Schedule 14A Information required in proxy statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Preliminary Additional Materials
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.149-11(c) or
Section 240.14a-12
Mutual Fund Variable Annuity Trust
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Joanne Doldo
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check appropriate box:
[x] $125 per Exchange Act Rule 20a-1(c)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(j) (3) [ ] Fee computed on table below per Exchange Act Rules 14a-6(j)(4)
and 0-11
1. Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2. Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
4. Proposed maximum value of transaction
Set forth the amount on which the filing fee is calculated and state how it was
determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0- 11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid.
- --------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3. Filing Party:
- --------------------------------------------------------------------------------
4. Date Filed:
- --------------------------------------------------------------------------------
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
MUTUAL FUND VARIABLE ANNUITY TRUST
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
(800) 90-VISTA
Dear Shareholder:
As you may be aware, The Chase Manhattan Corporation ("Chase") has entered into
an Agreement and Plan of Merger with Chemical Banking Corporation ("Chemical")
pursuant to which Chase will merge with and into Chemical (the "Holding Company
Merger"). Pursuant to the Investment Company Act of 1940, as amended,
consummation of the Holding Company Merger will result in the automatic
termination of the investment advisory agreements between the Portfolios of
Mutual Fund Variable Annuity Trust (the "Trust") and The Chase Manhattan Bank,
N.A. (the "Adviser"). In addition, subsequent to the Holding Company Merger, the
Adviser will be merged with and into Chemical Bank in a secondary merger of the
principal operating entities of Chase and Chemical (the "Bank Merger"). The Bank
Merger may also be deemed to result in the automatic termination of the
investment advisory agreements between the Adviser and the Portfolios. In
anticipation of the completion of the Holding Company Merger and the Bank
Merger, and to provide continuity in investment advisory services to your
Portfolio, we urge you to review the enclosed proxy statement. In the proxy
statement you are asked to vote on the approval of an interim and a new advisory
agreement between your portfolio and the Adviser in addition to other items
intended to rationalize the management of the Portfolios and each Portfolio's
objectives, policies and restrictions.
The Board of Trustees has voted unanimously in favor of each proposal and
recommends that you vote "FOR" them as well. You will find more information on
the proposals in the enclosed proxy statement.
Please be assured that there is no increase to the advisory fee rates in the
proposed advisory agreements.
The information below is designed to answer your questions and help you cast
your proxy as a shareholder of the Funds, and is being provided as a supplement
to, not a substitute for, your proxy materials which we urge you carefully
review.
Q. IF SHAREHOLDERS APPROVE THIS PLAN, WHAT WILL HAPPEN?
A. In March, the Vista Funds and the Hanover Funds will be merged into one
combined fund family with approximately $18 billion in assets under management.
This family will employ the name "Vista Funds." In some cases, current Vista and
Hanover funds with overlapping objectives will be merged together into a single
fund. All shareholders in existing Hanover or Vista funds will own shares in the
merged funds, without paying additional charges.
Q. AS A SHAREHOLDER, WHAT DO I NEED TO DO?
A. Just make sure you cast your proxy vote when you receive your ballot in
February. The Trustees of each fund are working to make sure this merger goes
smoothly. Shortly after the anticipated shareholder approval of the merger,
listings of daily fund prices and performance for most funds will appear under
the Vista heading in the business section of your local newspaper and business
periodicals. Your quarterly fund statements and your annual reports will reflect
that you are part of a larger Vista family with more investment choices.
Q. WHICH FUNDS ARE BEING COMBINED AND WHAT DO I DO IF I OWN ONE
OF THEM?
A. The following consolidation of funds will occur, upon
shareholder approval:
o Hanover Treasury Money Market Fund will be combined with
Vista Treasury Plus Money Market Fund. The resulting fund
will be called Vista Treasury Plus Money Market Fund.
o Hanover Cash Management Fund will be combined with Vista
Global Money Market Fund. The resulting fund will be called
the Vista Cash Management Money Market Fund.
o Hanover US Government Money Market Fund will be combined
with Vista U.S. Government Money Market Fund. The resulting
fund will be called Vista U.S. Government Money Market Fund.
o Hanover Tax-Free Money Market Fund will be combined with
Vista Tax-Free Money Market Fund. The resulting fund will
be called Vista Tax-Free Money Market Fund.
o Hanover Short-Term Government Bond Fund will be combined
with Vista Short-Term Bond Fund. The resulting fund will be
called Vista Short-Term Bond Fund.
o ___________________________________ Vista Small Cap Equity
Fund. The resulting fund will be called Vista Small Cap
Equity Fund.
o Hanover Blue-Chip Growth Fund will be combined with Vista
Equity Fund. The resulting fund will be called Vista
_______ Cap Equity Fund.
The decisions as to which funds should be appropriately merged was based upon a
review of each fund's fundamental investment objectives and the selection of
funds which were substantially similar. If you own any of the above funds, upon
shareholder approval you will automatically become a shareholder in the merged
fund. You don't need to do anything to continue your current investment program.
The complete details are contained in the proxy materials.
Q. WILL THERE BE ANY CHANGE IN HOW THE FUNDS ARE MANAGED?
A. Under the plan, current shareholders of Hanover Funds will gain the
investment expertise and discipline of Chase Manhattan. Chase has more than 100
years of experience providing money management services to individuals and
institutions. Vista has built a reputation as one of the most consistent
performers among stock mutual funds through Chase's proprietary 5-Step
StockSelection Model. Vista Growth & Income and Vista Capital Growth Fund
currently receive a 4-star rating from the prestigious Morningstar rating
service.
Q. WHAT RESEARCH SERVICES WILL THE FUNDS RELY UPON?
A. The expanded group will have access to the research and analysis which has
helped Vista achieve recognition for outstanding performance. These include
Chase's global presence through research professionals in strategic markets
throughout the world and also the independent mutual fund consulting group Chase
hires to audit the portfolio management practices of each Vista fund.
Q. WHAT ABOUT SHAREHOLDER SERVICES?
A. Current Hanover shareholders will be able to obtain fund information 24 hours
per day via Tele-Vista, Vista's Voice Response Unit available at 1-800-34VISTA.
Current Hanover shareholders who have already paid a sales charge will be
allowed to exchange into other funds of the larger Vista family without paying
an additional charge.
a
Q. HOW DO I CAST A PROXY VOTE?
A. In mid-February, you will receive a proxy card and statement in the mail for
each fund in which you are a shareholder. Several shareholder election items
will appear on this card, and after you have reviewed the accompanying proxy
material carefully, you should cast your vote in each of them. Then, return the
postage-paid reply card in the mail prior to March 10, 1996. That's all.
If you have any further questions, please call our customer service center,
between 8:00 AM and 6:00 PM EST, at 1-800-34VISTA (84782).
YOUR VOTE IS IMPORTANT. Please read the enclosed proxy statement and vote now by
completing, signing and returning the enclosed proxy ballot form(s) in the
pre-paid envelope. If you own shares in more than one Portfolio, you will
receive a proxy card for each of your Portfolios. Please vote and return EACH
proxy card you receive. EVERY VOTE COUNTS. If you have any questions, please
call at 800- - .
Very truly yours,
Fergus Reid
President
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
MUTUAL FUND VARIABLE ANNUITY TRUST
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
(800) 90-VISTA
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 15, 1996
A special meeting of the shareholders of the underlying portfolios (each, a
"Portfolio" and collectively, the "Portfolios") of MUTUAL FUND VARIABLE ANNUITY
TRUST (the "Trust") will be held at 12:00 p.m. (Eastern time) at 101 Park
Avenue, 17th Floor, New York, New York on March 15, 1996, for the purposes
indicated below:
The following items apply to shareholders of EACH PORTFOLIO:
1. To approve or disapprove an interim investment advisory agreement
between each of the Portfolios and The Chase Manhattan Bank, N.A.
(or the successor entity thereto) (the "Adviser") to take effect
after the merger of The Chase Manhattan Corporation (the parent
company of the Adviser) and Chemical Banking Corporation.
No fee increase is proposed.
2. To approve or disapprove a new investment advisory agreement
between each of the Portfolios and the Adviser, and a
sub-advisory agreement between the Adviser and Chase Asset
Management, Inc. with respect to each of the Portfolios to take
effect as soon as practicable after approval by shareholders (to
be voted on separately by the shareholders of each Portfolio). No
fee increase is proposed.
3. To elect eleven trustees to serve as members of the Board of
Trustees of the Trust;
4. To ratify the selection of Price Waterhouse LLP as independent
accountants for the 1996 fiscal year of each of the Portfolios;
5. To approve or disapprove an amendment to the Trust's Declaration
of Trust. In addition, for shareholders of all Portfolios, to
transact such other business as may properly come before the
meeting or any adjournment thereof.
The remaining proposals apply only to the Portfolio indicated in italics:
6. To consider the following proposals pertaining primarily to each
Portfolio's fundamental investment restrictions;
Proposals 6a-k apply to each Portfolio.
a. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning borrowing;
b. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning investment for
the purpose of exercising control;
c. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning the making of
loans;
d. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning purchases of
securities on margin;
e. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning concentration
of investment;
f. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning commodities
and real estate;
g. To approve or disapprove an amendment of each Portfolio's
fundamental investment restriction regarding investments in
restricted and illiquid securities;
h. To approve or disapprove of a reclassification, as
nonfundamental, of a fundamental restriction of each
Portfolio concerning the use of options;
i. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning senior
securities;
j. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction regarding short sales of
securities.
k. To approve or disapprove a proposal to adopt a new
investment policy that authorizes each Fund to invest all or
a part of its investment assets in a corresponding portfolio
of an open-end investment company having substantially the
same investment objective and policies as the Fund; and
Proposal 6k is related to the ASSET ALLOCATION PORTFOLIO ONLY:
l. To approve or disapprove the elimination of the Asset
Allocation Portfolio's fundamental investment restriction
concerning investments in other investment companies;
Proposal 7 relates to the U.S. TREASURY INCOME PORTFOLIO ONLY:
7. To approve or disapprove a modification to the Portfolio's
fundamental policy regarding permissible investments in
government securities.
Shareholders of record as of the close of business on January 22, 1996 are
entitled to receive notice of, and to vote at, the Meeting and any and all
adjournments thereof. Your attention is called to the accompanying proxy
statement.
By Order of the Board of Trustees
Ann Bergin
Secretary
February 5, 1996
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE TO
ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO
THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
MUTUAL FUND VARIABLE ANNUITY TRUST
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
(800) 90-VISTA
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Trustees of MUTUAL
FUND VARIABLE ANNUITY TRUST (the "Trust") and pertains, to the extent set forth
below, to each of its underlying investment funds (each, a "Portfolio" and
collectively, the "Portfolios"). The Trust is a registered open-end investment
company having its executive offices at 125 West 55th Street, New York, New York
10019. The proxy is revocable at any time before it is voted by sending written
notice of the revocation to the Trust or by appearing personally at the [Date]
special meeting of shareholders (the "Meeting"). The cost of preparing and
mailing the notice of meeting, the proxy card, this proxy statement and any
additional proxy material insofar as it relates to the approval of various
Advisory Agreements has been or is to be borne by The Chase Manhattan
Corporation, Chemical Banking Corporation and/or their affiliates. The Chase
Manhattan Bank, N.A. (the "Adviser") is currently the investment adviser to each
of the Portfolios. Proxy solicitations will be made primarily by mail, but may
also be made by telephone, telegraph, facsimile or personal interview conducted
by certain officers or employees of the Trust, the Adviser or its affiliates,
or, if necessary, a commercial firm retained for this purpose. In the event that
the shareholder signs and returns the proxy ballot, but does not indicate a
choice as to any of the items on the proxy ballot, the proxy attorneys will vote
those shares in favor of such proposal(s), including for the election of each
person nominated to the Board of Trustees of the Trust.
On January 22, 1996 the record date for determining shareholders entitled to
receive notice of and vote at the Meeting (the "Record Date"), the Portfolios
had the number of shares of beneficial interest ("Shares") outstanding set forth
below, each Share being entitled to one vote:
PORTFOLIO TOTAL SHARES
OUTSTANDING
International Equity Portfolio
Capital Growth Portfolio
Growth and Income Portfolio
Asset Allocation Portfolio
U.S. Treasury Income Portfolio
Money Market Portfolio
Shares which represent interests in a particular Portfolio of the Trust vote
separately on matters which pertain only to that Portfolio. All of the proposals
(except the election of Trustees of the
Trust) will be voted on separately by the shareholders of each Portfolio. In
addition, any other business which may properly come before the meeting will be
voted separately by shares of each Portfolio. The holders of each share of the
Trust shall be entitled to one vote for each full share and a fractional vote
for each fractional share.
The Trust is used exclusively as the underlying investment for certain variable
annuity contracts ("Variable Contracts") issued by Variable Account Two, a
separate account of Anchor National Life Insurance Company and FS Variable
Annuity Account Two, a separate account of First SunAmerica Life Insurance
Company (the "Life Companies"). Pursuant to current interpretations of the
Investment Company Act of 1940, as amended (the "1940 Act"), the Life Companies
will solicit voting instructions from owners of Variable Contracts with respect
to matters to be acted upon at the Meeting. All shares of the Trust held by the
Life Companies will be voted by the Life Companies in accordance with voting
instructions received from such contract owners. The Life Companies will vote
all of the shares which they are entitled to vote in the same proportion as the
votes cast by contract owners, on the issues presented, including shares which
are attributable to the Life Companies interest in the Trust. The Life Companies
have fixed the close of business on [Date] as the last day for which voting
instructions will be accepted.
The cost of the meeting, including the solicitation of proxies, will be paid by
or its affiliates. [The Life Companies will assume the costs associated with the
solicitation of voting instructions from their respective contract owners.]
A copy of each Portfolio's Annual Report (which contains information pertaining
to the Portfolio) may be obtained, without charge, by calling , at (800) .
This proxy statement and the enclosed notice of meeting and proxy card are first
being mailed to shareholders on or about February 5, 1996.
INTRODUCTION
The Meeting is being called for the following purposes.
With respect to each of the Portfolios: (1) to approve or disapprove an interim
investment advisory agreement (the "Interim Agreement") between each of the
Portfolios and the Adviser to take effect after the merger of The Chase
Manhattan Corporation and Chemical Banking Corporation; (2) to approve or
disapprove a new investment advisory agreement (the "New Agreement") between
each of the Portfolios and the Adviser (or its successor in the Bank Merger) and
a Sub-Advisory Agreement between the Adviser and Chase Asset Management, Inc. to
take effect as soon as practicable after approval by shareholders; (3) to elect
eleven trustees to serve as members of the Board of Trustees of the Trust; (4)
to ratify the selection of Price Waterhouse LLP as independent accountants for
the 1996 fiscal year of each of the Portfolios; (5) to approve or disapprove an
amendment to the Trust's Declarations of Trust; (6) to approve or disapprove
amendments to each Portfolio's fundamental investment restrictions; (7) with
respect to the U.S. Treasury Income Fund only, to approve or disapprove a
modification of the Portfolio's fundamental policy regarding permissible
investments in U.S. Government Securities; and to
2
transact such other business as may properly come before the Meeting or any
adjournment thereof.
PROPOSAL NUMBER
=============================================================================================================
NAME OF PORTFOLIO 1 2 3 4 5 6 7
- -------------------------------------------------------------------------------------------------------------
Asset Allocation Portfolio x x x x x x
- -------------------------------------------------------------------------------------------------------------
Money Market Portfolio x x x x x x
- -------------------------------------------------------------------------------------------------------------
U. S. Treasury Income Portfolio x x x x x x 1
- -------------------------------------------------------------------------------------------------------------
Growth & Income Portfolio x x x x x x x
- -------------------------------------------------------------------------------------------------------------
Capital Growth Portfolio x x x x x x
- -------------------------------------------------------------------------------------------------------------
International Equity Portfolio x x x x x x
=============================================================================================================
SUBCHART FOR PROPOSALS 6a-k
================================================================================================================================
NAME OF PORTFOLIO a b c d e f g h i j k
- --------------------------------------------------------------------------------------------------------------------------------
Asset Allocation Portfolio X X X X X X X X X X X
- --------------------------------------------------------------------------------------------------------------------------------
MONEY MARKET PORTFOLIO X X X X X X X X X X
- --------------------------------------------------------------------------------------------------------------------------------
U. S. TREASURY INCOME PORTFOLIO X X X X X X X X X X
- --------------------------------------------------------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO X X X X X X X X X X
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL GROWTH PORTFOLIO X X X X X X X X X X
- --------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO X X X X X X X X X X
================================================================================================================================
3
Approval of each one of the Proposals other than the election of trustees
(Proposal 3), the ratification of auditors (Proposal 4) and the amendment to the
Declaration of Trust (Proposal 5) requires the vote of a "majority of the
outstanding voting securities," within the meaning of the 1940 Act, of each
Portfolio to which the proposal is applicable. The term "majority of the
outstanding voting securities" is defined under the 1940 Act to mean: (a) 67% or
more of the outstanding Shares present at the Meeting, if the holders of more
than 50% of the outstanding Shares are present or represented by proxy, or (b)
more than 50% of the outstanding Shares of the Portfolio, whichever is less. The
election of each nominee for election as a trustee (Proposal 3) and the
amendment to the Declaration of Trust (Proposal 5) require the affirmative vote
of a majority of all Shares of the Trust voted at the Meeting, and the
ratification of auditors (Proposal 4) and the amendment to the Declaration of
Trust (Proposal 5) requires the vote of a majority of the Shares of each
Portfolio present at the Meeting.
