date, 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.
STRIPS AND ZERO COUPON OBLIGATIONS. Each Fund may invest up to 20% of its total
assets in stripped obligations (i.e., separately traded principal and interest
components of securities) where the underlying obligations are backed by the
full faith and credit of the U.S. Government, including instruments known as
"STRIPS". Vista Cash Management 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.
8
<PAGE>
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 securities
in which the Vista Cash Management 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 floating or variable
rate nature of these investments, a 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, a Fund's yield
may increase and it may have reduced risk of capital depreciation. Demand
features on certain floating or variable rate securities may obligate a 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. Each Fund may invest up to 10% of its total assets in
shares of other money market funds when consistent with its investment objective
and policies, subject to applicable regulatory limitations. Additional fees may
be charged by other money market funds.
PORTFOLIO TURNOVER. It is intended that the Funds will be fully managed by
buying and selling securities, as well as holding securities to maturity. The
frequency of the Funds' portfolio transactions will vary from year to year. In
managing a Fund, the Fund's advisers will seek to take advantage of market
developments, yield disparities and variations in the creditworthiness of
issuers. More frequent turnover will generally result in higher transactions
costs, including dealer mark-ups.
ADDITIONAL INVESTMENT POLICIES
OF VISTA CASH MANAGEMENT FUND
Vista Cash Management Fund may also invest in the following instruments, when
consistent with its overall objective 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
9
<PAGE>
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.
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 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 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. These 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 Funds limit investment
risks for their shareholders. These regulations and restrictions prohibit each
Fund from: (a) with certain limited exceptions, investing more than 5% of its
total assets in the securities of any one issuer (this limitation does not apply
to U.S. Government Obligations; (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 these and other investment policies 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
10
<PAGE>
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" and "Additional Investment Policies of Vista Cash
Management Fund."
VISTA CASH MANAGEMENT FUND. This Fund is permitted to invest any portion of its
assets in obligations of domestic banks (including their foreign branches), and
in obligations of 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 industry. 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 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. 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 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 is located at 270 Park
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Avenue, New York, New York 10017.
Chase Asset Management, Inc. ("CAM"), a registered investment adviser, is the
sub-investment adviser to the Federal Money Market 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 each of these
Funds on a day-to-day basis. For these services, CAM is entitled to receive a
fee, payable by Chase from its advisory fee, at an annual rate equal to 0.03% of
each such Fund's average daily net assets. 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.
Texas Commerce Bank, National Association ("TCB") is the sub- investment adviser
to the Vista Cash Management Fund pursuant to a Sub-Investment Advisory
Agreement between Chase and TCB. TCB has been in the investment counselling
business since 1987 and is ultimately controlled and owned by The Chase
Manhattan Corporation. TCB makes investment decisions for the Vista Cash
Management Fund on a day-to-day basis. For these services, TCB is entitled to
receive a fee, payable by Chase from its advisory fee, at an annual rate equal
to 0.03% of each such Fund's average daily net assets. TCB is located at 600
Travis, Houston, Texas 77002.
HOW TO BUY, SELL
AND EXCHANGE SHARES
- -------------------
PURCHASE OF SHARES
The minimum initial investment by a shareholder is $2,500 ($1,000 for IRAs,
SEP-IRAs and the automatic investment plan). There is no minimum for additional
investments. The Fund reserves the right, in its sole discretion, to reject any
purchase order or cease offering shares for purchase at any time. No share
certificates will be issued unless requested in writing. Subscriptions for
shares are subject to acceptance by the Fund and are not binding until accepted.
Purchase by Mail: Shares of the Fund may be purchased by sending a completed
Application (included with this Prospectus or obtainable from the Fund) to
"Gintel Group", c/o Chase Global Funds Services Company, P.O. Box 2798, Boston,
MA 02208-2798, accompanied by a check payable to Gintel Group in payment for the
shares. Applications sent to the Fund will be forwarded to Chase Global Funds
Services Company and will not be effective until received by Chase Global Funds
Services Company. Special forms are required for IRA and Keogh subscriptions and
may be obtained by contacting the Fund. When purchases are made by check,
redemptions will not be allowed until clearance of the purchase check, which may
take 15 calendar days or longer. In addition, the redemption of shares purchased
through ACH will not be allowed
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until clearance of the payment, hich may take 7 business days or longer. 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.
Purchase by Exchange: Shares of the Fund may be exchanged for shares of any
other fund within the Gintel Group, to the extent such shares are offered for
sale in the investor's state of residence. Before any exchange, an investor must
obtain and should carefully review a copy of the current prospectus of the fund
into which he or she wishes to exchange and should retain such copy for future
reference. When opening an account by exchange, the new account must be
established with the same name(s), address, and tax identification number as the
other account and must meet that fund's minimum initial investment and other
eligibility requirements. For federal income tax purposes, an exchange is
treated as a sale of shares and generally results in a capital gain or loss. If
an investor wishes to use the exchange feature, he or she should consult his or
her investment representative or Chase Global Funds Services Company to
determine if the feature is available and whether any other conditions are
imposed on its use. The discussion of the exchange feature in this Prospectus
supersedes the discussion of the exchange privileges in the SAI for investors
purchasing shares through the Gintel Group. Purchase by exchange may be executed
by either mail or telephone but in every instance must comply with the purchase
and redemption procedures set forth in the Prospectus. Neither Chase Global
Funds Services Company nor the Fund will be liable for acting upon such
instructions, regardless of the authority or absence thereof of the person
giving the instructions, or for any loss, expense, or cost arising out of any
exchange by telephone, whether or not properly authorized and directed. An
investor will bear the risk of loss. The staff of the Securities and Exchange
Commission is currently examining whether such responsibilities may be
disclaimed. The accuracy of telephone transactions should be verified
immediately upon the receipt of confirmation statement.
Purchase by Wire: Investors may purchase shares by wire by first telephoning
Chase Global Funds Services Company at 1-800-344- 3092 for instructions and wire
control number and subsequently wiring Federal funds and registration
instructions to:
The Chase Manhattan Bank
New York, NY 10003
ABA# 0210-0002-1
F/B/O The Gintel Group
Acct. # 910-2-732980
Ref: [Name of Fund]
Account Number ___________________
Account Name: ____________________
Purchase by Automatic Investment: Investors may purchase shares on a regular
basis, (the first, the fifteenth, or the first and fifteenth of each month), by
automatically transferring a specified dollar amount ($100 minimum) from their
regular checking or NOW account to their specified Gintel Group Account. Special
forms are required for this automatic
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<PAGE>
investment plan and may be obtained by contacting the Fund. Existing
shareholders may begin the Plan at any time by sending a signed letter with
signature guarantee and a deposit slip or voided check.
ADDITIONAL INVESTMENTS
An investor may add to his or her account by purchasing additional shares of the
same class of the Fund's shares by mailing a check to the Gintel Group (payable
to "Gintel Group") at its address set forth above under "Purchases by Mail" or
by wiring funds to the Fund's custodian using the procedures set forth above
under "Purchases by Wire." It is important that the account number, account name
and the Fund and class of shares to be purchased are specified on the check or
wire to ensure proper crediting to the investor's account.
Confirmed purchases will be done only at the discretion of the Investment
Advisor.
Purchase of shares of the Fund may also be made through registered securities
dealers who have entered into selected dealer agreements with the Distributor. A
dealer who agrees to process an order on behalf of an investor may charge the
investor a fee for this service.
The offering price of each Fund share is the net asset value per share next
computed after the subscriber's application is received by Chase Global Funds
Services Company. The net asset value per share is determined by dividing the
market value of the Fund's securities as of the close of trading plus any cash
or other assets (including dividends and accrued interest) less all liabilities
(including accrued expenses) by the number of the Fund's shares outstanding. The
Fund will determine net asset value of its shares on each "Fund Business Day",
which is any day the New York Stock Exchange is open for business exclusive of
national holidays.
All ordinary income dividends and capital gains distributions are automatically
reinvested at net asset value unless the Chase Global Funds Services Company
receives written notice from a shareholder at least 30 days prior to the record
date requesting that the distributions and dividends be distributed to the
investor in cash.
Shares are sold without a sales load at the net asset value next determined
after Chase Global Funds Services Company receives your order in proper form on
any business day during which the Federal Reserve Bank of New York and the New
York Stock Exchange are open for business ("Fund Business Day"). To receive that
day's dividend, Chase Global Funds Services Company or your investment
representative or shareholder servicing agent must generally receive your order
prior to a Fund's Cut-off Time. The Funds' Cut-off Times (Eastern time) are as
follows:
Vista Federal Money
Market Fund ............. 2:00 p.m.
Vista Cash Management
Fund .................... 2:00 p.m.
Each Fund reserves the right to set an earlier Cut-off Time on any Fund Business
Day on which the Public Securities Association ("PSA") recommends an early close
to trading on the U.S. Government securities market. Generally, such earlier
Cut-off Time will be noon (Eastern time). The PSA is the trade
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<PAGE>
association that represents securities firms and banks that underwrite, trade
and sell debt securities, both domestically and internationally. 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., Eastern time on any Fund Business Day will
not be accepted and executed on the same day except at the Funds' discretion.
Orders received and not accepted after a Fund's Cut-off Time will be considered
received prior to the Fund's Cut-off Time on the following Fund Business Day and
processed accordingly. Orders for shares are accepted by each Fund after funds
are converted to federal funds. Orders paid by check and received before a
Fund's Cut-off Time will generally be available for the purchase of shares the
following Fund Business Day. The Funds reserve the right to reject any purchase
order.
REDEMPTION OF SHARES
Upon receipt by Chase Global Funds Services Company of a request in proper form,
the Fund will redeem shares at its next determined net asset value. There is no
assurance that the net asset value received upon redemption will be greater than
that paid by a shareholder upon purchase. The Fund will forward redemption
payments only on shares for which it has collected payment.
Redemption by Mail: Shares may be redeemed by sending a written redemption
request to Gintel Group, c/o Chase Global Funds Services Company, P.O. Box 2798,
Boston, MA 02208-2798. Any written request sent to the Fund will be forwarded to
Chase Global Funds Services Company and the effective date of the redemption
request will be when the request is received in proper form by Chase Global
Funds Services Company. The redemption value of each Fund share is the net asset
value per share next computed after the redemption request is received in proper
form. Where share certificates have been issued, a shareholder must endorse the
certificates and include them in the redemption request. "Proper form" means
that the request for redemption must include the following:
1. A letter of instruction specifying the Fund name, the account number, and the
number of shares or the dollar amount to be redeemed and signed by all
registered owners exactly as their names appear on the account.
2. Signatures must be guaranteed by an eligible guarantor institution as
described in Rule 17Ad-15 under the Securities and Exchange Act of 1934. Such
institutions include banks, brokers, securities dealers, credit unions,
securities exchanges, clearing agencies and savings associations. On and after
August 24, 1992, the eligible guarantor institution must be a participant in a
recognized signature guarantee program such as the STAMP program of the
Securities Transfer Association. Until August 24, 1992, eligible guarantor
institutions previously approved by Chase Global Funds Services Company
(commercial banks and members of domestic stock exchanges) will continue to be
approved. Eligible guarantor institutions not
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<PAGE>
previously approved by Chase Global Funds Services Company and not yet members
of a recognized signature guarantee program, must make application to that
company. For complete information or a copy of Chase Global Funds Services
Company's signature guarantee Standards, Procedures and Guidelines, please
contact the Transfer Agent at (800) 344-3092. A notary public is not an
acceptable guarantor.
3. Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, corporations, pension and profit sharing plans and other
organizations. Shareholders should contact Chase Global Funds Services Company,
(800) 344- 3092, to obtain further information on the specific documentation
required.
Payment will be made for redeemed shares as soon as practicable, but generally
no later than five business days after proper receipt of redemption
notification. Payment will be made by check, unless a shareholder arranges for
the proceeds of redemption requests to be sent by Federal fund wire to a
designated bank account, in which case a wire charge (currently $8.00 per wire)
will be deducted from the account. Shareholders should contact Chase Global
Funds Services Company, (800) 344-3092, to obtain further information on this
service and the related charges.
Redemption by Telephone: Shareholders who authorize telephone redemptions in the
Application may redeem shares by telephone instructions to Chase Global Funds
Services Company which will wire or mail the proceeds of redemptions to the bank
and bank account number specified in the Application or mail the proceeds to the
address of record, except that telephone redemptions of less than $1000 will be
mailed. Redemptions of $1000 or more will be charged a wire fee (currently $8.00
per wire) which will be deducted from the account. Any change in the bank
account specified in the Application must be made in writing with a signature
guarantee as described above for redemptions by mail. If an investor selects a
telephone redemption privilege, the investor authorizes Chase Global Funds
Services Company to act on telephone instructions from any person representing
himself or herself to be the investor or the investor's investment
representative and reasonably believed by Chase Global Funds Services Company to
be genuine. The Fund will require Chase Global Funds Services Company to employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that the instructions are genuine and, if it does not follow such
procedures, the Fund may be liable for losses due to unauthorized or fraudulent
requests. An investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents nor Chase Global Funds Services
Company will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult Chase Global Fund's Services Company at (800) 344-3092. The
telephone redemption privilege may be
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<PAGE>
modified or terminated without notice.
Automatic Redemptions: A shareholder who owns shares of the Fund with a value of
$10,000 or more may establish a Systematic Withdrawal Plan. The Shareholder may
request a declining balance withdrawal, a fixed dollar withdrawal, a fixed share
withdrawal, or a fixed percentage withdrawal (based on the current value of the
account) on a monthly, quarterly, semiannual or annual basis. When a shareholder
reaches age 59-1/2 and begins to receive distributions from an IRA or other
retirement plan invested in the Fund, the shareholder can arrange to have a
regular monthly or quarterly redemptions made under Systematic Withdrawal Plan.
In this case it is not necessary for the account value to be $10,000 or more.
Further Information on establishing a Systematic Withdrawal Plan may be obtained
by calling the Fund.
PROCESSING OF
REDEMPTION ORDERS
The Fund generally sends payment for an investor's shares on the Fund Business
Day after the investor's request is received in proper form, provided that the
investor's request is received by the Fund prior to the Fund's Cut-off Time and
assuming that the Fund has collected payment of the purchase price of such
investor's shares. Under unusual circumstances, the Fund may suspend
redemptions, or postpone payment for more than seven business days, as permitted
by federal securities laws.
Sales of shares of the Fund may also be made through registered securities
dealers who have entered into selected dealer agreements with the Distributor. A
dealer who agrees to process an order on behalf of an investor may charge the
investor a fee for this service.
With the exception of IRA or Keogh accounts, the Fund reserves the right to
close an investor's account if the account has dropped below $500 in value for a
period of three months or longer other than as a result of a decline in the net
asset value per share or if an investor purchases through an automatic
investment plan and fails to meet the Fund's investment minimum within a
twelve-month period. Shareholders are notified at least 60 days prior to any
proposed redemption and invited to add to their account if they wish to continue
as a shareholder of the Fund; however the Fund does not presently contemplate
making such redemptions.
Confirmed redemptions will be done only at the discretion of the Investment
Advisor.
HOW THE FUNDS
VALUE THEIR SHARES
- ------------------
The net asset value of each class of shares of each Fund is currently determined
daily as of 4:00 p.m., Eastern time on each Fund Business Day by dividing the
net assets of a Fund attributable to such class by the number of shares of such
class outstanding at the time the determination is made. Effective with the
anticipated introduction of certain automated share purchase programs, the net
asset value of shares of each class of Funds available through the programs will
17
<PAGE>
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 Investment 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 a Fund would receive if the
instrument were sold. It is anticipated that the net asset value of each share
of each Fund will remain constant at $1.00 and the 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 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 a
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 or by ACH to a pre-established bank
account, 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.
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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 any net long-term capital gains would 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 FUNDS
- --------------------
DISTRIBUTION PLANS
The Funds' distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Federal
Money Market Fund has adopted a Rule 12b-1 distribution plan which provides that
such Fund will pay distribution fees at annual rates of up to 0.10% of the
average daily net assets attributable to its Vista Shares. There is no
distribution plan for the Vista Cash Management 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 Vista Shares, and are not tied to the amount of
actual expenses incurred. Some activities intended to promote the sale of Vista
Shares will be conducted generally by the Vista Family of Funds, and activities
intended to promote a Fund's Vista Shares may also benefit the Fund's other
shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater 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
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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 0.35% 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 0.25% 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 Trust to do so) credit to the accounts of their customers from
whom they are already receiving other fees amounts not exceeding such other fees
or the fees for their services as shareholder servicing agents. For shareholders
that bank with Chase, Chase may aggregate investments in the Vista Funds with
balances held in Chase bank accounts for purposes of determining eligibility for
certain bank privileges that are based on specified minimum balance
requirements, such as reduced or no fees for certain banking services or
preferred rates on loans and deposits. Chase and certain broker-dealers and
other shareholder servicing agents may, at their own expense, provide gifts,
such as computer software packages, guides and books related to investment or
additional Fund shares valued up to $250 to their customers that invest in the
Vista Funds.
Chase may from time to time, at its own expense, provide compensation to certain
selected dealers for performing administrative services for their customers.
These services include maintaining account records, processing orders to
purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of a Fund attributable to shares of such Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to a Fund or its shareholders, since it will be paid by
Chase.
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
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<PAGE>
equal to 0.05% of each Fund's average daily net assets.
VFD provides certain sub- administrative services to each Fund pursuant to a
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. VFD 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. VFD is located at 101 Park
Avenue, New York, New York 10178.
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.
TRANSFER AGENT AND
DIVIDEND PAYING AGENT
DST Systems, Inc. located at 210 W. 10th Street, Kansas City, MO 64105 serves
as the Funds' transfer agent and dividend paying agent.
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 Funds' custodian
for all services to the Funds, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of preparing and mailing
reports to investors and to government offices and commissions; expenses of
meetings of investors; fees and expenses of independent accountants, of legal
counsel and of any transfer agent, registrar or dividend disbursing agent of the
Trust; insurance premiums; and expenses of calculating the net asset value of,
and the net income on, shares of the Funds. Shareholder servicing and
distribution fees are allocated to specific classes of the Funds. In addition,
the Funds may allocate transfer agency and certain other expenses by class.
Service providers to a 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
21
<PAGE>
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 a
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 may issue multiple classes of shares. This Prospectus relates only to
Vista Shares of the Funds. Certain 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 would affect the relative
performance of the different classes. Investors may call 1-800-344-3092 to
obtain additional information about other classes of shares of the Funds that
are offered. Any person entitled to receive compensation for selling or
servicing shares of a Fund may receive different levels of compensation with
respect to one class of shares over another.
The business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
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.
Investment performance may from time to time be included in advertisements
about the Funds. Performance is calculated separately
22
<PAGE>
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.
23
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24
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VISTA [LOGO]
FAMILY OF MUTUAL FUNDS
MANAGED BY CHASE MANHATTAN
PROSPECTUS
VISTA(sm) TAX FREE INCOME FUND
Class A and B Shares
Investment Strategy: Income
December 27, 1996
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 December 27, 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.
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TABLE OF CONTENTS
Expense Summary 4
The expenses you might pay on your Fund investment, including
examples
Financial Highlights 6
How the Fund has performed
Fund Objectives 8
Investment Policies 8
The kinds of securities in which the Fund invests, investment
policies and techniques, and risk
Management 14
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment 15
Alternative sales arrangements
How to Buy, Sell and Exchange Shares 16
How the Fund Values Its Shares 23
How Distributions Are Made; Tax Information 23
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund 24
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information 27
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 29
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EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your 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 A Class B
Shares Shares
------- -------
SHAREHOLDER TRANSACTION EXPENSES
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, where indicated) 0.01%** 0.25%
Other Expenses 0.49% 0.49%
------- -------
Total Fund Operating Expenses (after waiver of fee)** 0.90% 1.64%
======= =======
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 $ 93 $151
Class B Shares:
Assuming complete redemption
at the end of the
period++ +++ $67 $82 $109 $175
Assuming no redemptions+++ $17 $52 $ 89 $175
*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 would be 0.30% for Class A and Class B shares,
the Shareholder Servicing Fee would be 0.25% for Class A shares, and Total
Fund Operating Expenses would be 1.29% and 1.79% for Class A and Class B
shares, respectively.
***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.
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+Assumes deduction at the time of purchase of the maximum sales charge.
++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 after purchase. 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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FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Class A Share and one Class B Share. This information is supplemented by
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the period ended August 31, 1996, which is
incorporated by reference into the SAI. 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 in the table below, have been audited by Price Waterhouse LLP,
independent accountants, whose report is included in the Annual Report to
Shareholders.
VISTA TAX FREE INCOME FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Class A
Year Year 11/1/93 Year Year
Ended ended through ended ended
8/31/96 8/31/95 8/31/94+ 10/31/93 10/31/92 10/31/91 10/31/90
------- ------- -------- -------- -------- -------- --------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $11.85 $11.70 $12.70 $11.52 $11.12 $10.43 $10.58
------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income 0.580 0.585 0.475 0.662 0.731 0.727 0.723
Net Gains or Losses in Securities
(both realized and unrealized) (0.007) 0.147 (0.847) 1.412 0.556 0.693 (0.094)
------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 0.573 0.732 (0.372) 2.074 1.287 1.420 0.629
------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income 0.583 0.582 0.475 0.662 0.731 0.726 0.726
Distributions from capital gains -- -- 0.153 0.237 0.156 -- 0.055
------ ------ ------ ------ ------ ------ ------
Total Distributions 0.583 0.582 0.628 0.899 0.887 0.726 0.781
------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of Period $11.84 $11.85 $11.70 $12.70 $11.52 $11.12 $10.43
====== ====== ====== ====== ====== ====== ======
Total Return(1) 4.88% 6.53% (2.99%) 18.72% 11.99% 13.98% 6.18%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 70,480 $88,783 $98,054 $83,672 $17,548 $5,425 $3,973
Ratio of Expenses to Average Net Assets# 0.90% 0.85% 0.58% 0.23% 0.00% 0.04% 0.12%
Ratio of Net Income to Average Net Assets# 4.83% 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# 1.46% 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# 4.27% 4.45% 4.04% 4.28% 3.92% 2.71% 4.48%
Portfolio Turnover Rate 210% 233% 258% 149% 266% 211% 89%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Class B
9/4/87* Year Year 11/4/93**
to Ended ended through
10/31/89 10/31/88 10/31/87 8/31/96 8/31/95 8/31/94
-------- -------- -------- ------- ------- --------
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $10.63 $10.08 $10.00 $11.77 $11.65 $12.51
------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income 0.756 0.738 0.059 0.486 0.498 0.423
Net Gains or Losses in Securities
(both realized and unrealized) 0.006 0.603 0.021 (0.006) 0.140 (0.707)
------ ------ ------ ------ ------ ------
Total from Investment Operations 0.762 1.341 0.080 0.480 0.638 (0.284)
------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income 0.759 0.791 -- 0.490 0.518 0.423
Distributions from capital gains 0.053 -- -- -- -- 0.153
------ ------ ------ ------ ------ -------
Total Distributions 0.812 0.791 -- 0.490 0.518 0.576
------ ------ ------ ------ ------ -----------
Net Asset Value, End of Period $10.58 $10.63 $10.08 $11.76 $11.77 $11.65
====== ====== ====== ====== ====== =========
Total Return(1) 7.48% 13.83% 5.41% 4.10% 5.70% (2.35%)
%)
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $3,196 $1,197 $101 $14,329 $14,265 $11,652
Ratio of Expenses to Average Net Assets# 0.00% 0.00% 0.00% 1.65% 1.61% 1.47%
Ratio of Net Income to Average Net Assets# 7.06% 7.50% 7.35% 4.08% 4.31% 3.95%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 2.50% 2.00% 2.00% 1.95% 1.97% 1.81%
Ratio of Net Investments Income without
waivers and assumption of expenses to
Average Net Assets# 4.56% 5.50% 5.35% 3.78% 3.95% 3.61%
Portfolio Turnover Rate 257% 422% 94% 210% 233% 258
</TABLE>
* Commencement of operations.
** Commencement of offering shares.
+ In 1994 the Tax Free Income Fund changed ifs fiscal year-end from October
31 to August 31.
(1) Total returns are calculated before taking into account effect of 4.50%
sales charge.
# Short periods have been annualized.
6 & 7
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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-3 or VMIG-3 by Moody's Investors Service, Inc. ("Moody's"),
or BBB or SP-2 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.
In lieu of investing directly, 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.
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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.
The two principal classifications of Municipal Obligations are general
obligation and 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. 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
revenue 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 in which the Fund may
invest contain "non-
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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. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the property
in the event of foreclosure might prove difficult. Certain investments in
municipal lease obligations may be illiquid.
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 delivery at a future date, 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
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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 stripped obligations (i.e., separately traded principal and
interest components of securities) where the underlying obligations are
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 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
floating or 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 floating or 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 floating or 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 securities 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. The market value of an
inverse floater will vary inversely with changes in market interest
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rates, and will be more volatile in response to interest rates changes than
that of a fixed-rate obligation. 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 securities which do not include such a structure.
OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets
in shares of other investment companies when consistent with its investment
objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
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. Inaccurate 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 losses that
may exceed the original investment of the Fund. 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
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derivatives, related instruments and the associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Fund's portfolio transactions will
vary from year to year. The Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and
would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund--Certain
Regulatory Matters."
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 obligations of states, cities,
municipalities or other public authorities). 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
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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 up to 25% of its total assets 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 the banking industry. 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 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. 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
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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 is entitled to receive a fee, payable by Chase from
its advisory fee, at an annual rate equal to 0.15% of the Fund's average
daily net assets. 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, Vice President of Chase, has been responsible for the
day-to-day management of the Fund since its inception in 1987. 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.
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, at the beginning of the ninth year 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"
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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. In almost all cases, investors planning
to purchase $250,000 or more of the Fund's shares will pay lower aggregate
charges and expenses by purchasing Class A shares.
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,
SEP-IRAs and the Systematic Investment Plan) 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 the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, 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 clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
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 transaction through automatic periodic 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 and a deposit slip or voided check 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 proper
form. 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. Orders for
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shares are accepted by the Fund after funds are converted to federal funds.
Orders paid by check and received by 2:00 p.m., Eastern Time will generally
be available for the purchase of shares the following business day.
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 Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
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.
Amount of
Sales charge as a sales charge
percentage of: reallowed to
------------------------- dealers as a
Amount of transaction at Offering Net amount percentage of
offering price ($) Price invested offering price
- ------------------------------------------------------------------------------
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
There is no initial sales charge on purchases of Class A shares of $1 million
or more.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
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
below. For other shares, the
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amount of the charge is determined as a percentage of the purchase 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. 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.
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 the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
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 shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker-dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of 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
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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 that charges a fee
for its 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 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 exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the 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 Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B 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, provided that the Class B
account had a minimum balance of $20,000 at the time the systematic
withdrawal plan was established. 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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For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on
specified minimum balance requirements, such as reduced or no fees for
certain banking services or preferred rates on loans and deposits. Chase and
certain broker-dealers and other shareholder servicing agents may, at their
own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to
their customers that invest in the Vista Funds. 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 Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
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 may require 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 in proper form, assuming the Fund has collected
payment of the purchase price of your shares. 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 from your
account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. Unless an investor indicates otherwise on the account application, the
Fund will be authorized to act upon redemption and transfer instructions
received by
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<PAGE>
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. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. 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 $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal
plan for Class A accounts. Call the Vista Service Center at 1-800-34-VISTA
for complete instructions.
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.
INVOLUNTARY REDEMPTION OF ACCOUNTS. 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 or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. 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 a CDSC, the
transaction will not be subject to the CDSC.
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<PAGE>
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.
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. Call the Vista Service
Center for procedures for telephone transactions. 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 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.
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.
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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., Eastern time), 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 or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. 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 or by ACH 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.
If a check representing a 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.
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<PAGE>
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 Fund Distributors, Inc. ("VFD"). VFD 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% 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 or Class B
shares may also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These
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<PAGE>
incentives may include gifts of up to $100 per person annually; an occasional
meal, ticket to a sporting event or theater for entertainment for
broker-dealers and their guests; and payment or reimbursement for travel
expenses, including lodging and meals, in connection with attendance at
training and educational meetings within and outside the U.S.
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.
Chase and/or VFD may from time to time, at their own expense out of
compensation retained by them from the Fund or other sources available to
them, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares and responding to certain
customer inquiries. The amount of such compensation may be up to an
additional 0.10% annually of the average net assets of the Fund attributable
to shares of the Fund held by customers of such shareholder servicing agents.
Such compensation does not represent an additional expense to the Fund or its
shareholders, since it will be paid by Chase and/or VFD.
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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.
VFD provides certain sub- administrative services to the Fund pursuant to a
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. VFD 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. VFD is located
at 101 Park Avenue, New York, New York 10178.
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,
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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 to Class
A and Class B shares of the Fund. The Fund may 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 would 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 business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required
to hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER
FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities would be indirect. In addition to selling a beneficial interest to
the Fund, a Portfolio could also sell beneficial interests to other mutual
funds or institutional investors. Such investors would invest in such
Portfolio on the same terms and conditions and would pay a proportionate
share of such Portfolio's expenses. However, other investors in a Portfolio
would not be required to sell their shares at the same public offering price
as the Fund, and might bear different levels of ongoing expenses than the
27
<PAGE>
Fund. Shareholders of the Fund should be aware that these differences may
result in differences in returns experienced in the different funds that
invest in a Portfolio. Such differences in return are also present in other
mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
State securities regulations generally would not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of a Portfolio
absent the adoption of procedures by a majority of the disinterested Trustees
of the Trust reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Fund
will not adopt a master/feeder structure under which the disinterested
Trustees of the Trust are Trustees of the Portfolio unless the Trustees of
the Trust, including a majority of the disinterested Trustees, adopt
procedures they believe to be reasonably appropriate to deal with any
conflict of interest up to and including creating a separate Board of
Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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, in
28
<PAGE>
the manner described in the SAI. "Yield" for each class of shares is
calculated by dividing the annualized net investment income 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 the Fund can then be compared to
the yield of a taxable fund. Tax equivalent yields can be quoted on either a
"yield" or "effective yield" basis.
"Total return" for the one-, five- and ten-year periods (or since inception,
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 may also be presented
for other periods or without reflecting sales charges. 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.
29
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
[bullet] 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.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or
semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no
additional charge for this service.
[bullet] 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. Investors
may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or
exchange.
[bullet] 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.
30
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
VISTA [LOGO]
FAMILY OF MUTUAL FUNDS
MANAGED BY CHASE MANHATTAN
P.O. Box 419392
Kansas City, MO 64141-6392
VTFI-1-1296
<PAGE>
[Vista logo]
VISTA
FAMILY OF MUTUAL FUNDS
MANAGED BY CHASE MANHATTAN
PROSPECTUS
VISTA(SM) NEW YORK TAX FREE INCOME FUND
CLASS A AND B SHARES
INVESTMENT STRATEGY: INCOME
December 27, 1996
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 December 27, 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>
[blank page]
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights 6
How the Fund has performed
Fund Objectives 8
Investment Policies 8
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management 15
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
About Your Investment 15
Alternative sales arrangements
How to Buy, Sell and Exchange Shares 16
How the Fund Values Its Shares 23
How Distributions Are Made; Tax Information 23
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund 24
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information 29
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges 30
</TABLE>
3
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your 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>
Class A Class B
Shares Shares
------------ ------------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
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)** 0.26% 0.26%
12b-1 Fee*** 0.25% 0.75%
Shareholder Servicing Fee (after estimated waiver, where indicated) 0.01%** 0.25%
Other Expenses 0.38% 0.38%
------------ ------------
Total Fund Operating Expenses (after waiver of fee)** 0.90% 1.64%
============ ============
</TABLE>
<TABLE>
<CAPTION>
EXAMPLES
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
----------------------- ------------ -------------
<S> <C> <C> <C> <C>
Class A Shares+ $54 $72 $ 93 $151
Class B Shares:
Assuming complete redemption at the end of
the period++ +++ $67 $82 $109 $175
Assuming no redemptions +++ $17 $52 $ 89 $175
</TABLE>
* 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 would be 0.30% for Class A and Class B
shares, the Shareholder Servicing Fee would be 0.25% for Class A shares,
and Total Fund Operating Expenses would be 1.18% and 1.68% for Class A
and Class B shares, respectively.
*** 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
++ 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 after purchase. 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.
4
<PAGE>
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."
5
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Class A Share and one Class B Share. This information is supplemented by
financial statements and accompanying notes appearing in the Fund's Annual
Report to Shareholders for the period ended August 31, 1996, which is
incorporated by reference into the SAI. 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 in the table below, have been audited by Price Waterhouse LLP,
independent accountants, whose report is included in the Annual Report to
Shareholders.
VISTA NEW YORK TAX FREE INCOME FUND
<TABLE>
<CAPTION>
Class A
---------------------------------------------------------
Year ended 11/1/93 Year ended
--------------------- through -----------------------
8/31/96 8/31/95 8/31/94+ 10/31/93 10/31/92
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.47 $ 11.30 $ 12.27 $ 11.18 $ 11.24
--------- ----------- ----------- ----------- -----------
Income from Investment Operations: Net
Investment Income 0.555 0.570 0.473 0.592 0.473
Net Gains or (Losses) in Securities
(both realized and unrealized) (0.077) 0.167 (0.688) 1.281 0.274
--------- ----------- ----------- ----------- -----------
Total from Investment Operations 0.478 0.737 (0.215) 1.873 0.747
Less Distributions: Dividends from Net
Investment Income 0.558 0.567 0.472 0.591 0.473
Distributions from Capital Gains -- -- 0.283 0.194 0.334
--------- ----------- ----------- ----------- -----------
Total Distributions 0.558 0.567 0.755 0.785 0.807
--------- ----------- ----------- ----------- -----------
Net Asset Value, End of Period $ 11.39 $ 11.47 $ 11.30 $ 12.27 $ 11.18
========= =========== =========== =========== ===========
Total Return(1) 4.20% 6.82% (1.81%) 17.31% 8.57%
Ratios/Supplemental Data Net Assets,
End of Period (000 omitted) $96,102 $104,168 $103,113 $120,809 $48,420
Ratio of Expenses to Average Net Assets# 0.90% 0.85% 0.76% 0.75% 0.75%
Ratio of Net Investment Income to
Average# 4.76% 5.11% 4.89% 4.86% 5.74%
Net Assets Ratio of Expenses with out
waivers and assumption of expenses to
Average Net Assets# 1.27% 1.37% 1.25% 1.11% 1.41%
Ratio of Net Investment Income without
waivers and assumption
of expenses to Average Net Assets# 4.39% 4.59% 4.40% 4.50% 5.08%
Portfolio Turnover Rate 156% 122% 162% 150% 280%
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------------------------- ---------------------------------
Year ended 9/4/87* Year ended 11/4/93**
---------------------------------------------- to -------------------- through
10/31/91 10/31/90 10/31/89 10/31/88 10/31/87 8/31/96 8/31/95 8/31/94
---------------------- ----------- ----------- ----------- --------- --------- ------------
<C> <C> <C> <C> <C> <C> <C> <C>
$ 10.48 $ 10.60 $ 10.62 $10.08 $10.00 $ 11.41 $ 11.27 $ 12.11
---------------------- ----------- ----------- ----------- --------- --------- ------------
0.635 0.671 0.739 0.701 0.053 0.469 0.485 0.419
0.762 (0.100) 0.045 0.590 0.027 (0.086) 0.162 (0.543)
---------------------- ----------- ----------- ----------- --------- --------- ------------
1.40 0.571 0.784 1.291 0.080 0.383 0.647 (0.124)
0.635 0.672 0.741 0.751 0.000 0.463 0.507 0.433
0.000 0.020 0.063 0.000 0.000 -- -- 0.283
---------------------- ----------- ----------- ----------- --------- --------- ------------
0.635 0.692 0.804 0.751 0.000 0.463 0.507 0.716
---------------------- ----------- ----------- ----------- --------- --------- ------------
$ 11.25 $ 10.48 $ 10.60 $10.62 $10.08 $ 11.33 $ 11.41 $ 11.27
====================== =========== =========== =========== ========= ========= ============
13.68% 5.56% 7.69% 13.24% 5.41% 3.46% 5.99% (1.11%)
$24,062 $20,413 $17,545 $5,557 $ 101 $13,657 $10,633 $ 7,234
0.76% 0.71% 0.20% 0.00% 0.00% 1.65% 1.61% 1.51%
5.85% 6.34% 6.90% 7.16% 7.49% 4.01% 4.35% 4.28%
1.71% 1.68% 2.30% 1.50% 1.50% 1.76% 1.87% 1.76%
4.90% 5.38% 4.81% 5.66% 5.99% 3.90% 4.09% 4.03%
353% 143% 286% 362% 90% 156% 122% 162%
</TABLE>
* Commencement of operations.