An election of Trustees under Proposal 3 an approval of auditors under Proposal
4 and the amendment to the Declaration of Trust (Proposal 5) would be effective
immediately. If Proposals 1 is approved, it is anticipated that it will become
effective upon the occurrence of the Holding Company Merger and the Bank Merger.
If Proposals 2 and 6 and 7 are approved, it is anticipated that they will become
effective as soon as practical after approval by shareholders (and after the
Bank Merger, as necessary).
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF A NEW INVESTMENT
ADVISORY AGREEMENT BETWEEN EACH PORTFOLIO
AND THE CHASE MANHATTAN BANK, N.A. (OR THE
SUCCESSOR ENTITY THERETO)
INTRODUCTION
The Chase Manhattan Bank, N.A. currently serves as each Portfolio's investment
adviser pursuant to a separate Investment Advisory Agreement (the "Current
Advisory Agreement") for each Portfolio. The Chase Manhattan Bank, N.A. is a
wholly-owned subsidiary of The Chase Manhattan Corporation, a registered bank
holding company.
On August 27, 1995, The Chase Manhattan Corporation announced its entry into an
Agreement and Plan of Merger (the "Merger Agreement") with Chemical Banking
Corporation ("Chemical"), a bank holding company, pursuant to which The Chase
Manhattan Corporation will merge with and into Chemical (the "Holding Company
Merger"). Under the terms of the Merger Agreement, Chemical will be the
surviving corporation in the Holding Company Merger and will continue its
corporate existence under Delaware law under the name "The Chase Manhattan
Corporation" ("New Chase"). The board of directors of each holding company has
approved the Holding Company Merger, which will create the largest bank holding
company in the United States based on assets. The consummation of the Holding
Company Merger is subject to certain closing conditions. The Holding Company
Merger is expected to be completed during the first quarter of 1996.
4
Subsequent to the Holding Company Merger, it is expected that the adviser to the
Portfolios, The Chase Manhattan Bank, N.A., will be merged with and into
Chemical Bank, a New York banking corporation ("Chemical Bank") (the "Bank
Merger" and together with the Holding Company Merger, the "Mergers"). The
surviving bank will continue operations under the name The Chase Manhattan Bank
(as used herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and
its successor in the Bank Merger, and the term "Adviser" means Chase (including
its successor in the Bank Merger) in its capacity as investment adviser to the
Portfolios). The consummation of the Bank Merger is subject to certain closing
conditions. The Bank Merger is expected to be completed on or about July, 1996.
Chemical is a publicly owned bank holding company incorporated under Delaware
law and registered under the Federal Bank Holding Company Act of 1956, as
amended. Through its direct or indirect subsidiaries, Chemical managed as of
December 31, 1995, more than $__ billion in assets, including approximately $__
billion in mutual fund assets in 11 mutual fund portfolios. Chemical Bank is a
wholly-owned subsidiary of Chemical and is a New York State chartered bank.
As required by the Investment Company Act of 1940, as amended (the "1940 Act"),
the Current Advisory Agreement provides for its automatic termination upon its
"assignment" (as defined in the 1940 Act). Consummation of the Holding Company
Merger may be deemed to result in an assignment of the Current Advisory
Agreement and, consequently, to terminate the Current Advisory Agreement in
accordance with its terms. Similarly, the consummation of the Bank Merger may
also be deemed to result in an assignment and consequently, terminate the
then-existing investment advisory contract. In anticipation of the consummation
of the Mergers and to provide continuity in investment advisory services, at a
meeting held on December __, 1995, the Trust's Board, including a majority of
the Board members who are not "interested persons" (as defined in the 1940 Act)
of the Investment Company, approved the Interim Advisory Agreement between the
Trust, on behalf of each Portfolio, and the Adviser to take effect upon the
consummation of the Holding Company Merger. The Board also directed that such
agreement be submitted to shareholders for approval at this meeting. In
addition, the Board of Trustees approved the continuation of such agreement
after the Bank Merger, on the same terms and conditions as in effect immediately
prior to the merger (except for effective and termination dates) in the event
the Interim Advisory Agreement is deemed to terminate as a result of the Bank
Merger. Approval of Proposal 1 will also be deemed approval of such continuation
of the New Advisory Agreement after the Bank Merger, if applicable. EACH INTERIM
ADVISORY AGREEMENT IS IDENTICAL TO THE CURRENT ADVISORY AGREEMENT, EXCEPT FOR
ITS EFFECTIVE DATE. FOR EACH PORTFOLIO, THE AGGREGATE CONTRACTUAL RATE
CHARGEABLE FOR INVESTMENT ADVISORY SERVICES WILL REMAIN THE SAME.
In connection with each Portfolio's approval of the Interim Advisory Agreement,
the Board considered that the terms of the Mergers do not require any change in
the Adviser's investment management or operation of the Portfolio, the
investment personnel managing the Portfolio, the shareholder services or other
business activities of the Portfolio, or, with the exception of the U.S.
Treasury Portfolio, the investment objectives of the Portfolios. Chemical and
the Adviser have informed the Board of Trustees that the Mergers will not at
this time result in any such
5
change, although no assurance can be given that such a change will not occur.
Each also has advised that, at present, neither plans nor proposes to make any
material changes in the business, corporate structure or composition of senior
management or personnel of the Adviser, or in the manner in which the Adviser
renders investment advisory services to each Portfolio. If, after the Mergers,
changes in the Adviser are proposed that might materially affect its services to
a Portfolio, the Board will consider the effect of those changes and take such
action as it deems advisable under the circumstances.
The Adviser has informed the Trust that it proposes to comply with Section 15(f)
of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser or any of its affiliated persons to receive any amount or
benefit in connection with a change in control of the investment adviser as long
as two conditions are met. First, for a period of three years after the
transaction, at least 75% of the Board members of the investment company must
not be interested persons of such investment adviser. Second, an "unfair burden"
must not be imposed on the investment company as a result of such transaction or
any express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the investment adviser,
or any interested person of any such adviser, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
security holders (other than fees for bona fide investment advisory or other
services) or, with certain exceptions, from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company. The Adviser, after due inquiry, is not aware of any express
or implied term, condition, arrangement or understanding which would impose an
"unfair burden" on the Trust as a result of the Mergers. New Chase, the Adviser
and their affiliates have agreed to take no action that would have the effect of
imposing an "unfair burden" on the Trust as a result of the Mergers. Chase,
Chemical and/or one or more of their affiliates have undertaken to pay all costs
relating to the Mergers, including the costs of the shareholders' meetings.
THE INVESTMENT ADVISER
THE ADVISORY AGREEMENTS. The Chase Manhattan Bank, N.A., One Chase Manhattan
Plaza, New York, New York 10081, currently serves as investment adviser to the
Portfolios pursuant to an investment advisory agreement between the Adviser and
the Trust on behalf of each Portfolio (the "Current Advisory Agreement"). The
Adviser will serve as investment adviser to the Portfolios after the Holding
Company Merger under an investment advisory agreement with the Trust on behalf
of each Portfolio (the "Interim Advisory Agreement") which is identical in all
material respects to the Current Advisory Agreement except for its effective
date. A copy of the form of the New Advisory Agreement is attached hereto as
Appendix A and should be read in conjunction with the following.
THE CHASE MANHATTAN BANK, N.A. The Chase Manhattan Bank, N.A., 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. Its
headquarters are at One Chase Manhattan Plaza, New York, New York 10081. As of
December 31, 1995, Chase was one of
6
the largest commercial banks in the United States, with assets of $____ billion.
As of such date, The Chase Manhattan Corporation was one of the largest bank
holding companies in the United States, having total assets of approximately
$___ billion. As of December 31, 1995, The Chase Manhattan Corporation through
various subsidiaries provided personal, corporate and institutional investment
management services for approximately $___ billion in assets, of which Chase
provided investment management services to portfolios containing approximately
$___ billion in assets. Included among Chase's accounts are commingled trust
funds and a broad spectrum of individual trust and investment management
portfolios. These accounts have varying investment objectives. Effective upon
consummation of the Holding Company Merger, The Chase Manhattan Bank, N.A. will
be a wholly-owned subsidiary of New Chase. Upon consummation of the Bank Merger,
The Chase Manhattan Bank, a New York State chartered bank (the successor entity
to The Chase Manhattan Bank, N.A.) will continue to be a wholly-owned subsidiary
of New Chase.
The other mutual funds for which the Adviser also serves as investment adviser,
their assets as of December 31, 1995, and their advisory fees are:
Total Assets
Mutual Fund Trust Advisory Fee as of 12/31/95
Vista California Tax Free Money Market Fund 0.10%
Vista New York Tax Free Money Market Fund 0.10
Vista Tax Free Money Market Fund 0.10
Vista U.S. Government Money Market Fund 0.10
Vista Global Money Market Fund 0.10
Vista Federal Money Market Fund 0.10
Vista Treasury Plus Money Market Fund 0.10
Vista Prime Money Market Fund 0.10
Vista Tax Free Inome Fund 0.30
Vista New York Tax Free Income Fund 0.30
Vista California Intermediate Tax Free Income Fund 0.30
Total Assets
Mutual Fund Group Fee as of 12/31/95
Vista Short Term Bond Fund 0.25%
Vista U.S. Treasury Income Fund 0.30
Vista Bond Fund 0.30
Vista U.S. Government Securities Fund 0.30
Vista Equity Income Fund 0.40
Vista Equity Fund 0.40
Vista Balanced Fund 0.50
IEEE Balanced Fund 0.60
Vista Small Cap Equity Fund 0.65
Vista Southeast Asian Fund 1.00
7
Vista Japan Fund 1.00
Vista European Fund 1.00
Vista Global Fixed Income Fund 0.75
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers throughout
the U.S. and around the world. Effective upon consummation of the Holding
Company Merger, the Adviser will be a wholly-owned subsidiary of New Chase. Upon
consummation of the Bank Merger, the Adviser will continue to be a wholly-owned
subsidiary of New Chase.
The Adviser is currently a wholly-owned subsidiary of The Chase Manhattan
Corporation, a registered bank holding company, and is a commercial bank
offering a wide range of banking and investment services to customers throughout
the U.S. and around the world. Effective upon consummation of the Holding
Company Merger, the Adviser will be a wholly-owned subsidiary of New Chase. Upon
consummation of the Bank Merger, the Adviser will continue to be a wholly-owned
subsidiary of New Chase.
CURRENT AND INTERIM ADVISORY AGREEMENTS
The Current and Interim Advisory Agreements for each Fund are identical, except
for their effective dates.
The Current and Interim Advisory Agreements provide for the Adviser to render
investment, supervisory and certain corporate administrative services subject to
the control of the Board of Trustees. The Current and Interim Advisory
Agreements state that the Adviser shall, at its expense, provide to the
particular Portfolio all office space and facilities, equipment and clerical
personnel necessary to carry out its duties under each Advisory Agreement.
Under each of the Current and Interim Advisory Agreements, the Adviser pays all
compensation of those officers and employees of the Trust and of those Trustees
who are affiliated with the Adviser. Each Portfolio bears the cost of the
preparation and setting in type of its prospectuses and reports to shareholders
and the costs of printing and distributing those copies of such prospectuses and
reports as are sent to shareholders. Under the Current and Interim Advisory
Agreements all other expenses of the Portfolio not expressly assumed by the
Adviser are paid by the Portfolio. Each Advisory Agreement lists examples of
such expenses; the major categories of such expenses relate to interest, taxes,
legal and audit expenses, custodian and transfer agent or shareholder servicing
agency expenses, stock issuance and redemption costs, certain printing costs,
registration costs of the Trust and its shares under federal and state
securities laws, and non-recurring expenses, including litigation.
For the services it provides under the terms of each Current and Interim
Advisory Agreement, each Portfolio pays the Adviser a monthly fee equal to a
specified percentage per annum of its
8
average daily net assets computed at the close of each business day. See "Fees
and Fee Waivers" below which sets forth the applicable percentage for each
Portfolio. The Adviser may voluntarily agree to waive a portion of the fees
payable to it.
The Current Advisory Agreements are currently in effect until August 23, 1996,
and each of the Current and Interim Advisory Agreements continues from year to
year thereafter, provided that the Agreement is specifically approved in a
manner consistent with the 1940 Act. However, the Current Advisory Agreements
may be deemed to terminate upon consummation of the Holding Company Merger. The
1940 Act requires approval at least annually by the Board of Trustees, including
the vote of a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of any party to the Agreement cast in person at a
meeting called for the purpose of voting on approval, or by the vote of the
holders of a "majority" of the outstanding voting securities (as defined in the
1940 Act) of the Portfolio. The Interim Agreements will terminate 120 days after
January 31, 1996 (see "Additional Information").
The Trust, on behalf of each Portfolio, may terminate each of the Current and
Interim Advisory Agreements without penalty on not more than 60 days' nor less
than 30 days' written notice when authorized by either a vote of the
shareholders of the Portfolio or by a vote of a majority of the Trust's Board of
Trustees, including the vote of a majority of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of any party to the Agreement.
The Adviser may terminate each of the Current and Interim Advisory Agreements on
not more than 60 days' nor less than 30 days' written notice. Both Advisory
Agreements will automatically terminate in the event of their assignment (as
defined in the 1940 Act).
In addition, each of the Current and Interim Advisory Agreements provides that,
in the event the operating expenses of the Portfolio, including all investment
advisory and administration fees, but excluding brokerage commissions and fees,
distribution fees, taxes, interest and extraordinary expenses such as litigation
expenses, for any fiscal year exceed the most restrictive expense limitation
applicable to the Portfolio imposed by the securities laws or regulations
thereunder of any state in which the shares of the Portfolio are qualified for a
sale, as such limitations may be raised or lowered from time to time, the
Adviser shall reduce its advisory fee described above to the extent of its share
of such excess expenses. The amount of any such reduction to be borne by the
Adviser will be deducted from the monthly fee otherwise payable to the Adviser
during such fiscal year; and if such amounts should exceed the monthly fee, the
Adviser will pay to the Portfolio its share of such excess expenses no later
than the last day of the first month of the next succeeding fiscal year.
CERTAIN RELATIONSHIPS AND ACTIVITIES. The Adviser and its affiliates may have
deposit, loan and other commercial banking relationships with the issuers of
securities purchased on behalf of any of the Portfolios, including outstanding
loans to such issuers which may be repaid in whole or in part with the proceeds
of securities so purchased. The Adviser and its affiliates deal, trade and
invest for their own accounts in U.S. Government obligations and municipal
obligations and are among the leading dealers of various types of U.S.
Government obligations and municipal obligations. The Adviser and its affiliates
may sell U.S. Government obligations and municipal obligations to and purchase
them from other investment companies distributed by Vista Broker Dealer
Services. The Adviser will not invest any Portfolio assets in any U.S.
Government
9
obligations or municipal obligations purchased from itself or any affiliate,
although under certain circumstances such securities may be purchased from other
members of an underwriting syndicate in which the Adviser or an affiliate is a
non-principal member. This restriction may limit the amount or type of U.S.
Government obligations or municipal obligations available to be purchased on
behalf of the Portfolios. The Adviser has informed the Portfolio that in making
its investment decisions it does not obtain or use material inside information
in the possession of any other division or department of the Adviser or in the
possession of any affiliate of the Adviser.
Both the Current and Interim Advisory Agreements provide that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard for its
obligations thereunder, the Adviser shall not be liable for any act or omission
in the course of or in connection with the rendering of its services thereunder.
BOARD CONSIDERATION
In considering whether to approve the Interim Advisory Agreement and to submit
it to the shareholders for their approval, the Board of Trustees considered the
following factors: (1) the representation that there would be no diminution in
the scope and quality of advisory and other services provided by the Adviser
under the Interim Advisory Agreement, and (2) the identical nature of the terms
and conditions, including compensation payable, contained in the Interim
Advisory Agreement as compared to the Current Advisory Agreement. Additionally,
the Board considered the benefits that would be obtained by each Portfolio in
maintaining continuity in the advisory services provided to it, and determined
that continuity was advantageous to the Portfolio as it would serve to minimize
uncertainty and confusion, provide for the continued utilization of the
demonstrated skills and capability of the staff of the Adviser and its
familiarity with the operations of the Trust, and avoid the possibility of
disruptive effects on the Trust that might otherwise result from a change in the
management and operations of the Trust.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of its Interim Advisory Agreement will require the affirmative vote of
a "majority of the outstanding voting securities" of the relevant Portfolio,
which for this purpose means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of such Portfolio or (2) 67% or more of the shares
of such Portfolio present at the meeting if more than 50% of the outstanding
shares of such Portfolio are represented at the meeting in person or by proxy (a
"Majority Vote"). If the shareholders of a Portfolio do not approve the Interim
Advisory Agreement, The Chase Manhattan Corporation and Chemical Banking
Corporation nevertheless intend to proceed with the Holding Company Merger and,
in such case, the affected Current Advisory Agreement will terminate
automatically. In that event, the Board will take such further action as it may
deem to be in the best interests of the Portfolio's shareholders.