** Commencement of offering shares.
+ In 1994 the New York Tax Free Income Fund changed its fiscal year-end
from October 31 to August 31.
(1) Total return figures are calculated before taking into account effect of
4.50% sales charge.
# Short periods have been annualized.
7
<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-3 or
VMIG-3 by Moody's Investors Service, Inc. ("Moody's"), or BBB or SP-2 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.
In lieu of investing directly, 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.
8
<PAGE>
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 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 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. 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
revenue 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.
9
<PAGE>
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 in which the Fund may
invest 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. Although
"non- appropriation" lease obligations are secured by the leased property,
disposition of the property in the event of foreclosure might prove
difficult. Certain investments in municipal lease obligations may be
illiquid.
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 delivery at a future date, 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.
10
<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 stripped obligations (i.e., separately traded principal and
interest components of securities) where the underlying obligations are
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 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
floating or 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 floating or 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 floating or variable rate municipal
obligations is tax exempt, and the Fund would purchase such instruments based
on opinions of bond counsel.
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INVERSE FLOATERS AND INTEREST RATE CAPS. The Fund may invest in inverse
floaters and in securities 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. The market value of an
inverse floater will vary inversely with changes in market interest rates,
and will be more volatile in response to interest rates changes than that of
a fixed-rate obligation. 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 securities which do not include such a structure.
OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets
in shares of other investment companies when consistent with its investment
objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
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. Inaccurate 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 losses that
may exceed the original investment of the Fund. 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
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<PAGE>
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.
PORTFOLIO TURNOVER. The frequency of the Fund's portfolio transactions will
vary from year to year. The Fund's investment policies may lead to frequent
changes in investments, particularly in periods of rapidly changing market
conditions. High portfolio turnover rates would generally result in higher
transaction costs, including brokerage commissions or dealer mark-ups, and
would make it more difficult for the Fund to qualify as a registered
investment company under federal tax law. See "How Distributions are Made;
Tax Information" and "Other Information Concerning the Fund-- Certain
Regulatory Matters."
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 obligations of states, cities,
municipalities or other public authorities). 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
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.
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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 up to 25% of its total assets 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 the banking industry. 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 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. 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 invests
will generally be located in the State of New York.
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<PAGE>
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 is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.15% of the Fund's average daily
net assets. 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, Vice President of Chase, has been responsible for the
day-to-day management of the Fund since its inception in 1987. 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.
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, at the beginning of the ninth year after purchase. For more
information about the conversion of Class B shares, see the SAI. This
discussion will include
15
<PAGE>
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. In almost all cases, investors planning
to purchase $250,000 or more of the Fund's shares will pay lower aggregate
charges and expenses by purchasing Class A shares.
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,
SEP-IRAs and the Systematic Investment Plan) 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 the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, 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 clearance of the purchase check, which
may take 15 calendar days or longer. In addition, the redemption of shares
purchased through ACH will not be allowed until clearance of your payment,
which may take 7 business days or longer.
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 transaction through automatic periodic 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 and a deposit slip or voided check 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
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next determined after the Vista Service Center receives your order in proper
form. 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. Orders for shares are accepted by the Fund after
funds are converted to federal funds. Orders paid by check and received by
2:00 p.m., Eastern Time will generally be available for the purchase of
shares the following business day.
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 Class A shares unless you
request them. Due to the conversion feature of Class B shares, certificates
for Class B shares will not be issued and all Class B shares will be held in
book entry form.
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.
The Fund's distributor pays broker-dealers commissions on net sales of Class
A shares of $1 million or more based on an investor's cumulative purchases.
Such commissions are paid at the rate of 0.75% of the amount under $2.5
million, 0.50% of the next $7.5 million, 0.25% of the next $40 million and
0.15% thereafter. The Fund's distributor may withhold such payments with
respect to short-term investments.
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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
below. For other shares, the amount of the charge is determined as a
percentage of the lesser of the current market value or the purchase price 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. 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.
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 the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
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 shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their immediate families) of Chase, the
Fund's distributor and transfer agent or any affiliates or subsidiaries
thereof, registered representatives and other employees (and their immediate
families) of broker- dealers having selected dealer agreements with the
Fund's distributor, employees (and their immediate families) of financial
institutions having selected dealer agreements with the Fund's distributor
(or otherwise having an arrangement with a broker-dealer or financial
institution with respect to
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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 that charges a fee
for its 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 master account of such investment
adviser or financial planner on the books and records of the broker or agent.
Such purchases may also be made for retirement and deferred compensation
plans and trusts used to fund those plans.
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 exercising investment discretion, provided
that appropriate notification of such fiduciary relationship is reported at
the time of the investment to the Fund, the Fund's distributor or the 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 Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an
investment company or personal holding company. The CDSC will be waived on
redemption of Class B 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
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<PAGE>
also be redeemed each year without a CDSC, provided that the Class B account
had a minimum balance of $20,000 at the time the systematic withdrawal plan
was established. 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.
For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on
specified minimum balance requirements, such as reduced or no fees for
certain banking services or preferred rates on loans and deposits. Chase and
certain broker- dealers and other shareholder servicing agents may, at their
own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to
their customers that invest in the Vista Funds.
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 Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The
Fund will only forward redemption payments on shares for which it has
collected payment of the purchase price.
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 may require 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 in proper form, assuming the Fund has collected
payment of the purchase price of your shares. Under unusual circumstances,
the Fund may suspend redemptions, or postpone payment for more than seven
days, as permitted by federal securities law.
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<PAGE>
You may use Vista's Telephone Redemption Privilege to redeem shares from your
account unless you have notified the Vista Service Center of an address
change within the preceding 30 days. Telephone redemption requests in excess
of $25,000 will only be made by wire to a bank account on record with the
Fund. 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. An investor agrees, however, that to
the extent permitted by applicable law, neither the Fund nor its agents will
be liable for any loss, liability, cost or expense arising out of any
redemption request, including any fraudulent or unauthorized request. 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 $50 or more ($100
or more for Class B accounts) monthly, quarterly or semiannually. A minimum
account balance of $5,000 is required to establish a systematic withdrawal
plan for Class A accounts. Call the Vista Service Center at 1-800-34-VISTA
for complete instructions.
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.
INVOLUNTARY REDEMPTION OF ACCOUNTS. 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, or if you purchase through the Systematic
Investment Plan and fail to meet the Fund's investment minimum within a
twelve month period. 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.
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<PAGE>
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 a 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.
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. Call the Vista Service
Center for procedures for telephone transactions. 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 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.
REINSTATEMENT PRIVILEGE. Class A shareholders have a one time privilege of
reinstating their
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<PAGE>
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., Eastern time), 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 or by ACH to a
pre-established bank account while reinvesting capital gains distributions in
additional shares without a sales charge; or (3) receive all distributions in
cash or by ACH. 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 or by ACH 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.
If a check representing a 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
23
<PAGE>
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).
OTHER INFORMATION
CONCERNING THE FUND
DISTRIBUTION PLANS
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The 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% 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.
24
<PAGE>
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 or Class B shares may also benefit the Fund's
other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts
of up to $100 per person annually; and occasional meal, ticket to a sporting
event or theater for entertainment for broker-dealers and their guests; and
payment or reimbursement for travel expenses, including lodging and meals, in
connection with attendance at training and educational meetings within and
outside the U.S.
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.
Chase and/or VFD may from time to time, at their own expense out of
compensation retained by them from the Fund or other sources available to
them, make additional payments to certain selected dealers or other
shareholder servicing agents for performing administrative services for their
customers. These services include maintaining account records, processing
orders to purchase, redeem and exchange Fund shares
25
<PAGE>
and responding to certain customer inquiries. The amount of such compensation
may be up to an additional 0.10% annually of the average net assets of the
Fund attributable to shares of the Fund held by customers of such shareholder
servicing agents. Such compensation does not represent an additional expense
to the Fund or its shareholers, since it will be paid by Chase and/or VFD.
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.
VFD provides certain sub- administrative services to the Fund pursuant to a
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. VFD 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. VFD is located
at 101 Park Avenue, New York, New York 10178.
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
26
<PAGE>
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 to Class
A and Class B shares of the Fund. The Fund may 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 would 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 business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required
to hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER
FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own
portfolio securities, the Fund is permitted to invest all of its investable
assets in a separate registered investment company (a "Portfolio"). In that
event, a shareholder's interest in the Fund's underlying investment
securities
27
<PAGE>
would be indirect. In addition to selling a beneficial interest to the Fund,
a Portfolio could also sell beneficial interests to other mutual funds or
institutional investors. Such investors would invest in such Portfolio on the
same terms and conditions and would pay a proportionate share of such
Portfolio's expenses. However, other investors in a Portfolio would not be
required to sell their shares at the same public offering price as the Fund,
and might bear different levels of ongoing expenses than the Fund.
Shareholders of the Fund should be aware that these differences may result in
differences in returns experienced in the different funds that invest in a
Portfolio. Such differences in return are also present in other mutual fund
structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund were to withdraw from a Portfolio, the remaining funds might experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control
of such Portfolio. Under this master/feeder investment approach, whenever the
Trust was requested to vote on matters pertaining to a Portfolio, the Trust
would hold a meeting of shareholders of the Fund and would cast all of its
votes in the same proportion as did the Fund's shareholders. Shares of the
Fund for which no voting instructions had been received would be voted in the
same proportion as those shares for which voting instructions had been
received. Certain changes in a Portfolio's objective, policies or
restrictions might require the Trust to withdraw the Fund's interest in such
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from such Portfolio).
The Fund could incur brokerage fees or other transaction costs in converting
such securities to cash. In addition, a distribution in kind could result in
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund.
State securities regulations generally would not permit the same individuals
who are disinterested Trustees of the Trust to be Trustees of a Portfolio
absent the adoption of procedures by a majority of the disinterested Trustees
of the Trust reasonably appropriate to deal with potential conflicts of
interest up to and including creating a separate Board of Trustees. The Fund
will not adopt a master/feeder structure under which the disinterested
Trustees of the Trust are Trustees of the Portfolio unless the Trustees of
the Trust, including a majority of the disinterested Trustees, adopt
procedures they believe to be reasonably appropriate to deal with any
conflict of interest up to and including creating a separate Board of
Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through
28
<PAGE>
other funds by contacting the Fund at 1-800-622-4273. In the event the Fund
adopts a master/feeder structure and invests all of its investable assets in
a Portfolio, shareholders of the Fund will be given at least 30 days' prior
written notice.
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, in the manner described in the SAI. "Yield" for each class
of shares is calculated by dividing the annualized net investment income 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 the Fund can then be compared
to the yield of a taxable Fund. Tax equivalent yields can be quoted on either
a "yield" or "effective yield" basis.
"Total return" for the one-, five- and ten-year periods (or since inception,
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.
29
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
The following services are available to you as a Vista mutual fund
shareholder.
[bullet] 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.
[bullet] SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more
($100 or more for Class B accounts) monthly, quarterly or semiannually. A
minimum account balance of $5,000 is required to establish a systematic
withdrawal plan for Class A accounts.
[bullet] SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista
account to another on a regular, prearranged basis. There is no additional
charge for this service.
[bullet] 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.
Investors may not maintain, within the same fund, simultaneous plans for
systematic investment or exchange and systematic withdrawal or exchange.
[bullet] 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.
30
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
[LOT A COVER]
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[logo]
VISTA
FAMILY OF MUTUAL FUND
MANAGED BY CHASE MANHATTAN
P.O. Box 419392
Kansas City, MO 64141-6392
VNYTF-1-1296X
<PAGE>
[LOT C COVER]
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[logo]
VISTA
FAMILY OF MUTUAL FUND
MANAGED BY CHASE MANHATTAN
P.O. Box 419392
Kansas City, MO 64141-6392
VNYT-1-1296
<PAGE>
[VISTA LOGO]
PROSPECTUS
VISTA[SM] CALIFORNIA INTERMEDIATE
TAX FREE INCOME FUND
---------------------------------
Investment Strategy: Income
---------------------------------
December 27, 1996
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 December 27, 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>
2
<PAGE>
TABLE OF CONTENTS
Expense Summary ............................................................ 4
The expenses you might pay on your Fund investment, including examples
Financial Highlights ....................................................... 5
How the Fund has performed
Fund Objective ............................................................. 6
Investment Policies ........................................................ 6
The kinds of securities in which the Fund invests, investment policies
and techniques, and risks
Management ................................................................. 12
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management,
the Fund's sub-adviser, and the individuals who manage the Fund
How to Buy, Sell and Exchange Shares ....................................... 13
How the Fund Values Its Shares ............................................. 19
How Distributions Are Made; Tax Information ................................ 19
How the Fund distributes its earnings, and tax treatment related
to those earnings
Other Information Concerning the Fund ...................................... 20
Distribution plans, shareholder servicing agents, administration,
custodian, expenses and organization
Performance Information .................................................... 23
How performance is determined, stated and/or advertised
Make the Most of Your Vista Privileges ..................................... 25
3
<PAGE>
EXPENSE SUMMARY
---------------
Expenses are one of several factors to consider when investing. The following
table summarizes your costs from investing in the Fund based on expenses
incurred in the most recent fiscal year. The example shows 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)* 0.05%
12b-1 Fee (after estimated waiver) * ** 0.10%
Shareholder Servicing Fee (after estimated waiver)* 0.00%
Other Expenses (after estimated waiver)* 0.45%
------
Total Fund Operating Expenses (after waivers of fees)* 0.60%
======
EXAMPLE
Your investment of $1,000 would
incur the following expenses,
assuming 5% annual return: 1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Shares+ $51 $63 $77 $117
*Reflects current waiver arrangements to maintain Total Fund Operating
Expenses at the level indicated in the table above. Absent such waivers, the
Investment Advisory Fee, 12b-1 Fee and Shareholder Servicing Fee would be
0.30%, 0.25% and 0.25%, respectively, and Total Fund Operating Expenses would
be 1.35%.
**Long-term shareholders in mutual funds with 12b-1 fees, such as 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.
+ Assumes deduction at the time of purchase of the maximum sales charge.
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 example
should not be considered a representation 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 one
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 period ended August 31, 1996, which is
incorporated by reference into the SAI. 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 in the
table below, have been audited by Price Waterhouse LLP, independent accountants,
whose report is included in the Annual Report to Shareholders.
VISTA CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
<TABLE>
<CAPTION>
Year ended 11/1/93 7/15/93*
---------------------- through through
8/31/96 8/31/95 8/31/94+ 10/31/93
-------- -------- --------- -----------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period $ 9.89 $ 9.69 $ 10.30 $ 10.22
-------- -------- --------- -----------
Income From Investment Operations:
Net Investment Income 0.473 0.505 0.320 0.166
Net Gains or (Losses) in Securities
(both realized and unrealized) 0.013 0.200 (0.408) 0.081
-------- -------- --------- -----------
Total from Investment Operations 0.486 0.705 (0.088) 0.247
-------- -------- --------- -----------
Less Distributions:
Dividends from Net Investment Income 0.476 0.505 0.404 0.165
Distributions from Capital Gains 0.090 -- 0.118 --
-------- -------- --------- -----------
Total distributions 0.566 0.505 0.522 0.165
-------- -------- --------- -----------
Net Asset Value, End of Period $ 9.81 $ 9.89 $ 9.69 $ 10.30
======== ======== ========= ===========
Total Return (1) 5.00% 7.55% (0.86%) 2.42%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 28,298 $32,746 $36,264 $ 41,728
Ratio of Expenses to Average Net Assets# 0.60% 0.52% 0.52% 0.52%
Ratio of Net Investment Income to Average
Net Assets# 4.77% 5.24% 4.88% 4.83%
Ratio of Expenses without waivers and
assumption of expenses to Average Net Assets# 1.47% 1.40% 1.37% 1.33%
Ratio of Net Investment Income without waivers
and assumption of expenses to Average
Net Assets# 3.90% 4.36% 4.03% 4.02%
Portfolio Turnover Rate 188% 94% 93% 40%
</TABLE>
* Commencement of offering shares.
+ In 1994 the California Intermediate Tax Free Income Fund changed its fiscal
year-end from October 31 to August 31.
(1) Total returns are calculated before taking into account effect of 4.50%
sales charge.
# Short periods have been annualized.
5
<PAGE>
FUND 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 Baa,
MIG-3 or VMIG-3 by Moody's Investors Service, Inc. ("Moody's"), BBB or SP-3 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.
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.
In lieu of investing directly, 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.
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
6
<PAGE>
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 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. 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 revenue 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 in which the Fund may invest contain "non-
appropriation" clauses which provide that the municipality has no
7
<PAGE>
obligation to make lease or installment payments in future years unless money is
later appropriated for such purpose. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the property in
the event of foreclosure might prove difficult. Certain investments in municipal
lease obligations may be illiquid.
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 delivery at a future date, 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
8
<PAGE>
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 stripped obligations (i.e., separately traded principal and interest
components of securities) where the underlying obligations are 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 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 floating or 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 floating
or 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 floating or 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 securities 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. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in response to interest rates changes than that of a fixed-rate
obligation.
9
<PAGE>
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 INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets
in shares of other investment companies, when consistent with its investment
objective and policies, subject to applicable regulatory limitations.
Additional fees may be charged by other investment companies.
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. Inaccurate 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 losses that may exceed the original investment of the
Fund. 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.
10
<PAGE>
PORTFOLIO TURNOVER. The frequency of the Fund's portfolio transactions will vary
from year to year. The Fund's investment policies may lead to frequent changes
in investments, particularly in periods of rapidly changing market conditions.
High portfolio turnover rates would generally result in higher transaction
costs, including brokerage commissions or dealer mark-ups, and would make it
more difficult for the Fund to qualify as a registered investment company under
federal tax law. See "How Distributions are Made; Tax Information" and "Other
Information Concerning the Fund--Certain Regulatory Matters."
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 obligations of states, cities,
municipalities or other public authorities). 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
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<PAGE>
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 up to 25% of its total assets 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 the banking industry. 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 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. 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 invests
will generally 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
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<PAGE>
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 is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.15% of the Fund's average daily net
assets. 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, Vice President of Chase, has been responsible for the
day-to-day management of the Fund since its inception in 1993. 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, SEP-IRAs
and the Systematic Investment Plan) 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 the Systematic Investment Plan.
All purchases made by check should be in U.S. dollars and made payable to the
Vista Funds. Third party checks, 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 clearance of the purchase check, which may take 15 calendar
days or longer. In addition, the redemption of shares purchased through ACH will
not be allowed until clearance of your payment, which may take 7 business days
or longer.
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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<PAGE>
BUYING SHARES THROUGH SYSTEMATIC INVESTING. You can make regular investments of
$100 or more per transaction through automatic periodic 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 and a deposit slip or voided check 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 proper form. 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. Orders for shares are accepted by the Fund after funds are
converted to federal funds. Orders paid by check and received by 2:00 p.m.,
Eastern Time will generally be available for the purchase of shares the
following business day.
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.
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<PAGE>
<TABLE>
<CAPTION>
Sales charge as a
percentage of:
----------------------
Amount of transaction at Amount of sales charge
offering price($) Offering Net amount reallowed to dealers as a
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.
The Fund's distributor pays broker-dealers commissions on net sales of shares of
$1 million or more based on an investor's cumulative purchases. Such commissions
are paid at the rate of 0.75% of the amount under $2.5 million, 0.50% of the
next $7.5 million, 0.25% of the next $40 million and 0.15% thereafter. The
Fund's distributor may withhold such payments with respect to short-term
investments.
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 the enclosed application and in the SAI. In
addition, sales charges will not apply to shares purchased with redemption
proceeds received within the prior ninety days from non-Vista mutual funds on
which the investor paid a front-end or contingent deferred sales charge.
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 immediate families), current and
retired employees (and their immediate families) of Chase, the Fund's
distributor and transfer agent or any affiliates or subsidiaries thereof,
registered representatives and other employees (and their immediate families) of
broker-dealers having selected dealer agreements with the Fund's distributor,
employees (and their immediate families) of financial institutions having
selected dealer agreements with the Fund's distributor (or otherwise having an
arrangement with a broker-dealer or financial institution with respect to sales
of 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
15
<PAGE>
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 its 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 exercising investment discretion, provided that appropriate
notification of such fiduciary relationship is reported at the time of the
investment to the Fund, the Fund's distributor or the 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.
For shareholders that bank with Chase, Chase may aggregate investments in the
Vista Funds with balances held in Chase bank accounts for purposes of
determining eligibility for certain bank privileges that are based on specified
minimum balance requirements, such as reduced or no
16
<PAGE>
fees for certain banking services or preferred rates on loans and deposits.
Chase and certain broker-dealers and other shareholder servicing agents may, at
their own expense, provide gifts, such as computer software packages, guides and
books related to investment or additional Fund shares valued up to $250 to their
customers that invest in the Vista Funds.
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 Fund shares any day the New York Stock Exchange is open,
either directly to the Fund or through your investment representative. The Fund
will only forward redemption payments on shares for which it has collected
payment of the purchase price.
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 in proper form, assuming the Fund has collected payment of
the purchase price of your shares. 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 from your
account unless you have notified the Vista Service Center of an address change
within the preceding 15 days. Telephone redemption requests in excess of $25,000
will only be made by wire to a bank account on record with the Fund. 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
17
<PAGE>
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. An investor agrees,
however, that to the extent permitted by applicable law, neither the Fund nor
its agents will be liable for any loss, liability, cost or expense arising out
of any redemption request, including any fraudulent or unauthorized request. 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 $50 or more
monthly, quarterly or semiannually. A minimum account balance of $5,000 is
required to establish a systematic withdrawal plan. Call the Vista Service
Center at 1-800-34-VISTA for complete instructions.
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.
INVOLUNTARY REDEMPTION OF ACCOUNTS. 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 or if you purchase through the Systematic Investment
Plan and fail to meet the Fund's investment minimum within a twelve month
period. 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.
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. Call the Vista Service
Center for procedures for telephone transactions. 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
18
<PAGE>
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 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.
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., Eastern time), on each business day of the Fund, by dividing the net
assets of the Fund by the total number of outstanding shares. 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 or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares without a sales
charge; or (3) receive all distributions in cash or by ACH. 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 or by ACH will be reinvested in
shares of the Fund. You will receive a statement confirming reinvestment of
distributions in additional Fund shares promptly following the
19
<PAGE>
quarter in which the reinvestment occurs.
If a check representing a 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 Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS
20
<PAGE>
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% 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.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater for entertainment for broker-dealers and their guests; and payment or
reimbursement for travel expenses, including lodging and meals, in connection
with attendance at training and 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
21
<PAGE>
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.
Chase and/or VFD may from time to time, at their own expense out of compensation
retained by them from the Fund or other sources available to them, make
additional payments to certain selected dealers or other shareholder servicing
agents for performing administrative services for their customers. These
services include maintaining account records, processing orders to purchase,
redeem and exchange Fund shares and responding to certain customer inquiries.
The amount of such compensation may be up to an additional 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such shareholder servicing agents. Such compensation does not
represent an additional expense to the Fund or its shareholders, since it will
be paid by Chase and/or VFD.
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.
VFD provides certain sub-administrative services to the Fund pursuant to a
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. VFD 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. VFD is located at 101 Park
Avenue, New York, New York 10178.
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
22
<PAGE>
calculating the net asset value of, and the net income on, shares of the Fund.
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.
This Prospectus relates to shares of the Fund. The Fund may offer other classes
of shares in addition to this class. 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 would 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 business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
PERFORMANCE
INFORMATION
- -----------
The Fund's investment performance may from time to time be included in
advertisements about the Fund. "Yield" is calculated by
23
<PAGE>
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 the Fund can then be compared to the
yield of a taxable fund. Tax equivalent yields can be quoted on either a "yield"
or "effective yield" basis.
"Total return" for the one-, five- and ten-year periods (or since inception, 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 may also be presented for other
periods or without reflecting sales charges. 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 and the Fund's operating expenses. 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.
24
<PAGE>
MAKE THE MOST OF YOUR VISTA PRIVILEGES
--------------------------------------
The following services are available to you as a Vista mutual fund shareholder.
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.
SYSTEMATIC WITHDRAWAL PLAN--Make regular withdrawals of $50 or more monthly,
quarterly or semiannually. A minimum account balance of $5,000 is required to
establish a systematic withdrawal plan.
SYSTEMATIC EXCHANGE--Transfer assets automatically from one Vista account to
another on a regular, prearranged basis. There is no additional charge for this
service.
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. Investors may not maintain, within the
same fund, simultaneous plans for systematic investment or exchange and
systematic withdrawal or exchange. 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.
25
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
(This Page Intentionally Left Blank)
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VCI-1-1296X
<PAGE>
VISTA SERVICE CENTER
P.O. Box 419392
Kansas City, MO 64141-6392
TRANSFER AGENT AND DIVIDEND PAYING 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
[VISTA LOGO]
P.O. Box 419392
Kansas City, MO 64141-6392
VCI-1-1296
<PAGE>
(VISTA LOGO)
PROSPECTUS
VISTA TAX FREE INCOME FUND
Class A
---------------------------
INVESTMENT STRATEGY: INCOME
---------------------------
December 27, 1996
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 December 27, 1996 Statement of
Additional Information, as amended periodically (the "SAI"). For a free copy
of the SAI, call Chase Global Funds Services Company at 1-800-344-3092. 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
<TABLE>
<CAPTION>
<S> <C>
Expense Summary ................................................................... 3
The expenses you might pay on your Fund investment, including examples
Financial Highlights .............................................................. 4
How the Fund has performed
Fund Objectives ................................................................... 6
Investment Policies ............................................................... 6
The kinds of securities in which the Fund invests, investment policies and
techniques, and risks
Management ........................................................................ 12
Chase Manhattan Bank, the Fund's adviser; Chase Asset Management, the Fund's
sub-adviser, and the individuals who manage the Fund
About Your Investment ............................................................. 13
Alternative sales arrangements
How to Buy, Sell and Exchange Shares .............................................. 13
How the Fund Values its Shares .................................................... 20
How Distributions Are Made; Tax Information ....................................... 20
How the Fund distributes its earnings, and tax treatment related to those earnings
Other Information Concerning the Fund ............................................. 22
Distribution plans, shareholder servicing agents, administration, custodian,
expenses and organization
Performance Information ........................................................... 25
How performance is determined, stated and/or advertised
</TABLE>
2
<PAGE>
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing. The following
table summarizes your 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 A
Shares
-------
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)* .................... 0.15%
12b-1 Fee** .......................................................... 0.25%
Shareholder Servicing Fee (after estimated waiver, where indicated) .. 0.01%*
Other Expenses ....................................................... 0.49%
-----
Total Fund Operating Expenses (after waiver of fee)* ................. 0.90%
=====
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 $93 $151
*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 would be 0.30%, the Shareholder Servicing Fee would be
0.25%, and Total Fund Operating Expenses would be 1.29%.
**Long-term shareholders in mutual funds with 12b-1 fees, such as Class A
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.
+Assumes deduction at the time of purchase of the maximum sales charge.
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."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The table set forth below provides selected per share data and ratios for one
Class A Share. This information is supplemented by financial statements and
accompanying notes appearing in the Fund's Annual Report to Shareholders for the
period ended August 31, 1996, which is incorporated by reference into the SAI.
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 in the table below, have been audited by Price
Waterhouse LLP, independent accountants, located at 1177 Avenue of the Americas,
New York, New York 10036, whose report is included in the Annual Report to
Shareholders.
VISTA TAX FREE INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------
Year ended
--------------------
Year Year 11/1/93
ended ended through
8/31/96 8/31/95 8/31/94+ 10/31/92 10/31/92
------- ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 11.85 $ 11.70 $ 12.70 $ 11.52 $ 11.12
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.580 0.585 0.475 0.662 0.731
Net Gains or (Losses) in Securities
(both realized and unrealized) (0.007) 0.147 (0.847) 1.412 0.556
------- ------- ------- ------- -------
Total from Investment Operations 0.573 0.573 (0.372) 2.074 1.287
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income 0.583 0.582 0.475 0.662 0.731
Distributions from capital gains -- -- 0.153 0.237 0.156
------- ------- ------- ------- -------
Total Distributions 0.583 0.582 0.628 0.899 0.887
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 11.84 $ 11.85 $ 11.70 $ 12.70 $ 11.52
======= ======= ======= ======= =======
Total Return (1) 4.88% 6.53% (2.99%) 18.72% 11.99%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $70,480 $88,783 $98,054 $83,672 $17,548
Ratio of Expenses to Average Net Assets 0.90% 0.85% 0.58%# 0.23% 0.00%
Ratio of Net Investment Income to
Average Net Assets 4.83% 5.07% 4.75%# 5.25% 6.26%
Ratio of Expenses without waivers and
assumption of expenses to
Average Net Assets 1.46% 1.47% 1.29%# 1.20% 2.34%
Ratio of Net Investment Income
without waivers and assumption of
expenses to Average Net Assets 4.27% 4.45% 4.03%# 4.28% 3.92%
Portfolio Turnover Rate 210% 233% 258% 149% 266%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------
9/4/87*
------------------------------------------------- to
10/31/91 10/31/90 10/31/89 10/31/88 10/31/87
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net Asset Value, Beginning of Period $ 10.43 $ 10.58 $ 10.63 $ 10.08 $ 10.00
------- ------- ------- ------- -------
Income from Investment Operations:
Net Investment Income 0.727 0.723 0.756 0.738 0.059
Net Gains or (Losses) in Securities
(both realized and unrealized) 0.693 (0.094) 0.006 0.603 0.021
Total from Investment Operations 1.420 0.629 0.762 1.341 0.080
------- ------- ------- ------- -------
Less Distributions:
Dividends from net investment income 0.726 0.726 0.759 0.791 --
Distributions from capital gains -- 0.055 0.053 -- --
------- ------- ------- ------- -------
Total Distributions 0.726 0.781 0.812 0.791 --
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 11.12 $ 10.43 $ 10.58 $ 10.63 $ 10.08
======= ======= ======= ======= =======
Total Return (1) 13.98% 6.18% 7.48% 13.83% 5.41%
Ratios/Supplemental Data
Net Assets, End of Period (000 omitted) $ 5,425 $ 3,973 $ 3,196 $ 1,197 $ 101
Ratio of Expenses to Average Net Assets 0.04% 0.12% 0.00% 0.00% 0.00%#
Ratio of Net Investment Income to
Average Net Assets 6.71% 6.86% 7.06% 7.50% 7.35%#
Ratio of Expenses without waivers and
assumption of expenses to
Average Net Assets 4.04% 2.50% 2.50% 2.00% 2.00%#
Ratio of Net Investment Income
without waivers and assumption of
expenses to average Net Assets 2.71% 4.48% 4.56% 5.50% 5.35%#
Portfolio Turnover Rate 211% 89% 157% 422% 94%
</TABLE>
- ----------
* Commencement of operations.
+ In 1994 the Tax Free Income Fund changed its fiscal year-end from October
31 to August 31.
(1) Total returns are calculated before taking into account effect of 4.50%
sales charge.
# Short periods less than one year have been annualized.
4 & 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-3 or VMIG-3 by Moody's Investors Service, Inc. ("Moody's"), or BBB or SP-2
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.
In lieu of investing directly, 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.
6
<PAGE>
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.
The two principal classifications of Municipal Obligations are general
obligation and 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. 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 revenue 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 in
which the Fund may invest contain "non-
7
<PAGE>
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. Although "non-appropriation" lease obligations
are secured by the leased property, disposition of the property in the event of
foreclosure might prove difficult. Certain investments in municipal lease
obligations may be illiquid.
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 delivery at a future date, 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
8
<PAGE>
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 stripped obligations (i.e., separately traded principal and interest
components of securities) where the underlying obligations are 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 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 floating or 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 floating
or 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 floating or 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 securities 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. The market value of an inverse
floater will vary inversely with changes in market interest rates, and will be
more volatile in
9
<PAGE>
response to interest rates changes than that of a fixed-rate obligation.
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 securities which do not include
such a structure.
OTHER INVESTMENT COMPANIES. The Fund may invest up to 10% of its total assets in
shares of other investment
companies when consistent with its investment objective and policies, subject to
applicable regulatory limitations. Additional fees may be charged by other
investment companies.
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. Inaccurate 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 losses that may exceed the original investment of the
Fund. 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
10
<PAGE>
additional information concerning derivatives, related instruments and the
associated risks, see the SAI.
PORTFOLIO TURNOVER. The frequency of the Fund's portfolio transactions will vary
from year to year. The Fund's investment policies may lead to frequent changes
in investments, particularly in periods of rapidly changing market conditions.
High portfolio turnover rates would generally result in higher transaction
costs, including brokerage commissions or dealer mark-ups, and would make it
more difficult for the Fund to qualify as a registered investment company under
federal tax law. See "How Distributions are Made; Tax Information" and "Other
Information Concerning the Fund--Certain Regulatory Matters."
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 obligations of states, cities,
municipalities or other public authorities). 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
11
<PAGE>
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 up to 25% of its total assets 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 the banking industry. 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 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. 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
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<PAGE>
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 is entitled to receive a fee, payable by Chase from its
advisory fee, at an annual rate equal to 0.15% of the Fund's average daily net
assets. 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, Vice President of Chase, has been responsible for the day-to-day
management of the Fund since its inception in 1987. 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.
ABOUT YOUR INVESTMENT
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. See "How to Buy, Sell and Exchange Shares" and "Other
Information Concerning the Fund."
HOW TO BUY, SELL
AND EXCHANGE SHARES
PURCHASE OF SHARES
The minimum initial investment by a shareholder is $2,500, including IRAs and
Keoghs. There is no minimum for additional investments. The Fund reserves the
right, in its sole discretion, to reject any purchase order or cease offering
shares for purchase at any time. No share certificates will be issued unless
requested in writing. Subscriptions for shares are subject to acceptance by the
Fund and are not binding until accepted.
Purchase by Mail: Shares of the Fund may be purchased by sending a completed
Application (included with this Prospectus or obtainable from the Fund) to
Gintel Group, c/o Chase Global Funds Services Company, P.O. Box 2798, Boston, MA
02208-2798, accompanied by a check payable to "Gintel Group" in payment for the
shares. Applications sent to the Fund will be forwarded to Chase Global Funds
Services Company and will not be effective until received by Chase Global Funds
Services Company. Special forms are required for IRA and Keogh subscriptions and
may be obtained by contacting the Fund. When purchases are made by check,
redemptions will not be allowed
13
<PAGE>
until clearance of the purchase check, which may take 15 calendar days or
longer. In addition, the redemption or shares purchased through ACH will not be
allowed until clearance of the payment, which may take 7 business days or
longer. 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.
Purchase by Exchange: Shares of the Fund may be exchanged for shares of any
other fund within the Gintel Group, to the extent such shares are offered for
sale in the investor's state of residence. Before any exchange, an investor must
obtain and should carefully review a copy of the current prospectus of the fund
into which he or she wishes to exchange and should retain such copy for future
reference. When opening an account by exchange, the new account must be
established with the same name(s), address, and tax identification number as the
other account and must meet that fund's minimum initial investment and other
eligibility requirements. For federal income tax purposes, an exchange is
treated as a sale of shares and generally results in a capital gain or loss. If
an investor wishes to use the exchange feature, he or she should consult his or
her investment representative or Chase Global Funds Services Company to
determine if the feature is available and whether any other conditions are
imposed on its use. The discussion of the exchange feature in this Prospectus
supersedes the discussion of the exchange privileges in the SAI for investors
purchasing shares through the Gintel Group. Purchase by exchange may be executed
by either mail or telephone but in every instance must comply with the purchase
and redemption procedures set forth in the Prospectus. Neither Chase Global
Funds Services Company nor the Fund will be liable for acting upon such
instructions, regardless of the authority or absence thereof of the person
giving the instructions, or for any loss, expense, or cost arising out of any
exchange by telephone, whether or not properly authorized and directed. An
investor will bear the risk of loss. The staff of the Securities and Exchange
Commission is currently examining whether such responsibilities may be
disclaimed. The accuracy of telephone transactions should be verified
immediately upon the receipt of confirmation statement.
Purchase by Wire: Investors may purchase shares by wire by first telephoning
Chase Global Funds Services Company at 1-800-344- 3092 for instructions and wire
control number and subsequently wiring Federal funds and registration
instructions to:
The Chase Manhattan Bank
New York, NY 10003
ABA# 0210-0002-1
F/B/O The Gintel Group
Acct. # 910-2-732980
Ref: Tax Free Income Fund
Account Number
------------------------
Account Name:
------------------------
Purchase by Automatic Investment: Investors may purchase shares on a regular
basis, (the first, the fifteenth,
14
<PAGE>
or the first and fifteenth of each month), by automatically transferring a
specified dollar amount ($100 minimum) from their regular checking or NOW
account to their specified Gintel Group Account. Special forms are required for
this automatic investment plan and may be obtained by contacting the Fund.
Existing shareholders may begin the plan at any time by sending a signed letter
with signature guarantee and a deposit slip or voided check.
ADDITIONAL INVESTMENTS
An investor may add to his or her account by purchasing additional shares of the
same class of the Fund's shares by mailing a check to the Gintel Group (payable
to "Gintel Group") at its address set forth above under "Purchases by Mail" or
by wiring funds to the Fund's custodian using the procedures set forth above
under "Purchases by Wire." It is important that the account number, account name
and the Fund and class of shares to be purchased are specified on the check or
wire to ensure proper crediting to the investor's account.
PROCESSING OF PURCHASE ORDERS
Shares are sold at the public offering price based on the net asset value next
determined after the Fund's distributor receives an order in proper form. In
most cases, in order for an investor to receive that day's public offering
price, Chase Global Funds Services Company must generally receive the purchase
order prior to the close of regular trading on the New York Stock Exchange. If
an investor buys shares through his or her investment representative, the
representative must have received the order before the close of regular trading
on the New York Stock Exchange in order to receive that day's public offering
price. Orders for shares are accepted by the Fund after funds are converted to
Federal Funds. Orders paid by check and received before 2:00 p.m. will generally
be available for the purchase of shares the following Fund Business Day.
Confirmed purchases will be done only at the discretion of the Investment
Advisor.
Purchase of shares of the Fund may also be made through registered securities
dealers who have entered into selected dealer agreements with the Distributor. A
dealer who agrees to process an order on behalf of an investor may charge the
investor a fee for this service.
The offering price of each Fund share is the net asset value per share next
computed after the subscriber's application is received by Chase Global Funds
Services Company. The net asset value per share is determined by dividing the
market value of the Fund's securities as of the close of trading plus any cash
or other assets (including dividends and accrued interest) less all liabilities
(including accrued expenses) by the number of the Fund's shares outstanding. The
Fund will determine net asset value of its shares on each "Fund Business Day",
which is any day the New York Stock Exchange is open for business exclusive of
national holidays.
All ordinary income dividends and capital gains distributions are automatically
reinvested at net asset value unless the Chase Global Funds Services Company
receives
15
<PAGE>
written notice from a shareholder at least 30 days prior to the record date
requesting that the distributions and dividends be distributed to the
investor in cash.
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:
-------------------- reallowed to dealers as a
Amount of transaction at Offering Net amount reallowed to dealers as a
offering 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.
The Fund's distributor pays broker-dealers commissions on net sales of Class A
shares of $1 million or more based on an investor's cumulative purchases. Such
commissions are paid at the rate of 0.75% of the amount under $2.5 million,
0.50% of the next $7.5 million, 0.25% of the next $40 million and 0.15%
thereafter. The Fund's distributor may withhold such payments with respect to
short-term investments.
GENERAL
You may be eligible to buy Class A shares at reduced sales charges. Consult your
investment representative or Chase Global Funds Services Company 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 the enclosed application and in the
SAI. In addition, sales charges will not apply to shares purchased with
redemption proceeds received within the prior ninety days from non-Vista mutual
funds on which the investor paid a front-end or contingent deferred sales
charge.
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 shares at net asset value without an initial sales
charge to the current and retired Trustees (and their immediate families),
current and retired employees (and their
16
<PAGE>
immediate families) of Chase, the Fund's distributor and transfer agent or any
affiliates or subsidiaries thereof, registered representatives and other
employees (and their immediate families) of broker- dealers having selected
dealer agreements with the Fund's distributor, employees (and their immediate
families) of financial institutions having selected dealer agreements with the
Fund's distributor (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of 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 that charges a fee for its
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 master
account of such investment adviser or financial planner on the books and records
of the broker or agent. Such purchases may also be made for retirement and
deferred compensation plans and trusts used to fund those plans.
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 exercising investment discretion, provided that
appropriate notification of such fiduciary relationship is reported at the time
of the investment to the Fund, the Fund's distributor.
The Fund may sell Class A shares at net asset value without an initial sales
charge in connection with the acquisition by the Fund of assets of an investment
company or personal holding company.
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.
REDEMPTION OF SHARES
Upon receipt by Chase Global Funds Services Company of a request in proper form,
the Fund will redeem shares at its next determined net asset value. There is no
assurance that the net asset value
17
<PAGE>
received upon redemption will be greater than that paid by a shareholder upon
purchase. The Fund will forward redemption payments only on shares for which
it has collected payment.
Redemption by Mail: Shares may be redeemed by sending a written redemption
request to Gintel Group, c/o Chase Global Funds Services Company, P.O. Box 2798,
Boston, MA 02208-2798. Any written request sent to the Fund will be forwarded to
Chase Global Funds Services Company and the effective date of the redemption
request will be when the request is received in proper form by Chase Global
Funds Services Company. The redemption value of each Fund share is the net asset
value per share next computed after the redemption request is received in proper
form. In order to receive that day's net asset value, Chase Global Funds
Services Company must receive an investor's request before the close of regular
trading on the New York Stock Exchange. Where share certificates have been
issued, a shareholder must endorse the certificates and include them in the
redemption request. "Proper form" means that the request for redemption must
include the following:
1. A letter of instruction specifying the Fund name, the account number, and the
number of shares or the dollar amount to be redeemed and signed by all
registered owners exactly as their names appear on the account.
2. Signatures must be guaranteed by an eligible guarantor institution as
described in Rule 17Ad-15 under the Securities and Exchange Act of 1934. Such
institutions include banks, brokers, securities dealers, credit unions,
securities exchanges, clearing agencies and savings associations. On and after
August 24, 1992, the eligible guarantor institution must be a participant in a
recognized signature guarantee program such as the STAMP program of the
Securities Transfer Association. Until August 24, 1992, eligible guarantor
institutions previously approved by Chase Global Funds Services Company
(commercial banks and members of domestic stock exchanges) will continue to be
approved. Eligible guarantor institutions not previously approved by Chase
Global Funds Services Company and not yet members of a recognized signature
guarantee program, must make application to that company. For complete
information or a copy of Chase Global Funds Services Company's signature
guarantee Standards, Procedures and Guidelines, please contact the Transfer
Agent at (800) 344-3092. A notary public is not an acceptable guarantor.
3. Other supporting legal documents, if required, in the case of estates,
trusts, guardianships, corporations, pension and profit sharing plans and other
organizations. Shareholders should contact Chase Global Funds Services Company,
(800) 344- 3092, to obtain further information on the specific documentation
required.
Payment will be made for redeemed shares as soon as practicable, but generally
no later than five business days after proper receipt of redemption
notification. Payment
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will be made by check, unless a shareholder arranges for the proceeds of
redemption requests to be sent by Federal fund wire to a designated bank
account, in which case a wire charge (currently $8.00 per wire) will be deducted
from the account. Shareholders should contact Chase Global Funds Services
Company, (800) 344- 3092, to obtain further information on this service and the
related charges.
Redemption by Telephone: Shareholders who authorize telephone redemptions in the
Application may redeem shares by telephone instructions to Chase Global Funds
Services Company which will wire or mail the proceeds of redemptions to the bank
and bank account number specified in the Application or mail the proceeds to the
address of record, except that telephone redemptions of less than $1000 will be
mailed. Redemptions of $1000 or more will be charged a wire fee (currently $8.00
per wire) which will be deducted from the account. Any change in the bank
account specified in the Application must be made in writing with a signature
guarantee as described above for redemptions by mail. If an investor selects a
telephone redemption privilege, the investor authorizes Chase Global Funds
Services Company to act on telephone instructions from any person representing
himself or herself to be the investor or the investor's investment
representative and reasonably believed by Chase Global Funds Services Company to
be genuine. The Fund will require Chase Global Funds Services Company to employ
reasonable procedures, such as requiring a form of personal identification, to
confirm that the instructions are genuine and, if it does not follow such
procedures, the Fund may be liable for losses due to unauthorized or fraudulent
requests. An investor agrees, however, that to the extent permitted by
applicable law, neither the Fund nor its agents nor Chase Global Funds Services
Company will be liable for any loss, liability, cost or expense arising out of
any redemption request, including any fraudulent or unauthorized request. For
information, consult Chase Global Funds Services Center at (800)-344-3092. The
telephone redemption privilege may be modified or terminated without notice.
Automatic Redemptions: A shareholder who owns shares of the Fund with a value of
$10,000 or more may establish a Systematic Withdrawal Plan. The Shareholder may
request a declining balance withdrawal, a fixed dollar withdrawal, a fixed share
withdrawal, or a fixed percentage withdrawal (based on the current value of the
account) on a monthly, quarterly, semiannual or annual basis. When a shareholder
reaches age 59-1/2 and begins to receive distributions from an IRA or other
retirement plan invested in the Fund, the shareholder can arrange to have a
regular monthly or quarterly redemptions made under Systematic Withdrawal Plan.
In this case it is not necessary for the account value to be $10,000 or more.
Further Information on establishing a Systematic Withdrawal Plan may be obtained
by calling the Fund.
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PROCESSING OF REDEMPTION ORDERS
The Fund generally sends payment for an investor's shares on the business day
after the investor's request is received in proper form, assuming that the
Fund has collected payment of the purchase price of such investor's shares.
Under unusual circumstances, the Fund may suspend redemptions, or postpone
payment for more than seven business days, as permitted by federal securities
laws.
Sales of shares of the Fund may also be made through registered securities
dealers who have entered into selected dealer agreements with the Distributor. A
dealer who agrees to process an order on behalf of an investor may charge the
investor a fee for this service.
With the exception of IRA or Keogh accounts, the Fund reserves the right to
close an investor's account if the account has dropped below $500 in value for a
period of three months or longer other than as a result of a decline in the net
asset value per share or if an investor purchases through an automatic
investment plan and fails to meet the Fund's investment minimum within a
twelve-month period. Shareholders are notified at least 60 days prior to any
proposed redemption and invited to add to their account if they wish to continue
as a shareholder of the Fund; however the Fund does not presently contemplate
making such redemptions.
Confirmed redemptions will be done only at the discretion of the Investment
Advisor.
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., Eastern time), 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.
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 or by ACH to a pre-established bank account while
reinvesting capital gains distributions in additional shares without a sales
charge; or (3) receive all distributions in cash or by ACH. You can change your
distribution option by notifying Chase Global Funds Services Company in writing.
If you do not
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select an option when you open your account, all distributions will be
reinvested. All distributions not paid in cash or by ACH 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.
If a check representing a Fund distribution is not cashed within a specified
period, Chase Global Funds Services Company will notify you that you have the
option of requesting another check or reinvesting the distribution in the Fund.
If Chase Global Funds Services Company does not receive your election, the
distribution will be reinvested in the Fund. Similarly, if correspondence sent
by the Fund or Chase Global Funds Services Company 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).
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OTHER INFORMATION CONCERNING THE FUND
DISTRIBUTION PLAN
The Fund's distributor is Vista Fund Distributors, Inc. ("VFD"). VFD is a
subsidiary of The BISYS Group, Inc. and is unaffiliated with Chase. The Trust
has adopted Rule 12b-1 distribution plans for Class A shares which provide that
the Fund will pay distribution fees at annual rates of up to 0.25% and 0.75% of
the average daily net assets attributable to Class A 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 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 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 shares will be conducted generally by the Vista
Family of Funds, and activities intended to promote the Fund's Class A shares
may also benefit the Fund's other shares and other Vista funds.
VFD may provide promotional incentives to broker-dealers that meet specified
sales targets for one or more Vista funds. These incentives may include gifts of
up to $100 per person annually; an occasional meal, ticket to a sporting event
or theater 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 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 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
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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. For shareholders that bank
with Chase, Chase may aggregate investments in the Vista Funds with balances
held in Chase bank accounts for purposes of determining eligibility for
certain bank privileges that are based on specified minimum balance
requirements, such as reduced or no fees for certain banking services or
preferred rates on loans and deposits. Chase and certain broker-dealers and
other shareholder servicing agents may, at their own expense, provide gifts,
such as computer software packages, guides and books related to investment or
additional Fund shares valued up to $250 to their customers that invest in
the Vista Funds.
Chase may from time to time, at its own expense, provide compensation to certain
selected dealers for performing administrative services for their customers.
These services include maintaining account records, processing orders to
purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. The amount of such compensation may be up to 0.10% annually of the
average net assets of the Fund attributable to shares of the Fund held by
customers of such selected dealers. Such compensation does not represent an
additional expense to the Fund or its shareholders, since it will be paid by
Chase.
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.
VFD provides certain sub- administrative services to the Fund pursuant to a
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. VFD 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. VFD is located at 101 Park
Avenue, New York, New York 10178.
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.
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TRANSFER AGENT AND DIVIDEND PAYING AGENT
DST Systems, Inc. located at 210 W. 10th Street, Kansas City, MO 64105 serves as
the Fund's transfer agent and dividend paying agent.
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 to Class A
shares of the Fund. The Fund may 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
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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 would affect the relative performance of the
different classes. Investors may call 1-800- 344-3092 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 business and affairs of the Trust are managed under the general direction
and supervision of the Trust's Board of Trustees. The Trust is not required to
hold annual meetings of shareholders but will hold special meetings of
shareholders of 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.
UNIQUE CHARACTERISTICS OF MASTER/FEEDER FUND STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfolio
securities, the Fund is permitted to invest all of its investable assets in a
separate registered investment company (a "Portfolio"). In that event, a
shareholder's interest in the Fund's underlying investment securities would be
indirect. In addition to selling a beneficial interest to the Fund, a Portfolio
could also sell beneficial interests to other mutual funds or institutional
investors. Such investors would invest in such Portfolio on the same terms and
conditions and would pay a proportionate share of such Portfolio's expenses.
However, other investors in a Portfolio would not be required to sell their
shares at the same public offering price as the Fund, and might bear different
levels of ongoing expenses than the Fund. Shareholders of the Fund should be
aware that these differences may result in differences in returns experienced in
the different funds that invest in a Portfolio. Such differences in return are
also present in other mutual fund structures.
Smaller funds investing in a Portfolio could be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
were to withdraw from a Portfolio, the remaining funds might experience higher
pro rata operating expenses, thereby producing lower returns.
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Additionally, the Portfolio could become less diverse, resulting in increased
portfolio risk. However, this possibility also exists for traditionally
structured funds which have large or institutional investors. Funds with a
greater pro rata ownership in a Portfolio could have effective voting control of
such Portfolio. Under this master/feeder investment approach, whenever the Trust
was requested to vote on matters pertaining to a Portfolio, the Trust would hold
a meeting of shareholders of the Fund and would cast all of its votes in the
same proportion as did the Fund's shareholders. Shares of the Fund for which no
voting instructions had been received would be voted in the same proportion as
those shares for which voting instructions had been received. Certain changes in
a Portfolio's objective, policies or restrictions might require the Trust to
withdraw the Fund's interest in such Portfolio. Any such withdrawal could result
in a distribution in kind of portfolio securities (as opposed to a cash
distribution from such Portfolio). The Fund could incur brokerage fees or other
transaction costs in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio of investments
or adversely affect the liquidity of the Fund.
State securities regulations generally would not permit the same individuals who
are disinterested Trustees of the Trust to be Trustees of a Portfolio absent the
adoption of procedures by a majority of the disinterested Trustees of the Trust
reasonably appropriate to deal with potential conflicts of interest up to and
including creating a separate Board of Trustees. The Fund will not adopt a
master/feeder structure under which the disinterested Trustees of the Trust are
Trustees of the Portfolio unless the Trustees of the Trust, including a majority
of the disinterested Trustees, adopt procedures they believe to be reasonably
appropriate to deal with any conflict of interest up to and including creating a
separate Board of Trustees.
If the Fund invests all of its investable assets in a Portfolio, investors in
the Fund will be able to obtain information about whether investment in the
Portfolio might be available through other funds by contacting the Fund at
1-800-622-4273. In the event the Fund adopts a master/feeder structure and
invests all of its investable assets in a Portfolio, shareholders of the Fund
will be given at least 30 days' prior written notice.
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, as described in the SAI. "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
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after-tax yield equivalent to the Fund's yield. The tax equivalent yield of the
Fund can then be compared to the yield of a taxable fund. Tax equivalent yields
can be quoted on either a "yield" or "effective yield" basis.
"Total return" for the one-, five- and ten-year periods (or since inception, 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 may also be presented for other
periods or without reflecting sales charges. 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.
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STATEMENT OF
ADDITIONAL INFORMATION
December 27, 1996
VISTA(SM) U.S. GOVERNMENT MONEY MARKET FUND
VISTASM 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
VISTASM TREASURY PLUS MONEY MARKET FUND
VISTASM TAX FREE MONEY MARKET FUND
VISTASM CALIFORNIA TAX FREE MONEY MARKET FUND
VISTASM NEW YORK TAX FREE MONEY MARKET FUND
VISTA(SM) TAX FREE INCOME FUND
VISTASM NEW YORK TAX FREE INCOME FUND
VISTASM CALIFORNIA INTERMEDIATE TAX FREE INCOME FUND
101 Park Avenue, New York, New York 10178
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 Prospectuses offering
shares of Vista Tax Free Income Fund, Vista California Intermediate Tax Free
Income Fund and Vista New York Tax Free Income Fund (collectively the "Income
Funds"), and 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, Vista Federal Money Market Fund, Vista Treasury Plus
Money Market, Vista Tax Free Money Market Fund, Vista California Tax Free
Money Market Fund and Vista New York Tax Free Money Market Fund (collectively
the "Money Market Funds"). 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 Fund Distributors,
Inc. ("VFD"), the Funds' distributor (the "Distributor"), at the above-listed
address. This Statement of Additional Information is NOT a prospectus and is
authorized for distribution to prospective investors only if preceded or
accompanied by an effective prospectus.
For more information about your account, simply call or write the Vista
Service Center at:
1-800-622-4273
Vista Service Center
P.O. Box 419392
Kansas City, MO 64141 MFT-SAI
MFT-SAI
<PAGE>
Table of Contents Page Page
- -------------------------------------------------------------------------------
The Funds ................................................................ 3
Investment Policies and Restrictions ..................................... 3
Performance Information .................................................. 19
Determination of Net Asset Value ......................................... 24
Purchases, Redemptions and Exchanges ..................................... 25
Tax Matters .............................................................. 28
Management of the Trust and Funds ........................................ 34
Independent Accountants .................................................. 50
Certain Regulatory Matters ............................................... 50
General Information ...................................................... 50
Appendix A Description of Certain Obligations Issued
or Guaranteed by U.S. Government Agencies or Instrumentalities .......... A-1
Appendix B Description of Ratings ........................................ B-1
Appendix C Special Investment Considerations Relating to New York
Municipal Obligations .................................................. C-1
Appendix D Special Investment Considerations Relating to California
Municipal Obligations .................................................. D-1
2
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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"). The shares
of the 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 such Funds into newly-created series of Mutual Fund
Trust, effective October 28, 1994. Prior to such approvals, each of such
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 such 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,
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 3, 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
Shares of U.S. Government Money Market Fund, The Cash Management Fund of
Hanover merged into the Vista Shares of Vista Global Money Market 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 Shares of Tax
Free Money Market Fund, The New York Tax Free Money Market Fund of Hanover
merged into the Vista Shares of New York Tax Free Money Market Fund, and The
100% U.S. Treasury Securities Money Market Fund of Hanover merged into the
Vista Shares of The 100% U.S. Treasury Securities Money Market Fund. The
foregoing mergers are referred to herein as the "Hanover Reorganization."
Effective as of May 6, 1996, Vista Global Money Market Fund changed its
name to Vista Cash Management Fund.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust including the Funds. The Chase Manhattan Bank ("Chase")
is the investment adviser for the Funds. Chase also serves as the Trust's
administrator (the "Administrator") and supervises the overall administration
of the Trust, including the Funds. A majority of the Trustees of the Trust
are not affiliated with the investment adviser or sub- advisers.
INVESTMENT POLICIES AND RESTRICTIONS
Investment Policies
The Prospectuses set forth the various investment policies applicable to
each Fund. The following information supplements and should be read in
conjunction with the related sections of each Prospectus.
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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 them 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 B. For a general
discussion of special investment considerations relating to investing in (i)
New York and (ii) California Municipal Obligations, see Appendices C and D,
respectively.
The management style used for the Funds 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. 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.
U.S. Government Securities. U.S. Government Securities include (1) U.S.
Treasury obligations, which generally differ only in their interest rates,
maturities and times of issuance, including U.S. Treasury bills (maturities
of one year or less), U.S. Treasury notes (maturities of one to ten years)
and U.S. Treasury bonds (generally maturities of greater than ten years); and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities which are supported by any of the following: (a) the full
faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow
any amount listed to a specific line of credit from the U.S. Treasury, (c)
discretionary authority of the U.S. Government to purchase certain
obligations of the U.S. Government agency or instrumentality or (d) the
credit of the agency or instrumentality. Agencies and instrumentalities of
the U.S. Government include but are not limited to: Federal Land Banks,
Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Student Loan Marketing
Association, United States Postal Service, Chrysler Corporate Loan Guarantee
Board, Small Business Administration, Tennessee Valley Authority and any
other enterprise established or sponsored by the U.S. Government. Certain
U.S. Government Securities, including U.S. Treasury bills, notes and bonds,
Government National Mortgage Association certificates and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government Securities are issued or guaranteed by
federal agencies or government sponsored enterprises and are not supported by
the full faith and credit of the United States. These securities include
obligations that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of Federal Home Loan Banks, and
obligations that are supported by the creditworthiness of the particular
instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. Vista Federal Money
Market Fund generally limits its investments in agency and instrumentality
obligations to obligations the interest on which is generally not subject to
state and local income taxes by reason of federal law. Agencies and
instrumentalities issuing such obligations include the Farm Credit System
Financial Assistance Corporation, the Federal Financing Bank, The General
Services Administration, Federal Home Loan Banks, the Tennessee Valley
Authority and the Student Loan Marketing Association. For a description of
certain obligations issued or guaranteed by U.S. Government agencies and
instrumentalities, see Appendix A.
In addition, certain U.S. Government agencies and instrumentalities issue
specialized types of securities, such as guaranteed notes of the Small
Business Administration, Federal Aviation Administration, Department of
Defense, Bureau of Indian Affairs and Private Export Funding Corporation,
which often provide 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
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(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
(or the equivalent in other currencies), and such other U.S. and foreign
commercial banks which are judged by the advisers to meet comparable credit
standing criteria.
Bank obligations include negotiable certificates of deposit, bankers'
acceptances, fixed time deposits and deposit notes. A certificate of deposit
is a short-term negotiable certificate issued by a commercial bank against
funds deposited in the bank and is either interest-bearing or purchased on a
discount basis. A bankers' acceptance is a short-term draft drawn on a
commercial bank by a borrower, usually in connection with an international
commercial transaction. The borrower is liable for payment as is the bank,
which unconditionally guarantees to pay the draft at its face amount on the
maturity date. Fixed time deposits are obligations of branches of United
States banks or foreign banks which are payable at a stated maturity date and
bear a fixed rate of interest. Although fixed time deposits do not have a
market, there are no contractual restrictions on the right to transfer a
beneficial interest in the deposit to a third party. Fixed time deposits
subject to withdrawal penalties and with respect to which a Fund cannot
realize the proceeds thereon within seven days are deemed "illiquid" for the
purposes of its restriction on investments in illiquid securities. Deposit
notes are notes issued by commercial banks which generally bear fixed rates
of interest and typically have original maturities ranging from eighteen
months to five years.
Banks are subject to extensive governmental regulations that may limit
both the amounts and types of loans and other financial commitments that may
be made and the interest rates and fees that may be charged. The
profitability of this industry is largely dependent upon the availability and
cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operations of this industry and exposure to credit
losses arising from possible financial difficulties of borrowers might affect
a bank's ability to meet its obligations. Bank obligations may be general
obligations of the parent bank or may be limited to the issuing branch by the
terms of the specific obligations or by government regulation. Investors
should also be aware that securities of foreign banks and foreign branches of
United States banks may involve foreign investment risks in addition to those
relating to domestic bank obligations.
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 Vista Prime Money Market Fund and the Vista Cash
Management Fund, other than those of bank holding companies, include
obligations which are (i) rated Prime-1 by Moody's, A-1 by S&P, or F-1 by
Fitch, or comparably rated by another NRO; or (ii) determined by the advisers
to be of comparable quality to those rated obligations which may be purchased
by the Vista Prime Money Market Fund and the Vista 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, Fitch or
another NRO. The commercial paper and other short-term obligations of U.S.
banks holding companies which may be purchased by the Vista Prime Money
Market Fund and the Vista 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, 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
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at a fixed price and time, thereby determining the yield during the Fund's
holding period. This procedure results in a fixed rate of return insulated
from market fluctuations during such period. A repurchase agreement is
subject to the risk that the seller may fail to repurchase the security.
Repurchase agreements are considered under the 1940 Act to be loans
collateralized by the underlying securities. All repurchase agreements
entered into by 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 102% of the amount of the loan, including the accrued
interest thereon, and the Fund or its custodian or sub-custodian will have
possession of the collateral, which the Board of Trustees believes will give
it a valid, perfected security interest in the collateral. Whether a
repurchase agreement is the purchase and sale of a security or a
collateralized loan has not been conclusively established. This might become
an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase
agreement construed to be a collateralized loan, the underlying securities
would not be owned by a Fund, but would only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, a Fund may suffer
time delays and incur costs in connection with the disposition of the
collateral. The Board of Trustees believes that the collateral underlying
repurchase agreements may be more susceptible to claims of the seller's
creditors than would be the case with securities owned by 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 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 by the Tax Free Money
Market Funds 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 Tax Free Money Market Fund, (a) an issue
of rated Municipal Obligations ceases to be rated in the highest short-term
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 Board of Trustees determines that it is no longer of
comparable quality or (b) a Money Market Fund's advisers become 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 advisers 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
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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, 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 amount of the purchase be held aside or
segregated to be used to pay for the commitment, a separate account of such
Fund consisting of cash, cash equivalents or high quality debt securities
equal to the amount of such Fund's commitments will be established at such
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 such 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 investors in 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 ("Section 4(2) paper"). Rule
144A provides an exemption from the registration requirements of the
Securities Act for the resale of certain restricted securities to qualified
institutional buyers. Section 4(2) paper is restricted as to disposition
under the federal securities laws, and generally is sold to institutional
investors such as a Fund who agree that they are purchasing the paper for
investment and not with a view to public distribution. Any resale of Section
4(2) paper by the purchaser must be in an exempt transaction.
One effect of Rule 144A and Section 4(2) is that certain restricted
securities may now be liquid, though there is no assurance that a liquid
market for Rule 144A securities or Section 4(2) paper will develop or be
maintained. The Trustees have adopted policies and procedures for the purpose
of determining whether securities that are eligible for resale under Rule
144A and Section 4(2) paper are liquid or illiquid for purposes of the
limitation on investment in illiquid securities. Pursuant to those policies
and procedures, the Trustees
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have delegated to the advisers the determination as to whether a particular
instrument is liquid or illiquid, requiring that consideration be given to,
among other things, the frequency of trades and quotes for the security, the
number of dealers willing to sell the security and the number of potential
purchasers, dealer undertakings to make a market in the security, the nature
of the security and the time needed to dispose of the security. The Trustees
will periodically review the Funds' purchases and sales of Rule 144A
securities and Section 4(2) paper.
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, broker-dealer or other financial institution 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 value,
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 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-dealer.
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 floating or 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 floating
or 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 floating or 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 floating or 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.
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The securities in which certain Funds may be invested include participation
certificates, issued by a bank, insurance company or other financial
institution, in securities owned by such institutions or affiliated
organizations ("Participation Certificates"). A Participation Certificate gives
a Fund an undivided interest in the security in the proportion that the Fund's
participation interest bears to the total principal amount of the security and
generally 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 may have 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 would
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 would 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 any such insurance, although the Funds retain
the option to purchase insurance if deemed appropriate. Obligations that have
a demand feature permitting a Fund to tender the obligation to a foreign bank
may involve certain risks associated with foreign investment. A Fund's
ability to receive payment in such circumstances under the demand feature
from such foreign banks may involve certain risks such as future political
and economic developments, the possible establishments of laws or
restrictions that might adversely affect the payment of the bank's
obligations under the demand feature and the difficulty of obtaining or
enforcing a judgment against the bank.
The advisers have been instructed by the Board of Trustees to monitor on
an ongoing basis the pricing, quality and liquidity of the floating and
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 floating or variable rate securities may change with changes in
interest rates generally, the floating or variable rate nature of the
underlying floating or 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
rate securities. A Fund's portfolio may contain floating or 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 floating or 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 floating or variable rate
securities is made in relation to movements of the applicable banks' "prime
rates" or other short-term rate adjustment indices, the floating or variable
rate securities are not comparable to long-term fixed rate securities.
Accordingly, interest rates on the floating or 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 vari-
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able 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 Floating or Variable Rate Certificates. The Money Market
Funds may invest in tender option bonds. A tender option bond is a synthetic
floating or variable 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 or variable 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 2a-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 or variable 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.
Securities Loans. To the extent specified in its Prospectus, each Fund is
permitted to lend its securities to broker-dealers and other institutional
investors in order to generate additional income. Such loans of portfolio
securities may not exceed 30% of the value of a Fund's total assets. In
connection with such loans, a Fund will receive collateral consisting of
cash, cash equivalents, U.S. Government securities or irrevocable letters of
credit issued by financial institutions. Such collateral will be maintained
at all times in an amount equal to at least 102% of the current market value
plus accrued interest of the securities loaned. A Fund can increase its
income through the investment of such collateral. A Fund continues to be
entitled to the interest payable or any dividend-equivalent payments received
on a loaned security and, in addition, to receive interest on the amount of
the loan. However, the receipt of any dividend-equivalent payments by a Fund
on a loaned security from the borrower will not qualify for the
dividends-received deduction. Such loans will be terminable at any time upon
specified notice. A Fund might experience risk of loss if the institutions
with which it has engaged in portfolio loan transactions breach their
agreements with such Fund. The risks in lending portfolio securities, as with
other extensions of secured credit, consist of possible delays in receiving
additional collateral or in the recovery of the securities or the possible
loss of rights in the collateral should the borrower experience financial
difficulty. Loans will be made only to firms deemed by the advisers to be of
good standing and will not be made unless, in the judgment of the advisers,
the consideration to be earned from such loans justifies the risk.
Zero Coupon and Stripped Obligations. The principal and interest
components of United States Treasury bonds with remaining maturities of
longer than ten years are eligible to be traded independently under the
Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request
of depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that
of United States Treasury bills with comparable maturities.
Zero coupon obligations are sold at a substantial discount from their
value at maturity and, when held to maturity, their entire return, which
consists of the amortization of discount, comes from the difference between
their purchase price and maturity value. Because interest on a zero coupon
obligation is not distributed on a current basis, the obligation tends to be
subject to greater price fluctuations in response to changes in interest
rates than are ordinary interest-paying securities with similar maturities.
The value of zero coupon obligations appreciates more than such ordinary
interest-paying securities during periods of declining interest rates and
depreciates more than such ordinary interest-paying securities during periods
of rising
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interest rates. Under the stripped bond rules of the Internal Revenue Code of
1986, as amended, investments in zero coupon obligations will result in the
accrual of interest income on such investments in advance of the receipt of
the cash corresponding to such income.
Zero coupon securities may be created when a dealer deposits a U.S.
Treasury or federal agency security with a custodian and then sells the
coupon payments and principal payment that will be generated by this security
separately. Proprietary receipts, such as Certificates of Accrual on Treasury
Securities, Treasury Investment Growth Receipts and generic Treasury
Receipts, are examples of stripped U.S. Treasury securities separated into
their component parts through such custodial arrangements.
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 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. 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
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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 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. The Funds will not write uncovered options.
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.
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Futures Contracts and Options on Futures Contracts. The Funds may purchase
or sell (i) interest-rate futures contracts, (ii) futures contracts on specified
instruments or indices, and (iii) options on these futures contracts ("futures
options").
The futures contracts and futures options may be based on various
instruments or indices in which the Funds may invest such as foreign
currencies, certificates of deposit, Eurodollar time deposits, securities
indices, economic indices (such as the Consumer Price Indices compiled by the
U.S. Department of Labor).
Futures contracts and futures options may be used to hedge portfolio
positions and transactions as well as to gain exposure to markets. For
example, 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 different from the security position
being hedged to take advantage of relationships between the two securities.
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 are
traded on a U.S. or foreign exchange or board of trade, or similar entity, or
quoted on an automated quotation system.
Forward Contracts. 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
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
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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.
The 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 or by reference to
another security) (the "reference rate"). As an example, inverse floaters may
constitute a class of CMOs with a coupon rate that moves inversely to a
designated index, such as LIBOR (London Interbank Offered Rate) or the cost
of Funds Index. Any rise in the reference rate of an inverse floater (as a
consequence of an increase in interest rates) causes a drop in the coupon
rate while any drop in the reference rate of an inverse floater causes an
increase in the coupon rate. A spread trade is an investment position
relating to a difference in the prices or interest rates of two securities
where the value of the investment position is determined by movements in the
difference between the prices or interest rates, as the case may be, of the
respective securities. When 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 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 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. None
of the Funds is a "commodity pool" (i.e., a pooled investment vehicle which
trades in commodity futures contracts and options thereon and the operator of
which is registered with the CFTC and futures contracts and futures options
will be purchased, sold or entered into only for bona fide hedging purposes,
provided that a Fund may enter into such transactions for purposes other than
bona fide hedging if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open contracts and options would not exceed 5%
of the liquidation value of the Fund's portfolio, provided, further, that, in
the case of an option that is in-the-money, the in-the-money amount may be
excluded in calculating the 5% limitation.
When 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
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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 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).
Investments by a Fund
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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. In addition, as a matter of
fundamental policy, 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. For purposes of investment restriction (5) above, real estate
includes Real Estate Limited Partnerships. For purposes of investment
restriction (3) above, industrial development bonds, where the payment of
principal and interest is the ultimate responsibility of companies within
the same industry, are grouped together as an "industry." Investment
restriction (3) above, however, is not applicable to investments by a Fund
in municipal obligations where the issuer is regarded as a state, city,
municipality or other public authority since such entities are not members
of any "industry." Supranational organizations are collectively considered
to be members of a single "industry" for purposes of restriction (3)
above.
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 assets in the securities of
any one issuer (other than obligations of the U.S. Government, its
agencies and instrumentalities); 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.
(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. It is the
Trust's position that proprietary strips, such as CATS and TIGRS, are
United States Government securities. How-
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ever, 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 its 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 regulatory policies, as a matter of
operating policy, each Fund will not invest for the purpose of exercising
control or management.
As a nonfundamental operating policy, the California Intermediate Tax Free
Income Fund will limit its investments in municipal obligations secured by
bank letters of credit or guarantees to not more than 25% of its total
assets. As a nonfundamental operating policy, the Money Market Funds will not
invest more than 25% of their respective total assets in obligations issued
by foreign banks (other than foreign branches of U.S. banks), and the Tax
Free Money Market Funds will not invest more than 25% of their respective
total assets in obligations secured by letters of credit or guarantees from
foreign banks (other than foreign branches of U.S. banks).
If a percentage or rating restriction on investment or use of assets set
forth herein or in a Prospectus is adhered to at the time, 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.
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. Each Income Fund
will engage in portfolio trading if its advisers believe a transaction, net
of costs (including custodian charges), will help it achieve its investment
objective.
For the fiscal year ended October 31, 1993, the period from November 1,
1993 through August 31, 1994, the fiscal year ended August 31, 1995, and the
fiscal year ended August 31, 1996, the annual rates of portfolio turnover for
the following Funds were as follows:
The Tax Free Income Fund: 149%, 258%, 233% and 210%, respectively; The New
York Tax Free Income Fund: 150%, 162%, 122% and 156%, respectively;
For the period July 16, 1993 through October 31, 1993, from November 1,
1993 through August 31, 1994, the fiscal year ended August 31, 1995, and the
fiscal year ended August 31, 1996, the California Intermediate Tax Free
Income Fund had portfolio turnover rates of 40%, 93%, 94% and 188%,
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
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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 to a Fund normally seeks to deal directly with
the primary market makers unless, in its opinion, best execution is available
elsewhere. In the case of securities purchased from underwriters, the cost of
such securities generally includes a fixed underwriting commission or
concession. From time to time, soliciting dealer fees are available to the
adviser or sub-adviser on the tender of a Fund's portfolio securities in
so-called tender or exchange offers. Such soliciting dealer fees are in
effect recaptured for the Funds by the adviser and sub-advisers. At present,
no other recapture arrangements are in effect.