ADDITIONAL INFORMATION
10
Chase also serves as each Portfolio's administrator pursuant to a separate
Administration Agreement. Under the Administration Agreement, Chase generally
assists in all aspects of the Portfolio's operations, other than providing
investment advice, subject to the overall authority of the Board of Trustees in
accordance with applicable state law. Under the terms of the relevant
Administration Agreement, Chase receives a monthly fee at the annual rate of
.05% of the value of each Portfolio's average daily net assets. For each
Portfolio, the administration fee payable, the amount by which such fee was
reduced pursuant to a waiver by Chase, and the net administration fees paid by
the Portfolio under the Administration Agreement for the indicated period are
set forth below under "Fees and Fee Waivers."
The Portfolios have engaged Vista Broker-Dealer Services, Inc. (the
"Sub-Administrator"), a wholly-owned subsidiary of BISYS Fund Services, Inc.,
located at 125 West 55th Street, New York, New York 10019, to assist it in
providing certain administrative services for each Portfolio pursuant to a
Sub-Administration Agreement between the Trust, on behalf of each Portfolio, and
the Sub-Administrator. The Sub-Administrator receives an annual fee, payable
monthly, of .15% of the average daily net assets of each Portfolio.
On November 6, 1995, the Trust, other investment companies advised by Chase, and
Chase filed an application (the "Application") with the Securities and Exchange
Commission (the "Commission") requesting an order of the Commission permitting
implementation, without prior shareholder approval, of the Interim Advisory
Agreements during the interim period commencing on the date of the closing on
the Holding Company Merger and ending at the earlier of such time as sufficient
votes are cast by the applicable Portfolio's shareholders to approve the
relevant Interim Agreement or April __, 1996 (the "Interim Period").
As a condition to the requested exemptive relief, the Trust has undertaken in
the Application that the advisory compensation payable by any Portfolio during
the Interim Period will be maintained in an interest-bearing escrow account and,
with respect to each Portfolio, amounts in the account will be paid to Chase
only upon approval by the shareholders of the Portfolio of the applicable
Interim Advisory Agreement and the compensation payable thereunder. In addition,
the Application contains representations that Chase (and its successor, if
applicable), will take all appropriate steps to ensure that the scope and
quality of its advisory and other services provided to the Portfolios during the
Interim Period will be at least equivalent to the scope and quality of the
services previously provided; and that, in the event of any material change in
the personnel providing services pursuant to the Interim Advisory Agreements
during the Interim Period, the Board will be apprised and consulted to assure
that they are satisfied that the services provided will not be diminished in
scope or quality.
The Trust's Board of Trustees concluded that payment of the investment advisory
fee under the Interim Advisory Agreement, during the Interim Period would be
appropriate and fair considering that (1) the fee would be paid at the same rate
as was previously in effect under the Current Advisory Agreement and services
would be provided in the same manner, (2) because of the relatively short time
frame necessary to complete the Holding Company Merger, there was a possibility
that some or all of the Portfolios would not obtain the requisite number of
votes to approve the Interim Advisory Agreement prior to the Holding Company
Merger, and (3) the
11
non-payment of advisory fees during the Interim Period would be an unduly harsh
result in view of the services provided to each Portfolio under the Interim
Advisory Agreements.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the Interim Advisory Agreement will require the affirmative vote of
a "majority of the outstanding voting securities" of the relevant Portfolio,
which for this purpose means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of such Portfolio or (2) 67% or more of the shares
of such Portfolio present at the meeting if more than 50% of the outstanding
shares of such Portfolio are represented at the meeting in person or by proxy (a
"Majority Vote"). If the shareholders of a Portfolio do not approve the Proposed
Advisory Agreement, the Adviser will continue to manage the Portfolio's
investments under the Existing or New Advisory Agreement, as the case may be. In
that event, the Board will take such further action as it may deem to be in the
best interests of the Portfolio's shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
PROPOSAL 2
APPROVAL OR DISAPPROVAL OF A NEW
INVESTMENT ADVISORY AGREEMENT BETWEEN EACH
OF THE PORTFOLIOS AND THE CHASE MANHATTAN BANK N.A.
(OR THE SUCCESSOR ENTITY THERETO) , AND A SUB-ADVISORY
AGREEMENT BETWEEN THE CHASE MANHATTAN BANK N.A. (OR THE
SUCCESSOR ENTITY THERETO) AND CHASE ASSET MANAGEMENT, INC.
INTRODUCTION
The Chase Manhattan Bank, N.A., the current investment adviser of the Portfolios
(as used herein, the term "Chase" refers to The Chase Manhattan Bank, N.A. and
its successor in the Bank Merger, and the term "Adviser" means Chase (including
its successor in the Bank Merger) in its capacity as Adviser to the Portfolios)
recommended to the Board that the Trust enter into a new Investment Advisory
Agreement, on behalf of each Portfolio, and the Adviser (the "New Advisory
Agreement") effective as soon as practicable after the approval of shareholders.
The Adviser also recommended to the Board that the Adviser be permitted to
utilize the services of its wholly-owned subsidiary, Chase Asset Management,
Inc. ("CAM Inc."), to render advisory services to the Portfolios. CAM Inc. is a
registered investment adviser which was recently incorporated for the purpose of
rationalizing the delivery of investment advisory services by The Chase
Manhattan Bank to its institutional clients. CAM Inc. will be retained pursuant
to a proposed Sub-Advisory Agreement (the "CAM Inc. Agreement"). The Board has
approved, and recommends that the shareholders of each Portfolio approve, the
New Advisory Agreement and CAM Inc. Agreement (collectively, the "Agreements").
In addition, the Board of Trustees approved the continuation of the New Advisory
Agreements after the Bank Merger, on the same terms and conditions as in effect
immediately prior to the merger (except for effective and termination dates) in
the event the Agreements are deemed to terminate as a result of the Bank
12
Merger. Approval of Proposal 7 will be deemed approval of such continuation of
the Agreement after the Bank Merger, if applicable. If approved, the New
Advisory Agreement will become effective as soon as practicable after the
approval of shareholders.
No increase is proposed to the contractual fee rates under the New Advisory
Agreement and the Adviser, and not the Portfolios, will compensate CAM Inc. for
its services as Sub-Adviser. THEREFORE, THE PORTFOLIOS WILL NOT BEAR ANY
INCREASE IN THE CONTRACTUAL ADVISORY FEE RATES RESULTING FROM THE NEW ADVISORY
AGREEMENT OR THE CAM INC. AGREEMENT.
While the New Advisory Agreement is described below, the discussion is qualified
by the provisions of the complete agreement, a copy of which is attached as
Exhibit B. If the shareholders of a Portfolio do not approve this Proposal, then
Chase will continue to act, commencing on the Holding Company Merger, as the
adviser to such Portfolio under the terms of the Interim Advisory Agreement,
assuming Proposal 1 is approved. The Proposed Advisory Agreement should be read
in conjunction with the following.
Background. In connection with the Mergers, New Chase intends to rationalize its
corporate wide investment management operations in order to more fully take
advantage of portfolio management skills that will exist within the various
corporate entities controlled by New Chase. As part of this structuring, New
Chase would like to consolidate its mutual fund supervisory functions within one
entity (Chase), and its portfolio management responsibilities within another
entity (CAM Inc.). The Adviser also seeks to retain the ability to utilize
portfolio managers employed by the various investment management entities
affiliated with the Adviser through common ownership by New Chase.
Thus, the New Advisory Agreement would provide the Adviser with the ability to
utilize the specialized portfolio skills of employees of all its various
affiliates, thereby providing the Portfolios with greater opportunities and
flexibility in accessing investment expertise. For the foreseeable future, the
Adviser would employ certain members of the Adviser's senior management.
SIMILARITIES BETWEEN THE CURRENT AND NEW ADVISORY AGREEMENTS:
The New Advisory Agreement is similar in many respects to the Current Advisory
Agreement and Interim Advisory Agreement. The New Advisory Agreement contains
the material terms of the Current Advisory Agreement, but reflects the proposed
change of the investment adviser from The Chase Manhattan Bank, N.A. to its
successor entity, and incorporates additional provisions designed to clarify and
supplement the rights and obligations of the parties.
MOST IMPORTANTLY, THE CONTRACTUAL RATE AT WHICH FEES ARE REQUIRED TO BE PAID BY
EACH PORTFOLIO FOR INVESTMENT ADVISORY SERVICES, AS A PERCENTAGE OF AVERAGE
DAILY NET ASSETS, WILL REMAIN THE SAME. Under the provisions of both the Current
and the New Advisory Agreements, each Portfolio is required to pay the Adviser a
monthly fee equal to a stated percentage per annum of its average daily net
assets. These amounts are set forth below under "Fees and Fee Waivers." Although
the Board of Trustees believes this fee to be comparable to advisory fees paid
by many funds having similar objectives and policies, the total advisory fee
payable by a
13
Portfolio with an advisory fee of .75% or higher is higher than the advisory
fees paid by most mutual funds.
The following summarizes certain additional aspects of the Current and New
Advisory Agreements (collectively, the "Agreements") which are materially the
same in both Agreements:
In the absence of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the obligations or duties of the Adviser, the Adviser shall not be
liable to the Portfolios or to any shareholder for any losses that may be
sustained by the Portfolios in connection with its performance of the Agreement.
The Adviser bears all expenses in connection with the performance of its
services under the Agreement. The Portfolios bear the expenses incurred in their
operations. Both agreements provide that the Adviser shall, at its expense,
provide the Portfolios with office space, furnishings and equipment and
personnel required by it to perform the services to be provided by the Adviser
and that the Trust shall be responsible for all of the Portfolios' expenses and
liabilities.
Under the Agreement, if the aggregate expenses incurred by a Portfolio in any
fiscal year is in excess of the lowest applicable expense limitation imposed by
state securities laws or regulations thereunder, the Adviser shall reduce its
investment advisory fee, but not below zero, to the extent of its share of such
excess expenses; provided, however, that certain provided expenses are
specifically excluded from such calculation. No such reimbursement was required
during the Portfolios' most recent fiscal period.
A Portfolio may terminate the Agreement as to that Portfolio without penalty on
not more than 60 days' written notice when authorized by either a vote of
shareholders holding a "majority of the outstanding voting securities" (within
the meaning of the 1940 Act) of the Portfolio or by a vote of a majority of the
Trust's Board of Trustees. The Adviser may terminate the Agreement on 60 days'
written notice to the Trust. The Agreement terminates in the event of its
assignment (as defined in the 1940 Act).
DIFFERENCES BETWEEN THE CURRENT AND NEW ADVISORY AGREEMENTS:
The following highlights summarize some of the additional provisions which are
included in the New Advisory Agreement:
After the Bank Merger, Chase Manhattan Bank, a New York state charted bank, the
successor entity to The Chase Manhattan Bank, N.A., will be the adviser to the
Portfolios rather than The Chase Manhattan Bank, N.A., and will continuously
supervise the investment and reinvestment of cash, securities and other property
comprising the assets of the Portfolios. The Chase Manhattan Bank, N.A. will be
the Adviser to the Portfolios until the Bank Merger.
14
Details Regarding the Adviser's Duties. The New Advisory Agreement clearly
specifies the duties of the Adviser. For example, that the Adviser will be
required to obtain and evaluate pertinent data and other significant events and
developments which affect the economy, the Portfolios' investment programs, the
issuers of securities and the industries in which they engage, and furnish a
continuous investment program for each Portfolio. The Adviser will be obligated
to furnish such reports, evaluations, information or analyses to the Trust as
the Board may request, make recommendations to the Board with respect to Trust
policies, and carry out such policies as are adopted by the Board.
Use of Affiliated Entities. The New Advisory Agreement clarifies that the
Adviser 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 to
the Trust under applicable laws and are under the common control of New Chase as
long as all such persons are functioning as part of an organized group of
persons, and such organized group of persons is managed at all times by
authorized officers of the Adviser. The Adviser will be as fully responsible to
the Trust for the acts and omissions of such persons as it is for its own acts
and omissions.
Use of a Sub-Adviser. The New Advisory Agreement clarifies that the Adviser may
from time to time employ or associate with such other entities or persons (a
"Sub-Adviser") as it believes appropriate to assist in the performance of the
New Advisory Agreement with respect to a particular Portfolio. However, the
Portfolios will not pay any additional compensation for any Sub-Adviser, and the
Adviser will be as fully responsible to the Trust for the acts and omissions of
the Sub-Adviser as it is for its own acts and omissions, and the Adviser must
review, monitor and report to the Board regarding the performance and investment
procedures of any SubAdviser. The proposed Sub-Advisory agreement is discussed
below under "Consideration and Proposal of the CAM Inc. Agreement".
Execution of Portfolio Transactions. The New Advisory Agreement sets forth
specific terms as to brokerage transactions and the Adviser's use of
broker-dealers. For example, the Adviser will be obligated to use its best
efforts to seek to execute portfolio transactions at prices which, under the
circumstances, result in total costs or proceeds being the most favorable to the
Portfolios. In assessing the best overall terms available for any transaction,
the Adviser will consider all factors it deems relevant, including the breadth
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, research services
provided and the reasonableness of the commission, if any, both for the specific
transaction and on a continuing basis.
"Soft Dollars." A provision of the New Advisory Agreement explicitly allows the
Adviser to select brokers or dealers who also provide brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) to the Adviser, the Portfolios and/or the other accounts over which
the Adviser exercises investment discretion, and provides that, notwithstanding
the above, the Adviser may pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for a
Portfolio which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Adviser
determines in good faith that the total commission is reasonable in relation to
the value of the brokerage and research services provided
15
by such broker or dealer, viewed in terms of either that particular transaction
or the overall responsibilities of the Adviser with respect to accounts over
which it exercises investment discretion.
Aggregation of Orders. There is also a clarification of the authority of the
Adviser to aggregate the securities to be sold or purchased with those of other
Portfolios or its other clients if, in the Adviser's reasonable judgment, such
aggregation will result in an overall benefit to a Portfolio, taking into
consideration the advantageous selling or purchase price, brokerage commission
and other expenses, and trading requirements.
Other Clarifications. The New Advisory Agreement contains certain additional
provisions which are intended to clarify the status, rights or obligations of
the parties. For example, the Adviser is deemed to be an independent contractor
and the provisions of the Proposed Advisory Agreement are deemed to apply to the
Portfolios severally and not jointly.
CONSIDERATION AND PROPOSAL OF THE CAM INC. AGREEMENT
It is being proposed that the Adviser be permitted to utilize the services of
CAM Inc. as a subadviser under a proposed Investment Sub-Advisory Agreement (the
"CAM Inc. Agreement") in order to enable the Adviser to more efficiently render
advisory services to each of the Portfolios.
The proposed form of the CAM Inc. Agreement is attached as Exhibit C and should
be read in conjunction with the following.
The Adviser's decision to utilize the services of CAM Inc. in a sub-advisory
capacity was based on various considerations, including the Adviser's desire to
consolidate its asset management responsibilities in one entity, that the
portfolio managers which currently manage the assets of the Portfolios for the
Adviser will also manage the Portfolios as employees of CAM Inc., that CAM Inc.
provides a wide range of investment management capabilities, including the
ability to discriminate among a wide range of potential investments as part of
an investment program for each of the Portfolios, that risk control is integral
to its methodology, that it has shown a relative consistency in investment
management performance, and the attractiveness of the fee structure and
estimated transaction costs that would be incurred.
Based upon the foregoing, the Adviser recommended to the Board of Trustees that,
subject to approval by the Board and such Portfolios' shareholders of the New
Advisory Agreement and the CAM Inc. Agreement, the Adviser enter into the CAM
Inc. Agreement with CAM Inc.. In considering whether to recommend that the CAM
Inc. Agreement be approved by shareholders, the Board requested and evaluated
various information from the Adviser and CAM Inc. relevant to the Adviser's
decision. In addition, the Board considered various other factors which it
deemed to be relevant, including, but not limited to, the fact that the managers
of each Portfolio will continue to manage the assets of the Portfolios as
employees of CAM Inc., capabilities to be provided by CAM Inc., the stability of
its investment staff, the trading systems to be utilized and the potential to
minimize transaction costs, the ability to customize portfolios for the
Portfolios, and the Adviser's access to the various investment and research
resources of CAM Inc.
16
DESCRIPTION OF THE PROPOSED CAM INC. AGREEMENT
The proposed arrangement between the Adviser and CAM Inc. under the CAM Inc.
Agreement would enable the Adviser to manage the investment activities of the
Portfolios covered in the CAM Inc. Agreement most effectively by delegating to
CAM Inc. portfolio management duties relating to transactions in the securities
held by such Portfolios. With respect to the day to day management of the
Portfolios under the CAM Inc. Agreement, CAM Inc. would make decisions
concerning, and place all orders for, purchases and sales of securities and help
maintain the records relating to such purchases and sales. CAM Inc. may, in its
discretion, provide such services through its own employees or the employees of
one or more affiliated companies that are qualified to act as an investment
adviser to the Trust under applicable laws and are under the common control of
New Chase; provided that (i) all persons, when providing services under the CAM
Inc. 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 CAM Inc.
The Adviser and CAM Inc. would bear all expenses in connection with the
performance of their respective services and the services under the CAM Inc.
Agreement.
As investment adviser, the Adviser would oversee the management of the
Portfolios under the CAM Inc. Agreement, and, subject to the general supervision
of the Board of Trustees, would make recommendations and provide guidelines to
CAM Inc. based on general economic trends and macroeconomic factors. Among the
recommendations which may be provided by the Adviser to CAM Inc. would be
guidelines and benchmarks against which the Portfolios would be managed. From
the fee paid by the Portfolios under the New Advisory Agreement to the Adviser,
the Adviser will bear responsibility for payment of sub-advisory fees to CAM
Inc. Therefore, the Portfolios would not bear any increase in advisory fee rates
resulting from the New Advisory Agreement and the CAM Inc. Agreement.
The Board of Trustees of the Trust, including a majority of the Trustees who are
not interested persons of the Portfolios, the Adviser or CAM Inc., unanimously
approved the CAM Inc. Agreement at a meeting held on December 14, 1995. If
approved by shareholders, unless sooner terminated, the CAM Inc. Agreement will
remain in effect for two years and will thereafter continue for successive
one-year periods, provided that such continuation is specifically approved at
least annually by the Board of Trustees, or by the vote of a "majority of the
outstanding voting securities" of the Portfolios under the CAM Inc. Agreement as
defined under the 1940 Act and, in either case, by a majority of the
Disinterested Trustees who are not interested persons of the Adviser or CAM
Inc., by vote cast in person at a meeting called for such purpose. The CAM Inc.
Agreement is terminable at any time, without penalty, by vote of the Board of
Trustees, by the Adviser, by the vote of "a majority of the outstanding voting
securities" of the Portfolios under the CAM Inc. Agreement, or by CAM Inc., upon
60 days' written notice. The CAM Inc. Agreement will terminate automatically in
the event of its assignment, as defined under the 1940 Act.
In the event that both the New Advisory Agreement and the CAM Inc. Agreement are
not approved by shareholders of any Portfolio, neither the New Advisory
Agreement nor the CAM Inc. Agreement will be implemented for such Portfolios,
and the Interim Advisory Agreement
17
between such Portfolios and the Adviser will remain in effect. If the Interim
Advisory Agreement is not approved by shareholders, the Board will consider the
appropriate course of action.
INFORMATION ABOUT CHASE ASSET MANAGEMENT, INC.
Chase Asset Management, Inc. was organized as a Delaware corporation on
September 1, 1995, and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. CAM Inc. is a wholly owned
subsidiary of The Chase Manhattan Bank, N.A., which is a wholly owned subsidiary
of The Chase Manhattan Corporation. After the completion of the mergers, CAM
Inc. will continue to be a wholly-owned subsidiary of the Adviser which will be
a wholly-owned subsidiary of New Chase. CAM Inc. is registered with the
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. Information about the
Adviser and its affiliates is set forth above.
The principal executive officers and directors of CAM Inc. are as follows:
James W. Zeigon, Director and Chairman of the Board. Mr. Zeigon is also an
Executive Vice President of the Chase Manhattan Bank, N.A.
Mark R. Richardson, Director, President and Chief Investment Officer. Mr.
Richardson is also a Managing Director of the Chase Manhattan Bank, N.A.
Stephen E. Prostano, Director, Executive Vice President and Chief Operating
Officer. Mr. Prostano is also a Managing Director of the Chase Manhattan Bank,
N.A.
The business address of each of the foregoing individuals is 1211 Avenue of the
Americas, New York, New York 10036.
BOARD CONSIDERATIONS
In considering whether to recommend that the New Advisory Agreement and CAM Inc.
Agreement be approved by shareholders, the Board considered the nature and
quality of services to be provided by the Adviser and CAM Inc. and comparative
data as to advisory fees and expenses, and the Board requested and evaluated
such other information from Chase and Chemical which the Board deemed to be
relevant, including, but not limited to, the Adviser's ability to select and
utilize portfolio managers from its affiliates, that the Portfolios would
continue to be managed by their current portfolio managers for the foreseeable
future, thereby ensuring continuity in management; that the rate at which
advisory fees will initially be paid to the Adviser would be identical to the
rate at which fees are now paid; and that the New Advisory Agreement would
include certain provisions designed to modernize the terms of the agreement and
reflect regulatory developments, such as those concerning "soft dollars" and
aggregation of orders under regulations and releases recently issued by the SEC.
18
The Board, including a majority of the Trustees who are not interested persons
of the Portfolios or the Adviser ("Disinterested Trustees"), unanimously
approved the New Advisory Agreement and CAM Inc. Agreement at a meeting held on
December , 1995.
FEES AND FEE WAIVERS
Under the Current Advisory Agreement, each Portfolio pays the Adviser (and under
the Interim and New Advisory Agreements, each Portfolio would pay the Adviser) a
fee, computed daily and paid monthly, at the annual rates set forth below as a
percentage of average daily net assets:
Name of Portfolio Fee
International Equity Portfolio 0.80%
Capital Growth Portfolio 0.60%
Growth and Income Portfolio 0.60%
Asset Allocation Portfolio 0.55%
Treasury Portfolio 0.50%
Money Market Portfolio 0.25%
Each of the Advisory Contracts is dated August 23, 1994 and was last approved by
shareholders on _______________.
Under the Current Advisory Agreement, the Interim Advisory Agreement and New
Advisory Agreement, the Adviser may periodically reduce all or a portion of its
advisory fee with respect to any Portfolio. In the fiscal period ended October
31, 1995, the Portfolios paid to the Adviser aggregate investment advisory fees,
and the Adviser waived its fees and/or reimbursed expenses to each Portfolio, as
follows:
Amount of Fee
Waiver
and/or
Expense
Name of Portfolio Fees Paid Reimbursement
*
International Equity Portfolio 0 $21,099
Capital Growth Portfolio 0 16,843
Growth and Income Portfolio 0 16,671
Asset Allocation Portfolio 0 14,637
Treasury Portfolio 0 13,126
Money Market Portfolio 0 6,468
19
Chase also serves as the Administrator to each Portfolio. For the fiscal period
ended October 31, 1995, Chase received fees, and waived its fees and/or
reimbursed expenses to each Portfolio, as follows:
Fee Waiver
and/or Expense
Name of Portfolio Fees Paid Reimbursement
*
International Equity Portfolio 0 $1,319
Capital Growth Portfolio 0 1,403
Growth and Income Portfolio 0 1,389
Asset Allocation Portfolio 0 1,331
Treasury Portfolio 0 1,313
Money Market Portfolio 0 1,294
* This voluntary waiver and/or limitation is currently in effect but
may be terminated.
ADDITIONAL INFORMATION
Additional information concerning the Adviser, the Administrator and the
Sub-Administrator is set forth under "Additional Information" under Proposal 1.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of the New Advisory Agreement and CAM Inc. Agreement will require the
affirmative vote of a "majority of the outstanding voting securities" of the
relevant Portfolio, which for this purpose means the affirmative vote of the
lesser of (1) more than 50% of the outstanding shares of such Portfolio or (2)
67% or more of the shares of such Portfolio present at the meeting if more than
50% of the outstanding shares of such Portfolio are represented at the meeting
in person or by proxy (a "Majority Vote"). If the shareholders of a Portfolio do
not approve the Proposed Advisory Agreement and CAM Inc. Agreement, the Adviser
will continue to manage the Portfolio's investments under the Current or Interim
Advisory Agreement, as the case may be. In that event, the Board will take such
further action as it may deem to be in the best interests of the Portfolio's
shareholders.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
20
PROPOSAL 3
ELECTION OF TRUSTEES
It is proposed that shareholders of the Portfolios consider the election of the
individuals listed below (the "Nominees") to the Board of Trustees of the Trust,
which is currently organized as a Massachusetts business trust. Biographical
information about the Nominees and other relevant information is set forth
below. Each Nominee has consented to being named in this Proxy Statement and has
agreed to serve as a Board member if elected.
The persons named in the accompanying form of proxy intend to vote each such
proxy "FOR" the election of the Nominees, unless shareholders specifically
indicate on their proxies the desire to withhold authority to vote for elections
to office. It is not contemplated that any Nominee will be unable to serve as a
Board member for any reason, but if that should occur prior to the Meeting, the
proxy holders reserve the right to substitute another person or persons of their
choice as nominee or nominees.
The following are the Nominees:
Principal Occupations Year First Became
NOMINEE Age for the Last Five Years a Trustee
Fergus Reid, III 63 Chairman and Chief Executive 1984
971 West Road Officer, Lumelite Corporation,
New Canaan, CT 06840 since September 1985; Trustee,
Morgan Stanley
Portfolios; from
January 1985 through
September 1985,
Director of Corporate
Finance, Noyes
Partners (investment
advisory firm); from
1982 through 1984,
Managing Director,
Bernhard Associates
(venture capital
firm).
Richard E. Ten Haken 61 Former District Superintendent 1984
4 Barnfield Road of Schools, Monroe No. 2 and
Pittsford, NY 14534 Orleans Counties, New York;
Chairman of the
Finance and the Audit
and Accounting
Committees, Member of
the Executive
Committee; Chairman
of the Board and
President, New York
State Teachers'
Retirement System.
21
William J. Armstrong 54 Vice President and Treasurer, 1987
49 Aspen Way Ingersoll-Rand Company.
Upper Saddle River, NJ 07458
John R.H. Blum 66 Attorney in Private Practice; 1984
322 Main Street formerly a Partner in the law
Lakeville, CT 06039 firm of Richards, O'Neil &
Allegaert (19__
-1994); Commissioner
of Agriculture State
of Connecticut, 1992-
1995.
[*]Joseph J. Harkins 64 Retired; Commercial Sector 1990
257 Plantation Circle South Executive and Executive Vice
Ponte Vedra Beach, FL 32082 President of The Chase
Manhattan Bank, N.A. from
1985 through 1989. He has
been employed by Chase in
numerous capacities and offices
since 1954. Director of
Blessings Corporation,
Jefferson Insurance Company
of New York, Monticello
Insurance Company and
Nationar.
*H. Richard Vartabedian 60 Consultant, Republic Bank of 1992
P.O. Box 296 New York; formerly, Senior
Beach Road Investment Officer, Division
Hendrick's Head Executive of the Investment
Southport, ME 04576 Management Division of The
Chase Manhattan Bank,
N.A., 1980 through
1991.
Stuart W. Cragin, Jr. 63 Retired; formerly President, 1992
108 Valley Road Fairfield Testing Laboratory,
Cos Cob, CT 06807 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
22
Irving L. Thode 64 Retired; Vice President of 1992
80` Perkins Road Quotron Systems. He has
Greenwich, CT 06830 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.
*W. Perry Neff 67 Independent Financial Proposed
RR 1 Box 102A Consultant; Director of North
Weston, VT 05181 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.
Roland R. Eppley, Jr. 62 Retired: formerly President and Proposed
105 Ceventry Place Chief Executive Officer,
Palm Beach Gardens, Eastern States Bankcard
FL 33418 Association Inc, (1971-1988);
Director, Janel Hydraulics, Inc.
and The Hanover Funds, Inc.
W.D. MacCallan 67 Director of The Adams Express Proposed
624 East 45th Street Co., The Hanover Funds, Inc.,
Savannah, GA 31405 The Hanover Investment
Funds, Inc. and Petroleum &
Resources Corp.; formerly
Chairman of the Board and
Chief Executive Officer of The
Adams Express Co. and
Petroleum & Resources Corp.
* Interested Trustee as defined under the 1940 Act.
23
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 year ended October 31, 1995.
REMUNERATION OF TRUSTEES AND CERTAIN EXECUTIVE OFFICERS:
Each Trustee is reimbursed for expenses incurred in attending each meeting of
the Board of Trustees or any committee thereof. Each Trustee who is not an
affiliate of the Adviser is compensated for his or her services according to a
fee schedule which recognizes the fact that each Trustee also serves as a
Trustee of other investment companies advised by the Adviser. 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. Prior
to August 21, 1995, the quarterly retainer was $9,000 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 October 31, 1995 for each Trustee of the Trust:
Pension or Total
All Retirement Compensation
Portfolios Benefits Accrued from "Fund
of the Trust as Fund Expenses Complex"(1)
Fergus Reid, III, 0 0
Trustee $78,456.65
Richard E. Ten Haken, 0 0 52,304.39
Trustee
William J. Armstrong, 0 0 46,632.34
Trustee
John R.H. Blum, 0 0 51,304.37
Trustee
Joseph J. Harkins, 0 0 52,304.39
Trustee
24
H. Richard Vartabedian, 0 0 74,804.44
Trustee
Stuart W. Cragin, Jr., 0 0 52,304.39
Trustee
Irving L. Thode, 0 0 52,304.39
Trustee
(1) Data reflects total compensation earned during the period January 1,
1995 to December 31, 1995 for service as a Trustee to all (Portfolios)
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 Portfolios, the Adviser, Administrator or distributor or
any of their affiliates) may be entitled to certain benefits upon retirement
from the Board of Trustees. Pursuant to the Plan, the normal retirement date is
the date on which the eligible Trustee has attained age 65 and has completed at
least five years of continuous service with one or more of the investment
companies advised by the Adviser (collectively, the "Covered Portfolios"). Each
Eligible Trustee is entitled to receive from the Covered Portfolios 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 Portfolios 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 Portfolios. Such benefit is payable to each eligible Trustee in
monthly installments for the life of the Trustee.
Set forth below in the table below are the estimated annual benefits payable to
an eligible Trustee upon retirement assuming various compensation and years of
service classifications. The estimated credited years of service for Messrs.
Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian, Cragin, and Thode are
11, 11, 8, 11, 3, 3 and 3 respectively.
YEARS OF
SERVICE HIGHEST ANNUAL COMPENSATION PAID BY ALL VISTA FUNDS
40,000 45,000 50,000 55,000
====================================================================
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
25
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
Effective August 21, 1995, the Trustees instituted a Deferred Compensation Plan
for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which each
Trustee (who is not an employee of any of the Funds, the Adviser, Administrator
or Distributor or any of their affiliates) may enter into agreements with the
Funds whereby payment of the Trustees' fees are deferred until the payment date
elected by the Trustee (or the Trustee's termination of service). The deferred
amounts are deemed invested in shares of the Fund on whose Board the Trustee
sits. The deferred amounts are paid out in a lump sum or over a period of
several years as elected by the Trustee at the time of deferral. If a deferring
Trustee dies prior to the distribution of amounts held in the deferral account,
the balance of the deferral account will be distributed to the Trustee's
designated beneficiary in a single lump sum payment as soon as practicable after
such deferring Trustee's death. The following Eligible Trustees have executed a
deferred compensation agreement for the 1996 calendar year: [ ]
PRINCIPAL EXECUTIVE OFFICERS:
The principal executive officers of the Trust are as follows:
H. Richard Vartabedian - President and Trustee.
Martin R. Dean - Treasurer and Assistant Secretary; Vice President, BISYS
Portfolios Group, Inc.
Ann Bergin - Secretary; Vice President, BISYS Portfolios Group, Inc.; Chief
Compliance Officer and Secretary, Vista Broker-Dealer Services, Inc.
OWNERSHIP OF SHARES OF THE PORTFOLIOS. The Trustees and officers as a group
directly or beneficially own less than 1% of each Portfolio.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
The election of each of the Nominees listed above requires the
affirmative vote of a plurality of the votes entitled to be cast at the Meeting
by all shareholders of the Trust.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL.
PROPOSAL 4
RATIFICATION OF PRICE WATERHOUSE LLP
AS INDEPENDENT PUBLIC ACCOUNTANTS
26
The Board, including a majority of the trustees who are not interested persons
of the Trust, is recommending Price Waterhouse LLP to serve as independent
public accountants of each Fund for each Portfolio's next fiscal year, subject
to the right of the Fund to terminate such employment immediately without
penalty by vote of a majority of the outstanding voting securities of the Fund
at any meeting called for such purpose. The Board's selection is hereby
submitted to the shareholders for ratification.