Under the advisory and sub-advisory agreements and as permitted by Section
28(e) of the Securities Exchange Act of 1934, the adviser or sub-advisers may
cause the Funds to pay a broker-dealer which provides brokerage and research
services to the adviser or sub-advisers, 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.
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 their 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
they should attempt to develop comparable information through their 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 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
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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.
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. A Fund's performance may be compared with
indices such as the Lehman Brothers Government/Corporate Bond Index, the Lehman
Brothers Government Bond Index, the Lehman Government Bond 1-3 Year Index and
the Lehman Aggregate Bond Index; the S&P 500 Index, the Dow Jones Industrial
Average or any other commonly quoted index of common stock prices; and the
Russell 2000 Index and the NASDAQ Composite Index. Additionally, 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 market
conditions, the current market value of the securities held by a Fund and
changes in the Fund's expenses. The advisers, Shareholder Servicing Agents, the
Administrator, the Distributor and other service providers may voluntarily waive
a portion of their fees on a month-to-month basis. In addition, the Distributor
may assume a portion of 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
19
<PAGE>
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 for each class of 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.
Advertising or communications to shareholders may contain the views of the
advisers as to current market, economic, trade and interest rate trends, as well
as legislative, regulatory and monetary developments, and may include investment
strategies and related matters believed to be of relevance to a Fund.
Advertisements for the Vista funds may include references to the asset size
of other financial products made available by Chase, such as the offshore assets
of other funds.
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 assuming the
reinvestment of all distributions (but excluding the effects of any
applicable sales charges) for the one and five year periods ended August 31,
1996, and for the period from September 8, 1987 (commencement of business
operations) to August 31, 1996, were as follows:
The Tax Free Income Fund: 4.88%, 7.64% and 8.92%, respectively; The New
York Tax Free Income Fund: 4.20%, 7.48% and 8.36%, respectively.
With the current maximum sales charge for Class A shares of 4.50%
reflected, the average annual total rate of return figures for the same
periods would be as follows:
The Tax Free Income Fund: 0.16%, 7.11% and 8.36%, respectively; The New
York Tax Free Income Fund: -0.49%, 6.50% and 7.80%, respectively.
The average rate of total return for the California Intermediate Tax Free
Income Fund (excluding the effects of any applicable sales charges) for the
one year period ended August 31, 1996 and from the inception date of July 15,
1993 through August 31, 1996 were 5.00% and 4.48%, respectively. With the
current maximum sales charge of 4.50% reflected, the average annual total
rate of return for the same periods would be 0.27% and 2.95%, respectively.
The average annual total rate of return figures for the Class B shares of
the following Funds, reflecting the initial investment and assuming the
reinvestment of all distributions for the one year period ended August 31,
1996, and for the period from commencement of business operations on November
4, 1993 to August 31, 1996 were as follows:
20
<PAGE>
The Tax Free Income Fund: 4.10% and 2.58%, respectively. The New York Tax
Free Income Fund: 3.46% and 2.92%, respectively.
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.
21
<PAGE>
Effective
Current Compound
Annualized Annualized
Yield Yield
as of 8/31/96 as of 8/31/96
------------- ---------------
U. S. Government Money Market Fund
Vista Shares 4.78% 4.90%
Premier Shares 4.82% 4.94%
Institutional Shares 5.12% 5.25%
Prime Money Market Fund
B Shares 4.07% 4.15%
Premier Shares 5.09% 5.22%
Institutional Shares 5.28% 5.42%
Federal Money Market Fund
Vista Shares 4.78% 4.89%
Premier Shares 4.98% 5.10%
Institutional Shares 5.19% 5.32%
Treasury Plus Money Market Fund
Vista Shares 4.65% 4.75%
Premier Shares 4.72% 4.83%
Institutional Shares 4.97% 5.09%
100% U.S. Treasury Securities
Money Market Fund
Vista Shares 4.55% 4.65%
Premier Shares 4.59% 4.69%
Institutional Shares 4.87% 4.99%
Cash Management Fund
Vista Shares 4.90% 5.02%
Premier Shares 4.99% 5.12%
Institutional Shares 5.24% 5.38%
Effective
Current Compound Annualized
Annualized Annualized Tax Equivalent
Yield Yield Yield**
as of 8/31/96 as of 8/31/96 as of 8/31/96
------------- ------------- ---------------
Tax Free Money Market Fund
Vista Shares 2.90% 2.94% 4.80%
Premier Shares 2.96% 3.01% 4.91%
Institutional Shares 3.21% 3.26% 5.31%
California Tax Free
Money Market Fund 2.87% 2.91% 5.34%
New York Tax Free
Money Market Fund 2.81% 2.84% 5.25%
22
<PAGE>
Tax Equivalent
Thirty-Day Thirty-Day
Yield Yield**
as of 8/31/96 as of 8/31/96
-------------- ---------------
Tax Free Income Fund
Class A Shares 4.70% 7.78%
Class B Shares 4.15% 6.87%
New York Tax Free Income Fund
Class A Shares 4.39% 8.22%
Class B Shares 3.86% 7.26%
California Intermediate Tax Free
Income Fund 4.45% 8.28%
- ----------
* Performance presented in the table for each class of these Funds is based
upon the performance of their respective predecessor funds (which had
fiscal years ending on November 30, 1995).
Performance presented for each class of each of these Funds is based on
the historical expenses and performance of the single class of shares of
its predecessor fund and does not reflect the current distribution,
service and/or other expenses that an investor would incur as a holder of
Vista, Premier or Institutional Shares of such Fund. Vista Shares of these
Funds currently bear expenses in excess of those borne by Premier Shares
and Premier Shares currently bear expenses in excess of those borne by
Institutional Shares. If such current expenses were reflected in the
yields presented for these Funds, the yields for Institutional Shares
would exceed those presented for Premier Shares and the yields for Premier
Shares would exceed those presented for Vista Shares.
** The 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.
23
<PAGE>
Non-Standardized Performance Results
The table below reflects the net change in the value of an assumed initial
investment of $10,000 in the following Funds (excluding the effects of any
applicable sales charges) 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 invested in additional
shares of the same class. From time to time, the Funds may 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
Prospectuses, 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.
<TABLE>
<CAPTION>
Value of Value of Value of
Initial Capital
Period Ended $10,000 Gains Reinvested Total
August 31, 1996 Investment Distribution Dividends Value
- -------------------------- ------------ ------------ --------- --------
<S> <C> <C> <C> <C>
The Tax Free Income Fund:
A Shares $11,840 $1,171 $8,497 $21,508
B Shares 9,400 129 1,215 10,745
The New York Tax Free
Income Fund:
A Shares 11,390 1,532 7,610 20,532
B Shares 9,356 249 1,238 10,843
The California
Intermediate
Tax Free
Income Fund 9,599 232 1,636 11,467
</TABLE>
With the current maximum sales charge of 4.50% for Class A shares, and the
currently applicable CDSC for Class B shares for each period length, reflected,
the figures for the same periods would be as follows:
<TABLE>
<CAPTION>
Value of Value of
Initial Capital Value of
Period Ended $10,000 Gains Reinvested Total
August 31, 1996 Investment Distribution Dividends Value
- -------------------------- ------------ ------------ --------- --------
<S> <C> <C> <C> <C>
The Tax Free Income Fund:
A Shares $11,307 $1,118 $8,115 $20,540
B Shares 9,118 129 1,215 10,463
The New York Tax Free
Income Fund:
A Shares 10,877 1,463 7,268 19,608
B Shares 9,075 249 1,238 10,563
The California
Intermediate
Tax Free
Income Fund 9,167 221 1,563 10,951
</TABLE>
DETERMINATION OF NET ASSET VALUE
As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition,to
the days listed above (other than Good Friday), the Funds are closed for
business on the following holidays: Martin Luther King Day, Columbus Day, and
Veteran's Day.
24
<PAGE>
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 Money Market Funds have established procedures designed 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 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 Funds' Transfer Agent may defer
acting on a shareholder's instructions until it has received them in proper
form. In addition, the privileges described in the Prospectuses 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, a 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 such 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
such 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 readily marketable portfolio
25
<PAGE>
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), excluding shares of any Vista money market fund, during a
13-month period. The sales charge is based on the total amount to be invested in
Class A shares during the 13-month period. All Class A or other qualifying
shares of these funds currently owned by the investor will be credited as
purchases (at their current offering prices on the date the Statement is signed)
toward completion of the Statement. A 90-day back-dating period can be used to
include earlier purchases at the investor's cost. The 13-month period would then
begin on the date of the first purchase during the 90-day period. No retroactive
adjustment will be made if purchases exceed the amount indicated in the
Statement. A shareholder must notify the Transfer Agent or Distributor whenever
a purchase is being made pursuant to a Statement.
The Statement is not a binding obligation on the investor to purchase the
full amount indicated; however, on the initial purchase, if required (or
subsequent purchases if necessary), 5% of the dollar amount specified in the
Statement will be held in escrow by the Transfer Agent in Class A shares (or if
a Fund has only one class and is subject to an initial sales charge, shares of
such Fund) registered in the shareholder's name in order to assure payment of
the proper sales charge. If total purchases pursuant to the Statement (less any
dispositions and exclusive of any distributions on such shares automatically
reinvested) are less than the amount specified, the investor will be requested
to remit to the Transfer Agent an amount equal to the difference between the
sales charge paid and the sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder. Reinvested dividend and
capital gain distributions are not counted toward satisfying the Statement.
Class A shares of a Fund may also be purchased by any person at a reduced
initial sales charge which is determined by (a) aggregating the dollar amount of
the new purchase and the greater of the purchaser's total (i) net asset value or
(ii) cost of any shares acquired and still held in the Fund, or any other Vista
fund excluding any Vista money market fund, and (b) applying the initial sales
charge applicable to such aggregate dollar value (the "Cumulative Quantity
Discount"). The privilege of the Cumulative Quality Discount is subject to
modification or discontinuance at any time with respect to all Class A shares
(or if a Fund has only one class and is subject to an initial sales charge,
shares of such Fund) purchased thereafter.
An individual who is a member of a qualified group (as hereinafter defined)
may also purchase Class A shares of a Fund (or if a Fund has only one class and
is subject to an initial sales charge, shares of such Fund) at the reduced sales
charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of Class A shares (or if a Fund
has only one class and is subject to an initial sales charge, shares of such
Fund) previously purchased and still owned by the group plus the securities
currently being purchased and is determined as stated in the preceding
paragraph. In order to obtain such discount, the purchaser or investment dealer
must provide the Transfer Agent with sufficient information, including the
purchaser's total cost, at the time of purchase to permit verification that the
purchaser qualifies for a cumulative quantity discount, and confirmation of the
order is subject to such verification. Information concerning the current
initial sales charge applicable to a group may be obtained by contacting the
Transfer Agent.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Class A shares (or if a Fund has
only one class and is subject to an initial sales charge, shares of such Fund)
at a discount and (iii) satisfies uniform criteria which enables the Distributor
to realize
26
<PAGE>
economies of scale in its costs of distributing Class A shares (or if a Fund
has only one class and is subject to an initial sales charge, shares of such
Fund). A qualified group must have more than 10 members, must be available to
arrange for group meetings between representatives of the Fund and the
members, must agree to include sales and other materials related to the Fund
in its publications and mailings to members at reduced or no cost to the
Distributor, and must seek to arrange for payroll deduction or other bulk
transmission of investments in the Fund. This privilege is subject to
modification or discontinuance at any time with respect to all Class A shares
(or if a Fund has only one class and is subject to an initial sales charge,
shares of such Fund) purchased thereafter.
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 non-money market funds
or the exchange will be done at relative net asset value plus the appropriate
sales charge. Any such exchange may create a gain or loss to be recognized for
federal income tax purposes. Normally, shares of the fund to be acquired are
purchased on the redemption date, but such purchase may be delayed by either
fund for up to five business days if a fund determines that it would be
disadvantaged by an immediate transfer of the proceeds.
The contingent deferred sales charge for Class B shares will be waived for
certain exchanges and for redemptions in connection with a Fund's systematic
withdrawal plan, subject to the conditions described in the Prospectuses. In
addition, subject to confirmation of a shareholder's status, the contingent
deferred sales charge will be waived for: (i) a total or partial redemption made
within one year of the shareholder's death or initial qualification for Social
Security disability payments; (ii) a redemption in connection with a Minimum
Required Distribution form an IRA, Keogh or custodial account under section
403(b) of the Internal Revenue Code or a mandatory distribution from a qualified
plan; (iii) redemptions made from an IRA, Keogh or custodial account under
section 403(b) of the Internal Revenue Code through an established Systematic
Redemption Plan; (iv) a redemption resulting from an over-contribution to an
IRA; (v) distributions from a qualified plan upon retirement; and (vi) an
involuntary redemption of an account balance under $500
Class B shares automatically convert to Class A shares (and thus are then
subject to the lower expenses borne by Class A shares) after a period of time
specified below has elapsed since the date of purchase (the "CDSC Period"),
together with the pro rata portion of all Class B shares representing dividends
and other distributions paid in additional Class B shares attributable to the
Class B shares then converting. The conversion of Class B shares purchased on or
after May 1, 1996, will be effected at the relative net asset values per share
of the two classes on the first business day of the month following the eighth
anniversary of the original purchase. The conversion of Class B shares purchased
prior to May 1, 1996, will be effected at the relative net asset values per
share of the two classes on the first business day of the month following the
seventh anniversary of the original purchase. If any exchanges of Class B shares
during the CDSC Period occurred, the holding period for the shares exchanged
will be counted toward the CDSC Period. At the time of the conversion the net
asset value per share of the Class A shares may be higher or lower than the net
asset value per share of the Class B shares; as a result, depending on the
relative net asset values per share, a shareholder may receive fewer or more
Class A shares than the number of Class B shares converted.
A Fund may require signature guarantees for changes that shareholders request
be made in Fund records with respect to their accounts, including but not
limited to, changes in bank accounts, for any written requests for additional
account services made after a shareholder has submitted an initial account
application to the Fund, and in certain other circumstances described in the
Prospectuses. A Fund may also refuse to accept or carry out any transaction that
does not satisfy any restrictions then in effect. A signature guarantee may be
obtained from a bank, trust company, broker-dealer or other member of a national
securities exchange. Please note that a notary public cannot provide a signature
guarantee.
27
<PAGE>
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
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., its investment company taxable
income, as that term is defined in the Code, without a deduction for dividends
paid) and net capital gain (i.e., the excess of net long-term capital gains over
net short-term capital losses) that it distributes to shareholders, provided
that it distributes at least 90% of its net investment income 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
28
<PAGE>
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) 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.
29
<PAGE>
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 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.
30
<PAGE>
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
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.
31
<PAGE>
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 a Money Market Fund will do
this. In such a case and any case involving the Income 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 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.
32
<PAGE>
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
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.
33
<PAGE>
MANAGEMENT OF THE TRUST AND THE FUNDS
Trustees and Officers
The Trustees and of the Trust officers and their principal occupations for
at least the past five years are set forth below. Their titles may have
varied during that period.
Fergus Reid, III--Chairman of the Trust. Chairman and Chief Executive
Officer, Lumelite Corporation, since September 1985; Trustee, Morgan Stanley
Funds. Age: 64. Address: 202 June Road, Stamford, CT 06903.
Richard E. Ten Haken--Trustee; Chairman of the Audit Committee. Formerly
District Superintendent of Schools, Monroe No. 2 and Orleans Counties, New
York; Chairman of the Board and President, New York State Teachers'
Retirement System. Age: 62. Address: 4 Barnfield Road, Pittsford, NY 14534.
William J. Armstrong--Trustee. Vice President and Treasurer,
Ingersoll-Rand Company (Woodcliff Lake, New Jersey). Age: 54. Address: 49
Aspen Way, Upper Saddle River, NJ 07458.
John R.H. Blum--Trustee. Attorney in private practice; formerly a Partner
in the law firm of Richards, O'Neil & Allegaert; Commissioner of Agriculture
State of Connecticut, 1992-1995. Age: 67. Address: 322 Main Street,
Lakeville,CT 06039.
Joseph J. Harkins--Trustee. Retired; Commercial Sector Executive and
Executive Vice President of The Chase Manhattan Bank, N.A. from 1985 through
1989. He has been employed by Chase in numerous capacities and offices since
1954. Director of Blessings Corporation, Jefferson Insurance Company of New
York, Monticello Insurance Company and National. Age: 65. Address: 257
Plantation Circle South, Ponte Vedra Beach, FL 32082.
*H. Richard Vartabedian--Trustee and 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. Age: 60. Address: P.O. Box 296, Beach Road, Hendrick's Head,
Southport, ME 04576.
Stuart W. Cragin, Jr.--Trustee. Retired; formerly President, Fairfield
Testing Laboratory, Inc. He has previously served in a variety of marketing,
manufacturing and general management positions with Union Camp Corp., Trinity
Paper & Plastics Corp., and Conover Industries. Age: 63. Address: 108 Valley
Road, Cos Cob, CT 06807.
Irving L. Thode--Trustee. Retired; formerly Vice President of Quotron
Systems. He has previously served in a number of executive positions with
Control Data Corp., including President of its Latin American Operations, and
General Manager of its Data Services business. Age: 65. Address: 80 Perkins
Road, Greenwich, CT 06830.
*W. Perry Neff--Trustee. Independent Financial Consultant; Director of
North America Life Assurance Co., Petroleum & Resources Corp. and The Adams
Express Co.; Director and Chairman of The Hanover Funds, Inc.; Director,
Chairman and President of The Hanover Investment Funds, Inc. Age: 69.
Address: RR 1 Box 102, Weston, VT 05181.
Roland R. Eppley, Jr.--Trustee. Retired; formerly President and Chief
Executive Officer, Eastern States Bankcard Association Inc. (1971-1988);
Director, Janel Hydraulics, Inc.; Director of The Hanover Funds, Inc. Age:
64. Address: 105 Coventry Place, Palm Beach Gardens, FL 33418.
W.D. MacCallan--Trustee. Director of The Adams Express Co. and Petroleum &
Resources Corp.; formerly Chairman of the Board and Chief Executive Officer
of The Adams Express Co. and Petroleum & Resources Corp.; Director of The
Hanover Funds, Inc. and The Hanover Investment Funds, Inc. Age: 69. Address:
624 East 45th Street, Savannah, GA 31405.
Martin R. Dean--Treasurer and Assistant Secretary. Associate Director,
Accounting Services, BISYS Fund Services; formerly Senior Manager, KPMG Peat
Marwick (1987-1994). Age: 33. Address: 3435 Stelzer Road, Columbus, OH 43219.
34
<PAGE>
Ann E. Bergin--Secretary. First Vice President, BISYS Fund Services, Inc.;
formerly, Senior Vice President, Administration, Concord Financial Group
(1991-1995); Assistant Vice President, Dreyfus Service Corporation
(1982-1991). Age: 36. Address: 125 West 55th Street, New York, NY 10019.
- ----------
* Asterisks indicate those Trustees that are "interested persons" (as defined
in the 1940 Act). Mr. Reid is not an interested person of the Trust's
investment advisers or principal underwriter, but may be deemed an
interested person of the Trust solely by reason of being an officer of the
Trust. The Board of Trustees of the Trust presently has an Audit Committee.
The members of the Audit Committee are Messrs. Ten Haken (Chairman), Blum,
Cragin, Thode, Armstrong, Harkins, Reid 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, 1996.
The Board of Trustees of the Trust has established an Investment
Committee. The members of the Investment Committee are Messrs. Vartabedian
(Chairman) and Reid, as well as Leonard M. Spalding, President of Vista
Capital Management. The function of the Investment Committee is to review the
investment management process of the Trust.
The Trustees and officers of the Trust appearing in the table above also
serve in the same capacities with respect to Mutual Fund Group, Mutual Fund
Variable Annuity Trust, Mutual Fund Select Group, Mutual Fund Select Trust,
Capital Growth Portfolio, Growth and Income Portfolio, International Equity
Portfolio and New Growth Opportunities Portfolio (these entities, together
with the Trust, are referred to below as the "Vista Funds").
Remuneration of Trustees and Certain Executive Officers:
Each Trustee is reimbursed for expenses incurred in attending each meeting
of the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the advisers is compensated for his or her services according to
a fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the advisers. Each Trustee
receives a fee, allocated among all investment companies for which the
Trustee serves, which consists of an annual retainer component and a meeting
fee component. 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 and the
Chairman of the Investment Committee each receive a 50% increment over
regular Trustee total compensation for serving in such capacities for all the
investment companies advised by the adviser.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended August 31, 1996 for each Trustee of the Trust:
<TABLE>
<CAPTION>
New
U.S. York California
Tax Tax
Government Free Prime Free Tax Free
Money Cash Money Money Money Money
Market Management Market Market Market Market
Fund Fund Fund Fund Fund Fund
---------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, $21,989.79 $9,147.97 $4,395.95 $8,730.30 $3,980.78 $397.65
Trustee
Richard E. Ten Haken, 14,659.88 6,098.69 2,930.59 5,820.22 2,653.82 265.12
Trustee
William J. Armstrong, 14,659.88 6,098.69 2,930.59 5,820.22 2,653.82 265.12
Trustee
John R.H. Blum, 14,786.88 6,141.29 2,946.35 5,904.86 2,675.35 262.56
Trustee
35
<PAGE>
New
York California
U.S. Tax Tax
Government Free Prime Free Tax Free
Money Cash Money Money Money Money
Market Management Market Market Market Market
Fund Fund Fund Fund Fund Fund
---------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Harkins, 14,659.88 6,098.69 2,930.59 5,820.22 2,653.82 265.12
Trustee
H. Richard 21,989.79 9,147.97 4,395.95 8,730.30 3,980.78 397.68
Vartabedian, Trustee
Stuart W. Cragin, 14,659.88 6,098.69 2,930.59 5,820.22 2,653.82 265.12
Jr., Trustee
Irving L. Thode, 14,659.88 6,098.69 2,930.59 5,820.22 2,653.82 265.12
Trustee
W. Perry Neff,
Trustee 3,556.90 2,034.48 781.87 959.91 723.89 42.80
Roland R. Eppley,
Jr., 3,556.90 2,034.48 781.87 959.91 723.89 42.80
Trustee
W.D. MacCallan, 3,196.07 1,834.43 708.46 859.36 654.46 38.19
Trustee
</TABLE>
<TABLE>
<CAPTION>
California 100% U.S.
Treasury Tax Intermediate Treasury
Federal Plus New York Free Tax Free Securities
Money Money Tax Free Income Income Money Market
Market Market Income
Fund Fund Fund Fund Fund Fund
--------- --------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Fergus Reid, III, $4,607.55 $3,216.71 $906.34 $803.95 $259.10 $2,027.93
Trustee
Richard E. Ten 3,071.67 2,144.42 604.23 535.97 172.74 1,351.95
Haken, Trustee
William J. 3,071.67 2,144.42 604.23 535.97 172.74 1,351.95
Armstrong, Trustee
John R.H. Blum, 3,088.06 2,156.63 612.12 542.49 174.56 1,351.95
Trustee
Joseph J. Harkins, 3,071.67 2,144.42 604.23 535.97 172.74 1,351.95
Trustee
H. Richard 4,607.55 3,216.71 906.34 803.95 259.10 2,027.93
Vartabedian, Trustee
Stuart W. Cragin, Jr. 3,071.67 2,144.42 604.23 535.97 172.74 1,351.95
Trustee
Irving L. Thode, 3,071.67 2,144.42 604.23 535.97 172.74 1,351.95
Trustee
W. Perry Neff, 554.96 1,466.23 91.69 77.28 25.52 1,351.95
Trustee
Roland R. Eppley, Jr. 554.96 1,466.23 91.69 77.28 25.52 1,351.95
Trustee
W.D. MacCallan, 499.01 1,324.63 81.70 69.06 22.80 1,228.33
Trustee
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Benefits
Accrued From
as Fund "Fund Complex"
Expenses (1)
------------- ---------------
<S> <C> <C>
Fergus Reid, III, Trustee 48,110 $90,000
Richard E. Ten Haken, Trustee 27,043 58,500
William J. Armstrong, Trustee 30,330 58,500
John R.H. Blum, Trustee 34,875 60,000
Joseph J. Harkins, Trustee 39,323 60,000
H. Richard Vartabedian,
Trustee 35,389 90,000
Stuart W. Cragin, Jr., Trustee 25,473 60,000
Irving L. Thode, Trustee 30,282 60,000
W. Perry Neff, Trustee 0 43,500
Roland R. Eppley, Jr., Trustee 0 43,500
W.D. MacCallan, Trustee 0 42,000
</TABLE>
- ----------
(1) Data reflects total compensation earned during the period January 1, 1996
to December 31, 1996 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 advisers, administrator or distributor
or any of their affiliates) may be entitled to certain benefits upon
retirement from the Board of Trustees. Pursuant to the Plan, the normal
retirement date is the date on which the eligible Trustee has attained age 65
and has completed at least five years of continuous service with one or more
of the investment companies advised by the adviser 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 are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years
of service classifications. As of October 31, 1996, the estimated credited
years of service for Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins,
Vartabedian, Cragin, Thode, Neff, Eppley and MacCallan are 11, 11, 8, 11, 5,
3, 3, 3, 6, 7, and 6, respectively.
<TABLE>
<CAPTION>
Highest Annual Compensation Paid by All
Vista Funds
-----------------------------------------
$40,000 $45,000 $50,000 $55,000
Years of
Service Estimated Annual Benefits Upon Retirement
- ------------- -----------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
Effective August 21, 1995, the Trustees instituted a Deferred Compensation
Plan for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which
each Trustee (who is not an employee of any of the Funds, the advisers,
administrator or distributor or any of their affiliates) may enter into
agreements with the Funds whereby payment of the Trustee's fees are deferred
until the payment date elected by the Trustee (or the Trustee's termination of
service). The deferred amounts are invested in shares of Vista funds selected
37
<PAGE>
by the Trustee. The deferred amounts are paid out in a lump sum or over a
period of several years as elected by the Trustee at the time of deferral. If
a deferring Trustee dies prior to the distribution of amounts held in the
deferral account, the balance of the deferral account will be distributed to
the Trustee's designated beneficiary in a single lump sum payment as soon as
practicable after such deferring Trustee's death.
Messrs. Ten Haken, Thode and Vartabedian have each executed a deferred
compensation agreement for the 1996 calendar year and as of October 31, 1996
they had contributed $17,400, $45,000 and $67,500, respectively.
The Declaration of Trust provides that the Trust will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with
the Trust, unless, as to liability to the Trust or its shareholders, it is
finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices or with respect to any matter unless it is finally adjudicated that
they did not act in good faith in the reasonable belief that their actions
were in the best interest of the Trust. In the case of settlement, such
indemnification will not be provided unless it has been determined by a court
or other body approving the settlement or other disposition, or by a
reasonable determination based upon a review of readily available facts, by
vote of a majority of disinterested Trustees or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
As of October 31, 1996, the Trustees and officers as a group owned less
than 1% of each Fund's outstanding shares, all of which were acquired for
investment purposes.
Adviser and Sub-Advisers
Chase acts as investment adviser to the Funds pursuant to an Investment
Advisory Agreement, dated as of May 6, 1996 (the "Advisory Agreement").
Subject to such policies as the Board of Trustees may determine, Chase is
responsible for investment decisions for the Funds. Pursuant to the terms of
the Advisory Agreement, Chase provides the Funds with such investment advice
and supervision as it deems necessary for the proper supervision of the
Funds' investments. The advisers continuously provide investment programs and
determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the Funds' assets shall be held uninvested. The
advisers to the Funds furnish, at their 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 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 and the sub-advisers'
agreements with the adviser, the adviser and sub-advisers are permitted to
render services to others. Each advisory agreement is terminable without
penalty by the Trust on behalf of the 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
agreements provide that the adviser or sub-adviser under such agreement shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission in the execution of
portfolio transactions for the respective Fund, except for 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 extraordi-
38
<PAGE>
nary 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 shall reduce its advisory fee (which
fee is described below) to the extent of its share of such excess expenses.
The amount of any such reduction to be borne by the adviser shall be deducted
from the monthly advisory fee otherwise payable with respect to the Funds
during such fiscal year; and if such amounts should exceed the monthly fee,
the 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.
Under the Advisory Agreement, Chase may delegate a portion of its
responsibilities to a sub-adviser. In addition, the Advisory Agreement
provides that Chase may render services through its own employees or the
employees of one or more affiliated companies that are qualified to act as an
investment adviser of the Fund and are under the common control of Chase as
long as all such persons are functioning as 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 dated as of May 6, 1996 with Chase Asset Management, Inc. ("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 separate sub- investment advisory agreement between Chase and
TCB dated as of May 6, 1996. With respect to the day- to-day management of
the Funds, under the sub-advisory agreements, the sub-advisers make decisions
concerning, and place all orders for, purchases and sales of securities and
help maintain the records relating to such purchases and sales. The
sub-advisers may, in their discretion, provide such services through their
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.
Chase, a wholly-owned subsidiary of The Chase Manhattan Corporation, a
registered bank holding company, is a commercial bank offering a wide range
of banking and investment services to customers throughout the United States
and around the world. Also included among the Chase 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 Agreement, the adviser is entitled to receive from each Fund an
investment advisory fee computed daily and paid monthly based on a rate equal
to a percentage of such Fund's average daily net assets specified in the
relevant Prospectuses. However, the adviser may voluntarily agree to waive a
portion of the fees payable to it on a month- to-month basis. For its
services under its sub-advisory agreement, CAM (or TCB in the case of the
Cash Management Fund and the Tax Free Money Market Fund) will be entitled to
receive with respect to each such Fund, such compensation, payable by the
adviser out of its advisory fee, as is described in the relevent
Prospectuses.
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
39
<PAGE>
fees with respect to the following Funds, and voluntarily waived the amounts
in parentheses following such fees with respect to each such period:
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal
Year- 11/1/93 Year- Year-
ended through ended ended
Fund 10/31/93 8/31/94 8/31/95 8/31/96
- ----------------------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Tax Free Money Market Fund:
Paid or Accrued $486,073 $371,535 $440,282 $602,984
Waived ($ 17,981) none none none
New York Tax Free Money
Market Fund:
Paid or Accrued $454,872 $279,493 $381,647 $564,728
Waived ($ 22,825)
Tax Free Income Fund:
Paid or Accrued $127,952 $252,244 $307,093 $286,711
Waived ($127,952) ($219,741) ($287,095) ($222,662)
New York Tax Free Income
Fund:
Paid or Accrued $267,793 $288,134 $333,493 $328,622
Waived
($118,398) ($172,770) ($219,772) ($105,922)
</TABLE>
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 and the Treasury Plus Money Market Fund, respectively.
For the period November 15, 1993 through August 31, 1994, Chase was paid
or accrued investment advisory fees, and voluntarily waived the amounts in
parentheses, $234,255 ($76,970) for the Prime Money Market Fund.
For the period October 31, 1993 through August 31, 1994, Chase was paid or
accrued investment advisory fees, and voluntarily waived the amounts in
parentheses, $100,182 ($100,182) for the California Intermediate Tax Free
Income Fund.
For the fiscal period ended October 31, 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: $74,175
($67,313) and $47,854 ($43,069).
For the period November 1, 1993 through August 31, 1994, Chase was paid or
accrued investment advisory fees with respect to the U.S. Government Money
Market Fund: of $887,334.
For the period December 1, 1995 through August 31, 1996, Chase was paid or
accrued investment advisory fees and voluntarily waived the amount in
parentheses, $1,518,404 ($197,536), for the 100% U.S. Treasury Securities
Money Market Fund
For the period December 1, 1995 through August 31, 1996, Chase was paid or
accrued investment advisory fees and voluntarily waived the amount in
parenthese, $1,781,610 ($195,420) for the Cash Management Fund
40
<PAGE>
For the years ended August 31, 1995 and August 31, 1996 Chase was paid or
accrued advisory fees, and voluntarily waived the amounts in parentheses:
Fiscal Fiscal
Year- Year-
Ended Ended
8/31/95 8/31/96
----------- -----------
Federal Money Market Fund
Paid or Accrued $ 389,075 $ 590,313
Waived ($ 118,975) none
Treasury Plus Money Market
Fund
Paid or Accrued $ 22,663 $ 665,556
Waived none none
Prime Money Market Fund
Paid or Accrued $ 352,679 $1,110,393
Waived $ 216,306 ($ 50,805)
California Intermediate
Tax Fee Income Fund
Paid or Accrued $ 102,004 $ 92,752
Waived ($ 102,004) ($ 90,335)
California Tax Free
Money Market Fund
Paid or Accrued $ 55,870 $ 48,544
Waived ($ 44,112) ($ 37,587)
U.S. Government
Money Market Fund
Paid or Accrued $1,440,186 $2,959,311
Waived none none
Administrator
Pursuant to an Administration Agreement (the "Administration Agreement"),
Chase serves as administrator of the Funds. Chase provides certain
administrative services to the Funds, including, among other
responsibilities, coordinating the negotiation of contracts and fees with,
and the monitoring of performance and billing of, the Funds' 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 performance data, including
net asset value and yield; responding to shareholder inquiries; and arranging
for the maintenance of books and records of the Funds and providing, at its
own expense, office facilities, equipment and personnel necessary to carry
out its duties. Chase in its capacity as administrator does not have any
responsibility or authority for the management of the Funds, the
determination of investment policy, or for any matter pertaining to the
distribution of Fund shares.
Under the Administration Agreement Chase is permitted to render
administrative services to others. The Administration Agreement 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 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, including a
majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust, or by Chase on 60 days' written notice, and will
automatically terminate in the event of its "assignment" (as defined in the
1940 Act). The Administration Agreement also provides that neither Chase nor
its personnel shall be liable for any error of judgment or mistake of law or
for any act or omis-
41
<PAGE>
sion in the administration 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 Agreement.
In addition, the Administration Agreement provides 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 years; 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 Agreement, Chase 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 period November 15, 1993 through August 31, 1994, Chase was paid
or accrued administration fees, and voluntarily waived the amounts in
parentheses, $117,129 ($18,992) for the Prime Money Market Fund.
For the period April 18, 1994 through August 31, 1994, Chase was paid or
accrued administration fees, and voluntarily waived the amounts in
parentheses, $16,161 ($3,123) for the Federal Money Market Fund and
$11,331($11,331) for the Treasury Plus Money Market Fund, respectively.
For the period from November 1, 1993 through August 31, 1994, 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: $23,926 ($19,141).
For the period November 1, 1993 through August 31, 1994, Chase was paid or
accrued administration fees, and voluntarily waived the amounts in
parentheses: $443,694 for the U.S. Government Money Market Fund, $185,769 for
the Tax Free Money Market Fund, $139.747 for the New York Tax Free Money
Market Fund, $84,082 ($68.719) for the Tax Free Income Fund, $96,046
($61,425) for the New York Tax Free Income Fund and $33,394 ($33,394) for the
California Intermediate Tax Free Income Fund, respectively.
For the period December 1, 1995 through August 31, 1996, Chase was paid or
accrued administration fees of $741,264 for the 100% U.S. Treasury Securities
Money Market Fund
For the period December 1, 1995 through August 31, 1996, Chase was paid or
accrued administration fees of $872,983 for the Cash Management Fund
For the years ended August 31, 1995 and August 31, 1996 Chase was paid or
accrued administration fees, and voluntarily waived the amounts in
parentheses for the following Funds:
Fiscal Fiscal
Year- Year-
Ended Ended
8/31/95 8/31/96
----------- -----------
Federal Money Market Fund
Paid or Accrued $194,538 $295,156
Waived ($ 61,243) none
Treasury Plus Money Market
Fund
Paid or Accrued $ 11,331 $332,778
42
<PAGE>
Fiscal Fiscal
Year- Year-
Ended Ended
8/31/95 8/31/96
----------- -----------
Waived ($ 11,331) ($ 49,071)
Prime Money Market Fund
Paid or Accrued $176,340 $ 550,477
Waived ($ 88,982) ($ 33,604)
California Intermediate
Tax Fee Income Fund
Paid or Accrued $ 34,001 $ 30,917
Waived ($ 34,001) ($ 30,917)
California Tax Free
Money Market Fund
Paid or Accrued $ 27,935 $ 24,272
Waived ($ 21,527) ($ 15,097)
U.S. Government
Money Market Fund
Paid or Accrued $720,093 $1,479,655
Waived none none
Tax Free Money Market Fund
Paid or Accrued $220,141 $ 301,492
Waived none none
New York Tax Free Money
Market Fund
Paid or Accrued $190,823 $ 282,364
Waived none none
Tax Free Income Fund
Paid or Accrued $102,364 $ 95,431
Waived ($ 64,572) ($ 52,872)
New York Tax Free Income Fund
Paid or Accrued $111,164 $ 109,422
Waived ($ 81,265) ($ 17,600)
Distribution Plans
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 and Class B shares of the Tax Free Income Fund and
the New York Tax Free Income Fund, the Class B shares of the Prime Money
Market Fund, the shares of the California Intermediate Tax Free Income Fund,
the Vista Shares of the Money Market Funds (except the Cash Management Fund),
and the Premier Shares of the U.S. Government Money Market Fund, which
provides that each of such classes of such Funds shall pay for distribution
services a distribution fee (the "Distribution Fee"), including payments to
the Distributor, at annual rates not to exceed the amounts set forth in their
respective Prospectuses. 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.