Price Waterhouse LLP served as the independent auditors for each of the
Portfolios during its most recent fiscal period ended October 31, 1995. Services
performed by Price Waterhouse LLP during such time have included the audit of
the financial statements of the Trust and services related to filings of the
Trust with the Commission. Price Waterhouse LLP has informed each Fund that
neither Price Waterhouse LLP nor any of its partners has any direct or material
indirect financial interest in the Trust. Representatives of Price Waterhouse
LLP are not expected to be present at the Meeting but have been given the
opportunity to make a statement if they so desire, and will be available should
any matter arise requiring their participation.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
The ratification of the selection of Price Waterhouse LLP as the independent
public accountants of a Portfolio requires the affirmative vote of a majority of
the votes entitled to be cast at the Meeting by the shareholders of the
Portfolio.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
PROPOSAL 5
APPROVAL OR DISAPPROVAL OF A
MODIFICATION TO THE DECLARATION OF TRUST
INTRODUCTION
The Trust is organized as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts. The Trust's Declaration of Trust provides, among
other things, that the Board of Trustees has the authority to make certain
amendments to the Declaration of Trust without the vote or consent of the
Trust's Shareholders in order to, among other things, designate series, change
the name of the Trust to supply any omission, to cure, correct or supplement any
ambiguous, defective or inconsistent provision thereof, or if they deem it
necessary or advisable to conform the Declaration of Trust to the requirements
of applicable federal laws or regulations or the requirements of the regulated
investment company provisions of the Internal Revenue Code of 1986, as amended.
Management has proposed, and the Board of Trustees has approved, a modification
to the Declaration of Trust which would allow the Trustees to amend the
Declaration of Trust with respect to items which do not effect the economic
value or legal rights of a shareholder upon majority vote of the Board of
Trustees. This would enable the Trustees to amend and modify the Declaration of
Trust when necessary to react to changes in
27
Massachusetts and other regulatory laws and to provide maximum flexibility to
the Trust, and therefore, the Portfolios and their shareholders.
[Insert text of Amendment]
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATIONS
The approval of the proposed modification to the Declaration of Trust requires
the affirmative vote of a majority of the shareholders of the Trust.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL.
PROPOSALS 6a-l
APPROVAL OR DISAPPROVAL OF CERTAIN CHANGES TO
THE FUNDAMENTAL INVESTMENT RESTRICTIONS
OF THE PORTFOLIOS
INTRODUCTION TO PROPOSALS 6a-l
Proposals 6a-l concern proposed changes to the current fundamental investment
restrictions ("Restrictions") of the Portfolios. Each of these proposals relate
to Restrictions of a Portfolio which are presently classified as "fundamental,"
which means that they can only be changed by a vote of the relevant Portfolio's
shareholders.
The Adviser recommended to the Trustees that it be authorized to analyze each
Portfolio's current Restrictions and, where practical and appropriate for each
Portfolio's investment objective, recommend to the Trustees whether, subject to
shareholder approval, certain changes should be adopted. Based on the Adviser's
review and recommendations, the Trustees believe that certain changes should be
implemented for each Portfolio. These changes fall within the following
categories:
Modification. The proposal involves a modification of certain Restrictions for
reasons outlined below.
Elimination. The proposal involves an elimination of certain Restrictions, for
reasons outlined below.
Reclassification. The proposal involves a reclassification of certain
Restrictions as nonfundamental restrictions, which could thereafter be changed
with the approval of the Trust's Board of Trustees, without a shareholder vote.
Based on the recommendations of the Adviser, the Trustees have approved the
proposed changes and believe that they are in the best interests of the
Portfolios and their shareholders for the following reasons:
28
Standardization. Some of the Portfolios' Restrictions differ in form and
substance from similar restrictions of similar mutual funds currently advised by
the Adviser. Increased standardized restrictions among all Chase mutual funds
will help promote operational efficiencies and facilitate the monitoring of
portfolio compliance. In all cases, the adoption of the new or revised
restriction is not expected to have any impact on the investment techniques
employed by a Portfolio at this time.
Modernization. The Portfolios' investment restrictions were derived from these
other Portfolios investment restrictions as a matter of administrative
convenience. Therefore, the Portfolios' Restrictions are derived form
restrictions which have been in effect, without changes, for many years. In
connection with the Mergers, the Adviser has recommended to all advised funds
(including the Portfolios) that their investment restrictions be evaluated and
amended as necessary. The Trustees, acting on the Adviser's recommendation,
recommend that each Portfolio should modernize its Restrictions, where
appropriate, to conform to current regulation and authorize the use of currently
available financial instruments and investment techniques.
Clarification. Some of the Portfolios' Restrictions contain ambiguities that, if
interpreted in a narrow way, might prevent the Portfolio from following the
original intent of the Restriction. Accordingly, the Trustees, acting on the
Adviser's recommendation, recommend that the Portfolio change the Restriction,
where appropriate, to eliminate any ambiguities. Some of these proposals include
the proposed division of a Restriction which currently covers multiple topics
into two or more distinct restrictions.
Flexibility. Several of the Portfolios' Restrictions are proposed to be changed
so as to allow the Portfolios to respond to recent and future regulatory
developments and changes in the financial markets. In addition, restrictions
prohibiting certain transactions have been or may be changed or eliminated by a
federal or state securities regulator. In order to take advantage of such
changes, the Portfolios would need shareholder approval, which is time consuming
and costly to the Portfolio and its shareholders. The Adviser believes that in
most cases, the proposed changes are not expected to have any immediate effect
on the Portfolios' investment strategy, since the Portfolios may not have a
current intention of changing their investment strategy. However, in order to
give the Portfolio more flexibility in responding to regulatory and market
developments, the Trustees, acting on the Adviser's recommendations, recommend
changing, reclassifying or eliminating some of the Restrictions described below
so that they can be changed by the Trustees without a shareholder vote. In the
future, when changes to nonfundamental restrictions of a Portfolio are adopted,
the Portfolio's prospectus and statement of additional information will be
amended to reflect the changes and shareholders will be notified thereof.
The proposals regarding the Restrictions are presented in the Proposals 5a-j,
below, categorized by topic (e.g., borrowing, concentration, etc.). In each
case, the current Restriction is set forth in the left hand column under
"Current" and, for the Portfolio(s) to which the current Restriction applies, it
is proposed that the Restriction be restated, eliminated, reclassified, or
otherwise changed as indicated in the right hand column under "Proposed". In
each case, the reason for, and an explanation of, the proposed change, is set
forth below the comparison.
29
INTRODUCTION TO PROPOSALS 6a-k.
Proposals 6a-k each apply to each of the Portfolios:
PROPOSAL 6a
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING BORROWING
CURRENT: PROPOSED:
- ------- --------
No Portfolio may borrow money or FUNDAMENTAL RESTRICTION
pledge, mortgage or hypothecate its No Portfolio may borrow money,
assets, except that, as a temporary except that each Portfolio may
measure for extraordinary or borrow money for temporary or
emergency purposes (with respect to emergency purposes, or by engaging
all the Portfolios), it may borrow in reverse repurchase transactions,
in an amount not to exceed 1/3 of in an amount not exceeding 33 1/3%
the current value of its net of the value of its total assets at
assets, including the amount the time when the loan is made and
borrowed, and may pledge, mortgage may pledge, mortgage or hypothecate
or hypothecate not more than 1/3 of no more than 1/3 of its net assets
such assets to secure such to secure such borrowings. Any
borrowings (it is intended that borrowings representing more than
money would be borrowed by a 5% of a Portfolio's total assets
Portfolio only from banks and only must be repaid before the Portfolio
to accommodate requests for the may make additional investments.
repurchase of shares of the
Portfolio while effecting an
orderly liquidation of portfolio
securities), provided that
collateral arrangements with
respect to a Portfolio's
permissible futures and options
transactions, including initial and
variation margin, are not
considered to be a pledge of assets
for purposes of this restriction;
no Portfolio will purchase
investment securities if its
outstanding borrowing, including
repurchase agreements, exceeds 5%
of the value of the Portfolio's
total assets.
BORROWING: The proposed amendment clarifies and modernizes the restriction on
borrowing by treating borrowings for temporary or emergency purposes separately
from other borrowings. Borrowing for emergency purposes may be necessary to
address excessive or unanticipated liquidations of Portfolio shares that exceed
available cash. To increase flexibility, reverse repurchase agreements would be
allowable outside the context of borrowings implemented for temporary purposes,
and would be subject to a limitation of 33 1/3% of a Portfolio's assets.
30
PROPOSAL 6b
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL
INVESTMENT RESTRICTION CONCERNING INVESTMENT
FOR THE PURPOSE OF EXERCISING CONTROL
CURRENT: PROPOSED:
- ------- --------
No Portfolio (except for the Money NONFUNDAMENTAL RESTRICTION
Market Portfolio) may purchase No Portfolio may, with respect to
securities of any issuer if such 50% (75% with respect to the Money
purchase at the time thereof would Market Portfolio) of its assets,
cause more than 10% of the voting hold more than 10% of the
securities of such issuer to be outstanding voting securities of an
held by the Portfolio. The Money issuer.
Market Portfolio may not purchase
any voting securities.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment would clarify, for
all Portfolios, that the Restriction involving a 10% limitation on investments
in any issuer is a limitation based upon the outstanding voting securities of
the issuer and would not be applicable outside the diversification requirements
which are applicable only to 50% (75% with respect to the Money Market
Portfolio) of the Portfolio's assets. This restatement and reclassification of
the Restriction would clarify and help standardize the Restriction and provide
additional flexibility for the investment of each Portfolio's assets.
31
PROPOSAL 6c
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING THE MAKING OF LOANS
CURRENT: PROPOSED:
- ------- --------
The Portfolios are not permitted to FUNDAMENTAL RESTRICTION
make loans to other persons, except No Portfolio may make loans, except
(i) through the lending of their that each Fund may: (i) purchase
portfolio securities and provided and hold debt instruments
that any such loans not exceed 30% (including without limitation,
of a Portfolio's total assets bonds, notes, debentures or other
(taken at market value), (ii) obligations and certificates of
through the use of repurchase deposit, bankers' acceptances and
agreements or the purchase of fixed time deposits) in accordance
short-term obligations and provided with its investment objectives and
that not more than 10% of a policies; (ii) enter into
Portfolio's total assets will be repurchase agreements with respect
invested in repurchase agreements to portfolio securities; and (iii)
maturing in more than seven days, lend portfolio securities with a
or (iii) by purchasing, subject to value not in excess of one- third
the limitation on illiquid and of the value of its total assets.
restricted securities above, a
portion of an issue of debt
securities of types commonly
distributed privately to financial
institutions, for which purposes
the purchase of short-term
commercial paper or a portion of an
issue of debt securities which are
part of an issue to the public
shall not be considered the making
of a loan.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment is intended to
clarify the basic limitation on securities lending, and would also exclude those
transactions that current regulatory interpretations and policies allow. The
investment adviser will not make loans of a Portfolio's portfolio securities (or
enter into repurchase agreements) unless it receives collateral that is at least
102% of the value of the loan, including accrued interest. If the recipient of
the loan (or the seller of the instrument to be repurchased) defaults and the
value of the collateral securing the loan (or the repurchase agreement)
declines, a Portfolio could incur a loss.
32
PROPOSAL 6d
RECLASSIFICATION OF EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING PURCHASES OF SECURITIES ON MARGIN
CURRENT: PROPOSED:
- ------- --------
No Portfolio may purchase any NONFUNDAMENTAL RESTRICTION
security or evidence of interest No Portfolio may make short sales
therein on margin, except that such of securities, other than short
short-term credit as may be sales "against the box," or
obtained as may be necessary for purchase securities on margin
the clearance of purchases and except for short-term credits
sales of securities and except necessary for clearance of
that, with respect to a Portfolio's portfolio transactions, provided
permissible options and futures that this restriction will not be
transactions, deposits of initial applied to limit the use of
and variation margin may be made in options, futures contracts and
connection with the purchase, related options, in the manner
ownership, holding or sale of otherwise permitted by the
futures or options positions. investment restrictions, policies
and investment program of a
Portfolio.
EXPLANATION OF THE PROPOSED CHANGE. The proposed change modernizes and clarifies
the circumstances under which a Portfolio may make margin purchases. The
reclassification as
33
nonfundamental could enable the Portfolios to respond more quickly to changes in
financial markets.
PROPOSAL 6e
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING CONCENTRATION OF INVESTMENT
CURRENT: PROPOSED:
- ------- --------
No Portfolio may concentrate its FUNDAMENTAL RESTRICTION
investments in any particular No Portfolio may purchase the
industry, except that, with respect securities of any issuer (other
to a Portfolio's permissible than securities issued or
futures and options transactions, guaranteed by the U.S. government
positions in options and futures or any of its agencies or
shall not be subject to this instrumentalities, or repurchase
restriction, and except that the agreements secured thereby) if, as
Money Market Portfolio may invest a result, more than 25% of the
more than 25% of its total assets Portfolio's total assets would be
in obligations issued by banks, invested in the securities of
including U. S. banks, and in companies whose principal business
obligations issued or guaranteed by activities are in the same
the U.S. Government, its agencies industry. Notwithstanding the
or instrumentalities. foregoing, (i) there is no
limitation with respect to
securities issued by banks, or
repurchase agreements secured
thereby, (ii) with respect to a
Portfolio's permissible futures and
options transactions, positions in
options and futures shall not be
subject to this restriction and
(iii) the Money Market Portfolio
may invest more than 25% of its
total assets in obligations issued
by banks, including U. S. banks,
and in obligations issued or
guaranteed by the U.S. Government,
its agencies or instrumentalities.
EXPLANATION OF THE PROPOSED CHANGES: The proposed amendment is intended to
clarify the basic limitation on concentration of investment and would also
exclude certain types of transactions and securities from the limitation as
allowed by current regulatory policies and interpretations.
34
PROPOSAL 6f
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING COMMODITIES AND REAL ESTATE
CURRENT: PROPOSED:
- ------- --------
No Portfolio may purchase or sell FUNDAMENTAL RESTRICTION
real estate (including limited No Portfolio may purchase or sell
partnership interests but excluding physical commodities unless
securities secured by real estate acquired as a result of ownership
or interests therein), interests in of securities or other instruments
oil, gas or mineral leases, (but this shall not prevent a
commodities or commodity contracts Portfolio from (i) purchasing or
in the ordinary course of business, selling options and futures
other than (i) with respect to the contracts or from investing in
Portfolio's permissible futures and securities or other instruments
options transactions, or (ii) with backed by physical commodities) or
respect to the Growth and Income (ii) engaging in forward purchases
Portfolio, the Capital Growth or sales of foreign currencies or
Portfolio, and International Equity securities.
Portfolio only, forward purchases
and sales of foreign currencies or FUNDAMENTAL RESTRICTION
securities (each Portfolio reserves No Portfolio may purchase or sell
the freedom of action to hold and real estate unless acquired as a
to sell real estate acquired as a result of ownership of securities
result of its ownership of or other instruments (but this
securities). shall not prevent a Portfolio from
investing in securities or other
instruments backed by real estate
or securities of companies engaged
in the real estate business).
Investments by a Portfolio in
securities backed by mortgages on
real estate or in marketable
securities of companies engaged in
such activities are not hereby
precluded.
NONFUNDAMENTAL RESTRICTION
No Portfolio may purchase or sell
interests in oil, gas or mineral
leases.
EXPLANATION OF THE PROPOSED CHANGES: The proposed changes modernize and clarify
the application of the Restrictions pertaining to commodities and real estate,
and to a large extent would standardize the Restrictions applicable to each of
the respective Portfolios.
35
PROPOSAL 6g
AMENDMENT OF EACH PORTFOLIO'S FUNDAMENTAL
INVESTMENT RESTRICTION REGARDING INVESTMENTS
IN RESTRICTED AND ILLIQUID SECURITIES
Current: PROPOSED:
No Portfolio may knowingly invest NONFUNDAMENTAL RESTRICTION
in securities which are subject to No Portfolio may invest more than 15% of
legal or contractual restrictions its net assets in illiquid securities.
on resale (including securities
that are not readily marketable,
but not including repurchase
agreements maturing in not more
than seven days) if, as a result
thereof, more than 15% of the
Portfolio's total assets (taken at
market value) would be so invested
(including repurchase agreements
maturing in more than seven days).
EXPLANATION OF THE PROPOSED CHANGES: Illiquid securities are securities that are
not readily marketable or cannot be disposed of promptly within seven days and
in the usual course of business at approximately the price at which the
Portfolio has valued them. Such securities include, but are not limited to, time
deposits and repurchase agreements with maturities longer than seven days.
Securities that may be resold under Rule 144A or securities offered pursuant to
Section 4(2) of the 1933 Act, shall not be deemed illiquid solely by reason of
being unregistered. The Adviser or Sub-Adviser determines whether a particular
security is deemed to be liquid based on the trading markets for the specific
security and other factors in accordance with procedures approved or adopted by
the Board of Trustees.
The proposed changes would standardize, among all Portfolios, the
applicable investment restriction, and would remove from all of the descriptions
certain interpretations of what may constitute illiquid securities. By doing
this, each Portfolio would be subject to the same current interpretations, from
time to time, of what constitutes an illiquid security, under SEC releases and
other relevant authority. The defundamentalization of this restriction would
avoid the delay and expense of a shareholder vote in the event that the
permissible guidelines for investments in illiquid securities changes at some
time in the future. This limitation may be subject to additional restrictions
imposed by jurisdictions in which a Portfolio's shares are offered for sale.
36
PROPOSAL 6h
RECLASSIFICATION OF EACH PORTFOLIO'S FUNDAMENTAL
RESTRICTION CONCERNING THE USE OF OPTIONS
Current: PROPOSED:
- ------- --------
No Portfolio may write, purchase or NONFUNDAMENTAL RESTRICTION
sell any put or call option or any No Portfolio may write, purchase or
combination thereof, provided that sell any put or call option or any
this shall not prevent (i) with combination thereof, provided that
respect to the Growth and Income this shall not prevent (i) with
Portfolio and the Capital Growth respect to the Growth and Income
Portfolio only, the purchase, Portfolio and the Capital Growth
ownership, holding or sale of Portfolio only, the purchase,
warrants where the grantor of the ownership, holding or sale of
warrants is the issuer of the warrants where the grantor of the
underlying securities, (ii) with warrants is the issuer of the
respect to all of the Portfolios, underlying securities, (ii) with
the writing, purchasing or selling respect to all of the Portfolios,
of puts, calls or combinations the writing, purchasing or selling
thereof with respect to U.S. of puts, calls or combinations
government securities or (iii) with thereof with respect to portfolio
respect to a Portfolio's securities or (iii) with respect to
permissible futures and options a Portfolio's permissible futures
transactions, the writing, and options transactions, the
purchasing, ownership, holding or writing, purchasing, ownership,
selling of futures and options holding or selling of futures and
positions or of puts, calls or options positions or of puts, calls
combinations thereof with respect or combinations thereof with
to futures. respect to futures.
EXPLANATION OF THE PROPOSED CHANGE: The proposed reclassification of this
Restriction as nonfundamental would avoid the delay and expense of a shareholder
vote in the event that the permissible guidelines for such investments changes
at some time in the future. The terms of this Restriction are consistent with
general restrictions, including limitations on liquidity and portfolio
diversification. Therefore, no foreseeable impact on the Portfolios is
anticipated by the proposed reclassification.
37
PROPOSAL 6i
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT
RESTRICTION CONCERNING SENIOR SECURITIES
Current: PROPOSED:
- ------- --------
No Portfolio may issue any senior FUNDAMENTAL RESTRICTION
security (as that term is defined No Portfolio may issue any senior
in the 1940 Act) if such issuance security (as defined in the 1940
is specifically prohibited by the Act), except that (a) the Portfolio
1940 Act or the rules and may engage in transactions that may
regulations promulgated thereunder, result in the issuance of senior
provided that collateral securities to the extent permitted
arrangements with respect to a under applicable regulations and
Portfolio's permissible options and interpretations of the 1940 Act or
futures transactions, including an exemptive order; (b) a Portfolio
deposits of initial and variation may acquire other securities, the
margin, are not considered to be acquisition of which may result in
the issuance of a senior security the issuance of a senior security,
for purposes of this restriction. to the extent permitted under
applicable regulations or
interpretations of the 1940 Act;
(c) subject to the restrictions set
forth below, a Portfolio may borrow
money as authorized by the 1940
Act. For purposes of this
restriction, collateral
arrangements with respect to a
Portfolio's permissible options and
futures transactions, including
deposits of initial and variation
margin, are not considered to be
the issuance of a senior security.
SENIOR SECURITIES: Under the 1940 Act, an open-end investment company (such as
the Trust) cannot issue senior securities except under certain very limited
conditions. The proposed amendment clarifies and modernizes the language
concerning senior securities to conform to provisions of the 1940 Act. It is
proposed that this restriction exclude those transactions which are allowed by
current regulatory interpretations and policies, and which are consistent with
current investment marketplace practices. Therefore, the proposed fundamental
restrictions will allow, for example, the following investments even though they
may result in the issuance of senior securities: The Portfolios could, to the
extent permitted by applicable law or exemptive order (a) enter into
commitments, including reverse repurchase agreements and delayed delivery and
when-issued securities; (b) engage in transactions that may result in the
issuance of a senior security; (c) engage in short sales of securities; (d)
purchase and sell futures contracts and related options; (e) borrow money; and
(f) issue multiple classes of securities in each case subject to any other
applicable restrictions.
38
PROPOSAL 6j
AMENDMENT TO EACH PORTFOLIO'S FUNDAMENTAL INVESTMENT
RESTRICTION REGARDING SHORT SALES OF SECURITIES
CURRENT: PROPOSED:
No Portfolio may make short sales It is proposed that this
of securities or maintain a short restriction be eliminated, as it
position; except that all has been combined with a
Portfolios other than the Money nonfundmental restriction
Market Portfolio, may only make concerning purchases of securities
short position if when a short on margin. (See such short sales of
position is open the Portfolio owns securities or maintain a Proposal
an equal amount of such securities 6d above.)
or securities convertible into or
exchangeable, without payment of
any further consideration, for
securities of the same issue as,
and equal in amount to, the
securities sold short, and unless
not more than 10% of the
Portfolio's net assets (taken at
market value) is held as collateral
for such sales at any one time (it
is the present intention of
management to make such sales only
for the purpose of deferring
realization of gain or loss for
federal income tax purposes; such
sales would not be made of
securities subject to outstanding
options).
EXPLANATION OF THE PROPOSED CHANGE. The proposed change modernizes and clarifies
the circumstances under which a Portfolio may make short sales of securities.
The reclassification as nonfundamental could enable the Portfolios to respond
more quickly to changes in financial markets.
39
PROPOSAL 6k
APPROVAL OF A NEW FUNDAMENTAL INVESTMENT
POLICY PERMITTING EACH
FUND TO INVEST ALL OR A PART OF ITS INVESTEMENT
ASSETS IN ANOTHER INVESTMENT COMPANY
Introduction: Master/Feeder Fund Structure
At a meeting held on December 14, 1995, the Board considered and approved,
subject to shareholder approval, the adoption of a new fundamental investment
policy with respect to each Fund which would allow each Fund to convert to a
Master/Feeder Structure. The Master/Feeder Fund Structure is an arrangement that
allows several investment companies with different shareholder-related features
or distribution channels, but having the same investment objective, policies and
restrictions, to combine their investments by investing all of their assets in
the same portfolio instead of managing them separately, achieving certain
economies of scale. For example, a fund offering its shares at net asset value
(not subject to a sales charge) might pool its investments with another fund
having the same investment objective and policies that offers its shares subject
to a front-end or contingent deferred sales charge.
Under the Master/Feeder Fund Structure, a Fund will have the ability to invest
all or a part of its investment assets in another investment company (the
"Master Portfolio") having substantially the same investment objectives and
policies as the Fund in exchange for shares of beneficial interest in the Master
Portfolio. This means that the only investment securities that will be held by a
Fund will be the Fund's interest in the Master Portfolio. Each Master Portfolio
will be a series of an investment company ("Master Trust"), as each Fund is a
series of the Trust.
Conversion to a Master/Feeder Fund Structure may serve to attract other
collective investment vehicles with different shareholder servicing or
distribution arrangements and with shareholders that would not have invested in
a Fund. In this event, additional assets may allow for operating expenses to be
spread over a larger asset base. In addition, a Master/Feeder Fund Structure may
serve as an alternative for large, institutional investors in a Fund who may
prefer to offer separate, proprietary investment vehicles and
40
who otherwise might establish such vehicles outside of a Fund's current
operational structure. Conversion to a Master/Feeder Fund Structure may allow a
Fund to stabilize its expenses and achieve certain operational efficiencies. No
assurance can be given, however, that the Master/Feeder Fund Structure will
result in a Fund stabilizing its expenses or achieving greater operational
efficiencies.
NEW INVESTMENT POLICY
The Board has approved with respect to each Fund, subject to shareholder
approval, the adoption of a new fundamental investment policy that would permit
a Fund to convert to the Master/Feeder Fund Structure by investing all or a part
of its assets in another appropriate investment fund. As discussed above under
"Introduction: Master/Feeder Fund Structure," the purpose of this Proposal is to
allow a Fund to enhance its flexibility and permit it to take advantage of
potential efficiencies available through investment of all or a part of its
assets in another investment company. At present, certain of the fundamental
investment restrictions of each Fund, such as those limiting investment in a
single issuer or concentration in an industry, may prevent it from investing all
or a part of its assets in another registered investment company. The Board
proposes that these restrictions be modified by adding the following fundamental
investment policy:
Notwithstanding any other investment policy or restriction, the Fund
may seek to achieve its investment objective by holding, as its only
investment securities, the securities of another investment company
having substantially the same investment objective and policies as the
Fund.
A Fund's methods of operation and shareholder services would not be materially
affected by its investment in a corresponding Master Portfolio, except that the
assets of the Fund may be managed as part of a larger pool. If a Fund invested
all of its assets in a Master Portfolio, it would hold only investment
securities issued by the Master Portfolio; the Master Portfolio would directly
invest in individual securities of other issuers. The Fund would otherwise
continue its normal operation. The Board would retain the right to withdraw a
Fund's investment from its corresponding Master Portfolio at any time; the Fund
would then resume investing directly in individual securities of other issuers
or invest in another Master Portfolio.
In approving the Proposal authorizing the investment of the assets of each Fund
in corresponding Master Portfolios, the Board determined that (i) such
investment policy is in the best interests of each Fund and its shareholders;
and (ii) the interests of existing shareholders of each Fund will not be diluted
as a result of effecting any such transaction. The Board considered, among other
things, the possible operational efficiencies offered by the structure. The
Board believes that investment in a Master
41
Portfolio will not materially increase costs to a Fund's shareholders.
ADDITIONAL INFORMATION REGARDING EACH MASTER PORTFOLIO
Each Master Portfolio will be a series of a Master Trust which, like the Trust,
will be an open-end management investment company under the 1940 Act. It is
expected that the Master Trust will be organized as a Massachussets business
trust and will have one series to correspond to each series of the Trust that
converts to the Master/Feeder Fund Structure. The investment objective and
policies of each Master Portfolio will be substantially the same as those of the
corresponding Fund; in seeking to achieve the same objective as the Fund, the
Master Portfolio will invest in the same type of securities and engage in the
same transactions permitted by the investment policies and restrictions of the
corresponding Fund.
The Adviser, or its successor in the Bank Merger will be the investment adviser
of each Fund's corresponding Master Portfolio. See Proposal ________ . Entities
or their successors in the Bank Merger that currently perform services with
respect to each Fund, such as administrative, custodial, will perform
substantially similar services for each Master Portfolio.
Each Master Portfolio will calculate its net asset value at the same time, on
the same days, and pursuant to same method as its corresponding Fund calculates
its net asset value. Investors in each Master Portfolio will have no preemptive
rights and no conversion rights. Each Master Portfolio normally will not hold
meetings of investors except as required under the 1940 Act. As an investor in
the Master Portfolio, the Fund will be entitled to vote in proportion to its
relative interest in the Master Portfolio. As to any issue on which Fund
shareholders vote, the Fund will vote its interest in the Master Portfolio in
proportion to the votes cast by its shareholders. If there are other investors
in the Master Portfolio, there can be no assurance that any issue that receives
a majority of the votes cast by a Fund's shareholders will receive a majority of
votes cast by all Master Portfolio shareholders. Investors holding at least a
10% interest in each Master Portfolio will be able to call a meeting of
shareholders for certain purposes affecting only the Master Portfolio, and
shareholders holding at least a 10% interest in the Master Trust will be able to
call a meeting to remove any Trustee. A Trustee may be removed upon the vote of
the holders of interest qualified to vote representing ________ of the value of
the Master Trust.
Changing a fundamental policy of a Master Portfolio will require approval of the
holders of a majority of interests in the Master Portfolio. The Board of
Trustees of the Master Trust will have the ability to change nonfundamental
policies without prior interestholder approval.
42
In addition to a vote to remove a Trustee or change a fundamental policy,
examples of matters that will require approval of shareholders of the Master
Trust include, subject to applicable statutory and regulatory requirements: the
election of Trustees; approval of an investment advisory contract; certain
amendments to the Trust Instrument of the Master Trust; a merger, consolidation
or sale of substantially all of a Master Portfolio's assets; or any additional
matters required or authorized by the Trust Instrument of the Master Trust or
any registration statement of the Master Trust, or as the Trustees may consider
desirable.
Generally, a Fund will hold a meeting of its shareholders to obtain instructions
on how to vote its interest in the Master Portfolio when the Master Portfolio is
conducting a meeting of its shareholders. However, subject to applicable
statutory and regulatory requirements, the Fund will not seek instructions from
its shareholders with respect to (i) any proposal relating to the Master
Portfolio which, if made with respect to the Fund, would not require the vote of
Fund shareholders, or (ii) any proposal relating to the Master Portfolio that is
identical to a proposal previously approved by the Fund's shareholders.
As a Massachusetts business trust, the Master Trust's operations will be
governed by its Trust Instrument, and applicable Massachusetts law. The
operations of the Master Trust and the Master Portfolios, like those of the
Trust and the Funds, will be subject to the provisions of the 1940 Act and the
rules and regulations of the SEC thereunder and applicable state securities
laws.
TRUSTEES AND OFFICERS OF THE MASTER TRUST
The initial interestholders of the Master Trust are expected to elect as
Trustees of the Master Trust, the individuals serving as members of the Board of
Trustees of the Trust. See Proposal ____. Subject to the provisions of its Trust
Instrument, the business of the Master Trust will be supervised by its Trustees,
who will serve indefinite terms and who will have all powers necessary or
convenient to carry out their responsibilities. A majority of Trustees then in
office generally would be able to appoint successor Trustees and fill vacancies,
provided that at least a majority of the Trustees has been elected by
shareholders. The Trustees of the Master Trust will elect officers of the Master
Trust whom they deem appropriate.
TAX CONSEQUENCES OF INVESTMENT IN A MASTER PORTFOLIO
The Trust will receive an opinion from its tax counsel, on or prior to the date
of a Fund's conversion to the Master/Feeder Fund Structure, that the Fund's
investment of all of its assets in a Master Portfolio will not have tax effects
with regard to the Fund, the Trust and the Fund's shareholders. While no ruling
has been requested from the Internal Revenue Service ("IRS") concerning the
foregoing, and the IRS is not bound by the opinion of counsel,
43
the Board believes that an opinion of counsel provides sufficient authority on
the tax effects of a Fund's investment in a corresponding Master Portfolio, in
view of the nature and complexity of such investment.
It is intended that each Fund will continue to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986. In each taxable
year that a Fund so qualifies, the Fund (but not its shareholders) will be
relieved of Federal income tax on that part of its investment company taxable
income and net capital gain that is distributed to its shareholders. Neither the
Fund nor the Master Portfolio is expected to be required to pay any Federal
income or excise taxes. Distributions from a Fund, except for distributions from
a Fund designated as long-term capital gain distributions, will continue to be
taxable to its shareholders as ordinary income, whether received in cash or
reinvested in Fund shares.
EVALUATION BY THE BOARD
After considering the matters in Proposal __ at a meeting held on December 14,
1995, the Board determined to seek shareholder authorization of the actions
necessary for each Fund to have the ability to convert to the Master/Feeder Fund
Structure. Management of the Trust presented to the Board the potential
benefits, along with the costs and potential risks, of each Fund converting to
this structure. In this regard the Board considered the following.
[Management of the Trust presented information relating to redemptions in the
mutual fund industry generally and the likelihood that institutional investors
of a Fund, who may represent a significant share of the Fund's net assets, may
redeem to form independent investment vehicles with different distribution
channels or shareholder-related services than the Fund. Management pointed out
that, unless a Fund's operational structure is attractive to investors with
different servicing needs, a Fund may suffer net redemptions, to the detriment
of its shareholders. Management then presented information concerning steps
which some mutual funds have taken to avoid the erosion of assets under
management while developing a competitive advantage in the mutual funds
marketplace. A Master/Feeder Fund Structure is designed to attract new assets to
a Fund's overall fund structure.
Management also believes that the retention of assets would assist a Fund in its
efforts to keep operational costs from rising significantly. In addition, in the
view of management, a larger asset base may allow the purchase of individual
investment securities in larger amounts, which may reduce certain transactional
and custodial expenses.
Certain of these benefits would likely arise only if the respective Master
Portfolio were to grow through investments in the Master Portfolio by investors
other than the Fund. There is no assurance
44
that, even if other investors invest in a Master Portfolio, expense savings or
other benefits will be realized. In addition, the Board recognized that the
Adviser or the successor entity thereto, may benefit through increased economies
of scale in the event that assets rise, without a corresponding benefit to Fund
shareholders. In particular, conversion to a Master/Feeder Fund Structure may
enable the Adviser or the successor entity thereto to increase assets under
management through attraction and development of new investment vehicles with
less risk than would be possible without this structure. As a result, the
Adviser or the successor entity thereto could earn fees with less risk of
limited success than is typical in the early, developmental years of an
investment vehicle, since new investors in the Master Portfolio will be
presented with the ability to pool their assets in an established vehicle.
The Board also considered, among other things, (i) the costs of the proposed
change in fund structure, (ii) other options to the proposed change, and (iii)
the tax-free nature of the proposed change.]
Based on the foregoing, the Board, including a majority of the Independent
Trustees, determined that it would be in the best interests of the Funds and
their shareholders for shareholders to authorize those actions necessary for
each Fund to have the ability to convert to a Master/Feeder Fund Structure. Even
if this Proposal is approved by shareholders of a Fund, the Board will retain
the right to delay or not to proceed with a conversion with respect to a Fund if
for any reason it would not be in the best interests of shareholders of that
Fund.