Class B shares pay a Distribution Fee of up to 0.75% of average daily net
assets. The Distributor currently expects to pay sales commissions to a
dealer at the time of sale of Class B shares of the Income Funds of up to
4.00% of the purchase price of the shares sold by such dealer. The
Distributor will use its own funds (which may be borrowed or otherwise
financed) to pay such amounts. Because the Distributor will receive a maximum
Distribution Fee of 0.75% of average daily net assets with respect to Class B
shares, it will take
43
<PAGE>
the Distributor several years to recoup the sales commissions paid to dealers
and other sales expenses.
No class of shares of a Fund will make payments or be liable for any
distribution expenses incurred by other classes of shares of such Fund.
The Institutional Shares of the Money Market Funds have no distribution
plan. There is no distribution plan for Premier Shares for any Money Market
Fund other than the U.S. Government Money Market Fund.
Some payments under the Distribution Plans may be used to compensate
broker-dealers with trail or maintenance commissions in an amount not to
exceed 0.25% annualized of the average net asset value of Class A shares,
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 Income Fund maintained in a 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 a class of a Fund during any year may be
more or less than actual expenses incurred pursuant to the Distribution
Plans. For this reason, this type of distribution fee arrangement is
characterized by the staff of the Securities and Exchange Commission as being
of the "compensation variety" (in contrast to "reimbursement" arrangements by
which a distributor's payments are directly linked to its expenses). With
respect to Class B shares of the Income Funds, 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 accrued and paid by a 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 of
the Income Funds, investors should consider that 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 October 13, 1995. 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 the class of such Fund to which it applies (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
a Distribution Plan for a period of not less than six years from the date of
the Distribution Plan, and for the first two years such copies will be
preserved in an easily accessible place.
44
<PAGE>
For the fiscal year ended August 31, 1996, the Distributor was paid or
accrued the following Distribution Fees and voluntarily waived the amounts in
parenthesis following such fees with respect to the Shares of each Fund:
U.S. Government Money Market Fund Vista
Shares $912,482
Premier Shares $1,087,140
100% Treasury Securities Money Market
Fund Vista Shares $530,117
Treasury Plus Money Market Fund Vista
Shares $499,192
Prime Money Market Fund B Shares $65,891
Federal Money Market Fund Vista Shares $251,673
Tax Free Money Market Fund Vista Shares $452,351
($52,717)
Premier Shares $219,460
($109,730)
New York Tax Free Money Market Fund Vista $988,412
Shares ($141,228)
California Tax Free Money Market Fund $97,471
($16,309)
Tax Free Income Fund A Shares $201,911
($28,105)
Tax Free Income Fund B Shares $111,045
New York Tax Free Income Fund $241,773
A Shares ($32,880)
New York Tax Free Income Fund
B Shares $96,234
California Intermediate Fud $77,294
($70,104)
With respect to the Vista Shares of the New York Tax Free Money Market
Fund, the Distribution Fee of $847,184 accrued or paid to the Distributor was
allocated as follows: printing postage and handling --$181,213; sales
compensation--$519,324; advertising and administrative filings--$146,478;
With respect to the Vista Shares of the Tax Free Money Market Fund, the
Distribution Fee of $399,634 accrued or paid to the Distributor was allocated
as follows: printing postage and handling--$85,482; sales
compensation--$244,976; advertising & administrative filings--$69,097;
With respect to the Vista Shares of the Federal Money Market Fund, the
Distribution Fee of $251,673 accrued or paid to the Distributor was allocated
as follows: printing postage and handling--$53,833; sales
compensation--$154,276; advertising & administrative filings--$43,514;
With respect to the Shares of the California Tax Free Money Market Fund,
the Distribution Fee of $81,162 accrued or paid to the Distributor was
allocated as follows: printing postage and handling--$17,361; sales
compensation--$49,752; advertising & administrative filings--$14,033;
With respect to the A Shares of the Tax Free Income Fund, the Distribution
Fee of $173,806 accrued or paid to the Distributor was allocated as follows:
printing postage and handling--$37,177; sales compensation--$106,543;
advertising & administrative filings--$30,051;
With respect to the A Shares of the New York Tax Free Income Fund, the
Distribution Fee of $208,893; accrued or paid to the Distributor was
allocated as follows: printing postage and handling--$44,682; sales
compensation--$128,051; advertising & administrative filings $36,118;
With respect to Shares of the California Intermediate Tax Free Income
Fund, the Distribution Fee of $7,190 accrued or paid to the Distributor was
allocated as follows: printing postage and handling --$1,538;
45
<PAGE>
sales compensation--$4,407; advertising & administrative filings--$1,243;
With respect to the Vista Shares of the U.S. Government Money Market Fund,
the Distribution Fee of $912,482 accrued or paid to the Distributor was
allocated as follows: printing postage and handling-- $195,180; sales
compensation--$559,351; advertising & administrative filings--$157,768.
With respect to the Vista Shares of the 100% Treasury Securities Money
Market Fund, the Distribution Fee of $530,117 accrued or paid to the
Distributor was allocated as follows: printing postage and handling--
$113,392; sales compensation--$324,962; advertising & administrative
filings--$91,657
For the fiscal period ended August 31, 1996, the Distributor was paid or
accrued the following Distribution Fees and voluntarily waived the amounts in
parenthesis following such fees with respect to the Premier Shares of the
following Funds:
With respect to the Premier Shares of the Tax Free Money Market Fund, the
Distribution Fee of $109,730 accrued or paid to the Distributor was allocated
as follows: printing postage and handling-- $23,471; sales
compensation--$67,264; advertising & administrative filings--$18,972
With respect to the Premier Shares of the U.S. Government Money Market
Fund, the Distribution Fee of $1,087,140 accrued or paid to the Distributor
was allocated as follows: printing postage and handling $232,539; sales
compensation--$666,417; advertising & administrative filings--$187,967
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 Plus Money Market Fund and Federal Money Market 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 class
of 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 Plans. 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
46
<PAGE>
shall reduce its sub-administration 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, 1993,the
period November 1, 1993 through August 31, 1994, the year ended August 31,
1995 and the fiscal year ended August 31, 1996, the Distributor was paid or
accrued the following sub- administration fees under the Distribution
Agreement, and voluntarily waived the amounts in parentheses following such
fees:
For the years ended August 31, 1995 and August 31, 1996 the Distributor
was paid or accrued sub- administration fees, and voluntarily waived the
amounts in parentheses for the following Funds:
Fiscal
Period Fiscal Fiscal
11/1/93 Year- Year-
through Ended Ended
8/31/94 8/31/95 8/31/96
------------ ----------- -----------
Federal Money Market Fund
Paid or Accrued $ 16,161* 194,538 295,156
Waived 15,733 9,048 --
Treasury Plus Money Market Fund
Paid or Accrued 3,123* 11,331 332,778
Waived 2,944 11,331 16,881
Prime Money Market Fund
Paid or Accrued 117,129* 176,342 550,477
Waived -- -- --
California Intermediate
Tax Fee Income Fund
Paid or Accrued 16,696 17,001 15,438
Waived -- -- --
California Tax Free
Money Market Fund
Paid or Accrued 23,926 27,935 24,272
Waived -- -- --
U.S. Government
Money Market Fund
Paid or Accrued 443,694 720,093 1,479,655
Waived -- -- --
100% Treasury Securities
Money Market Fund
Paid or Accrued -- -- 265,361
Waived -- -- --
Cash Management Fund
Paid or Accrued -- -- 402,255
Waived -- -- --
Tax Free Money Market Fund
Paid or Accrued 185,769 220,141 301,492
47
<PAGE>
Fiscal
Period Fiscal Fiscal
11/1/93 Year- Year-
through Ended Ended
8/31/94 8/31/95 8/31/96
------------ ----------- -----------
Waived -- -- --
New York Tax Free Money
Market Fund
Paid or Accrued 139,747 190,823 282,364
Waived -- -- --
Tax Free Income Fund
Paid or Accrued 42,041 51,182 47,721
Waived 2,137 -- --
New York Tax Free Income Fund
Paid or Accrued 48,024 55,725 54,712
Waived -- -- --
- ----------
* Represents fees paid or accrued from November 15, 1993 through August 31,
1994 for the Prime Money Market and for the period from April 18, 1994
through August 31, 1994 for the Treasury Plus Money Market Fund and the
Federal Money Market Fund.
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.
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. Fees payable to the
Shareholder Servicing Agents (all of which currently are related parties) and
the amounts voluntarily waived for the following periods were as follows:
48
<PAGE>
<TABLE>
<CAPTION>
11/1/93 9/1/94 12/1/95
through through through
8/31/94 8/31/95 8/31/96
----------------- ----------------- ------------------
Fund payable waived payable waived payable waived
- ---- ------- ------ ------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
Money Market Fund
Vista Shares 713,799 -- 816,674 -- 3,193,687 791,007
Premier Shares 518,683 -- 684,952 -- 2,336,485 194,645
100% Treasury
Securities Money
Market Fund
Vista Shares -- -- -- -- 4,161,761 803,962
Premier Shares -- -- -- -- 126 --
Cash Management
Fund
Vista Shares 559,995 50,574 348,526 106,710 4,086,512 143,866
Premier Shares 401,859 -- 422,032 46 368,896 30,771
Treasury Plus
Money Market Fund
Vista Shares n/a n/a n/a n/a 1,747,171 711,428
Premier Shares 17 17 2,970 2,970 172,057 21,998
Federal Money Market
Fund
Vista Shares 2,635 2,635 353,730 140,653 880,856 584,851
Premier Shares 3,571 3,571 109,180 15,790 455,489 41,636
Prime Money Market Fund
B Shares 687 -- 10,080 5,488 25,702 25,702
Premier Shares 217,100 -- 82,617 72,534 910,639 214,388
Tax Free Money
Market Fund
Vista Shares 312,937 -- 367,259 -- 1,029,700 264,273
Premier Shares 353,241 226,331 344,945 131,039 465,133 139,053
N.Y. Tax Free
Money Market Fund 698,735 -- 954,117 -- 1,976,547 415,903
California Tax Free
Money Market Fund 119,635 119,635 139,735 139,735 169,905 152,096
Tax Free Income Fund
A Shares 196,918 169,386 223,990 179,192 201,911 173,806
B Shares 13,285 -- 31,921 -- 37,015 --
N.Y. Tax Free Income
Fund
A Shares 233,497 179,364 256,481 205,185 241,773 208,893
B Shares 6,614 -- 21,430 -- 32,078 --
California Intermediate
Tax Free Fund 83,485 83,485 85,003 85,003 77,293 77,293
</TABLE>
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 DST acts as transfer agent for the Trust. DST's
address is 210 West 10th Street, Kansas City, MO 64105.
49
<PAGE>
Pursuant to a Custodian Agreement, Chase acts as the custodian of the assets
of each Fund for which Chase receives such compensation as is from time to time
agreed upon by the Trust and Chase. As custodian, Chase provides oversight and
record keeping for the assets held in the portfolios of each Fund. Chase also
provides fund accounting services for the income, expenses and shares
outstanding for the Funds. Chase is located at 3 Metrotech Center, Brooklyn, NY
11245. For additional information, see the Prospectuses.
INDEPENDENT ACCOUNTANTS
The financial statements incorporated herein by reference from the Trust's
Annual Reports to Shareholders for the fiscal year ended August 31, 1996, and
the related financial highl ights which appear in the Prospectuses, have been
incorporated herein and included in the Prospectuses 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 LLP provides the Funds with
audit services, tax return preparation and assistance and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission.
The financial statements incorporated herein by reference from The Hanover
Funds, Inc.'s Annual Reports to Shareholders for the year ended November 30,
1995, and the related financial highlights for the Vista 100% U.S. Treasury
Securities Money Market Fund and the Vista Cash Management Fund for the
periods prior to December 1, 1995 which appear in the Prospectuses, have been
incorporated herein and included in the Prospectuses in reliance on the
report of KPMG Peat Marwick LLP, independent certified public accountants,
and upon the authority of said firm as experts in accounting and auditing.
KPMG Peat Marwick LLP has offices at 345 Park Avenue, New York, New York
10154.
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 the Prospectus and this Statement of Additional Information 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 my 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
decision, it does not obtain or use material inside information in the
possession of any other division or department of Chase, including the division
that performs services for the Trust as custodian, or in the possession of any
affiliate of Chase. Shareholders of the Funds 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.
50
<PAGE>
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 series of shares of beneficial interest,
par value $.001 per share. 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
a Fund or its designated agent prior to a shareholder meeting at which a proxy
is to be voted and the shareholder does not attend the meeting in person, the
Shareholder Servicing Agent for such shareholder will be authorized pursuant to
an applicable agreement with the shareholder to vote the shareholder's
outstanding shares in the same proportion as the votes cast by other Fund
shareholders represented at the meeting in person or by proxy.
Shareholders of the Vista Shares, Premier Shares and Institutional Shares
of the Money Market Funds bear the fees and expenses described herein and in
the Prospectuses. 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,
absent waivers, 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, absent waivers, at any given time, the net yield
on the Vista Shares will be lower than the yield on the Premier Shares and
the yield on the Premier Shares will be lower than the yield on Institutional
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, as described
herein and in the Prospectuses. In addition to such differences, expenses
borne by each class of a Fund may differ slightly because of the allocation
of other class-specific expenses. For example, a higher transfer agency fee
may be imposed on Class B shares than on Class A shares. The relative impact
of initial sales charges, contingent deferred sales charges, and ongoing
annual expenses will depend on the length of time a share is held.
Selected dealers and financial consultants may receive different levels of
compensation for selling one particular class of shares rather than another.
The 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
51
<PAGE>
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. No certificates are issued for shares of the
Money Market Funds or Class B shares of the Income Funds.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for its
obligations. However, the Trust's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Trust and
provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of
the Trust. The Trust's Declaration of Trust also provides that the Trust
shall maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, its
shareholders, Trustees, officers, employees and agents covering possible tort
and other liabilities. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
both inadequate insurance existed and the Trust itself was unable to meet its
obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, errors of judgment or mistakes of fact or law, but nothing
in the Declaration of Trust protects a Trustee against any liability to which
he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the conduct
of his office.
The Board of Trustees has adopted a code of ethics addressing personal
securities transactions by investment personnel and access persons and other
related matters. The code has been designated to address potential conflicts
of interest that can arise in connection with personal trading activities of
such persons. Persons subject to the code are generally permitted to engage
in personal securities transactions, subject to certain prohibitions,
pre-clearance requirements and blackout periods.
52
<PAGE>
Principal Holders
As of November 30, 1996, the following persons owned of record, directly or
indirectly, 5% or more of the outstanding shares of the following classes of the
following Funds:
Vista US Government Money Market Fund--Vista Shares
CUDD & COMPANY 18.48%
OMNIBUS ACCOUNT # 1
PTIS DIV ATTN: ANDREW C. OLSON
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHEMICAL BANK 8.90%
ADMINISTRATIVE SERVICES
ATTN: SEVAN MARINOS
AIS SECTION 31/270
270 PARK AVENUE
NEW YORK, NY 10017-2014
Vista US Government Money Market Fund--Premier Shares
CHASE MANHATTAN BANK NA 33.48%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
CHASE MANHATTAN BANK NA 16.87%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
PENLIN & CO 12.62%
CHASE LINCOLN FIRST BANK
ATTN: P WHALEN
PO BOX 1412
ROCHESTER, NY 14603-1412
NATIONAL FINANCIAL SERV CORP 6.57%
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION PO BOX 3908
NEW YORK, NY 10008-3908
Vista US Government Money Market Fund--Institutional Shares
CHASE MANHATTAN BANK NA 30.71%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-0002
PRUDENTIAL INSURANCE COMPANY 19.44%
53
<PAGE>
STEVEN MARRERO
450 W 33RD ST FL 15
NEW YORK, NY 10001-2603
CHASE MANHATTAN BANK NA 14.92%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
ODYSSEY PARTNERS LP 10.01%
C/O LAWRENCE LEVITT
31 W 52ND ST
NEW YORK, NY 10019-6118
Vista Cash Management Fund--Vista Shares
CHEMICAL BANK 11.00%
ADMINISTRATIVE SERVICES
ATTN: SEVAN MARINOS
AIS SECTION 31/270
270 PARK AVENUE
NEW YORK, NY 10017-2014
CHASE MANHATTAN BANK NA 7.39%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245
Vista Cash Management Fund--Premier Shares
CHASE MANHATTAN BANK NA 25.87%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
NATIONAL FINANCIAL SERV CORP 14.69%
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION
PO BOX 3908
NEW YORK, NY 10008-3908
CHASE MANHATTAN BANK NA 8.60%
SPECIAL ACTIVITY AC FOR EXCLUSIVE
BENEFIT OF CPA CUSTOMERS OF CMB NA
PROOF & CONTROL/ATTN: JOHN MOLLOY
2000 MARCUS AVENUE-1
NEW HYDE PARK, NY 11042-1063
54
<PAGE>
CUDD & COMPANY 7.86%
OMNIBUS ACCOUNT #1
PTIS DIV ATTN: ANDREW C OLSON
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK NA 7.22%
METROPOLITAN COMMUNITY BANK
ATTN: JOHN MOLLOY
PROOF & CONTROL
1985 MARCUS AVENUE-2
NEW HYDE PARK, NY 11042-1081
Vista Cash Management Fund--Institutional Shares
CHASE MANHATTAN BANK NA 51.63%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
CUDD & COMPANY 15.62%
OMNIBUS ACCOUNT #1
PTIS DIV ATTN: ANDREW C OLSON
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
NATIONAL FINANCIAL SERV CORP 6.92%
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION
PO BOX 3908
NEW YORK, NY 10008-3908
Vista Prime Money Market Fund--Institutional Shares
CHASE MANHTTAN BANK NA 40.86%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
CHASE MANHATTAN BANK NA 20.08%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 1245-0002
CHEMICAL BANK-OMNIBUS 7.94%
F/B/O INSTITUTIONAL CUSTODY
4 NEW YORK PLAZA FL 4
NEW YORK, NY 10004-2413
55
<PAGE>
IRWIN HOME EQUITY CORP TR 96-2 6.51%
PREFUNDING
C/O CHASE MANHATTAN BANK
450 W 33RD ST
NEW YORK, NY 10001-2603
Vista Prime Money Market Fund--Premier Shares
CHASE MANHATTAN BANK NA 68.93%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
CHASE SALLIE MAE EDUCATION LOAN 7.31%
TRUST
UA DTD OCT 01 96
ATTN: RICHARD LORENZEN
450 W 33RD ST 15TH FLR
NEW YORK, NY 10001-2603
Vista Treasury Plus Money Market Fund--Vista Shares
OBIE & CO 19.02%
C/O TEXAS COMMERCE BANK
ATTN: STIF UNIT 17 HCB 98
PO BOX 2558
HOUSTON, TX 77252-2558
CHEMICAL BANK 8.37%
ADMINISTRATIVE SERVICES
ATTN: SEVAN MARINOS
AIS SECTION 31/270
270 PARK AVENUE
NEW YORK, NY 10017-2014
CHASE MANHATTAN BANK NA 5.01%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
Vista Treasury Plus Money Market Fund--Premier Shares
CHASE MANHATTAN BANK NA 66.32%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
PHOTRONICS INCORPORATED 8.03%
ATTN: ROBERT J BOLLO
15 SECOR ROAD
BROOKFIELD, CT 06804-3937
TRENWICK GROUP INC 5.39%
C/O LORI STALOWICZ
METRO CENTER ONE STATION PLACE
STAMFORD, CT 06902
56
<PAGE>
Vista Treasury Plus Money Market Fund--Institutional Shares
CHASE MANHATTAN BANK NA 31.24%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
AT&T CAPITAL CORPORATION 12.56%
ATTN: KATHLEEN BECK
ATT CAPITAL CORP
44 WHIPPANY RD 2ND FLR
MORRISTOWN, NJ 07960-4558
MURRAY PARTNERS LP 9.86%
C/O JEFFERY A ARONSON
270 MADISON AVE STE 1302
NEW YORK, NY 10016
CHASE MANHATTAN BANK NA 7.91%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER 7TH FLOOR
BROOKLYN, NY 11245-0002
OBIE & CO 7.84%
C/O TEXAS COMMERCE BANK
ATTN: STIF UNIT 17 HCB 98
PO BOX 2558
HOUSTON, TX 77252-2558
MUNICH REINSURANCE ESCROW 6.34%
ATTN: CHRISTOPHER GREENE
450 WEST 33RD ST FL 15
NEW YORK, NY 10001-2603
Vista Federal Money Market Fund--Vista Shares
CHASE MANHATTAN BANK NA 15.63%
METROPOLITAN COMMUNITY BANK
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 45.61%
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION
PO BOX 3908
NEW YORK, NY 10008-3908
57
<PAGE>
CHASE MANHATTAN BANK NA 30.53%
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 46.05%
OMNIBUS ACCOUNT#1
PTIS DIV ATTN: ANDREW C OLSON
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
CHASE MANHATTAN BANK NA 23.23%
ATTN: DEBORAH DERENZO
4 NEW YORK PLAZA FL 9
NEW YORK, NY 10004-2413
HEALTH MANAGEMENT SYSTEMS INC 11.15%
ATTN: BARBARA MOUNADI
401 PARK AVES FL 4
NEW YORK, NY 10016-8808
Vista Tax Free Money Market Fund--Vista Shares
CUDD & COMPANY 31.91%
OMNIBUS ACCOUNT #1
PTIS DIV ATTN: ANDREW C OLSON
VALERIE DUNBAR-INSTL TRUST GRP
450 W 33RD STREET FL 15
NEW YORK, NY 10001-2603
CHEMICAL BANK 23.17%
ADMINISTRATIVE SERVICES
ATTN: SEVAN MARINOS
AIS SECTION 31/270
270 PARK AVE
NEW YORK, NY 10017-2014
OBIE & CO 10.32%
C/O TEXAS COMMERCE BANK
ATTN: STIF UNIT 17 HCB 98
PO BOX 2558
HOUSTON, TX 77252-2558
Vista Tax Free Money Market Fund--Premier Shares
CUDD & COMPANY 52.58%
CHASE MANHATTAN BANK NA PTIS DIV
ATTN: ANDREW C OLSON 35TH FL
1211 AVE OF THE AMERICAS
NEW YORK, NY 10036-8701
58
<PAGE>
NATIONAL FINANCIAL SERV CORP 6.61%
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION
PO BOX 3908
NEW YORK, NY 10008-3908
CHASE MANHATTAN BANK NA 5.57%
METROPOLITAN COMMUNITY BANK
ATTN: JOHN MOLLOY
PROOF & CONTROL
1985 MARCUS AVENUE-2
NEW HYDE PARK, NY 11042-1081
Vista Tax Free Money Market Fund--Institutional Shares
CUDD & COMPANY 53.46%
OMNIBUS ACCOUNT #1
PTIS DIV ATTN: ANDREW C OLSON
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
UNION BANK OF SWITZERLAND NY 16.07%
BRANCH AS CUSTODIAN
ATTN: ANDREW FOX
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105-0199
NOMURA RESEARCH INSTITUTE AMERICA INC 10.67%
NICHOLAS CURCIO VP CONTROLLER
2 WORLD FINANCIAL CENTER 18TH FLR
NEW YORK, NY 10281-1008
Vista 100% US Treasury Securities Money Market Fund--Vista Shares
CHEMICAL BANK 13.20%
ADMINISTRATIVE SERVICES
ATTN: SEVAN MARINOS
AIS SECTION 31/270
270 PARK AVENUE
NEW YORK, NY 10017-2014
Vista 100% US Treasury Securities Money Market Fund--Premier Shares
DVI COMMUNICATIONS INC 38.83%
170 BROADWAY FL 11
NEW YORK, NY 10038-4154
ALLALEMDJIAN FUR CORP 37.55%
234 W 30TH ST
NEW YORK, NY 10001-4901
JOHN P ENGEL & ASSOCIATES 23.56%
1740 BROADWAY FL 25
NEW YORK, NY 10019-4315
59
<PAGE>
Vista 100% US Treasury Securities Money Market Fund--Institutional Shares
LOUISIANA PACIFIC 49.29%
ATTN: AURA V CALDAS
450 W 33RD ST FL 15
NEW YORK, NY 10001-2603
CHASE MANHATTAN BANK NA 31.48%
GLOBAL SEC SERVICES OMNIBUS
ATTN: ALEX KWONG
3 CHASE METRO TECH CENTER
7TH FLOOR
BROOKLYN, NY 11245-0002
OBIE & CO 13.92%
C/O TEXAS COMMERCE BANK
ATTN: STIF UNIT 17 HCB 98
PO BOX 2558
HOUSTON, TX 77252-2558
Vista New York, Tax Free Money Market Fund--Vista Shares
CUDD & COMPANY 26.47%
C/O CHASE MANHATTAN BANK
PTIS DIV ATTN: ANDREW C OLSON
1211 AVE OF THE AMERICAS 35TH FL
NEW YORK, NY 10036-8701
CHEMICAL BANK 15.21%
ADMINISTRATIVE SERVICES
ATTN: SEVAN MARINOS
AIS SECTION 31/270
270 PARK AVENUE
NEW YORK, NY 10017-2014
CHASE MANHATTAN BANK NA 11.86%
METROPOLITAN COMMUNITY BANK
ATTN: JOHN MOLLOY
PROOF & CONTROL
1985 MARCUS AVENUE-2
NEW HYDE PARK, NY 11042-1081
NATIONAL FINANCIAL SERV CORP 8.17%
FOR THE EXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION
PO BOX 3908
NEW YORK, NY 10008-3908
CHASE MANHATTAN BANK NA 6.54%
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
60
<PAGE>
Vista California Tax Free Money Market Fund--Vista Shares
UNION BANK OF SWITZERLAND NY 37.27%
ATTN: ANDREW FOX VP
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105-0199
CUDD & COMPANY 31.73%
C/O CHASE MANHATTAN BANK
PTIS DIV ATTN: ANDREW C OLSON
35TH FLOOR
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036-8701
NATIONAL FINANCIAL SERV CORP 14.14%
FOR THE TXCL BEN OF OUR CUST
ATTN: MIKE MCLAUGHLIN
CHURCH STREET STATION
PO BOX 3908
NEW YORK, NY 1008-3908
Vista New York Tax Free Income Fund--A Shares
CUDD & COMPANY 23.89%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK, NY 10036-8701
CUDD & COMPANY 5.53%
CUSTODY DIVISON
1211 6TH AVENUE 35TH FLOOR
NEW YORK, NY 10036-8701
Vista Tax Free Income Fund--A Shares
CUDD & COMPANY 5.26%
CUSTODY DIVISION
1211 6TH AVENUE 35TH FLOOR
NEW YORK,NY 10036-8701
61
<PAGE>
Financial Statements
The 1996 Annual Report to Shareholders of each Fund including the reports of
independent accountants, financial highlights and financial statements for the
fiscal year ended August 31, 1996 contained therein, are incorporated herein by
reference.
Specimen Computations of Offering Prices Per Share
<TABLE>
<CAPTION>
<S> <C>
New York Tax Free Income Fund (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial Interest at August 31, 1996 $11.39
Maximum Offering Price per Share ($ 11.39 divided by .955) (reduced on purchases of
$100,000 or more) $11.93
New York Tax Free Income Fund B Shares (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial Interest at August 31, 1996 $11.33
Tax Free Income Fund (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial Interest at August 31, 1996 $11.84
Maximum Offering Price per Share ($11.84 divided by .955) (reduced on purchases of
$100,000 or more) $12.40
Tax Free Income Fund B Shares (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial Interest at August 31, 1996 $11.76
California Intermediate Tax Free Income Fund (specimen computations)
Net Asset Value and Redemption Price per Share of Beneficial Interest at August 31, 1996 $ 9.81
Maximum Offering Price per Share ($ 9.81 divided by .955) (reduced on purchases of
$100,000 or more) $10.27
The Shares of the Money Market Funds are offered for sale at Net Asset Value
</TABLE>
62
<PAGE>
APPENDIX A
DESCRIPTION OF CERTAIN OBLIGATIONS
ISSUED OR GUARANTEED BY U.S. GOVERNMENT
AGENCIES OR INSTRUMENTALITIES
Federal Farm Credit System Notes and Bonds--are bonds issued by a
cooperatively owned nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
These bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds--are bonds issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FNMA Bonds--are bonds guaranteed by the Federal National Mortgage
Association. These bonds are not guaranteed by the U.S. Government.
FHA Debentures--are debentures issued by the Federal Housing
Administration of the U.S. Government and are guaranteed by the U.S.
Government.
FHA Insured Notes--are bonds issued by the Farmers Home Administration of
the U.S. Government and are guaranteed by the U.S. Government.
GNMA Certificates--are mortgage-backed securities which represent a
partial ownership interest in a pool of mortgage loans issued by lenders such
as mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration and therefore
guaranteed by the U.S. Government. As a consequence of the fees paid to GNMA
and the issuer of GNMA Certificates, the coupon rate of interest of GNMA
Certificates is lower than the interest paid on the VA-guaranteed or
FHA-insured mortgages underlying the Certificates. The average life of a GNMA
Certificate is likely to be substantially less than the original maturity of
the mortgage pools underlying the securities. Prepayments of principal by
mortgagors and mortgage foreclosures may result in the return of the greater
part of principal invested far in advance of the maturity of the mortgages in
the pool. Foreclosures impose no risk to principal investment because of the
GNMA guarantee. As the prepayment rate of individual mortgage pools will vary
widely, it is not possible to accurately predict the average life of a
particular issue of GNMA Certificates. The yield which will be earned on GNMA
Certificates may vary form their coupon rates for the following reasons: (i)
Certificates may be issued at a premium or discount, rather than at par; (ii)
Certificates may trade in the secondary market at a premium or discount after
issuance; (iii) interest is earned and compounded monthly which has the
effect of raising the effective yield earned on the Certificates; and (iv)
the actual yield of each Certificate is affected by the prepayment of
mortgages included in the mortgage pool underlying the Certificates.
Principal which is so prepaid will be reinvested, although possibly at a
lower rate. In addition, prepayment of mortgages included in the mortgage
pool underlying a GNMA Certificate purchased at a premium could result in a
loss to a Fund. Due to the large amount of GNMA Certificates outstanding and
active participation in the secondary market by securities dealers and
investors, GNMA Certificates are highly liquid instruments. Prices of GNMA
Certificates are readily available from securities dealers and depend on,
among other things, the level of market rates, the Certificate's coupon rate
and the prepayment experience of the pool of mortgages backing each
Certificate. If agency securities are purchased at a premium above principal,
the premium is not guaranteed by the issuing agency and a decline in the
market value to par may result in a loss of the premium, which may be
particularly likely in the event of a prepayment. When and if available, U.S.
Government obligations may be purchased at a discount from face value.
FHLMC Certificates and FNMA Certificates--are mortgage-backed bonds issued
by the Federal Home Loan Mortgage Corporation and the Federal National
Mortgage Association, respectively, and are guaranteed by the U.S.
Government.
GSA Participation Certificates--are participation certificates issued by
the General Services Administration of the U.S. Government and are guaranteed
by the U.S. Government.
A-1
<PAGE>
New Communities Debentures--are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
Public Housing Bonds--are bonds issued by public housing and urban renewal
agencies in connection with programs administered by the Department of
Housing and Urban Development of the U.S. Government, the payment of which is
secured by the U.S. Government.
Penn Central Transportation Certificates--are certificates issued by Penn
Central Transportation and guaranteed by the U.S. Government.
SBA Debentures--are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
Washington Metropolitan Area Transit Authority Bonds--are bonds issued by
the Washington Metropolitan Area Transit Authority. Some of the bonds issued
prior to 1993 are guaranteed by the U.S. Government.
FHLMC Bonds--are bonds issued and guaranteed by the Federal Home Loan
Mortgage Corporation. These bonds are not guaranteed by the U.S. Government.
Federal Home Loan Bank Notes and Bonds--are notes and bonds issued by the
Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and Bonds--are
notes and bonds issued by the Student Loan Marketing Association and are not
guaranteed by the U.S. Government.
D.C. Armory Board Bonds--are bonds issued by the District of Columbia
Armory Board and are guaranteed by the U.S. Government.
Export-Import Bank Certificates--are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import
Bank of the U.S. and are guaranteed by the U.S. Government.
In the case of securities not backed by the "full faith and credit" of the
U.S. Government, the investor must look principally to the agency issuing or
guaranteeing the obligation for ultimate repayment, and may not be able to
assert a claim against the U.S. Government itself in the event the agency or
instrumentality does not meet its commitments.
Investments may also be made in obligations of U.S. Government agencies or
instrumentalities other than those listed above.
A-2
<PAGE>
APPENDIX B
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 three 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. A short-term rating may also be assigned on an issue having a
demand feature- variable rate demand obligation or commercial paper programs;
such ratings will be designated as "VMIG." Short-term ratings on issues with
demand features are differentiated by the use of the VMIG symbol to reflect
such characteristics as payment upon periodic demand rather than fixed
maturity dates and payment relying on external liquidity. Symbols used are as
follows:
MIG-1/VMIG-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.
MIG-2/VMIG-2--Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
- ----------
* 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.
B-1
<PAGE>
MIG-3/VMIG-3--Notes bearing this designation are of favorable quality,
where all security elements are accounted for but there is lacking the
undeniable strength of the preceding grade, liquidity and cash flow
protection may be narrow and market access for refinancing is likely to be
less well established.
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/B-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+").
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.
B-2
<PAGE>
B-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--Bonds rated A are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse changes in
economic conditions and circumstance than bonds with higher ratings.
BBB--Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse
consequences on these bonds, and therefore impair timely payment. The
likelihood that the ratings of these bonds will fall below investment grade
is higher than for bonds with higher ratings.
Plus and minus signs are used by Fitch to indicate the relative position
of credit within a rating category. Plus and minus signs, however, are not
used in the AAA category.
B-3
<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.
F-3--Fair Credit Quality. Issues assigned this rating have characteristics
suggesting that the degree of assurance for timely payment is adequate,
although near-term adverse changes could cause these securities to be rated
below investment grade.
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APPENDIX C
SPECIAL INVESTMENT CONSIDERATIONS RELATING TO
NEW YORK MUNICIPAL OBLIGATIONS
Some of the significant financial considerations relating to the
investments of the New York Municipal Bond Fund in New York municipal
securities are summarized below. The following information constitutes only a
brief summary, does not purport to be a complete description and is largely
based on information drawn from official statements relating to securities
offerings of New York municipal obligations available as of the date of this
Statement of Additional Information. The accuracy and completeness of the
information contained in such offering statements has not been independently
verified.
New York State
New York State Financing Activities. There are a number of methods by
which New York State (the 'State') may incur debt. Under the State
Constitution, the State may not, with limited exceptions for emergencies,
undertake long-term general obligation borrowing (i.e., borrowing for more
than one year) unless the borrowing is authorized in a specific amount for a
single work or purpose by the New York State Legislature (the 'Legislature')
and approved by the voters. There is no limitation on the amount of long-term
general obligation debt that may be so authorized and subsequently incurred
by the State. With the exception of general obligation housing bonds (which
must be paid in equal annual installments or installments that result in
substantially level or declining debt service payments, within 50 years after
issuance, commencing no more than three years after issuance), general
obligation bonds must be paid in equal annual installments or installments
that result in substantially level or declining debt service payments, within
40 years after issuance, beginning not more than one year after issuance of
such bonds.