45
PROPOSAL l
ELIMINATION OF THE ASSET ALLOCATION PORTFOLIO'S
FUNDAMENTAL INVESTMENT RESTRICTION CONCERNING
INVESTMENTS IN OTHER INVESTMENT COMPANIES
Proposal 6l is applicable to the ASSET ALLOCATION PORTFOLIO ONLY.
Current: PROPOSED:
The Asset Allocation Portfolio may It is proposed that this
not purchase the securities of restriction be eliminated and
other investment companies except replaced with the following
as part of a merger, consolidation nonfundamental policy:
or other acquisition involving such
Portfolio. Each Portfolio 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.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment to eliminate this
restriction and replace it with a nonfundamental policy would modernize and
clarify the restriction on investments in other investment companies by giving
the Portfolios the broadest possible freedom to make such investments consistent
with the provisions of the 1940 Act.
ADDITIONAL INFORMATION REGARDING PROPOSALS 6a-l
Unless otherwise noted, whenever an amended or restated investment policy or
limitation states a maximum percentage of the Portfolio's assets that may be
invested, such percentage limitation will be determined immediately after and as
a result of the acquisition of such security or other asset, except in the case
of borrowing (or other activities that may be deemed to result in the issuance
of a "senior security" under the 1940 Act) or illiquid securities. Any
subsequent change in values, assets, or other circumstances will not be
considered when determining whether the investment complies with the
Portfolios's investment policies and limitations. If any of Proposals 6a-k are
not approved by shareholders, the current Restriction will remain unchanged.
46
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Each of the above proposals to change a Portfolio's Restriction requires the
approval of a "majority of the outstanding voting securities" of the Portfolio,
as defined under the 1940 Act.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSALS
PROPOSAL 7
APPROVAL OR DISAPPROVAL OF A MODIFICATION
OF THE FUNDAMENTAL INVESTMENT POLICY
OF THE U.S. TREASURY INCOME PORTFOLIO
REGARDING PERMISSIBLE INVESTMENTS
IN GOVERNMENT SECURITIES
This Proposal relates to the U.S. TREASURY INCOME PORTFOLIO ONLY:
At a meeting of the Board of Trustees of the Trust held on December 14, 1995,
the Trustees, including each of the Trustees who is not an "interested person"
of the Trust or the Adviser, within the meaning of the 1940 Act (the
"Disinterested Trustees"), considered and unanimously approved the proposals of
the Adviser to eliminate, subject to shareholder approval, the fundamental
investment policy of the U.S. Treasury Income Portfolio pertaining to
permissible investment in U.S. Government Securities and replace it with a
modified, non-fundamental investment policy. Contingent upon shareholder
approval of this proposal, the Trustees have approved (i) the modification of
the Portfolio's investment objective to reflect the modified investment policy
and (ii) a change in the name of the U.S. Treasury Income Portfolio to the U.S.
Government Income Portfolio.
CURRENT FUNDAMENTAL INVESTMENT POLICY. A current Fundamental Investment policy
of the U.S. Treasury Income Portfolio provides that:
"The U.S. Treasury Income Portfolio will invest at least
65% of its assets in obligations that are backed by the full
faith and credit of the U.S. government or in repurchase
agreements fully collateralized by U.S. government
obligations, except that up to 5% of the U.S. Treasury
Income Portfolio's assets may be invested in futures
contracts (and related options thereon) based on U.S.
government obligations, including any index of government
obligations that may be available for trading."
47
This investment policy is fundamental, which means that it cannot be changed
without the approval of a majority of the outstanding voting securities of the
U.S. Treasury Income Portfolio, as defined in the 1940 Act.
PROPOSED NON-FUNDAMENTAL INVESTMENT POLICY. It is proposed that the U.S.
Treasury Income Portfolio replace change the above fundamental investment policy
to the following non- fundamental policy:
"Under normal circumstances, the U.S. Treasury Income
Portfolio will invest at least 65% of its assets in U.S.
Treasury obligations, obligations issued or guaranteed by
U.S. government agencies or instrumentalities if such
obligations are backed by the "full faith and credit" of the
U.S. Treasury, and securities issued or guaranteed as to
principal and interest by the U.S. government or by agencies
or instrumentalities thereof."
Thus, under the proposed amendment, the U.S. Treasury Income Portfolio would no
longer be required to invest primarily in debt obligations that are backed by
the "full faith and credit" of the U.S. government, unless shareholders approve
otherwise.
MODIFICATION OF INVESTMENT OBJECTIVE. In addition, contingent upon shareholder
approval of the elimination of the fundamental investment policy described
above, the Trustees have approved (i) the modifiaction of the Portfolio's
investment objective to reflect the modified investment policy and (ii) a change
in the name of the U.S. Treasury Income Portfolio to the U.S. Government Income
Portfolio. The U.S. Treasury Income Portfolio's investment objective is
non-fundamental, which means that it can be changed upon approval of the Board
of Trustees. Therefore, shareholders are not being asked to approve the change
in the investment objective. The proposed investment objective is consistent
with the modified investment policy and is as follows
"The U.S. Treasury Income Portfolio seeks to provide
monthly dividends as well as to protect the value of an
investors' investment (i.e., to preserve principal) by
investing in debt obligations that are backed by the "full
faith and credit" of the U.S. government and securities
issued or guaranteed as to principal and interest by the
U.S. government or by agencies or instrumentalities
thereof" as well as by using futures contracts on fixed
income securities or indexes of fixed income securities and
options on such futures contracts for the purpose of
protecting (i.e., "hedging") the value of its portfolio."
The U.S. Treasury Income Portfolio's other investment policies would remain
unchanged.
48
REASONS FOR THE PROPOSAL. The proposed changes are intended to increase the
flexibility available in managing the U.S. Treasury Income Portfolio as well as
to maximize the ability to be responsive to market conditions, so that higher
yields may be obtained without undue risks. The Adviser has also informed the
Board that the current fundamental investment policy have imposed undue
restrictions on the Portfolio's ability to comply with Subchapter L of the
Internal Revenue Code of 1986, which concerns variable annuity contracts. The
defundamentalization of this policy would avoid the delay and expense of a
shareholder vote in the event of the need to modify the Portfolio's permissible
investments in government securities at some time in the future.
The U.S. Treasury Income Portfolio's current fundamental investment policy
requires the U.S. Treasury Income Portfolio to invest at least 65% of its assets
in obligations that are backed by the full faith and credit of the U.S.
government or in repurchase agreements fully collateralized by U.S. government
obligations, except that up to 5% of the U.S. Treasury Income Portfolio's assets
may be invested in futures contracts (and related options thereon) based on U.S.
government obligations, including any index of government obligations that may
be available for trading.
The Adviser believes that this fundamental policy, which requires the U.S.
Treasury Income Portfolio to invest primarily in obligations that are backed by
the full faith and credit of the U.S. government, may limit the ability of the
U.S. Treasury Income Portfolio to invest in other appropriate securities that
provide, in its judgment, a reasonable return consistent with reasonable risk.
The proposed investment objective would require the U.S. Treasury Income
Portfolio to invest primarily in U.S. Treasury obligations, obligations issued
or guaranteed by U.S. government agencies or instrumentalities if such
obligations are backed by the "full faith and credit" of the U.S. Treasury, and
securities issued or guaranteed as to principal and interest by the U.S.
government or by agencies or instrumentalities thereof. By requiring that at
least 65% of the U.S. Treasury Income Portfolio's assets be invested in U.S.
Treasury obligations, obligations issued or guaranteed by U.S. government
agencies or instrumentalities if such obligations are backed by the "full faith
and credit" of the U.S. Treasury, and securities issued or guaranteed as to
principal and interest by the U.S. government or by agencies or
instrumentalities thereof rather than U.S. Treasury obligations, the range of
available investments would be increased, and the Adviser believes that the U.S.
Treasury Income Portfolio could respond to changing market conditions and obtain
higher yields without unreasonable risk, and manage the Portfolio in compliance
with Subchapter L. Similarly, the Adviser believes that the proposed
non-fundamental investment policy requiring the U.S. Treasury Income Portfolio
to invest at least 65% of its assets in U.S. Treasury obligations, obligations
issued or guaranteed by U.S. government agencies or instrumentalities if such
obligations are backed by the "full faith and credit" of the U.S. Treasury, and
securities issued or guaranteed as to principal and interest by the U.S.
government or by agencies or instrumentalities thereof would also provide added
flexibility without unreasonable risk, by permitting the U.S. Treasury Income
Portfolio's principal investments to be in a wider range of debt obligations.
For the reasons indicated above, the Adviser believes that these changes will
provide added flexibility, will allow the U.S. Treasury Income Portfolio to take
advantage of additional
49
investment opportunities without undue risk, and are in the best interests of
the U.S. Treasury Income Portfolio and its shareholders. However, market
conditions change and there can be no assurance that adoption of the proposals
will result in the U.S. Treasury Income Portfolio's realizing yields higher than
it currently realizes.
Accordingly, based on the recommendation of the Adviser, the Trustees of the
Trust, including all of the Disinterested Trustees, unanimously approved the
foregoing changes to the U.S. Treasury Income Portfolio's fundamental investment
policy, subject to the approval of the U.S.
Treasury Income Portfolio's shareholders.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
If the proposals are approved by shareholders, the new investment objective and
the new nonfundamental investment policy will become effective as soon as
practicable. If the proposal is not approved, then the proposal will not be
implemented and the current objective and the current fundamental investment
policy will remain unchanged.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
OTHER INFORMATION
The Portfolio's present Sub-Administrator is Vista Broker Dealer Services, Inc.
("VBDS"), a wholly-owned subsidiary of BISYS Portfolios Services, Inc. See
"Administrator" under Proposal 1. The following are officers of the Trust who
may be deemed to have an interest in VBDS by virtue of their status as employees
and/or executive officers of VBDS:
Position With Officer of the
NAME the Trust Age Trust Since
Ann Bergin .................... Secretary 35 1995
Martin R. Dean ................ Treasurer 31 1995
SUBSTANTIAL SHAREHOLDERS. As of January 22, 1996 the separate accounts of the
Life Companies were known to the Board of Trustees and the management of the
Trust to own of record all shares of the Portfolios, [Do any trustees own
Variable K's?]
Ownership by certain beneficial owners. The Life Companies have advised the
Trust that as of February 5, 1996 there were no persons owning Variable
Contracts which would entitle them to instruct the Life Companies with respect
to more than 5% of the voting securities of any Portfolio of the Trust.
50
Voting Information and Discretion of the Persons Named as Proxies. While the
Meeting is called to act upon any other business that may properly come before
it, at the date of this proxy statement the only business which the management
intends to present or knows that others will present is the business mentioned
in the Notice of Meeting. If any other matters lawfully come before the Meeting,
and in all procedural matters at the Meeting, it is the intention that the
enclosed proxy shall be voted in accordance with the best judgment of the
attorneys named therein, or their substitutes, present and acting at the
Meeting.
If at the time any session of the Meeting is called to order a quorum is not
present, in person or by proxy, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of one or more of
the proposals have not been received, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitation of
proxies with respect to any such proposal. All such adjournments will require
the affirmative vote of a majority of the Shares present in person or by proxy
at the session of the Meeting to be adjourned. The persons named as proxies will
vote those proxies which they are entitled to vote in favor of the proposal, in
favor of such an adjournment, and will vote those proxies required to be voted
against the proposal, against any such adjournment. A vote may be taken on one
or more of the proposals in this proxy statement prior to any such adjournment
if sufficient votes for its approval have been received and it is otherwise
appropriate.
Submission of Proposals for the Next Annual Meeting of the Trust. Under
the Trust's Declaration of Trust and By-Laws, annual meetings of shareholders
are not required to be held unless necessary under the 1940 Act (for example,
when fewer than a majority of the Trustees have been elected by shareholders).
Therefore, the Trust does not hold shareholder meetings on an annual basis. A
shareholder proposal intended to be presented at any meeting hereafter called
should be sent to the Trust at 125 West 55th Street, New York, New York 10019,
and must be received by the Trust within a reasonable time before the
solicitation relating thereto is made in order to be included in the notice or
proxy statement related to such meeting. The submission by a shareholder of a
proposal for inclusion in a proxy statement does not guarantee that it will be
included. Shareholder proposals are subject to certain regulations under federal
securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT
EXPECT TO ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD
PROMPTLY AND RETURN IT IN THE ENCLOSED ENVELOPE TO AVOID
UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS NECESSARY.
February 5, 1996
BY ORDER OF THE BOARD OF
OF TRUSTEES OF MUTUAL PORTFOLIOS
VARIABLE ANNUITY TRUST
Ann Bergin,
Secretary
51
EXHIBIT A
INTERIM INVESTMENT ADVISORY AGREEMENT
FORM OF
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made this day of , by and between MUTUAL FUND _________ (the
"Trust") on behalf of the series of the Trust (the "Fund") and THE CHASE
MANHATTAN BANK, a New York State chartered banking corporation (the "Adviser").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"Act"); and
WHEREAS, the Trust and the Adviser desire to enter into an agreement to
provide advisory services for the Fund on the terms and conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by and between the parties hereto as
follows:
1. Appointment. The Adviser agrees, all as more fully set forth
herein, to act as investment adviser to the Fund with respect to the
investment of its assets and to supervise and arrange the purchase of
securities for and the sale of securities held in the portfolio of the
Fund.
2. Duties and Obligations of the Adviser With Respect to Investments
of Assets of the Fund.
(a) Subject to the succeeding provisions of this section and
subject to the direction and control of the Board of Trustees of the
Trust, the Adviser shall:
(i) supervise continuously the investment program of the
Fund and the composition of its portfolio;
(ii) determine what securities shall be purchased or sold by
the Fund; and
(iii) arrange for the purchase and the sale of securities
held in the portfolio of the Fund.
(b) Any investment program furnished by the Adviser under this
section shall at all times conform to, and be in accordance with, any
requirements imposed by:
(i) the provisions of the Act and of any rules or
regulations in force thereunder;
(ii) any other applicable provisions of state and federal
law;
(iii) the provisions of the Declaration of Trust and By-Laws
of the Trust, as amended from time to time;
(iv) any policies and determinations of the Board of
Trustees of the Trust; and
(v) the fundamental policies of the Fund, as reflected in
its Registration Statement under the Act, as amended from time to
time.
(c) In making recommendations for the Fund, Trust Division
personnel of the Adviser will not inquire or take into consideration
whether the issuer of securities proposed for purchase or sale for the
Fund's account are customers of the Commercial Division of the
Adviser. In dealing with commercial customers, the Commercial Division
will not inquire or take into consideration whether securities of
those customers are held by the Fund.
(d) The Adviser shall give the Fund the benefit of its best
judgment and effort in rendering services hereunder, but the Adviser
shall not be liable for any loss sustained by the Fund in connection
with the matters to which this Agreement relates, including
specifically but not limited to, the calculation of net asset value
and the adoption of any investment policy or the purchase, sale or
retention of any security, whether or not such purchase, sale or
retention shall have been based upon its own investigation and
research or upon investigation and research made by any other
individual, firm or corporation, if such purchase, sale or retention
shall have been made and such other individual, firm or corporation
shall have been selected in good faith. Nothing herein contained
shall, however, be construed to protect the Adviser against any
liability to the Fund or its security holders by reason of willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its obligations and
duties under this Agreement.
(e) Nothing in this Agreement shall prevent the Adviser or any
affiliated person (as defined in the Act) of the Adviser from acting
as investment adviser or manager for any other person, firm or
corporation (including other investment companies) and shall not in
2
any way limit or restrict the Adviser or any such affiliated person
from buying, selling or trading any securities for its or their own
accounts or for the accounts of others for whom it or they may be
acting; provided, however, that the Adviser expressly represents that
it will undertake no activities which, in its judgment, will adversely
affect the performance of its obligations to the Fund under this
Agreement.
(f) The Fund will supply the Adviser with certified copies of the
following documents: (i) the Trust's Declaration of Trust and By-Laws,
as amended; (ii) resolutions of the Trust's Board of Trustees and
shareholders authorizing the appointment of the Adviser and approving
this Agreement; (iii) the Trust's Registration Statement, as filed
with the SEC; and (iv) the Fund's most recent prospectus and statement
of additional information. The Fund will furnish the Adviser from time
to time with copies of all amendments or supplements to the foregoing,
if any, and all documents, notices and reports filed with the SEC.
(g) The Fund will supply, or cause its custodian bank to supply,
to the Adviser such financial information as is necessary or desirable
for the functions of the Adviser hereunder.
3. Broker-Dealer Relationships. The Adviser is responsible for
decisions to buy and sell securities for the Fund, broker-dealer selection
and negotiation of its brokerage commission rates. The Adviser's primary
consideration in effecting a security transaction will be execution at the
most favorable price. The Fund understands that a substantial majority of
the Fund's portfolio transactions will be transacted with primary market
makers acting as principal on a net basis, with no brokerage commissions
being paid by the Fund. Such principal transactions may, however, result in
a profit to the market makers. In certain instances the Adviser may make
purchases of underwritten issues at prices which include underwriting fees.