The State may undertake short-term borrowings without voter approval (i)
in anticipation of the receipt of taxes and revenues, by issuing tax and
revenue anticipation notes ("TRANs"), and (ii) in anticipation of the receipt
of proceeds from the sale of duly authorized but unissued bonds, by issuing
bond anticipation notes ("BANs"). TRANs must mature within one year from
their dates of issuance and may not be refunded or refinanced beyond such
period. BANS may only be issued for the purposes and within the amounts for
which bonds may be issued pursuant to voter authorizations. Such BANs must be
paid from the proceeds of the sale of bonds in anticipation of which they
were issued or from other sources within two years of the date of issuance
or, in the case of BANs for housing purposes, within five years of the date
of issuance.
The State may also, pursuant to specific constitutional authorization,
directly guarantee certain public authority obligations. The State
Constitution provides for the State guarantee of the repayment of certain
borrowings for designated projects of the New York State Thruway Authority,
the Job Development Authority and the Port Authority of New York and New
Jersey. The State has never been called upon to make any direct payments
pursuant to such guarantees. The constitutional provisions allowing a
State-guarantee of certain Port Authority of New York and New Jersey debt
stipulates that no such guaranteed debt may be outstanding after December 31,
1996. State-guaranteed bonds issued by the Thruway Authority were fully
retired on July 1, 1995.
Payments of debt service on State general obligation and State-guaranteed
bonds and notes are legally enforceable obligations of the State.
The State employs additional long-term financing mechanisms,
lease-purchase and contractual- obligation financing, which involve
obligations of public authorities or municipalities that are State-supported
but not general obligations of the State. Under these financing arrangements,
certain public authorities and municipalities have issued obligations to
finance the construction and rehabilitation of facilities or the acquisition
and rehabilitation of equipment and expect to meet their debt service
requirements through the receipt of rental or other contractual payments made
by the State. Although these financing arrangements involve a contractual
agreement by the State to make payments to a public authority, municipality
or other entity, the State's obligation to make such payments is generally
expressly made subject to appropriation by the
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Legislature and the actual availability of money to the State for making the
payments. The State has also entered into a contractual-obligation financing
arrangement with the New York Local Government Assistance Corporation
('LGAC') to restructure the way the State makes certain local aid payments.
The State also participates in the issuance of certificates of participation
("COPs") in a pool of leases entered into by the State's Office of General
Services on behalf of several State departments and agencies interested in
acquiring operational equipment, or in certain cases, real property.
Legislation enacted in 1986 established restrictions upon and centralized
State control, through the Comptroller and the Director of the Budget, over
the issuance of COPs representing the State's contractual obligation, subject
to annual appropriation by the Legislature and availability of money, to make
installment or lease-purchase payments for the State's acquisition of such
equipment or real property.
The State has never defaulted on any of its general obligation
indebtedness or its obligations under lease-purchase or
contractual-obligation financing arrangements and has never been called upon
to make any direct payments pursuant to its guarantees although there can be
no assurance that such a default or call will not occur in the future.
The State also employs moral obligation financing. Moral obligation
financing generally involves the issuance of debt by a public authority to
finance a revenue-producing project or other activity. The debt is secured by
project revenues and statutory provisions require the State, subject to
appropriation by the Legislature, to make up any deficiencies which may occur
in the issuer's debt service reserve fund. There has never been a default on
any moral obligation debt of any public authority although there can be no
assurance that such a default will not occur in the future.
The State anticipates that its capital programs will be financed, in part,
through borrowings by the State and public authorities in the 1996-97 fiscal
year. The State expects to issue $411 million in general obligation bonds
(including $153.6 million for purposes of redeeming outstanding BANs) and
$154 million in general obligation commercial paper. The Legislature has also
authorized the issuance of up to $101 million in COPs during the State's
1996-97 fiscal year for equipment purchases. The projection of the State
regarding its borrowings for the 1996-97 fiscal year may change if
circumstances require.
Borrowings by other public authorities pursuant to lease-purchase and
contractual-obligation financings for capital programs of the State are
projected to total $2.15 billion, including costs of issuances, reserve
funds, and other costs, net of anticipated refundings and other adjustments
for 1996-97 capital projects. Included therein are borrowings by (i) DASNY
for SUNY, The City University of New York ("CUNY"), health facilities, and
mental health facilities; (ii) Thruway Authority for the Dedicated Highway
and Bridge Trust Fund and Consolidated Highway Improvement Program; (iii) UDC
(doing business as the Empire State Development Corporation) for prison and
youth facilities; (iv) the Housing Finance Agency ("HFA") for housing
programs; and (v) borrowings by the Environmental Facilities Corporation
("EFC") or other authorities. In addition, the Legislature has authorized
DASNY to refinance a $787 million pension obligation of the State.
In the 1996 legislative session, the Legislature approved the Governor's
proposal to present to the voters in November 1996 a $1.75 billion State
general obligation bond referendum to finance various environmental
improvement and remediation projects. If the Clean Water, Clean Air Bond Act
is approved by the voters, the amount of general obligation bonds issued
during the 1996-97 fiscal year may increase above the $411 million currently
included in the 1996-97 Borrowing Plan to finance a portion of this new
program.
In addition to the arrangements described above, State law provides for
State municipal assistance corporations, which are Authorities authorized to
aid financially troubled localities. The Municipal Assistance Corporation for
The City of New York ("MAC") was created to provide financing assistance to
New York City (the "City"). To enable MAC to pay debt service on its
obligations, MAC receives, subject to annual appropriation by the
Legislature, receipts from the 4% New York State Sales Tax for the Benefit of
New York City, the State-imposed Stock Transfer Tax and, subject to certain
prior liens, certain local assistance payments otherwise payable to the City.
The legislation creating MAC also includes a moral obligation provision.
Under its enabling legislation, MAC's authority to issue bonds and notes
(other than refunding bonds and notes) expired on December 31, 1984.
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State Financial Operations. The State has historically 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, gradually eroding the
State's relative economic affluence. Statewide, urban centers have
experienced significant changes involving migration of the more affluent to
the suburbs and an influx of generally less affluent residents. Regionally,
the older Northeast cities have suffered because of the relative success that
the South and the West have had in attracting people and business. The City
has also had to face greater competition as other major cities have developed
financial and business capabilities which make them less dependent on the
specialized services traditionally available almost exclusively in the City.
Although the State ranks 22nd in the nation for its State tax burden, the
State has the second highest combined state and local tax burden in the
United States. In 1991, total State and local taxes in New York were $3,349
per capita, compared with $1,475 per capita in 1980. Between 1980 and 1991,
State and local taxes per capita increased at approximately the same rate in
the State as in the nation as a whole with per capita taxes in the State
increasing by 127% while such taxes increased 111% in the nation. The State
Division of the Budget ("DOB") believes, however, that it is more informative
to describe the state and local tax burden in terms of its relationship to
personal income. In 1992, total State and local taxes in New York were
$154.70 per $1,000 of personal income, compared with $152.70 in 1980. Between
1980 and 1992, State and local taxes per $1,000 of personal income increased
at a slower rate in the State than in the nation as a whole with such taxes
in the State increasing by 1.3 percent while such taxes increased 4 percent
in the nation. The State and its localities have used these taxes to develop
and maintain their respective transportation networks, public schools and
colleges, public health systems, other social services, and recreational
facilities. Despite these benefits, the burden of State and local taxation,
in combination with the many other causes of regional economic dislocation,
may have contributed to the decisions of some businesses and individuals to
relocate outside, or not locate within, the State.
The national economy began expanding in 1991 and has added over 7 million
jobs since early 1992. However, the recession lasted longer in the State, and
the State's economic recovery has lagged behind the nation's. Although the
State has added approximately 185,000 jobs since November 1992, employment
growth in the State has been hindered during recent years by significant
cutbacks in the computer and instrument manufacturing, utility, defense, and
banking industries. DOB forecasted that national economic growth would
weaken, but not turn negative, during the course of 1995 before beginning to
rebound. This dynamic is often described as a 'soft landing.'
The national economy achieved the desired 'soft landing' in 1995, as
growth slowed from 6.2 percent in 1994 to a rate sufficiently slow to inhibit
the buildup of inflationary pressures. This was achieved without any material
pause in the economic expansion, although recession worries flared in the
late spring and early summer. Growth in the national economy is expected to
moderate during 1996. Real GDP grew only 0.9 percent in the fourth quarter of
1995, and there were declines in the leading economic indicators in four of
the past five months. It is anticipated that slow economic growth will
continue through the first half of 1996 and inflationary pressures will be
modest in 1996. Economic growth will gradually accelerate in the second half
of 1996 as the lower level of interest rates over the last year is expected
to stimulate economic activity. Economic growth, as measured by the nation's
nominal GDP, is projected to expand by 4.3 percent in 1996 versus 4.6 in
1995. In 1992 dollars, real GDP is expected to grow 1.8 percent as compared
with the 2.1 percent growth in 1995. By either measure, economic growth is
projected to be noticeably slower for 1996 than 1995.
To stimulate economic growth, the State has developed programs, including
the provision of direct financial assistance, designed to assist businesses
to expand existing operations located within the State and to attract new
businesses to the State. In addition, the State has provided various tax
incentives to encourage business relocation and expansion. These programs
include direct tax abatements from local property taxes for new facilities
(subject to locality approval) and investment tax credits that are applied
against the State corporation franchise tax. Furthermore, the State has
created 40 'economic development zones' in economically distressed regions of
the States. Businesses in these zones are provided a variety
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of tax and other incentives to create jobs and make investments in the zones.
There can be no assurance that these programs will be successful.
From 1994 to 1995 the annual growth rates of most economic indicators for
the State improved. The pace of private sector employment expansion and
personal income and wage growth all accelerated. Government employment fell
as workforce reductions were implemented at federal, State and local levels.
Similar to the nation, some moderation of growth is expected in the year
ahead. Private sector employment is expected to continue to rise, although
somewhat more slowly than in 1995, while public employment should continue to
fall, reflecting government budget cutbacks. Anticipated continued restraint
in wage settlements, a lower rate of employment growth and falling interest
rates are expected to slow personal income growth significantly.
The State's current fiscal year commenced on April 1, 1996, and ends on
March 31, 1997, and is referred to herein as the State's 1995-96 fiscal year.
The State's budget for the State's 1996-97 fiscal year, commencing on
April 1, 1996, was enacted by the Legislature on July 13, 1996. The State
Financial Plan for the 1996-97 fiscal year was formulated on July 25, 1996
and is based on the State's budget as enacted by the Legislature and signed
into law by the Governor, as well as actual results for the first quarter of
the current fiscal year. The 1996-97 State Financial Plan is updated in
October and January. The 1996-97 State Financial Plan is projected to be
balanced on a cash basis. Total General Fund receipts and transfers from
other funds are projected to be $33.17 billion, while total General Fund
disbursements and transfers to other funds are projected to be $33.12
billion. After adjustments for comparability, the adopted 1996-97 budget
projects a year-over-year increase in General Fund disbursements of 0.2
percent. As compared to the Governor's proposed budget as revised on March
20, 1996, the State's adopted budget for 1996-97 increases General Fund
spending by $842 million, primarily from increases for education, special
education and higher education ($563 million). Resources used to fund these
additional expenditures include $540 million in increased revenues projected
for 1996-97 based on higher than projected tax collections during the first
half of calendar 1996, $110 million in projected receipts from a new State
tax amnesty program, and other resources including certain non-recurring
resources.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. Those factors can
be very complex, may vary from fiscal year to fiscal year, and are frequently
the result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the Federal government, that
are not under the control of the State. In addition, the State Financial Plan
is based upon forecasts of national and State economic activity. Economic
forecasts have frequently failed to predict accurately the timing 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, the extent of corporate and
governmental restructuring, federal fiscal and monetary policies, the level
of interest rates, and the condition of the world economy, which could have
an adverse effect on the State. Actual results could differ materially and
adversely from projections and those projections may be changed materially
and adversely from time to time.
The 1996-97 State Financial Plan includes actions that will have an effect
on the budget outlook for State fiscal year 1996-97 and beyond. The State
Division of the Budget estimates that the 1996-97 State Financial Plan
contains actions that provide non-recurring resources or savings totaling
approximately $1.3 billion, or 3.9% of total General Fund receipts. These
include the use of $481 million in surplus funds available from the Medical
Malpractice Insurance Association, $134 million in savings from a refinancing
of certain pension obligations, $88 million in projected savings from bond
refundings, and $36 million in surplus fund transfers. The balance is
composed of $314 million in resources carried forward from the State's
1995-96 fiscal year and various other actions, including that portion of the
proposed tax amnesty program that is projected to be non-recurring.
The State closed projected budget gaps of $5.0 billion and $3.9 billion
for its 1995-96 and 1996-97 fiscal years, respectively. The 1997-98 gap was
projected at $1.44 billion, based on the Governor's proposed budget of
December 1995. As a result of changes made in the enacted budget, that gap is
now expected to be larger.
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The out-year projection will be impacted by a variety of factors. Enacted
tax reductions, which reduced receipts in the 1996-97 State fiscal year by an
incremental $2.4 billion, are projected to reduce receipts in the 1997-98
State fiscal year by an additional increment of $2.1 billion. The use of up
to $1.3 billion of non- recurring resources in 1996-97, and the annualized
costs of certain program increases in the 1996-97 enacted budget, will both
add additional pressure in closing the 1997-98 gap. However, actions
undertaken in the State's 1996-97 fiscal year, such as workforce reductions,
health care and education reforms, and strict controls on State agency
spending, are expected to provide larger recurring savings in State fiscal
year 1997- 98. Sustained growth in the State's economy and continued declines
in welfare caseload and Medicaid costs would produce additional savings in
the 1997-98 Financial Plan.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy,
actions of the Federal government and other factors have created structural
budget gaps for the State. These gaps resulted from a significant disparity
between recurring revenues and the costs of maintaining or increasing the
level of support for State programs. To address a potential imbalance in any
given fiscal year, the State would be required to take actions to increase
receipts and/or reduce disbursements as it enacts the budget for that year,
and under the State Constitution, the Governor is required to propose a
balanced budget each year. There can be no assurance, however, that the
Legislature will enact the Governor's proposals or that the State's actions
will be sufficient to preserve budgetary balance in a given fiscal year or to
align recurring receipts and disbursements in future fiscal years.
On October 29, 1996, the State issued its second quarterly update to the
1996-97 State Financial Plan based on updated economic forecasts, actual
receipts and disbursements for the first six months of the fiscal year and an
assessment of changing program requirements. The update reflects a balanced
1996-97 State Financial Plan, with a reserve for contingencies in the General
Fund of $300 million, which will be utilized to help offset a variety of
potential risks and other unexpected contingencies that the State may face
during the balance of the 1996-97 fiscal year. Actual receipts through the first
two quarters of the 1996-97 State fiscal year reflect stronger-than-expected
growth in most taxes, with actual receipts exceeding expectations by $276
million, and, based on the revised economic outlook and actual receipts for the
first six months of 1996-97, projected General Fund receipts for the 1996-97
State fiscal year have been increased by $420 million.
Uncertainties with regard to the economy, as well as the outcome of
certain litigation now pending against the State, could produce adverse
effects on the State's projections of receipts and disbursements. For
example, changes to current levels of interest rates or deteriorating world
economic conditions could have an adverse effect on the State economy and
produce results in the current fiscal year that are worse than predicted.
Similarly, adverse judgments in legal proceedings against the State could
exceed amounts reserved in the 1996-97 Financial Plan for payment of such
judgments and produce additional unbudgeted costs to the State.
On August 13, 1996, the State Comptroller released a report in which he
identified several risks to the State Financial Plan and estimated that the
State faces a potential imbalance in receipts and disbursements of
approximately $3 billion for the State's 1997-98 fiscal year and
approximately $3.2 billion for the State's 1998-99 fiscal year. The 1997-98
fiscal year estimate by the State Comptroller is within the range previously
discussed by the State Division of the Budget.
The Governor is required to submit a balanced budget to the State
Legislature and has indicated that he will close any potential imbalance in
the 1997-98 Financial Plan primarily through General Fund expenditure
reductions and without increases in taxes or deferrals of scheduled tax
reductions. It is expected by the State Division of the Budget that the
State's 1997-98 Financial Plan will reflect a continuing strategy of
substantially reduced State spending, including agency consolidations,
reductions in the State workforce, and efficiency and productivity
initiatives. The division of the Budget intends to update the State Financial
Plan and provide an update to the Annual Information Statement upon release
of the 1997-98 Executive Budget.
On August 22, 1996, the President signed into law the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996. On October
16, 1996, the Governor submitted the State's TANF implementation
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plan to the federal government, as required under the new federal welfare
law. Legislation will be required to implement the State's TANF plan. The
Governor has indicated that he plans to introduce legislation necessary to
conform with federal law shortly, and that he may submit amendments to the
State plan if necessary. The Governor's proposals will be available for
consideration by the Legislature either before the end of calendar 1996 or in
the 1997 legislative session. It is expected by the State that funding levels
provided under the federal TANF block grant will be higher than currently
anticipated in the State's financial plan. However, the net fiscal impact of
any changes to the State's welfare programs that are necessary to conform
with federal law will be dependent upon such factors as the ability of the
State to avoid any federal fiscal penalties, the level of additional
resources required to comply with any new State and/or federal requirements,
and the division of non-federal welfare costs between the State and its
localities. States are required to comply with the new federal welfare reform
law no later than July 1, 1997. Given the size and scope of the changes
required under federal law, it is likely that these proposals will produce
extensive public discussions. There can be no assurances that the State
Legislature will enact welfare reform proposals as submitted by the Governor
and as required under federal law.
In recent years, the State has failed to adopt a budget prior to the
beginning of its fiscal year. A delay in the adoption of the State's budget
beyond the statutory April 1 deadline could delay the projected receipt by
the City of State aid, and there can be no assurance that State budgets in
future fiscal years will be adopted by the April 1 statutory deadline.
The State's budget for the 1995-96 fiscal year was enacted by the
Legislature on June 7, 1995, 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 the 1995-96 fiscal year (the
'1995-96 State Financial Plan') was formulated on June 20, 1995 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 updated quarterly pursuant to law
in July, October and January.
The 1995-96 budget is the first to be enacted in the administration of
Governor George Pataki, who assumed office on January 1, 1995. It is the
first budget in over half a century which proposed and, as enacted, projects
an absolute year-over-year decline in General Fund disbursements. Spending
for State operations is projected to drop even more sharply, by 4.6 percent.
Nominal spending from all State funding sources (i.e., excluding Federal aid)
is proposed to increase by only 2.5 percent from the prior fiscal year, in
contrast to the prior decade when such spending growth averaged more than 6.0
percent annually.
In his Executive Budget, the Governor indicated that in the 1995-96 fiscal
year, the 1995-96 State Financial Plan, based on then-current law governing
spending and revenues, would be out of balance by almost $4.7 billion, as a
result of the projected structural deficit resulting from the ongoing
disparity between sluggish growth in receipts, the effect of prior-year tax
changes, and the rapid acceleration of spending growth; the impact of
unfunded 1994-95 initiatives, primarily for local aid programs; and the use
of one-time solutions, primarily surplus funds from the prior year, to fund
recurring spending in the 1994-95 budget. The Governor proposed additional
tax cuts to spur economic growth and provide relief for low and middle-income
tax payers, which were larger than those ultimately adopted, and which added
$240 million to the then projected imbalance or budget gap, bringing the
total to approximately $5 billion.
The 1995-96 State Financial Plan contemplates closing this gap based on
the enacted budget, through a series of actions, mainly spending reductions
and cost containment measures and certain reestimates that are expected to be
recurring, but also through the use of one-time solutions. The 1995-96 State
Financial Plan projects (i) nearly $1.6 billion in savings from cost
containment, disbursement reestimates, and other savings in social welfare
programs, including Medicaid, income maintenance and various child and family
care programs; (ii) $2.2 billion in savings from State agency actions to
reduce spending on the State workforce, SUNY and CUNY, mental hygiene
programs, capital projects, the prison system and fringe benefits; (iii) $300
million in savings from local assistance reforms, including actions affecting
school aid and revenue sharing while proposing program legislation to provide
relief from certain mandates that increase
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local spending; (iv) over $400 million in revenue measures, primarily a new
Quick Draw Lottery game, changes to tax payment schedules, and the sale of
assets; and (v) $300 million from reestimates in receipts. There can be no
assurance that these gap-closing measures can be implemented as planned.
The following discussion summarizes updates to the 1995-96 State Financial
Plan and recent fiscal years with particular emphasis on the State's General
Fund. Pursuant to statute, the State updates the financial plan at least on a
quarterly basis. Due to changing economic conditions and information, public
statements or reports may be released by the Governor, members of the
Legislature, and their respective staffs, as well as others involved in the
budget process from time to time. Those statements or reports may contain
predictions, projections or other items of information relating to the
State's financial condition, including potential operating results for the
current fiscal year and projected baseline gaps for future fiscal years, that
may vary materially and adversely from the information provided herein.
The General Fund is the principal operating fund of the State and is used
to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. In the State's 1995-96 fiscal year, the General Fund is expected by
the State to account for approximately 49 percent of total governmental-fund
receipts and 71 percent of total governmental-fund disbursements. General
Fund moneys are also transferred to other funds, primarily to support certain
capital projects and debt service payments in other fund types.
The General Fund is projected to be balanced on a cash basis for the
1995-96 fiscal year. Total receipts are projected to be $33.110 billion, an
increase of $48 million over total receipts in the prior fiscal year. Total
General Fund disbursements are projected to be $33.055 billion, an increase
of $344 million over the total amount disbursed and transferred in the prior
fiscal year.
In addition to the General Fund, the State Financial Plan includes Special
Revenue Funds, Capital Projects Funds and Debt Service Funds.
Special Revenue Funds are used to account for the proceeds of specific
revenue sources such as Federal grants that are legally restricted, either by
the Legislature or outside parties, to expenditures for specified purposes.
Although activity in this fund type is expected to comprise more than 40
percent of total government funds receipts and disbursements in the 1995-96
fiscal year, about three-quarters of that activity relates to
Federally-funded programs.
Projected receipts in this fund type total $25.547 billion, an increase of
$1.316 billion over the prior year. Projected disbursements in this fund type
total $26.002 billion, an increase of $1.641 billion over 1994-95 levels.
Disbursements from Federal funds, primarily the Federal share of Medicaid and
other social services programs, are projected to total $19.209 billion in the
1995-96 fiscal year. Remaining projected spending of $6.793 billion primarily
reflects aid to SUNY supported by tuition and dormitory fees, education aid
funded from lottery receipts, operating aid payments to the Metropolitan
Transportation Authority (the 'MTA') funded from the proceeds of dedicated
transportation taxes, and costs of a variety of self-supporting programs
which deliver services financed by user fees.
Capital Projects Funds are used to account for the financial resources
used for the acquisition, construction, or rehabilitation of major State
capital facilities and for capital assistance grants to certain local
governments or public authorities. This fund type consists of the Capital
Projects Fund, which is supported by tax dollars transferred from the General
Fund, and 37 other capital funds established to distinguish specific capital
construction purposes supported by other revenues. In the 1996-97 fiscal
year, activity in these funds is expected to comprise 6 percent of total
governmental receipts and disbursements.
Total receipts in this fund type are projected at $3.58 billion.
Disbursements from this fund type are projected to be $3.85 billion, a
decrease of $120 million (3.1 percent) over prior-year levels, due in part to
a reclassification of economic development projects to the category of grants
to local governments in the General Fund. The Dedicated Highway and Bridge
Trust Fund is the single largest dedicated fund, comprising an estimated $920
million (24 percent) of the activity in this fund type. Total spending for
capital projects
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will be financed through a combination of sources: federal grants (28
percent), public authority bond proceeds (34 percent), general obligation
bond proceeds (12 percent), and pay-as-you-go revenues (26 percent).
Debt Service Funds are used to account for the payment of principal of,
and interest on, long-term debt of the State and to meet commitments under
lease-purchase and other contractual-obligation financing arrangements. This
fund is expected to comprise 4 percent of total governmental fund receipts
and disbursements in the 1996-97 fiscal year. Receipts in these funds in
excess of debt service requirements are transferred to the General Fund and
Special Revenue Funds, pursuant to law.
The Debt Service Fund type consists of the General Debt Service Fund,
which is supported primarily by tax dollars transferred from the General
Fund, and other funds established to accumulate moneys for the payment of
debt service. In the 1996-97 fiscal year, total disbursements in this fund
type are projected at $2.58 billion, an increase of $164 million or 16.8
percent. The projected transfer from the General Fund of $1.59 billion is
expected to finance 62 percent of these payments.
The General Fund is the principal operating fund of the State and is used
to account for all financial transactions, except those required to be
accounted for in another fund. It is the State's largest fund and receives
almost all State taxes and other resources not dedicated to particular
purposes. General Fund moneys are also transferred to other funds, primarily
to support certain capital projects and debt service payments in other fund
types. A narrative description of cash-basis results in the General Fund is
presented below, followed by a tabular presentation of the actual General
Fund results for the prior three fiscal years.
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
TRANs. A national recession, followed by the lingering economic slowdown in
the New York and regional economy, resulted in repeated shortfalls in
receipts and three budget deficits during those years. During its last four
fiscal years, however, the State has recorded balanced budgets on a cash
basis, with positive fund balances as described below.
The State ended its 1995-96 fiscal year on March 31, 1996 with a General
Fund cash surplus. The DOB reported that revenues exceeded projections by
$270 million, while spending for social service programs was lower than
forecast by $120 million and all other spending was lower by $55 million.
From the resulting benefit of $445 million, a $65 million voluntary deposit
was made into the TSRF, and $380 million was used to reduce 1996-97 Financial
Plan liabilities by accelerating 1996-97 payments, deferring 1995-96
revenues, and making a deposit to the tax refund reserve account.
The General Fund closing fund balance was $287 million, an increase of
$129 million from 1994-95 levels. The $129 million change in fund balance is
attributable to the $65 million voluntary deposit to the TSRF, a $15 million
required deposit to the TSRF, a $40 million deposit to the CRF, and a $9
million deposit to the Revenue Accumulation Fund. The closing fund balance
includes $237 million on deposit in the TSRF, to be used in the event of any
future General Fund deficit as provided under the State Constitution and
State Finance Law. In addition, $41 million is on deposit in the CRF. The CRF
was established in State fiscal year 1993-94 to assist the State in financing
the costs of extraordinary litigation. The remaining $9 million reflects
amounts on deposit in the Revenue Accumulation Fund. This fund was created to
hold certain tax receipts temporarily before their deposit to other accounts.
In addition, $678 million was on deposit in the tax refund reserve account,
of which $521 million was necessary to complete the restructuring of the
State's cash flow under the LGAC program.
General Fund receipts totaled $32.81 billion, a decrease of 1.1 percent
from 1994-95 levels. This decrease reflects the impact of tax reductions
enacted and effective in both 1994 and 1995. General Fund disbursements
totaled $32.68 billion for the 1995-96 fiscal year, a decrease of 2.2 percent
from 1994-95 levels. Mid-year spending reductions, taken as part of a
management review undertaken in October at the direction of the Governor,
yielded savings from Medicaid utilization controls, office space
consolidation, overtime and contractual expense reductions, and statewide
productivity improvements achieved by State agencies.
Together with decreased social services spending, this management review
accounts for the bulk of the decline in spending.
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The State ended its 1994-95 fiscal year with the General Fund in balance.
The $241 million decline in the fund balance reflects the planned use of $264
million from the CRF, partially offset by the required deposit of $23 million
to the TSRF. In addition, $278 million was on deposit in the tax refund
reserve account, $250 million of which was deposited to continue the process
of restructuring the State's cash flow as part of the LGAC program. The
closing fund balance of $158 million reflects $157 million in the TSRF and $1
million in the CRF.
General Fund receipts totaled $33.16 billion, an increase of 2.9 percent
from 1993-94 levels. General Fund disbursements totaled $33.40 billion for
the 1994-95 fiscal year, an increase of 4.7 percent from the previous fiscal
year. The increase in disbursements was primarily the result of one-time
litigation costs for the State, funded by the use of the CRF, offset by $188
million in spending reductions initiated in January 1995 to avert a potential
gap in the 1994-95 State Financial Plan. These actions included savings from
a hiring freeze, halting the development of certain services, and the
suspension of non-essential capital projects.
The State ended its 1993-94 fiscal year with a General Fund cash surplus,
primarily the result of an improving national economy, State employment
growth, tax collections that exceeded earlier projections and disbursements
that were below expectations. A deposit of $268 million was made to the CRF,
with a withdrawal during the year of $3 million, and a deposit of $67 million
was made to the TSRF. These three transactions result in the change in fund
balance of $332 million. In addition, a deposit of $1.14 billion was made to
the tax refund reserve account, of which $1.03 billion was available for
budgetary purposes in the 1994-95 fiscal year. (For more information on the
personal income tax refund reserve account, see Table 5.) The remaining $114
million was 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 LGAC program. The General Fund closing
balance was $399 million, of which $265 million was on deposit in the CRF and
$134 million in the TSRF. The CRF was initially funded with a transfer of
$100 million attributable to a positive margin recorded in the 1992-93 fiscal
year.
General Fund receipts totaled $32.23 billion, an increase of 2.6 percent
from 1992-93 levels. General Fund disbursements totaled $31.90 billion for
the 1993-94 fiscal year, 3.5 percent higher than the previous fiscal year.
Receipts were higher in part due to improved tax collections from renewed
State economic growth although the State continued to lag behind the national
economic recovery. Disbursements were higher due in part to increased local
assistance costs for school aid and social services, accelerated payment of
certain Medicaid expenses, and the cost of an additional payroll for State
employees.
Activity in the three other governmental funds has remained relatively
stable over the last three fiscal years, with federally-funded programs
comprising approximately two-thirds of these funds. The most significant
change in the structure of these funds has been the redirection, beginning in
the 1993-94 fiscal year, of a portion of transportation-related revenues from
the General Fund to two new dedicated funds in the Special Revenue and
Capital Projects Fund types. These revenues are used to support the capital
programs of the Department of Transportation and the MTA.
In the Special Revenue Funds, disbursements increased from $22.72 billion
to $26.26 billion over the last three years, primarily as a result of
increased costs for the federal share of Medicaid. Other activity reflected
dedication of taxes to a new fund for mass transportation, new lottery games,
and new fees for criminal justice programs.
Disbursements in the Capital Projects Funds grew from $3.10 billion to
$3.97 billion over the last three years, as spending for transportation and
mental hygiene programs increased, partially offset by declines for
corrections and environmental programs. The composition of this fund type's
receipts also changed as the dedicated transportation taxes began to be
deposited, general obligation bond proceeds declined substantially, federal
grants remained stable, and reimbursements from public authority bonds
(primarily transportation related) increased. The increase in the negative
fund balance in 1994-95 resulted from delays in reimbursements caused by
delays in the timing of public authority bond sales.
Activity in the Debt Service Funds reflected increased use of bonds during
the three-year period for improvements to the State's capital facilities and
the continued implementation of the LGAC fiscal reform
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program. The increases were moderated by the refunding savings achieved by
the State over the last several years using strict present value savings
criteria. The growth in LGAC debt service was offset by reduced short-term
borrowing costs reflected in the General Fund.
The economic and financial condition of the State may be affected by
various financial, social, economic and political factors. These factors can
be very complex, may vary from fiscal year to fiscal year, and are frequently
the result of actions taken not only by the State and its agencies and
instrumentalities, but also by entities, such as the federal government, that
are not under the control of the State. For example, various proposals
relating to federal tax and spending policies that are currently being
publicly discussed and debated could, if enacted, have a significant impact
on the State's financial condition in the current and future fiscal years.
Because of the uncertainty and unpredictability of the changes, their impact
cannot, as a practical matter, be included in the assumptions underlying the
State's projections at this time.
The State Financial Plan is based upon forecasts of national and State
economic activity developed through both internal analysis and review of
State and national economic forecasts prepared by commercial forecasting
services and other public and private forecasters. Economic forecasts have
frequently failed to predict accurately the timing 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, the extent of corporate and governmental
restructuring, federal fiscal and monetary policies, the level of interest
rates, 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 results in the current fiscal year that are worse than
predicted, with corresponding material and adverse effects on the State's
projections of receipts and disbursements.
Projections of total State receipts in the State Financial Plan are based
on the State tax structure in effect during the fiscal year and on
assumptions relating to basic economic factors and their historical
relationships to State tax receipts. In preparing projections of State
receipts, economic forecasts relating to personal income, wages, consumption,
profits and employment have been particularly important. The projection of
receipts from most tax or revenue sources is generally made by estimating the
change in yield of such tax or revenue source caused by economic and other
factors, rather than by estimating the total yield of such tax or revenue
source from its estimated tax base. The forecasting methodology, however,
ensures that State fiscal year estimates for taxes that are based on a
computation of annual liability, such as the business and personal income
taxes, are consistent with estimates of total liability under such taxes.
Projections of total State disbursements are based on assumptions relating
to economic and demographic factors, levels of disbursements for various
services provided by local governments (where the cost is partially
reimbursed by the State), and the results of various administrative and
statutory mechanisms in controlling disbursements for State operations.
Factors that may affect the level of disbursements in the fiscal year include
uncertainties relating to the economy of the nation and the State, the
policies of the federal government, and changes in the demand for and use of
State services.
The Division of the Budget believes that its projections of receipts and
disbursements relating to the current State Financial Plan, and the
assumptions on which they are based, are reasonable. Actual results, however,
could differ materially and adversely from the projections set forth in this
Annual Information Statement. In the past, the State has taken management
actions and made use of internal sources to address potential State Financial
Plan shortfalls, and DOB believes it could take similar actions should
variances occur in its projections for the current fiscal year.
In recent years, State actions affecting the level of receipts and
disbursements, the relative strength of the State and regional economy,
actions of the federal government and other factors, have created structural
budget gaps for the State. These gaps resulted from a significant disparity
between recurring revenues and the costs of maintaining or increasing the
level of support for State programs. To address a potential imbalance in any
given fiscal year, the State would be required to take actions to increase
receipts and/or reduce disbursements as it enacts the budget for that year,
and under the State Constitution, the Governor is required to propose a
balanced budget each year. There can be no assurance, however, that the Leg-
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islature will enact the Governor's proposals or that the State's actions will
be sufficient to preserve budgetary balance in a given fiscal year or to
align recurring receipts and disbursements in future fiscal years.
On January 13, 1992, Standard & Poor's ("S&P") lowered its rating on the
State's general obligation bonds from A to A--and, in addition, reduced its
ratings on the State's moral obligation, lease purchase, guaranteed and
contractual obligation debt. S&P also continued its negative rating outlook
assessment on State general obligation debt. On April 26, 1993 S&P revised
the rating outlook assessment to stable. On February 14, 1994, S&P revised
its outlook to positive and, on August 5, 1996, confirmed its A- rating. On
January 6, 1992, Moody's reduced its ratings on outstanding limited-liability
State lease purchase and contractual obligations from A to Baa1. On July 26,
1996, Moody's reconfirmed its A rating on the State's general obligation
long-term indebtedness.
On June 6, 1990, Moody's changed its ratings on all of the State's
outstanding general obligation bonds from A1 to A, the rating having been A1
since May 27, 1986. On November 12, 1990, Moody's confirmed the A rating. In
1992, S&P lowered the State's general obligation bond rating to A-, where it
currently remains and was affirmed on July 13, 1995. Prior to this, on March
26, 1990, S&P lowered its rating of all of the State's outstanding general
obligation bonds from AA- to A. Previous S&P ratings were AA-from August,
1987 to March, 1990 and A+ from November, 1982 to August, 1987.
Authorities. The fiscal stability of the State is related, in part, to the
fiscal stability of its public authorities, which generally have
responsibility for financing, constructing and operating revenue-producing
public benefit facilities. Public authorities are not subject to the
constitutional restrictions on the incurrence of debt which apply to the
State itself, and may issue bonds and notes within the amounts of, and as
otherwise restricted by, their legislative authorization. The State's access
to the public credit markets could be impaired, and the market price of its
outstanding debt may be materially adversely affected, if any of its public
authorities were to default on their respective obligations. As of September
30, 1995 there were 17 Authorities that had outstanding debt of $100 million
or more each, and the aggregate outstanding debt, including refunding bonds,
of all state public authorities was $73.45 billion.
There are numerous public authorities, with various responsibilities,
including those which finance, construct and/or operate revenue producing
public facilities. Public authority operating expenses and debt service costs
are generally paid by revenues generated by the projects financed or
operated, such as tolls charged for the use of highways, bridges or tunnels,
rentals charged for housing units, and charges for occupancy at medical care
facilities.
In addition, State legislation authorizes several financing techniques for
public authorities. Also, there are statutory arrangements providing for
State local assistance payments otherwise payable to localities to be made
under certain circumstances to public authorities. Although the State has no
obligation to provide additional assistance to localities whose local
assistance payments have been paid to public authorities under these
arrangements if local assistance payments are so diverted, the affected
localities could seek additional State assistance.
Some authorities also receive monies from State appropriations to pay for
the operating costs of certain of their programs. As described below, the MTA
receives the bulk of this money in order to carry out mass transit and
commuter services.
The State's experience has been that if an Authority suffers serious
financial difficulties, both the ability of the State and the Authorities to
obtain financing in the public credit markets and the market price of the
State's outstanding bonds and notes may be adversely affected. The New York
State HFA, the New York State Urban Development Corporation and certain other
Authorities have in the past required and continue to require substantial
amounts of assistance from the State to meet debt service costs or to pay
operating expenses. Further assistance, possibly in increasing amounts, may
be required for these, or other, Authorities in the future. In addition,
certain other statutory arrangements provide for State local assistance
payments otherwise payable to localities to be made under certain
circumstances to certain Authorities. The State has no obligation to provide
additional assistance to localities whose local assistance payments have been
paid
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to Authorities under these arrangements. However, in the event that such
local assistance payments are so diverted, the affected localities could seek
additional State funds.
Metropolitan Transportation Authority. The MTA oversees the operation of
the 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"). The MTA operates certain commuter rail and bus
lines in the New York Metropolitan area through MTA's subsidiaries, the Long
Island Rail Road Company, the Metro-North Commuter Railroad Company and the
Metropolitan Suburban Bus Authority. In addition, the Staten Island Rapid
Transit Operating 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 intrastate 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. If current
revenue projections are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek additional
State assistance, raise fares or take other actions.
Since 1980, 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 Metropolitan Transportation
Region served by the MTA and a special one-quarter of 1 percent regional
sales and use tax--that provide revenues for mass transit purposes, including
assistance to the MTA. In addition, since 1987, State law has required that
the proceeds of a one quarter of 1% mortgage recording tax paid on certain
mortgages in the Metropolitan Transportation Region be deposited in a special
MTA fund for operating or capital expenses. Further, in 1993 the State
dedicated a portion of the State petroleum business tax to fund operating or
capital assistance to the MTA. For the 1996-97 fiscal year, total State
assistance to the MTA is estimated by the State to be approximately $1.09
billion.
State legislation accompanying the 1996-97 adopted State budget authorized
the MTA, TBTA and TA to issue an aggregate of $6.5 billion in bonds to
finance a portion of a new $11.98 billion MTA capital plan for the 1995
through 1999 calendar years (the "1995-99 Capital Program"), and authorized
the MTA to submit the 1995-99 Capital Program to the Capital Program Review
Board for approval. This plan will supersede the overlapping portion of the
MTA's 1992-96 Capital Program. This is the fourth capital plan since the
Legislature authorized procedures for the adoption, approval and amendment of
MTA capital programs and is designed to upgrade the performance of the MTA's
transportation systems by investing in new rolling stock, maintaining
replacement schedules for existing assets and bringing the MTA system into a
state of good repair. The 1995-99 Capital Program assumes the issuance of an
estimated $5.1 billion in bonds under this $6.5 billion aggregate bonding
authority. The remainder of the plan is projected to be financed through
assistance from the State, the federal government, and the City of New York,
and from various other revenues generated from actions taken by the MTA.
There can be no assurance that all the necessary governmental actions for
the 1995-99 Capital Program will be taken, that funding sources currently
identified will not be decreased or eliminated, or that the 1995-99 Capital
Program, or parts thereof, will not be delayed or reduced. If the 1995-99
Capital Program is delayed or reduced, ridership and fare revenues may
decline, which could, among other things, impair the MTA's ability to meet
its operating expenses without additional assistance.
Localities. Certain localities outside the City have experienced financial
problems and have requested and received additional State assistance during
the last several State fiscal years. The potential impact on the State of any
future requests by localities for additional assistance is not included in
the projections of the State's receipts and disbursements for the State's
1996-97 fiscal year.
Fiscal difficulties experienced by the City of Yonkers resulted in the
re-establishment of the Financial Control Board for the City of Yonkers by
the State in 1984. That Board is charged with oversight of the fiscal affairs
of Yonkers. Future actions taken by the State to assist Yonkers could result
in increased State expenditures for extraordinary local assistance.
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Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the
City of Troy in 1994. The Supervisory Board's powers were increased in 1995,
when Troy MAC was created to help Troy avoid default on certain obligations.
The legislation creating Troy MAC prohibits the City of Troy from seeking
federal bankruptcy protection while Troy MAC bonds are outstanding.
Seventeen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted
for distressed cities.
Municipal Indebtedness. Municipalities and school districts have engaged
in substantial short-term and long-term borrowings. In 1994, the total
indebtedness of all localities in the State other than the City was
approximately $17.7 billion. A small portion (approximately $82.9 million) of
that indebtedness represented borrowing to finance budgetary deficits and was
issued pursuant to State enabling legislation. State law requires the
Comptroller to review and make recommendations concerning the budgets 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. Fifteen localities had outstanding indebtedness for deficit
financing at the close of their fiscal year ending in 1994.
From time to time, proposed Federal expenditure reductions could reduce,
or in some cases eliminate, Federal funding of some local programs and
accordingly might impose substantial increased expenditure requirements on
affected localities. If the State, the City or any of the Authorities 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. Long-range potential
problems of declining urban population, increasing expenditures and other
economic trends could adversely affect certain localities and require
increasing State assistance in the future.
Litigation. Certain litigation pending against the State or its officers
or employees could have a substantial or long-term adverse effect on State
finances. Among the more significant of these cases are those that involve:
(i) employee welfare benefit plans seeking a declaratory judgment nullifying
on the ground of federal preemption provisions of Section 2807-c of the
Public Health Law and implementing regulations which impose a bad debt and
charity care allowance on all hospital bills and a 13 percent surcharge on
inpatient bills paid by employee welfare benefit plans; (ii) several
challenges to provisions of Chapter 81 of the Laws of 1995 which alter the
nursing home Medicaid reimbursement methodology; (iii) the validity of
agreements and treaties by which various Indian tribes transferred title to
the State of certain land in central and upstate New York; (iv) challenges to
the practice of using patients' Social Security benefits for the costs of
care of patients of State Office of Mental Health facilities; (v) 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; (vi) challenges to the practice of
reimbursing certain Office of Mental Health patient care expenses from the
client's Social Security benefits; (vii) alleged responsibility of State
officials to assist in remedying racial segregation in the City of Yonkers;
(viii) alleged responsibility of the State Department of Environmental
Conservation for a plaintiff's inability to complete construction of a
cogeneration facility in a timely fashion and the damages suffered thereby;
(ix) challenges to the promulgation of the State's proposed procedure to
determine the eligibility for and nature of home care services for Medicaid
recipients; (x) a challenge to State implementation of a program which
reduces Medicaid benefits to certain home-relief recipients; (xi) a challenge
to the constitutionality of petroleum business tax assessments authorized by
Tax Law SS 301; and (xii) an action for reimbursement from the State for
certain costs arising out of the provision of preschool services and programs
for children with handicapping conditions, pursuant to Sections 4410 (10) and
(11) of the Education Law.
Adverse developments in the proceedings described above or the initiation
of new proceedings could affect the ability of the State to maintain a
balanced 1996-97 State Financial Plan. In its Notes to its General Purpose
Financial Statements for the fiscal year ended March 31, 1996, the State
reports its estimated liability for awards and anticipated unfavorable
judgments at $474 million. There can be no assurance that an
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adverse decision in any of the above cited proceedings would not exceed the
amount of the 1996-97 State Financial Plan reserves for the payment of
judgments and, therefore, could affect the ability of the State to maintain a
balanced 1996-97 State Financial Plan.
New York City
The fiscal health of the State may also be impacted by the fiscal health
of its localities, particularly the City, which continues to require
significant financial assistance from the State. The City depends on State
aid both to enable the City to balance its budget and to meet its cash
requirements. The State could also be affected by the ability of the City to
market its securities successfully in the public credit markets. The City has
achieved balanced operating results for each of its fiscal years since 1981
as reported in accordance with the then-applicable GAAP standards. The City's
financial plans are usually prepared quarterly, and the annual financial
report for its most recent completed fiscal year is prepared at the end of
October of each year.
In response to the City's fiscal crisis in 1975, the State took action to
assist the City in returning to fiscal stability. Among these actions, the
State established the Municipal Assistance Corporation for the City of New
York ("MAC") to provide financing assistance to the City. The State also
enacted the New York State Financial Emergency Act for The City of New York
(the "Financial Emergency Act") which, among other things, established the
New York State Financial Control Board (the "Control Board") to oversee the
City's financial affairs. The State also established the Office of the State
Deputy Comptroller for the City of New York ("OSDC") to assist the Control
Board in exercising its powers and responsibilities and a 'Control Period'
from 1975 to 1986 during which the City was subject to certain
statutorily-prescribed fiscal-monitoring arrangements. Although the Control
Board terminated the Control Period in 1986 when certain statutory conditions
were met, thus suspending certain Control Board powers, the Control Board,
MAC and OSDC continue to exercise various fiscal-monitoring functions over
the City, and upon the occurrence or 'substantial likelihood and imminence'
of the occurrence of certain events, including, but not limited to a City
operating budget deficit of more than $100 million, the Control Board is
required by law to reimpose a Control Period. Currently, the City and its
"Covered Organizations" (i.e., those which receive or may receive money from
the City directly, indirectly or contingently) operate under a four-year
financial plan, which the City prepares annually and updates periodically and
which includes the City's capital revenue and expense projections and
outlines proposed gap-closing programs for years with projected budget gaps.
The City's current four-year financial plan projects substantial budget gaps
for each of the 1997 through 1999 fiscal years, before implementation of the
proposed gap-closing program contained in the current financial plan. The
City is required to submit its financial plans to review bodies, including
the Control Board.
Although the City has balanced its budget since 1981, estimates of the
City's revenues and expenditures, which are based on numerous assumptions,
are subject to various uncertainties. If, for example, expected federal or
State aid is not forthcoming, if unforeseen developments in the economy
significantly reduce revenues derived from economically sensitive taxes or
necessitate increased expenditures for public assistance, if the City should
negotiate wage increases for its employees greater than the amounts provided
for in the City's financial plan or if other uncertainties materialize that
reduce expected revenues or increase projected expenditures, then, to avoid
operating deficits, the City may be required to implement additional actions,
including increases in taxes and reductions in essential City services. The
City might also seek additional assistance from the State. Unforseen
developments and changes in major assumptions could significantly affect the
City's ability to balance its budget as required by State law and to meet its
annual cash flow and financing requirements.
Implementation of the Financial Plan is also dependent upon the ability of
the City and certain Covered Organizations to market their securities
successfully. The City issues securities to finance, refinance and
rehabilitate infrastructure and other capital needs, as well as for seasonal
financing needs. The City currently projects that if no action is taken, it
will exceed its State Constitutional general debt limit beginning in City
fiscal year 1998. The current Financial Plan includes certain alternative
methods of financing a portion of the City's capital program which require
State or other outside approval. Future developments concerning
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the City or its Covered Organizations, and public discussion of such
developments, as well as prevailing market conditions and securities credit
ratings, may affect the ability or cost to sell securities issued by the City
or such Covered Organizations and may also affect the market for their
outstanding securities.
The staffs of the Control Board, OSDC and the City Comptroller issue
periodic reports on the City's Financial Plans which analyze the City's
forecasts of revenues and expenditures, cash flow, and debt service
requirements for, and Financial Plan compliance by, the City and its Covered
Organizations. According to recent staff reports, the City's economy has
experienced weak employment and moderate wage and income growth throughout
the mid-1990s. Although this trend is expected to continue for the rest of
the decade, there is the risk of a slowdown in the City's economy in the next
few years, which would depress revenue growth and put further strains on the
City's budget. These reports have also indicated that recent City budgets
have been balanced in part through the use of non-recurring resources; that
the City's Financial Plan tends to rely on actions outside its direct
control; that the City has not yet brought its long-term expenditure growth
in line with recurring revenue growth; and that the City is therefore likely
to continue to face substantial future budget gaps that must be closed with
reduced expenditures and/or increased revenues.
The 1997-2000 Financial Plan projects revenues and expenditures for the
1997 fiscal year balanced in accordance with GAAP. The projections for the
1997 fiscal year reflect proposed actions to close a previously projected gap
of approximately $2.6 billion for the 1997 fiscal year. The proposed actions
for the 1997 fiscal year include (i) additional agency actions totaling $1.2
billion; (ii) a revised tax reduction program which would increase projected
tax revenues by $385 million due to the four year extension of the 12.5%
personal income tax surcharge and other actions; (iii) savings resulting from
cost containment in entitlement programs to reduce City expenditures and
additional proposed State aid of $75 million; (iv) the assumed receipt of
revenues relating to rent payments for the City's airports totaling $269
million, which are currently the subject of a dispute with the Port
Authority; (v) the sale of the City's television station for $207 million;
and (vi) pension cost savings totaling $134 million resulting from a proposed
increase in the earnings assumption for pension assets from 8.5% to 8.75%,
$40 million of which the City currently does not expect to be achieved. There
can be no assurance that these gap-closing measures can be implemented as
planned.
The Financial Plan also sets forth projections for the 1998 through 2000
fiscal years and projects gaps of $1.7 billion, $2.7 billion and $3.4 billion
for the 1998, 1999 and 2000 fiscal years, respectively.
The projections for the 1997 through 2000 fiscal years assume (i) approval
by the Governor and the State Legislature of the extension of the 12.5%
personal income tax surcharge, which is projected to provide revenue of $171
million, $447 million, $478 million and $507 million in the 1997 through 2000
fiscal years, respectively, (ii) collection of the projected rent payments
for the City's airports, which may depend on the successful completion of
negotiations with the Port Authority or the enforcement of the City's rights
under the existing leases thereto through pending legal actions; (iii) the
ability of HHC and BOE to identify actions to offset substantial City and
State revenue reductions and the receipt by BOE of additional State aid; and
(iv) State approval of the cost containment initiatives and State aid
proposed by the City. The Financial Plan does not reflect any increased costs
which the City might incur as a result of welfare legislation recently
enacted by Congress.
The City's financial plans have been the subject of extensive public
comment and criticism. On July 16, 1996, the staff of the City Comptroller
issued a report on the Financial Plan. The report concluded that the City's
fiscal situation remains serious, and that the City faces budgetary risks of
approximately $787 million to $941 million for the 1997 fiscal year, which
increase to $4.16 billion to $4.31 billion for fiscal year 2000.
In connection with the Financial Plan, the City has outlined a gap-closing
program for the 1998 through 2000 fiscal years to substantially reduce the
remaining $1.7 billion, $2.7 billion and $3.4 billion projected budget gaps
for such fiscal years. This program, which is not specified in detail,
assumes additional agency programs to reduce expenditures or increase
revenues by $674 million, $959 million and $1.1 billion in the 1998 through
2000 fiscal years, respectively; additional reductions in entitlement cost of
$400 million, $750 million and $1.0 billion in the 1998 through 2000 fiscal
years, respectively; additional savings of $250 million, $300 million and
$500 million in the 1998 through 2000 fiscal years, respectively, resulting
from restructuring City
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government by consolidating operations, privatization and mandate management
and other initiatives; additional proposed federal and State aid of $105
million, $200 million and $300 million in the 1998 through 2000 fiscal years,
respectively; additional revenue initiatives and asset sales of $155 million,
$350 million and $400 million in the 1998 through 2000 fiscal years,
respectively; and the availability in each of the 1998 through 2000 fiscal
years of $100 million of the General Reserve.
The City's projected budget gaps for the 1999 and 2000 fiscal years do not
reflect the savings expected to result from prior years' programs to close
the gaps set forth in the Financial Plan. Thus, for example, recurring
savings anticipated from the actions which the City proposes to take to
balance the fiscal year 1998 budget are not taken into account in projecting
the budget gaps for the 1999 and 2000 fiscal years.
Although the City has maintained balanced budgets in each of its last
sixteen fiscal years, and is projected to achieve balanced operating results
for the 1997 fiscal year, there can be no assurance that the gap- closing
actions proposed in the Financial Plan can be successfully implemented or
that the City will maintain a balanced budget in future years without
additional State aid, revenue increases or expenditure reductions. Additional
tax increases and reductions in essential City services could adversely
affect the City's economic base.
Assumptions
The 1997-2000 Financial Plan is based on numerous assumptions, including
the condition of the City's and the region's economy and a modest employment
recovery and the concomitant receipt of economically sensitive tax revenues
in the amounts projected. The 1997-2000 Financial Plan is subject to various
other uncertainties and contingencies relating to, among other factors, the
extent, if any, to which wage increases for City employees exceed the annual
wage costs assumed for the 1997 through 2000 fiscal years; continuation of
projected interest earnings assumptions for pension fund assets and current
assumptions with respect to wages for City employees affecting the City's
required pension fund contributions; the willingness and ability of the
State, in the context of the State's current financial condition, to provide
the aid contemplated by the Financial Plan and to take various other actions
to assist the City; the ability of HHC, BOE and other such agencies to
maintain balanced budgets; the willingness of the Federal government to
provide the amount of Federal aid contemplated in the Financial Plan;
adoption of the City's budgets by the City Council in substantially the forms
submitted by the Mayor; the ability of the City to implement proposed
reductions in City personnel and other cost reduction initiatives, and the
success with which the City controls expenditures; the impact of conditions
in the real estate market on real estate tax revenues; the City's ability to
market its securities successfully in the public credit markets; and
unanticipated expenditures that may be incurred as a result of the need to
maintain the City's infrastructure. Certain of these assumptions have been
questioned by the City Comptroller and other public officials.
The projections and assumptions contained in the 1997-2000 Financial Plan
are subject to revision which may involve substantial change, and no
assurance can be given that these estimates and projections, which include
actions which the City expects will be taken but which are not within the
City's control, will be realized. The principal projections and assumptions
described below are based on information available in May 1996.
Substantially all of the City's full-time employees are members of labor
unions. The Financial Emergency Act requires that all collective bargaining
agreements entered into by the City and the Covered Organizations be
consistent with the City's current financial plan, except for certain awards
arrived at through impasse procedures. During a Control Period, and subject
to the foregoing exception, the Control Board would be required to disapprove
collective bargaining agreements that are inconsistent with the City's
current financial plan.
Under applicable law, the City may not make unilateral changes in wages,
hours or working conditions under any of the following circumstances: (i)
during the period of negotiations between the City and a union representing
municipal employees concerning a collective bargaining agreement; (ii) if an
impasse panel is appointed, then during the period commencing on the date on
which such panel is appointed and ending
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sixty days thereafter or thirty days after it submits its report, whichever
is sooner, subject to extension under certain circumstances to permit
completion of panel proceedings; or (iii) during the pendency of an appeal to
the Board of Collective Bargaining. Although State law prohibits strikes by
municipal employees, strikes and work stoppages by employees of the City and
the Covered Organizations have occurred.
The 1997-2000 Financial Plan projects that the authorized number of
City-funded employees whose salaries are paid directly from City funds, as
opposed to federal or State funds, will decrease from an estimated level of
206,716 on June 30, 1996 to an estimated level of 203,793 by June 30, 2000,
before implementation of the gap closing program outlined in the Financial
Plan.
Contracts with all of the City's municipal unions expired in the 1995 and
1996 fiscal years. The City has reached settlements with unions representing
approximately two-thirds of the City's workforce. The Financial Plan reflects
the costs of the settlements and assumes similar increases for all other
City-funded employees.
The terms of wage settlements could be determined through the impasse
procedure in the New York City Collective Bargaining Law, which can impose a
binding settlement. Legislation passed in February 1996 will place collective
bargaining matters relating to police and firefighters, including impasse
proceedings, under the jurisdiction of the State Public Employment Relations
Board ("PERB"), instead of the New York City Office of Collective Bargaining
("OCB"). OCB considers wage levels of municipal employees in similar cities
in the United States in reaching its determinations, while PERB's
determinations take into account wage levels in both private and public
employment in comparable communities, particularly within the State. In
addition, PERB can approve only two-year contracts, unlike OCB which can
approve longer contracts. For these reasons, among others, PERB jurisdiction
could result in labor settlements which impose higher costs on the City than
those reached under existing procedures. On January 23, 1996, the City
requested the Office of Collective Bargaining to declare an impasse against
the Patrolmen's Benevolent Association ("PBA") and the Uniformed Firefighters
Association ("UFA"). In addition, on February 29, 1996, the City commenced an
action in the State Supreme Court seeking a declaratory judgment confirming
that OCB, rather than PERB, has jurisdiction over collective bargaining
matters relating to police. On April 10, 1996, the Court issued a decision
which found the legislation in violation of the home rule provisions of the
State Constitution, and held that OCB and not PERB had jurisdiction over
collective bargaining matters relating to police. On September 12, 1996, the
Appellate Division, First Department affirmed this decision. The PBA has
appealed the Apellate Division decision.
The projections for the 1997 through 2000 fiscal years reflect the costs
of the settlements with the United Federation of Teachers ("UFT") and a
coalition of unions headed by District Council 37 of the American Federation
of State, County and Municipal Employees ("District Council 37"), which
together represent approximately two-thirds of the City's workforce, and
assume that the City will reach agreement with its remaining municipal unions
under terms which are generally consistent with such settlements. The
settlement provides for a wage freeze in the first two years, followed by a
cumulative effective wage increase of 11% by the end of the five year period
covered by the proposed agreements, ending in fiscal years 2000 and 2001.
Additional benefit increases would raise the total cumulative effective
increase to 13% above present costs. Costs associated with similar
settlements for all City-funded employees would total $49 million, $459
million and $1.2 billion in the 1997, 1998 and 1999 fiscal years,
respectively, and exceed $2 billion in each fiscal year after the 1999 fiscal
year. There can be no assurance that the City will reach an agreement with
the unions that have not yet reached a settlement with the City on the terms
contained in the Financial Plan.
In the event of a collective bargaining impasse, the terms of wage
settlements could be determined through statutory impasse procedures, which
can impose a binding settlement except in the case of collective bargaining
with the UFT, which may be subject to non-binding arbitration. On January 23,
1996, the City requested the Office of Collective Bargaining to declare an
impasse against the PBA and the UFA.
From time to time, the Control Board staff, MAC, OSDC, the City
Comptroller and others issue reports and make public statements regarding the
City's financial condition, commenting on, among other matters,
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the City's financial plans, projected revenues and expenditures and actions
by the City to eliminate projected operating deficits. Some of these reports
and statements have warned that the City may have underestimated certain
expenditures and overestimated certain revenues and have suggested that the
City may not have adequately provided for future contingencies. Certain of
these reports have analyzed the City's future economic and social conditions
and have questioned whether the City has the capacity to generate sufficient
revenues in the future to meet the costs of its expenditure increases and to
provide necessary services. It is reasonable to expect that reports and
statements will continue to be issued and to engender public comment.
On July 16, 1996, the City Comptroller issued a report on the Financial
Plan, which concluded that the City's fiscal situation remains serious. With
respect to the 1997 fiscal year, the report identified between $787 million
and $941 million in potential risks, including (i) $319 million in airport
related payments from the Port Authority that are the subject of arbitration;
(ii) $202 million to $266 million in risks related to BOE resulting primarily
from unidentified expenditure reductions and projected State aid which has
not been appropriated by the State Legislature; (iii) possible tax revenue
shortfalls totaling $69 million, reflecting the potential impact that rising
interest rates may have on the economy; and (iv) $144 million relating to
projected overtime savings. In addition, the report noted that HHC has not
provided any details with respect to assumed expenditure reductions and
revenue enhancements to close a projected deficit for the 1997 fiscal year,
and that HHC faces additional uncertainties, including the impact of reform
of the State's health care reimbursement methodology, lower Medicaid and
Medicare revenues due to proposed reductions by the Federal Government and
the impact of proposals to privatize certain hospital facilities. The report
also noted that the City's capital budget includes risks in the 1997 fiscal
year of $777 million, including $607 million in capital from the proposed
sale of the City's water and sewer system, which the City Comptroller has
opposed and which was ruled unconstitutional in a unanimous decision of the
Appellate Division of the State Supreme Court.
With respect to fiscal years 1998 through 2000, the report identified
total risks of between $2.47 billion and $2.58 billion for the 1998 fiscal
year, $3.38 billion and $3.53 billion for the 1999 fiscal year and $4.16
billion and $4.31 billion for fiscal year 2000, which include the gaps
identified in the Financial Plan and the same categories of risks for fiscal
years 1998 through 2000 that the report identified for the 1997 fiscal year.
With respect to the City's capital budget for the 1998 through 2000 fiscal
years, the report identified risks of $1.5 billion, $1.7 billion and $1.4
billion, respectively, including the risk that the proposed Infrastructure
Finance Agency may not be approved by the State Legislature. The report also
noted that the City's reliance on $1.5 billion of nonrecurring actions for
the 1997 fiscal year to close current year budget gaps and, therefore, defer
them into future fiscal years, has resulted in a rapid increase in the size
of estimated budget gaps for the later years of the Financial Plan. The
largest of these recent budget actions include City labor contracts, which
defer major costs until the end of the contract period, bond refundings, and
the sale of Mitchell- Lama mortgages. In a subsequent report, the City
Comptroller set forth various proposals to relieve overcrowding in the public
schools, including year-round schooling, double shifts, busing to nearby
schools with available space, and federal funding for new school construction
and renovation projects.
On July 18, 1996, the staff of the OSDC issued a report on the Financial
Plan. The report concluded that, while the City will end the 1996 fiscal year
with a balanced budget, the City has made no progress towards structural
budget balance, despite its headcount and entitlement reduction programs and
higher revenue collections. The report noted that the City relied on $1.4
billion in non-recurring resources to achieve budget balance in the 1996
fiscal year and, as a result, future projected gaps have increased to the
largest the City has ever faced. The report projected budget gaps of $74
million, $1.8 billion, $2.7 billion and $3.5 billion, and identified
additional risks of $774 million, $1.3 billion, $1.0 billion and $1.1
billion, for the 1997 through 2000 fiscal years, respectively. The principal
risks identified in the report relate to (i) uncertain State education aid
and mandate relief, and unspecified expenditure reductions, relating to BOE,
totaling $327 million in the 1997 fiscal year and $402 million in each of the
1998, 1999 and 2000 fiscal years; (ii) the receipt of Port Authority lease
payments totaling $314 million and $226 million in the 1997 and 1998 fiscal
years, respectively; (iii) State approval of a four-year extension to the
City's personal income tax surcharge which would generate revenues of $171
million, $447 million, $478 million and $507 million in the 1997 through
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2000 fiscal years, respectively; and (iv) the receipt of $200 million in the
1998 fiscal year in connection with a proposed sale of the New York Coliseum.
The report noted that the large future budget gaps result primarily from tax
cuts and the cost of labor agreements, and that revenues are projected to
increase 1.2% per year during the period covered by the Financial Plan, while
expenditures are projected to increase 6% per year. The report further noted
that the City's economy is heavily dependent on profits in the securities
sector, which are volatile, and that there is a strong likelihood of a
downturn in the national and local economies during the period of the
Financial Plan, which creates a risk to City tax collections beyond those
quantified in the report. In addition, the report noted that HHC could face a
budget gap of approximately $370 million for the 1997 fiscal year, resulting
from lower hospital utilization and other factors, and, with respect to the
capital plan, the report noted that the City anticipates funding over the
next four years of approximately $5.7 billion which is uncertain, including
financing from the proposed sale of the water and sewer system, savings from
amendments to the Wicks Law and the proceeds from the sale of bonds issued by
the proposed Infrastructure Finance Authority.
On July 18, 1996, the staff of the Control Board issued a report on the
Financial Plan. The report identified risks totaling $594 million, $1.1
billion, $851 million and $813 million, for the 1997 fiscal year, the 1998
fiscal year, the 1999 fiscal year and fiscal year 2000, respectively. The
principal risks identified in the report included (i) revenues from the
proposed extension of the 12.5% personal income tax surcharge totaling $171
million, $394 million, $419 million and $445 million in the 1997 through 2000
fiscal years, respectively, which requires State legislation; (ii)
implementation by BOE of various actions, totaling $56 million in the 1997
fiscal year and $334 million in each of the 1998 through 2000 fiscal years,
which include unspecified reductions and uncertain State funding; (iii) the
receipt of $314 million and $226 million from the Port Authority in the 1997
and 1998 fiscal years, respectively, which is the subject of arbitration; and
(iv) the potential for greater than forecast overtime spending totaling
between $71 and $77 million in each of the 1997 through 2000 fiscal years.
Taking into account the risks identified in the report and the unprecedented
gaps projected in the Financial Plan, the Control Board identified projected
gaps of $2.8 billion, $3.5 billion and $4.2 billion for the 1998 fiscal year,
the 1999 fiscal year and fiscal year 2000, respectively. The report concluded
that the City has not addressed its underlying problems, which include
inadequate and unstable revenue growth, high debt service expenditures and
increasing costs of health care and employee fringe benefits. The report
noted that by fiscal year 2000, City-funded revenues will have grown by only
6.1% since the 1996 fiscal year, which is substantially below the expected
rate of inflation, while expenditures are expected to grow at about the
expected rate of inflation. The report noted that this problem is increased
by the volatility and cyclicality of the City's tax revenues, which do not
grow uniformly from one year to the next and which are sensitive to
fluctuations of the securities industry. The report further noted that the
City is approaching the limit on outstanding general obligation debt
permitted under the State Constitution and, as a result, has proposed the
creation of the Infrastructure Finance Authority. In addition, the report
stated that the City's structural imbalance has led to insufficient funding
for maintaining the existing capital plant through the expense budget, and
questioned whether the current capital plan is affordable over the long term.
On October 9, 1995, Standard & Poor's issued a report which concluded that
proposals to replace the graduated Federal income tax system with a 'flat'
tax could be detrimental to the creditworthiness of certain municipal bonds.
The report noted that the elimination of Federal income tax deductions
currently available, including residential mortgage interest, property taxes
and state and local income taxes, could have a severe impact on funding
methods under which municipalities operate. With respect to property taxes,
the report noted that the total valuation of a municipality's tax base is
affected by the affordability of real estate and that elimination of mortgage
interest deduction would result in a significant reduction in affordability
and, thus, in the demand for, and the valuation of, real estate. The report
noted that rapid losses in property valuations would be felt by many
municipalities, hurting their revenue raising abilities. In addition, the
report noted that the loss of the current deduction for real property and
state and local income taxes from Federal income tax liability would make
rate increases more difficult and increase pressures to lower existing rates,
and that the cost of borrowing for municipalities could increase if the
tax-exempt status of municipal bond interest is worth less to investors.
Finally, the report noted that tax anticipation notes issued in anticipation
of property taxes could be hurt by the imposition of a flat tax, if
uncertainty is introduced with regard to their repayment
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revenues, until property values fully reflect the loss of mortgage and property
tax deductions.
On December 17, 1996, the Control Board issued a report noting that the
City's general tax revenues are growing much more slowly than the City's
expenditures, which will make it increasingly difficult to balance the
budget. On the same day, the staff of the City Comptroller issued a report
which tended to support the Control Board report, finding that the rate of
growth of personal income in the City was much lower than the national rate.
The City since 1981 has fully satisfied its seasonal financing needs in
the public credit markets, repaying all short-term obligations within their
fiscal year of issuance. The City has issued $2.4 billion of short-term
obligations for fiscal year 1997 to finance the current estimate of its
seasonal cash flow needs for the 1997 fiscal year. Seasonal financing
requirements for the 1996 fiscal year increased to $2.4 billion from $2.2
billion and $1.75 billion in the 1995 and 1994 fiscal years, respectively.
Seasonal financing requirements were $1.4 billion and $2.25 billion in the
1993 and 1992 fiscal years, respectively. The delay in the adoption of the
State's budget in certain past fiscal years has required the City to issue
short-term notes exceeding those expected early in such fiscal years.
The City is a defendant in a significant number of lawsuits. Such
litigation includes, but is not limited to, actions commenced and claims
asserted against the City arising out of alleged constitutional violations,
alleged torts, alleged breaches of contracts and other violations of law and
condemnation proceedings. While the ultimate outcome and fiscal impact, if
any, on the proceedings and claims are not currently predictable, adverse
determinations in certain of them might have a material adverse effect upon
the City's ability to carry out the 1997-2000 Financial Plan. The City is a
party to numerous lawsuits and is the subject of numerous claims and
investigations. The City has estimated that its potential future liability on
account of outstanding claims against it as of June 30, 1996 amounted to
approximately $2.8 billion. This estimate was made by categorizing the
various claims and applying a statistical model, based primarily on actual
settlements by type of claim during the preceding ten fiscal years, and by
supplementing the estimated liability with information supplied by the City's
Corporation Counsel.
On July 10, 1995, S&P revised downward its rating on City general
obligation bonds from A-to BBB+ and removed City bonds from CreditWatch. S&P
stated that 'structural budgetary balance remains elusive because of
persistent softness in the City's economy, highlighted by weak job growth and
a growing dependence on the historically volatile financial services sector.'
Other factors identified by S&P's in lowering its rating on City bonds
included a trend of using one-time measures, including debt refinancings, to
close projected budget gaps, dependence on unratified labor savings to help
balance the Financial Plan, optimistic projections of additional federal and
State aid or mandate relief, a history of cash flow difficulties caused by
State budget delays and continued high debt levels.
Fitch Investors Service, Inc. ('Fitch') rates City general obligation
bonds A-. Moody's rating for City general obligation bonds is Baa1. On March
1, 1996, Moody's stated that the rating for the City's Baa1 general
obligation bonds remains under review for a possible downgrade pending the
outcome of the adoption of the City's budget for the 1997 fiscal year and in
light of the status of the debate on public assistance and Medicaid reform;
the enactment of a State budget, upon which major assumptions regarding State
aid are dependent, which may be extensively delayed; and the seasoning of the
City's economy with regard to its strength and direction in the face of a
potential national economic slowdown. Since July 15, 1993, Fitch has rated
City bonds A-. On February 28, 1996, Fitch placed the City's general
obligation bonds on FitchAlert with negative implications. On November 5,
1996, Fitch removed the City's general obligation bonds from FitchAlert
although Fitch stated that the outlook remains negative. There is no
assurance that such ratings will continue for any given period of time or
that they will not be revised downward or withdrawn entirely. Any such
downward revision or withdrawal could have an adverse effect on the market
prices of the City's general obligation bonds.
In 1975, S&P suspended its A rating of City bonds. This suspension
remained in effect until March 1981, at which time the City received an
investment grade rating of BBB from S&P. On July 2, 1985, S&P revised its
rating of City bonds upward to BBB+ and on November 19, 1987, to A-. On July
10, 1995, S&P revised its rating of City bonds downward to BBB+, as discussed
above. Moody's ratings of City bonds were revised in November 1981 from B (in
effect since 1977) to Ba1, in November 1983 to Baa, in December 1985 to Baa1,
in May 1988 to A and again in February 1991 to Baa1. Since July 15, 1993,
Fitch has rated City bonds A-.
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APPENDIX D
SPECIAL INVESTMENT CONSIDERATIONS
RELATING TO CALIFORNIA MUNICIPAL OBLIGATIONS
Overview
The financial condition of the State of California ("California"), its public
authorities and local governments could affect the market values and
marketability of, and therefore the net asset value per share and the interest
income of, the Vista California Tax Free Money Market Fund or the Vista
California Intermediate Tax Free Income Fund, or result in the default of
existing obligations, including obligations which may be held by the Vista
California Tax Free Money Market Fund or the Vista California Intermediate Tax
Free Income Fund. The following section provides only a brief summary of the
complex factors affecting the financial condition of California, and is based on
information obtained from California, as publicly available prior to the date of
this Statement of Additional Information. The information contained in such
publicly available documents has not been independently verified. It should be
noted that the creditworthiness of obligations issued by local issuers may be
unrelated to the creditworthiness of California, and that there is no obligation
on the part of California to make payment on such local obligations in the event
of default in the absence of a specific guarantee or pledge provided by
California.
During the early 1990's California experienced significant financial
difficulties, which have reduced its credit standing but the state's finances
have improved since 1995. The ratings of certain related debt of other
issuers for which California has an outstanding lease purchase, guarantee or
other contractual obligation (such as for state-insured hospital bonds) are
generally linked directly to California's rating. Should the financial
condition of California deteriorate again, its credit ratings could be
further reduced, and the market value and marketability of all outstanding
notes and bonds issued by California, its public authorities or local
governments could be adversely affected.
Economic Factors. California's economy is the largest among the 50 states
(accounting for almost 13% of the nation's output of goods and services) and
one of the largest in the world. California's population of more than 32
million represents over 12% of the total United States population and grew by
27% in the 1980s. While California's substantial population growth during the
1980's stimulated local economic growth and diversification and sustained a
real estate boom between 1984 and 1990, it has increased strains on
California's limited water resources and demands for government services and
may impede future economic growth. Population growth slowed since 1991 even
while substantial immigration has continued, due to a significant increase in
outmigration by California residents. Generally, the household incomes of new
residents have been substantially lower (and their education and welfare
utilization higher) than those of departing households, which may have a
major long-term socioeconomic and fiscal impact. However, with the California
economy improving, the recent net outmigration within the Continental U.S. is
expected to decrease or be reversed.
From mid-1990 to late 1993, California's economy suffered its worst
recession since the 1930s, with over 700,000 jobs lost. The largest job
losses have been in Southern California, led by declines in the aerospace and
construction industries. Most of the losses were related to cuts in federal
defense spending.
Since the start of 1994, the California economy has been experiencing
recovery and growth. The State Department of Finance reports net job growth,
particularly in construction and related manufacturing, wholesale and retail
trade, electronics, exports, transportation, recreation and services. This
growth has offset the continuing but slowing job losses in the aerospace
industry and restructuring of the finance and utility sectors. Pre-recession
job levels were reached in early 1996, and job growth is estimated to remain
strong for the next few years.
Constitutional and Statutory Limitations on Taxes,
Other Charges and Appropriations
Limitations on Property Taxes. Certain California Instruments may be
obligations of issuers which rely in whole or in part, directly or indirectly,
on ad valorem property taxes as a source of revenue. The taxing
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power of California local governments and districts is limited by Article
XIIIA of the California "Proposition 13." Briefly, Article XIIIA limits to 1%
of full cash value the rate of ad valorem property taxes on real property and
generally restricts the reassessment of property to 2% per year, except upon
new construction or change of ownership (subject to a number of exemptions).
Taxing entities may, however, raise ad valorem taxes above the 1% limit to
pay debt service on voter-approved bonded indebtedness.
Under Article XIIIA, the basic 1% ad valorem tax levy is applied against
the assessed value of property as of the owner's date of acquisition (or as
of March 1, 1975, if acquired earlier), subject to certain adjustments. This
system has resulted in widely varying amounts of tax on similarly situated
properties. Several lawsuits have been filed challenging the
acquisition-based assessment system of Proposition 13, and on June 18, 1992
the U.S. Supreme Court announced a decision upholding Proposition 13.
Article XIIIA prohibits local governments from raising revenues through ad
valorem property taxes above the 1% limit; it also requires voters of any
governmental unit to give two-thirds approval to levy any "special tax."
Court decisions, however, allowed non-voter approved levy of "general taxes"
which were not dedicated to a specific use.
Limitations on Other Taxes, Fees and Charges. On November 5, 1996, the
voters of the State approved Proposition 218, the so-called "Right to Vote on
Taxes Act." Proposition 218 added Articles XIIIC and XIIID to the State
Constitution, which contain a number of provisions affecting the ability of
local agencies to levy and collect both existing and future taxes,
assessments, fees and charges.
Article XIIIC requires that all new or increased local taxes be submitted
to the electorate before they become effective. Taxes for general
governmental purposes require a majority vote and taxes for specific purposes
require a two-thirds vote. Further, any general purpose tax which was
imposed, extended or increased without voter approval after December 31, 1994
must be approved by a majority vote within two years.
Article XIIID contains several new provisions making it generally more
difficult for local agencies to levy and maintain "assessments" for municipal
services and programs. Article XIIID also contains several new provisions
affecting "fees" and "charges", defined for purposes of Article XIIID to mean
"any levy other than an ad valorem tax, a special tax, or an assessment,
imposed by a local government upon a parcel or upon a person as an incident
of property ownership, including a user fee or charge for a property related
service." All new and existing property related fees and charges must conform
to requirements prohibiting, among other things, fees and charges which
generate revenues exceeding the funds required to provide the property
related service or are used for unrelated purposes. There are new notice,
hearing and protest procedures for levying or increasing property related
fees and charges, and, except for fees or charges for sewer, water and refuse
collection services (or fees for electrical and gas service, which are not
treated as "property related" for purposes of Article XIIID), no property
related fee or charge may be imposed or increased without majority approval
by the property owners subject to the fee or charge or, at the option of the
local agency, two-thirds voter approval by the electorate residing in the
affected area.
In addition to the provisions described above, Article XIIIC removes
limitations on the initiative power in matters of local taxes, assessments,
fees and charges. Consequently, local voters could, by future initiative,
repeal, reduce or prohibit the future imposition or increase of any local
tax, assessment, fee or charge. It is unclear how this right of local
initiative may be used in cases where taxes or charges have been or will be
specifically pledged to secure debt issues.
The interpretation and application of Proposition 218 will ultimately be
determined by the courts with respect to a number of matters, and it is not
possible at this time to predict with certainty the outcome of such
determinations. Proposition 218 is generally viewed as restricting the fiscal
flexibility of local governments, and for this reason, some ratings of
California cities and counties have been, and others may be, reduced.
Appropriation Limits. The State and its local governments are subject to
an annual "appropriations limit" imposed by Article XIIIB of the California
Constitution, enacted by the voters in 1979 and significantly
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amended by Propositions 98 and 111 in 1988 and 1990, respectively. Article
XIIIB prohibits the State or any covered local government from spending
"appropriations subject to limitation" in excess of the appropriations limit
imposed. "Appropriations subject to limitation" 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 of providing the product or
service, but "proceeds of taxes" excludes most State subventions to local
governments. 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, including bond proceeds.
Among the expenditures not included in the Article XIIIB appropriations
limit are (1) the debt service cost of bonds issued or authorized prior to
January 1, 1979, or subsequently authorized by the voters, (2) appropriations
arising from certain emergencies declared by the Governor, (3) appropriations
for certain capital outlay projects, (4) appropriations by the State of post
1989 increases in gasoline taxes and vehicle weight fees, and (5)
appropriations made in certain cases of emergency.
The appropriations limit for each year is adjusted annually to reflect
changes in cost of living and population and any transfer of service
responsibilities between governmental units. The definitions for such
adjustments were liberalized in 1990 to follow more closely growth in the
State's economy.
"Excess" revenues are measured over a two year cycle. Local governments
must return any excess to taxpayers by rate reductions. The State must refund
50% paid to schools and community colleges. With more liberal annual
adjustment factors since 1988, and depressed revenues for several years after
1990 because of the recession, few governments, including the State, are
currently operating near their spending limits, but this condition may change
over time. The State's 1996-97 Budget Act provides for State appropriations
more than $7 billion under the Article XIIIB limit. Local governments may by
voter approval exceed their spending limits for up to four years.
A 1986 initiative statute, called "Proposition 62," imposed additional
limits on local governments, by requiring either majority or 2/3 voter
approval for any increases in "general taxes" or "special taxes,"
respectively (other than property taxes, which are unchangeable). Court
decisions had struck down most of Proposition 62 and many local governments,
especially cities, had enacted or raised local "general taxes" without voter
approval. In September, 1995, the California Supreme Court overruled the
prior cases, and upheld the constitutionality of Proposition 62. Many aspects
of this decision remain unclear (such as its impact on charter (home rule)
cities, and whether it will have retroactive effect), but its future effect
will be to further limit the fiscal flexibility of many local governments.
Because of the complex nature of Articles XIIIA, XIIIB, XIIIC and XIIID of
the California Constitution, the ambiguities and possible inconsistencies of
their terms, and the impossibility of predicting future appropriations or
changes in population and cost of living, and the probability of continuing
legal challenges, it is not currently possible to determine fully the impact
of these articles on California Instruments. It is not presently possible to
predict the outcome of any pending litigation with respect to the ultimate
scope, impact or constitutionality of either these articles, or the impact of
any such determinations upon State agencies or local governments, or upon
their ability to pay debt service or their obligations. Future initiatives or
legislative changes in laws or the California Constitution may also affect
the ability of the State or local issuers to repay their obligations.
State Debt. Under the California Constitution, debt service on outstanding
general obligation bonds is the second charge to the General Fund after
support of the public school system and public institutions of higher
education. Total outstanding general obligation bonds and lease purchase debt
of California increased from $9.4 billion at June 30, 1987 to $23.3 billion
at October 1, 1996. The State also had outstanding at October 1, 1996 $272
million of general obligation commercial paper notes which will be refunded
into long-term bonds at a later date. In FY1995-96, debt service on general
obligation bonds and lease purchase debt was approximately 5.2% of General
Fund revenues. State voters approved $5.0 billion of new bond authorizations
on the March 26, 1996 ballot, and an additional $2.1 billion on the November
5, 1996 ballot.
Recent Financial Results. The principal sources of General Fund revenues
in 1994-1995 were the California personal income tax (43% of total revenues),
the sales tax (34%), bank and corporation taxes
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<PAGE>
(13%), and the gross premium tax on insurance (3%). California maintains a
Special Fund for Economic Uncertainties ("SFEU"), derived from General Fund
revenues, as a reserve to meet cash needs of the General Fund. Because of the
recession, the SFEU has not been funded for the past four years.
General. Throughout the 1980s, California state spending increased rapidly
as California's population and economy also grew rapidly, including increased
spending for many assistance programs to local governments, which were
constrained by Proposition 13 and other laws. The largest state program is
assistance to local public school districts. In 1988, an initiative
(Proposition 98) was enacted which (subject to suspension by a two-thirds
vote of the Legislature and the Governor) guarantees local school districts
and community college districts a minimum share of California General Fund
revenues (currently about 35%).
Since the start of 1990-91 Fiscal Year, California has faced adverse
economic, fiscal and budget conditions. The economic recession seriously
affected California's tax revenues. It also caused increased expenditures for
health and welfare programs. California is also facing a structural imbalance
in its budget with the largest programs supported by the General Fund
(education, health, welfare and corrections) growing at rates higher than the
growth rates for the principal revenue sources of the General Fund. These
structural concerns will be exacerbated in coming years by the expected need
to substantially increase capital and operating funds for corrections as a
result of a "Three Strikes" law enacted in 1994.
Recent Budgets. As a result of these factors, among others, from the late
1980's until 1992-93, the State had a period of nearly chronic budget
imbalance, with expenditures exceeding revenues in four out of six years, and
the State accumulated and sustained a budget deficit in the budget reserve,
the SFEU approaching $2.8 billion at its peak at June 30, 1993. Starting in
the 1990-91 Fiscal Year and for each year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance and to close large "budget gaps" which were identified. The
Legislature and Governor eventually agreed on a number of different steps to
produce Budget Acts in the Years 1991-92 to 1994-95, including: significant
cuts in health and welfare program expenditures;
transfers of program responsibilities and some funding sources from the
State to local governments, coupled with some reduction in mandates on
local government;
transfer of about $3.6 billion in annual local property tax revenues from
cities, counties, redevelopment agencies and some other districts to local
school districts, thereby reducing state funding for schools;
reduction in growth of support for higher education programs, coupled with
increases in student fees;
revenue increases (particularly in the 1991-92 Fiscal Year budget), most of
which were for a short duration;
increased reliance on aid from the federal government to offset the costs
of incarcerating, educating and providing health and welfare services to
undocumented aliens (although these efforts have produced much less federal
aid than the State Administration had requested); and
various one-time adjustment and accounting changes. Despite these budget
actions, the effects of the recession led to large unanticipated deficits
in the SFEU, as compared to projected positive balances. By the start of
the 1993-94 Fiscal Year, the accumulated deficit was so large (almost $2.8
billion) that it was impractical to budget to retire it in one year, so a
two-year program was implemented, using the issuance of revenue
anticipation warrants to carry a portion of the deficit over the end of the
fiscal year. When the economy failed to recover sufficiently in 1993-94, a
second two-year plan was implemented in 1994-95, to carry the final
retirement of the deficit into 1995-96.
The combination of stringent budget actions cutting State expenditures,
and the turnaround of the economy by late 1993, finally led to the
restoration of positive financial results. While General Fund revenues and
expenditures were essentially equal in Fiscal Year 1992-93 (following two
years of excess expenditures over revenues), the General Fund had positive
operating results in Fiscal Years 1993-94 through 1995-96, which have reduced
the accumulated budget deficit to less than $100 million as of June 30, 1996.
The State Department of Finance estimated that the General Fund received
revenues of about $46.1 billion in FY 1995-96, about $2 billion higher than
was originally expected, as a result of the strengthening
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<PAGE>
economy. Expenditures totaled about $45.4 billion, also about $2 billion
higher than budgeted, in part because of the constitutional requirement to
disburse revenues to local school districts, and in part because federal
actions to reduce welfare costs and to pay for costs of illegal immigrants
were not forthcoming.
A consequence of the accumulated budget deficits in the early 1990's,
together with other factors such as disbursement of funds to local school
districts "borrowed" from future fiscal years and hence not shown in the
annual budget, was to significantly reduce the State's cash resources
available to pay its ongoing obligations. When the Legislature and the
Governor failed to adopt a budget for the 1992-93 Fiscal Year by July 1,
1992, which would have allowed the State to carry out its normal annual cash
flow borrowing to replenish its cash reserves, the State Controller was
forced to issue approximately $3.8 billion of registered warrants ("IOUs")
over a 2-month period to pay a variety of obligations representing prior
years' or continuing appropriations, and mandates from court orders.
Available funds were used to make constitutionally-mandated payments, such as
debt service on bonds and warrants.
The State's cash condition became so serious that from late spring 1992
until 1995, the State had to rely on issuance of short-term notes which
matured in a subsequent fiscal year to finance its ongoing deficit and pay
current obligations. With the repayment of the last of these deficit notes in
April, 1996, the State does not plan to rely further on external borrowing
across fiscal years, but will continue its normal cash flow borrowing during
a fiscal year.
Current Budget. The 1996-97 Budget Act was signed by the Governor on July
15, 1996, along with various implementing bills. The Legislature rejected the
Governor's proposed 15% cut in personal income taxes (to be phased over three
years), but did approve a 5% cut in bank and corporation taxes, to be
effective for income years starting on January 1, 1997. As a result, revenues
for the Fiscal Year are estimated to total $47.643 billion, a 3.3 percent
increase over the final estimated 1995-96 revenues. The Budget Act contains
General Fund appropriations totaling $47.251 billion, a 4.0 percent increase
over the final estimated 1995-96 expenditures.
The following are principal features of the 1996-97 Budget Act:
1. Funding for schools and community college districts increased by $1.65
billion total above revised 1995-96 levels. Almost half of this money was
budgeted to fund class- size reductions in kindergarten and grades 1-3. Also,
for the second year in a row, the full cost of living allowance (3.2 percent)
was funded. The funding increases have brought K-12 expenditures to almost
$4,800 per pupil, an almost 15% increase over the level prevailing during the
recession years.
2. Proposed cuts in health and welfare totaling $660 million. All of these
cuts require federal law changes (including welfare reform, which was
enacted), federal waivers, or federal budget appropriations in order to be
achieved. Ultimate federal actions after enactment of the Budget Act will
allow the State to save only about $360 million of this amount.
3. A 4.9 percent increase in funding for the University of California and
the California State University system, with no increases in student fees for
the second consecutive year.
4. The Budget Act assumed the federal government will provide
approximately $700 million in new aid for incarceration and health care costs
of illegal immigrants. These funds reduce appropriations in these categories
that would otherwise have to be paid from the General Fund.
With signing of the Budget Act, the State implemented its regular cash
flow borrowing program with the issuance of $3.0 billion of Revenue
Anticipation Notes to mature on June 30, 1997. The Budget Act appropriated a
modest budget reserve in the SFEU of $305 million, as of June 30, 1997. The
General Fund fund balance, however, still reflects $1.6 billion of "loans"
which the General Fund made to local schools in the recession years,
representing cash outlays above the mandatory minimum funding level.
Settlement of litigation over these transactions in July 1996 calls for
repayment of these loans over the period ending in 2001- 02, about equally
split between outlays from the General Fund and from schools' entitlements.
The 1996-97 Budget Act contained a $150 million appropriation from the
General Fund toward this settlement.
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The Department of Finance projected, when the Budget Act was passed, that,
on June 30, 1997, the State's available internal borrowable (cash) resources
will be $2.9 billion, after payment of all obligations due by that date, so
that no external cross-fiscal year borrowing will be needed. The State will
continue to rely on internal borrowing and intra-year external note borrowing
to meet its cash flow requirements.
The Department of Finance has reported that, through the first five months
of the 1996-97 fiscal year, General Fund revenues have been about $460
million (2.7%) above projection, reflecting the continued strength of the
State's economic recovery. This is offset by required increased payments to
schools, and lower than expected savings resulting from federal welfare
reform actions. The State has not yet given any prediction of how the federal
welfare reform law will impact the State's finances, or those of its local
agencies; this State is in the midst of making many decisions concerning
implementation of the new welfare law. A complete update of the FY 1996-97
budget will be released by the Governor in early January, 1997, along with
his proposed budget for FY 1997-98.
Bond Ratings. The ratings on California's long-term general obligation
bonds were reduced in the early 1990's from "AAA" levels which had existed
prior to the recession. In 1996, Fitch and Standard & Poor's raised their
ratings of California's general obligation bonds, which are currently
assigned ratings of "A+" from Standard & Poor's, "Al" from Moody's and "A+"
from Fitch. There can be no assurance that such ratings will be maintained in
the future. It should be noted that the creditworthiness of obligations
issued by local California issuers may be unrelated to the creditworthiness
of obligations issued by the State of California, and that there is no
obligation on the part of California to make payment on such obligations in
the event of default.
Legal Proceedings. Calfornia is involved in certain legal proceedings
(described in California's recent financial statements) that, if decided
against California, may require California to make significant future
expenditures or may substantially impair revenues. Trial courts have recently
entered tentative decisions or injunctions which would overturn several parts
of the state's recent budget compromises. The matters covered by these
lawsuits include a deferral of payments by California to the Public Employees
Retirement System and reductions in welfare payments. These cases are subject
to further proceedings and appeals, and if California eventually loses, the
final remedies may not have to be implemented in one year.
Obligations of Other Issuers
Other Issuers of California Instruments. There are a number of state
agencies, instrumentalities and political subdivisions of the State of
California that issue municipal obligations, some of which may be conduit
revenue obligations payable from payments from private borrowers. These
entities are subject to various economic risks and uncertainties, and the
credit quality of the securities issued by them may vary considerably from
the credit quality of obligations backed by the full faith and credit of the
State of California.
State Assistance. Property tax revenues received by local governments
declined more than 50% following passage of Proposition 13. Subsequently, the
California Legislature enacted measures to provide for the redistribution of
California's General Fund surplus to local agencies, the reallocation of
certain state revenues to local agencies and the assumption of certain
governmental functions by the State of California to assist municipal issuers
to raise revenues. Through 1990-91, local assistance (including public
schools) accounted for around 75% of General Fund spending. To reduce
California General Fund support for school districts, the 1992-93 and 1993-94
Budget Acts caused local governments to transfer a total of $3.9 billion of
property tax revenues to school districts, representing loss of all the
post-Proposition 13 "bailout" aid. The largest share of these transfers came
from counties, and the balance from cities, special districts and
redevelopment agencies. In order to make up part of this shortfall, the
Legislature proposed, and voters approved in 1993, dedicating 0.5% of the
sales tax to counties and cities for public safety purposes. In addition, the
Legislature has changed laws to relieve local governments of certain
mandates, allowing them to reduce costs.
To the extent that California should be constrained by its Article XIIIB
appropriations limit, or its obligation to conform to Proposition 98, or
other fiscal considerations, the absolute level, or the rate of growth, of
state assistance to local governments may continue to be reduced. Any such
reductions in state aid could
D-6
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compound the serious fiscal constraints already experienced by many local
governments, particularly counties. A number of counties, both rural and
urban, have also indicated that their budgetary condition is extremely
serious. At the start of the 1995-96 fiscal year, Los Angeles County, the
largest in the State, had to make significant cuts in services and personnel,
particularly in the health care system, in order to balance its budget. The
County's debt was downgraded by Moody's and S&P in the summer of 1995. Orange
County, which recently emerged from federal bankruptcy protection, has
substantially reduced services and personnel in order to live within much
reduced means.
Assessment Bonds. California Instruments which are assessment bonds may be
adversely affected by a general decline in real estate values or a slowdown
in real estate sales activity. In many cases, such bonds are secured by land
which is undeveloped at the time of issuance but anticipated to be developed
within a few years after issuance. In the event of such reduction or
slowdown, such development may not occur or may be delayed, thereby
increasing the risk of a default on the bonds. Because the special
assessments or taxes securing these bonds are not the personal liability of
the owners of the property assessed, the lien on the property is the only
security for the bonds. Moreover, in most cases the issuer of these bonds is
not required to make payments on the bonds in the event of delinquency in the
payment of assessments or taxes, except from amounts, if any, in a reserve
fund established for the bonds.
California Long-Term Lease Obligations. Certain California long-term lease
obligations, though typically payable from the general fund of the
municipality, are subject to "abatement" in the event the facility being
leased in unavailable for beneficial use and occupancy by the municipality
during the term of the lease. Abatement is not a default, and there may be no
remedies available to the holders of the certificates evidencing the lease
obligation in the event abatement occurs. The most common cases of abatement
are failure to complete construction of the facility before the end of the
period during which lease payments have been capitalized and uninsured
casualty losses to the facility (e.g. due to earthquake). In the event
abatement occurs with respect to a lease obligation, lease payments may be
interrupted (if all available insurance proceeds and reserves are exhausted)
and the certificates may not be paid when due.
Several years ago the Richmond Unified School District (the "District")
entered into a lease transaction in which certain existing properties of the
District were sold and leased back in order to obtain funds to cover
operating deficits. Following a fiscal crisis in which the District's
finances were taken over by a state receiver (including a brief period under
bankruptcy court protection), the District failed to make rental payments on
this lease, resulting in a lawsuit by the Trustee for the Certificate of
Participation holders, in which the State of California was a named defendant
(on the grounds that it controlled the District's finances). One of the
defenses raised in answer to this lawsuit was the invalidity of the
District's lease. The trial court upheld the validity of the lease, and the
case was subsequently settled. Any ultimate judgment in any future case
against the position taken by the Trustee may have adverse implications for
lease transactions of a similar nature by other California entities.
Other Considerations
The repayment of industrial development securities secured by real property
may be affected by California laws limiting foreclosure rights of creditors.
Securities backed by health care and hospital revenues may be affected by
changes in state regulations governing cost reimbursements to health care
providers under Medi-Cal (the State's Medicaid program), including risks
related to the policy of awarding exclusive contracts to certain hospitals.
Limitations on ad valorem property taxes may particularly affect "tax
allocation" bonds issued by California redevelopment agencies. Such bonds are
secured solely by the increase in assessed valuation of a redevelopment
project area after the start of redevelopment activity. In the event that
assessed values in the redevelopment project decline (e.g. because of major
natural disaster such as an earthquake), the tax increment revenue may be
insufficient to make principal and interest payments on these bonds. Both
Moody's and S&P suspended ratings on California tax allocation bonds after
the enactment of Articles XIIIA and XIIIB, and only resumed such ratings on a
selective basis.
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Proposition 87, approved by California voters in 1988, requires that all
revenues produced by a tax rate increase go directly to the taxing entity which
increased such tax rate to repay that entity's general obligation indebtedness.
As a result, redevelopment agencies (which typically are the issuers of tax
allocation securities) no longer receive an increase in tax incrment when taxes
on property in the project area are increased to repay voter-approved bonded
indebtedness.
The effect of these various constitutional and statutory changes upon the
ability of California municipal securities issuers to pay interest and
principal on their obligations remains unclear. Furthermore, other measures
affecting the taxing or spending authority of California or its political
subdivisions may be approved or enacted in the future. Legislation has been
or may be introduced which would modify existing taxes or other revenue
raising measures or which either would further limit or, alternatively, would
increase the abilities of state and local governments to impose new taxes or
increase existing taxes. It is not presently possible to predict the extent
to which any such legislation will be enacted. Nor is it presently possible
to determine the impact of any such legislation on California Instruments in
which the California Portfolio may invest, future allocations of state
revenues to local governments or the abilities of state or local governments
to pay the interest on, or repay the principal of, such California
Instruments.
Substantially all of California is within an active geologic region
subject to major seismic activity. Northern California in 1989 and Southern
California in 1994 experienced major earthquakes causing billions of dollars
in damages. The federal government provided more than $13 billion in aid for
both earthquakes, and neither event is expected to have any long-term
negative economic impact. Any security in the California Portfolio could be
affected by an interruption of revenues because of damaged facilities, or,
consequently, income tax deductions for casualty losses or property tax
assessment reductions. Compensatory financial assistance could be constrained
by the inability of (i) an issuer to have obtained earthquake insurance
coverage at reasonable rates; (ii) an insurer to perform on its contracts of
insurance in the event of widespread losses; or (iii) the federal or state
government to appropriate sufficient funds within their respective budget
limitations.
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MUTUAL FUND TRUST
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial statements:
In Part A: Financial Highlights
In Part B: Financial Statements and the Reports thereon for the
Funds filed herein for the fiscal year ended August 31,
1996 are incorporated by reference into Part B as part
of the 1996 Annual Reports to Shareholders for such
Funds as filed with the Securities and Exchange
Commission by the Registrant on Form N-30D on November
5, 1996, accession number 0000950123-96-006191
and on Form N-30D on November 5, 1996, accession number
0000950123-96-006192. Financial Statements and the
Reports thereon for The 100% U.S. Treasury Securities
Money Market Fund and The Cash Management Fund of The
Hanover Funds, Inc. for the fiscal year ended November
30, 1995 are incorporated by reference into Part B as
part of the 1995 Annual Reports to Shareholders for such
funds as filed with the Securities and Exchange
Commission by The Hanover Funds, Inc. on Form N-30D on
February 2, 1996, accession number 0000950123-96-000335.
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 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. (10)
11(b) Consent of KPMG Peat Marwick LLP. (10)
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)
C-1
<PAGE>
17. Financial Data Schedule. (8)
18. Form of Rule 18f-3 Multi-Class Plan. (6)
99. Power of Attorney for: Fergus Reid, III, H. Richard Vartabedian,
William J. Armstrong, John R. H. Blum, Stuart W. Cragin, Jr.,
Joseph J. Harkins, Irving L. Thode, W. Perry Neff, Roland R. Eppley,
Jr., W. D. MacCallan. (9)
- -------------------
(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 Post-Effective Amendment No. 4 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 as an Exhibit to Post-Effective Amendment No. 5 to the Registration
Statement on Form N-1A of the Registrant as filed with the Securities and
Exchange Commission on March 7, 1996.
(8) Filed as an Exhibit to Post-Effective Amendment No. 6 to the Registration
Statement on Form N-1A of the Registrant as filed with the Securities and
Exchange Commission on April 22, 1996.
(9) Filed as an exhibit to Post-Effective Amendment No. 7 to the Registration
Statement on Form N-1A of the Registrant as filed with the Securities and
Exchange Commission on September 6, 1996.
(10) Filed herewith.
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 November 30, 1996
--------------- -----------------
None
Vista Premier Institutional Class A Class B
Shares Shares Shares Shares Shares
------ ------ ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Vista(SM) Treasury Plus
Money Market Fund N/A 40 38 N/A N/A
Vista(SM) Federal Money
Market Fund 9,554 263 24 N/A N/A
Vista(SM) U.S. Government
Money Market Fund 7,915 594 182 N/A N/A
Vista(SM) Cash Management
Fund 9,417 391 72 N/A N/A
Vista(SM) Prime Money
Market Fund N/A 162 60 N/A 469
Vista(SM) Tax Free Money
Market Fund 1,237 166 21 N/A N/A
Vista(SM) California Tax Free
Money Market Fund 82 N/A N/A N/A N/A
Vista(SM) New York Tax Free
Money Market Fund 5,193 N/A N/A N/A N/A
Vista(SM) 100% U.S. Treasury
Securities Money Market Fund 5,130 8 11 N/A N/A
</TABLE>
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<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 N/A N/A N/A 2,689 547
Vista(SM) New York Tax Free
Income Fund N/A N/A N/A 2,827 472
Vista(SM) California Intermediate
Tax Free Income Fund N/A N/A N/A 635 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
C-3
<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(a) Business and Other Connections of Investment Adviser
The Chase Manhattan Bank (the "Adviser") is a commercial bank
providing a wide range of banking and investment services.
To the knowledge of the Registrant, none of the Directors or
executive officers of the Adviser, except those described below, are or have
been, at any time during the past two years, engaged in any other business,
profession, vocation or employment of a substantial nature, except that certain
Directors and executive officers of the Adviser also hold or have held various
positions with bank and non-bank affiliates of the Adviser, including its
parent, The Chase Manhattan Corporation. Each Director listed below is also a
Director of The Chase Manhattan Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
Thomas G. Labreque 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>
C-5
<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 28(b)
Chase Asset Management ("CAM" is an Investment Advisor providing investment
services to institutional clients.
To the knowledge of the Registrant, none of the Directors or executive
officers of the CAM, except those described below, are or have been, at any time
during the past two years, engaged in any other business, profession, vocation
or employment of a substantial nature, except that certain Directors and
executive officers of the CAM also held or have held various positions with bank
and non-bank affiliates of the Advisor, including its parent. The Chase
Manhattan Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name the Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
James Zeigon Chairman and Director Director of Chase
Asset Management
(London) Limited
Steven Prostano Executive Vice President Chief Operating Officer
and Chief Operating Officer and Director of Chase
Asset Management
(London) Limited
Mark Richardson President and Chief Chief Investment Officer
Investment Officer and Director of Chase
Asset Management
(London) Limited
</TABLE>
Item 28(c)
Texas Commerce Bank National Association ("TCB") is an Investment Adviser and
its business has been that of a national bank.
To the knowledge of the Registrant, none of the Directors or executive
officers of TCB, 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 or
executive officers of TCB also hold or have held various positions with bank and
non-bank affiliates of the Adviser, including its parent, The Chase Manhattan
Corporation.
<TABLE>
<CAPTION>
Principal Occupation or Other
Position with Employment of a Substantial
Name Sub-Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
<S> <C> <C>
John L. Adams Director, Vice Chairman None
Elaine B. Agather Chairman and CEO, TCB- None
Fort Worth, Vice Chairman,
TCB-Metroplex
C-6
<PAGE>
Principal Occupation or Other
Position with Employment of a Substantial
Name Sub-Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
David W. Biegler Director Chairman, President and CEO,
ENSERCH Corporation, 300 South
St. Paul St., Dallas, TX 75201
Robert W. Bishop Executive Vice President None
Alan R. Buckwalter, III Director, Vice Chairman None
H. Worth Burke Executive Vice President None
Charles W. Duncan Director Investments, 600 Travis,
Houston, TX 77002-3007
Dan S. Hallmark Chairman and CEO None
TCB-Beaumont
Dennis R. Hendrix Director Chairman, PanEnergy Corp.,
P.O. Box 1642, Houston, TX
77251-1642
Harold S. Hook Director Chairman and CEO, American
General Corporation, P.O. Box
3247, Houston TX 77253
C-7
<PAGE>
Principal Occupation or Other
Position with Employment of a Substantial
Name Sub-Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
Robert C. Hunter Director, Vice Chairman None
Ed Jones President and CEO, TCB- None
Midland
R. Bruce LaBoon Director Managing Partner, Liddell, Sapp,
Zivley, Hill & LaBoon, L.L.P.,
3400 Texas Commerce Tower,
Houston, TX 77002-3004
Shelaghmichael Executive Vice President None
C. Lents
S. Todd Maclin President, TCB-Dallas, None
Executive Vice President
Beverly H. McCaskill Executive Vice President None
Joe C. McKinney Chairman and CEO TCB-San None
Antonio
C-8
<PAGE>
Principal Occupation or Other
Position with Employment of a Substantial
Name Sub-Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
Scott J. McLean Chairman and CEO TCB-El Paso None
Randal B. McLelland President and CEO, TCB- None
Rio Grande Valley
David L. Mendez Executive Vice President None
W. Merriman Morton Chairman and CEO TCB-Austin None
Paul Poullard Exective Vice President None
Jeffrey B. Reitman General Counsel None
Edward N. Robinson Executive Vice President None
Ann V. Rogers Executive Vice President None
C-9
<PAGE>
Principal Occupation or Other
Position with Employment of a Substantial
Name Sub-Adviser Nature During Past Two Years
- ---- ------------- -----------------------------
Marc J. Shapiro Director, Chairman, None
President and CEO
Larry L. Shryock Executive Vice President None
Kenneth L. Tilton Executive Vice President None
and Controller
Harriet S. Wasserstrum Executive Vice President None
Gary K. Wright Executive Vice President None
</TABLE>
ITEM 29. Principal Underwriters
(a) Vista Fund Distributors, 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 Fund
Distributors, Inc. The principal business address of each of these persons,
with the exception of Mr. Spicer, is 101 Park Avenue, New York, New York 10178.
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:
C-10
<PAGE>
Name Address
---- -------
Vista Fund Distributors, Inc. 101 Park Avenue,
New York, NY 10022
DST Systems, Inc. 210 W. 10th Street,
Kansas City, MO 64105
The Chase Manhattan Bank 270 Park Avenue,
New York, NY 10017
The Chase Manhattan Bank One Chase Square,
Rochester, NY 14363
Chase Asset Management, Inc. 1211 Avenue of the
Americas,
New York, NY 10036
Texas Commerce Bank, National Association 600 Travis,
Houston, TX 77002
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.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has certified that it meets all of the
requirements for effectiveness of the Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and the
State of New York on the 27th day of December, 1996.
MUTUAL FUND TRUST
By /s/ H. Richard Vartabedian
--------------------------
H. Richard Vartabedian
President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Fergus Reid, III Chairman December 27, 1996
- ------------------------------- and Trustee
Fergus Reid, III
/s/ William J. Armstrong Trustee December 27, 1996
- -------------------------------
William J. Armstrong
/s/ John R.H. Blum Trustee December 27, 1996
- -------------------------------
John R.H. Blum
/s/ Joseph J. Harkins Trustee December 27, 1996
- -------------------------------
Joseph J. Harkins
/s/ Richard E. Ten Haken
- ------------------------------- Trustee December 27, 1996
Richard E. Ten Haken
/s/ Stuart W. Cragin, Jr. Trustee December 27, 1996
- -------------------------------
Stuart W. Cragin, Jr.
/s/ Irving L. Thode Trustee December 27, 1996
- -------------------------------
Irving L. Thode
/s/ H. Richard Vartabedian President December 27, 1996
- ------------------------------- and Trustee
H. Richard Vartabedian
/s/ W. Perry Neff Trustee December 27, 1996
- -------------------------------
W. Perry Neff
/s/ Roland R. Eppley, Jr. Trustee December 27, 1996
- -------------------------------
Roland R. Eppley, Jr.
/s/ W.D. MacCallan Trustee December 27, 1996
- -------------------------------
W.D. MacCallan
/s/ Martin Dean Treasurer and December 27, 1996
- ------------------------------- Principal
Martin Dean Accounting
Officer
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
11(a) Consent of Price Waterhouse LLP.
11(b) Consent of KPMG Peat Marwick LLP.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 8 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated October 18, 1996, relating to the financial
statements and selected per share data and ratios for a share of beneficial
interest outstanding appearing in the August 31, 1996 Annual Reports to
Shareholders of Vista Federal Money Market Fund, Vista New York Tax Free Money
Market Fund, Vista Tax Free Money Market Fund, Vista California Tax Free Money
Market Fund, Vista Cash Management Money Market Fund, Vista Prime Money Market
Fund, Vista U.S. Government Money Market Fund, Vista Treasury Plus Money Market
Fund, Vista 100% U.S. Treasury Securities Money Market Fund, Vista New York Tax
Free Income Fund, Vista Tax Free Income Fund and Vista California Intermediate
Tax Free Fund (separately managed portfolios of Mutual Fund Trust), which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the heading "Financial Highlights" in the
Prospectuses and under the heading "Independent Accountants" in the Statement of
Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, NY 10036
December 24, 1996
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
The Board of Directors of
The Hanover Funds, Inc.
We consent to the use of our report dated January 19, 1996 on the financial
statements and the related financial highlights of the Hanover Funds, Inc. with
respect to The 100% U.S. Treasury Securities Money Market Fund and The Cash
Management Fund as of November 30, 1995 and for each of the periods presented
incorporated herein by reference and to the reference to our firm under the
heading "Independent Accountants" in the Statement of Additional Information.
New York, New York
December 23, 1996