In selecting a broker or dealer to execute each particular transaction, the
Adviser will take the following into consideration; the best price
available; the reliability, integrity and financial condition of the broker
or dealer; the size of and difficulty in executing the order; and the value
of the expected contribution of the broker or dealer to the investment
performance of the Fund on a continuing basis. Accordingly, the price to
the Fund in any transaction may be less favorable than that available from
another broker or dealer if the difference is reasonably justified by other
aspects of the portfolio execution services offered. Subject to such
policies as the Board of Trustees may determine, the Adviser shall not be
deemed to have acted unlawfully or to have breached any duty
3
created by this Agreement or otherwise solely by reason of its having
caused the Fund to pay a broker or dealer that provides brokerage and
research services to the Adviser an amount of commission for effecting a
portfolio investment transaction in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction,
if the Adviser determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker or dealer, viewed in terms of either that
particular transaction or the Adviser's overall responsibilities with
respect to the Fund. The Adviser is further authorized to allocate the
orders placed by it on behalf of the Fund to such brokers and dealers who
also provide research or statistical material, or other services to the
Fund (which material or services may also assist the Adviser in rendering
services to other clients). Such allocation shall be in such amounts and
proportions as the Adviser shall determine and the Adviser will report on
said allocations regularly to the Board of Trustees indicating the brokers
to whom such allocations have been made and the basis therefor.
4. Allocation of Expenses. The Adviser agrees that it will furnish the
Fund, at its expense, all office space and facilities, equipment and
clerical personnel necessary for carrying out its duties under this
Agreement and the keeping of certain accounting records of the Fund. The
Adviser agrees that it will supply to any sub-adviser or administrator (the
"Administrator") of the Fund all necessary financial information in
connection with the Administrator's duties under any Agreement between the
Administrator and the Trust. The Adviser will also pay all compensation of
all Trustees, officers and employees of the Fund who are "affiliated
persons" of the Adviser as defined in the Act. All costs and expenses not
expressly assumed by the Adviser under this Agreement or by the
Administrator under the administration agreement between it and the Trust
shall be paid by the Fund, including, but not limited to (i) fees paid to
the Adviser and the Administrator; (ii) interest and taxes; (iii) brokerage
commissions; (iv) insurance premiums; (v) compensation and expenses of its
Trustees other than those affiliated with the Adviser or the Administrator;
(vi) legal, accounting and audit expenses; (vii) custodian and transfer
agent, or shareholder servicing agent, fees and expenses; (viii) expenses,
including clerical expenses, incident to the issuance, redemption or
repurchase of shares, including issuance on the payment of, or reinvestment
of, dividends; (ix) fees and expenses incident to the registration under
Federal or state securities laws of the Fund or its shares; (x) expenses of
preparing, setting in type, printing and mailing prospectuses, statements
of additional information, reports and notices and proxy material to
shareholders of the Fund;
4
(xi) all other expenses incidental to holding meetings of the Fund's
shareholders; and (xii) such extraordinary expenses as may arise, including
litigation affecting the Fund and the legal obligations which the Trust may
have to indemnify its officers and Trustees with respect thereto.
5. Compensation of the Adviser. (a) For the services to be rendered
and the expenses assumed by the Adviser, the Fund shall pay to the Adviser
monthly compensation at an annual rate, of % of the Fund's average daily
net assets, as set forth in Schedule A. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily and
the amounts of the daily accruals shall be paid monthly. If the Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the month
this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth above. Subject to the provisions
of subsection (b) hereof, payment of the Adviser's compensation for the
preceding month shall be made as promptly as possible after completion of
the computations contemplated by subsection (b) hereof.
(b) In the event the operating expenses of the Fund including all
investment advisory, sub-advisory and administration fees, for any
fiscal year ending on a date on which this Agreement is in effect
exceed the expense limitations applicable to the Fund imposed by the
securities laws or regulations thereunder of any state in which the
Fund's shares are qualified for sale, as such limitations may be
raised or lowered from time to time, the Adviser shall reduce its
investment advisory fee, but not below zero, to the extent of its
share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes,
brokerage commissions and extraordinary expenses (including but not
limited to legal claims and liabilities and litigation costs and any
indemnification related thereto) paid or payable by the Fund. Such
reduction, if any, shall be computed and accrued daily, shall be
settled on a monthly basis and shall be based upon the expense
limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more of such expense limitations be
applicable as at the end of the last business day of the month, that
expense limitation which results in the largest reduction in the
Adviser's fee shall be applicable. For the purposes of this paragraph,
the Adviser's share of any excess expenses shall be computed by
multiplying such excess expenses by a fraction, the numerator of which
is the amount of the investment advisory fee which would otherwise be
payable to the Adviser for such fiscal year were it not
5
for this subsection 5(b) and the denominator of which is the sum of
all investment advisory and administrative fees which would otherwise
be payable by the Fund were it not for the expense limitation
provisions of any investment advisory or administrative agreement to
which the Fund is a party.
6. Duration, Amendment and Termination. (a) This Agreement shall
go into effect as to the Fund on the date set forth above (the
"Effective Date") and shall, unless terminated as hereinafter
provided, continue in effect for two years from the Effective Date and
shall continue from year to year thereafter, but only so long as such
continuance is specifically approved at least annually by the Board of
Trustees of the Trust, including the vote of a majority of the
Trustees who are not parties to this Agreement or "interested persons"
(as defined in the Act) of any such party cast in person at a meeting
called for the purpose of voting on such approval, or by the vote of
the holders of a "majority" (as so defined) of the outstanding voting
securities of the Fund and by such a vote of the Trustees.
(b) This Agreement may not be amended except in accordance
with the provisions of the Act, including specifically, the
provisions of the Act and the rules and regulations thereunder
regarding series votes by shareholders of the Fund.
(c) This Agreement may be terminated by the Adviser at any
time without penalty upon giving the Fund sixty (60) days'
written notice (which notice may be waived by the Fund) and may
be terminated by the Fund at any time without penalty upon giving
the Adviser sixty (60) days' written notice (which notice may be
waived by the Adviser), provided that such termination by the
Fund shall be approved by the vote of a majority of all the
Trustees in office at the time or by the vote of the holders of a
majority (as defined in the Act) of the voting securities of the
Fund at the time outstanding and entitled to vote. This Agreement
may only be terminated in accordance with the provisions of the
Act, and shall automatically terminate in the event of its
assignment (as defined in the Act).
7. Board of Trustees Meeting. The Fund agrees that notice of each
meeting of the Board of Trustees of the Trust will be sent to the
Adviser and that the Fund will make appropriate arrangements for the
attendance (as persons present by invitation) of such person or
persons as the Adviser may designate.
6
8. Notices. Any notices under this Agreement shall be in
writing, addressed and delivered or mailed postage paid to the other
party at such address as such other party may designate for the receipt
of such notice. Until further notice to the other party, it is agreed
that the address of the Fund for this purpose shall be 125 West 55th
Street, New York, New York 10019, and that of the Adviser shall be One
Chase Manhattan Plaza, New York, New York 10081.
9. Questions of Interpretation. Any question of interpretation
of any term or provision of this Agreement having a counterpart in or
otherwise derived from a term or provision of the Act, as amended,
shall be resolved by reference to such term or provision of the Act and
to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules,
regulations or orders of the Securities and Exchange Commission issued
pursuant to said Act. In addition, where the effect of a requirement of
the Act, reflected in any provision of this Agreement is revised by
rule, regulation or order of the Securities and Exchange Commission,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused the foregoing
instrument to be executed by their duly authorized officers and their seals to
be hereunder affixed, all as of the day and year first above written.
MUTUAL FUND ______________________
Name:
Title:
ATTEST:
THE CHASE MANHATTAN BANK
Name:
Title:
ATTEST:
7
EXHIBIT B
NEW INVESTMENT ADVISORY AGREEMENT
FORM OF
PROPOSED
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND _______________
AND
THE CHASE MANHATTAN BANK
AGREEMENT made this day of , 1996, by and between Mutual Fund
_______________, a Massachusetts business trust which may issue one or more
series of shares (hereinafter the "Trust"), and The Chase Manhattan Bank, a New
York state chartered bank (hereinafter the "Adviser").
WHEREAS, the Trust is registered as an open-end, management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services in connection with the series of the Trust listed on Schedule
A (each, a "Fund" and collectively, the "Funds"), and the Adviser represents
that it is willing and possesses legal authority to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Structure of Agreement. The Trust is entering into this Agreement
on behalf of the Funds severally and not jointly. The responsibilities and
benefits set forth in this Agreement shall refer to each Fund severally and not
jointly. No individual Fund shall have any responsibility for any obligation
with respect to any other Fund arising out of this Agreement. Without otherwise
limiting the generality of the foregoing,
(a) any breach of any term of this Agreement regarding the Trust
with respect to any one Fund shall not create a right or
obligation with respect to any other Fund;
(b) under no circumstances shall the Adviser have the right to set
off claims relating to a Fund by applying property of any
other Fund; and
(c) the business and contractual relationships created by this
Agreement, the consideration for entering into this Agreement,
and the consequences of such
relationships and consideration relate solely to the Trust and
the particular Fund to which such relationship and
consideration applies.
2. Delivery of Documents. The Trust has delivered to the Adviser
copies of each of the following documents and will deliver to it all future
amendments and supplements thereto, if any:
(a) The Trust's Declaration of Trust;
(b) The By-Laws of the Trust;
(c) Resolutions of the Board of Trustees of the Trust authorizing
the execution and delivery of this Agreement;
(d) The Trust's Registration Statement under the Securities Act of
1933, as amended (the "1933 Act"), and the Investment Company
Act of 1940, as amended (the "1940 Act"), on Form N-1A as
filed with the Securities and Exchange Commission (the
"Commission") on July 18, 1994 and all subsequent amendments
thereto relating to the Funds (the "Registration Statement");
(e) Notification of Registration of the Trust under the 1940 Act
on Form N-8A as filed with the Commission; and
(f) Prospectuses and Statements of Additional Information of the
Funds (collectively, the "Prospectuses").
3. Appointment.
(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Funds for the period and on the
terms set forth in this Agreement. The Adviser accepts such
appointment and agrees to furnish the services herein set
forth for the compensation herein provided.
(b) Employees of Affiliates. The Adviser may, in its discretion,
provide such services through its own employees or the
employees of one or more affiliated companies that are
qualified to act as an investment adviser to the Trust under
applicable laws and are under the control of The Chase
Manhattan Corporation, the parent of the Adviser; provided
that (i) all persons, when providing services hereunder, are
functioning as part of an organized group of persons, and (ii)
such organized group of persons is managed at all times by
authorized officers of the Adviser.
2
(c) Sub-Advisers. It is understood and agreed that the Adviser may
from time to time employ or associate with such other entities
or persons as the Adviser believes appropriate to assist in
the performance of this Agreement with respect to a particular
Fund or Funds (each a "Sub-Adviser"), and that any such
Sub-Adviser shall have all of the rights and powers of the
Adviser set forth in this Agreement; provided that a Fund
shall not pay any additional compensation for any Sub-Adviser
and the Adviser shall be as fully responsible to the Trust for
the acts and omissions of the Sub-Adviser as it is for its own
acts and omissions; and provided further that the retention of
any Sub-Adviser shall be approved in advance by (i) the Board
of Trustees of the Trust and (ii) the shareholders of the
relevant Fund if required under any applicable provisions of
the 1940 Act. The Adviser will review, monitor and report to
the Trust's Board of Trustees regarding the performance and
investment procedures of any Sub-Adviser. In the event that
the services of any Sub-Adviser are terminated, the Adviser
may provide investment advisory services pursuant to this
Agreement to the Fund without a Sub-Adviser and without
further shareholder approval, to the extent consistent with
the 1940 Act. A Sub-Adviser may be an affiliate of the
Adviser.
4. Investment Advisory Services.
(a) Management of the Funds. The Adviser hereby undertakes to act
as investment adviser to the Funds. The Adviser shall
regularly provide investment advice to the Funds and
continuously supervise the investment and reinvestment of
cash, securities and other property composing the assets of
the Funds and, in furtherance thereof, shall:
(i) supervise all aspects of the operations of the Trust
and each Fund;
(ii) obtain and evaluate pertinent economic, statistical
and financial data, as well as other significant
events and developments, which affect the economy
generally, the Funds' investment programs, and the
issuers of securities included in the Funds'
portfolios and the industries in which they engage,
or which may relate to securities or other
investments which the Adviser may deem desirable for
inclusion in a Fund's portfolio;
(iii) determine which issuers and securities shall be
included in the portfolio of each Fund; (iv) furnish
a continuous investment program for each Fund;
3
(v) in its discretion and without prior consultation with
the Trust, buy, sell, lend and otherwise trade any
stocks, bonds and other securities and investment
instruments on behalf of each Fund; and
(vi) take, on behalf of each Fund, all actions the Adviser
may deem necessary in order to carry into effect such
investment program and the Adviser's functions as
provided above, including the making of appropriate
periodic reports to the Trust's Board of Trustees.
(b) Covenants. The Adviser shall carry out its investment
advisory and supervisory responsibilities in a manner
consistent with the investment objectives, policies, and
restrictions provided in: (i) each Fund's Prospectus and
Statement of Additional Information as revised and in effect
from time to time; (ii) the Company's Trust Instrument,
By-Laws or other governing instruments, as amended from time
to time; (iii) the 1940 Act; (iv) other applicable laws; and
(v) such other investment policies, procedures and/or
limitations as may be adopted by the Company with respect to a
Fund and provided to the Adviser in writing. The Adviser
agrees to use reasonable efforts to manage each Fund so that
it will qualify, and continue to qualify, as a regulated
investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended, and regulations issued thereunder
(the "Code"), except as may be authorized to the contrary by
the Company's Board of Trustees. The management of the Funds
by the Adviser shall at all times be subject to the review of
the Company's Board of Trustees.
(c) Books and Records. The Adviser shall keep each Fund's books
and records required by applicable law to be maintained by the
Funds with respect to advisory services. The Adviser agrees
that all records which it maintains for a Fund are the
property of the Fund and it will promptly surrender any of
such records to the Fund upon the Fund's request. The Adviser
further agrees to preserve for the periods prescribed by the
1940 Act any such records of the Fund required to be preserved
by such Rule.
(d) Reports, Evaluations and other services. The Adviser shall
furnish reports, evaluations, information or analyses to the
Trust with respect to the Funds and in connection with the
Adviser's services hereunder as the Trust's Board of Trustees
may request from time to time or as the Adviser may otherwise
deem to be desirable. The Adviser shall make recommendations
to the Trust's Board of Trustees with respect to Trust
policies, and shall carry out such policies as are adopted by
the Board of Trustees. The Adviser shall, subject to review by
the Board of Trustees, furnish such other services as the
Adviser shall from time to time determine to be necessary or
useful to perform its obligations under this Agreement.
4
(e) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for
each Fund with brokers or dealers selected by the Adviser,
which may include brokers or dealers affiliated with the
Adviser to the extent permitted by the 1940 Act and the
Trust's policies and procedures applicable to the Funds. The
Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the
circumstances, result in total costs or proceeds being the
most favorable to the Funds. In assessing the best overall
terms available for any transaction, the Adviser shall
consider all factors it deems relevant, including the breadth
of the market in the security, the price of the security, the
financial condition and execution capability of the broker or
dealer, research services provided to the Adviser, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In no event
shall the Adviser be under any duty to obtain the lowest
commission or the best net price for any Fund on any
particular transaction, nor shall the Adviser be under any
duty to execute any order in a fashion either preferential to
any Fund relative to other accounts managed by the Adviser or
otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or
dealers qualified to execute a particular transaction, brokers
or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934) to the Adviser, the
Funds and/or the other accounts over which the Adviser
exercises investment discretion. The Adviser is authorized to
pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of
commission another broker or dealer would have charged for
effecting that transaction if the Adviser determines in good
faith that the total commission is reasonable in relation to
the value of the brokerage and research services provided by
such broker or dealer, viewed in terms of either that
particular transaction or the overall responsibilities of the
Adviser with respect to accounts over which it exercises
investment discretion. The Adviser shall report to the Board
of Trustees of the Trust regarding overall commissions paid by
the Funds and their reasonableness in relation to the benefits
to the Funds.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Fund, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be sold or purchased
with those of other Funds or its other clients if, in the
Adviser's reasonable judgment, such aggregation (i) will
result in an overall economic benefit to the Fund, taking into
consideration the advantageous selling or purchase price,
brokerage commission and other expenses, and trading
requirements, and (ii) is not inconsistent with the policies
set forth in the
5
Trust's registration statement and the Fund's Prospectus and
Statement of Additional Information. In such event, the
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.
5. Expenses. (a) The Adviser shall, at its expense, provide the Funds
with office space, furnishings and equipment and personnel required by it to
perform the services to be provided by the Adviser pursuant to this Agreement.
The Adviser also hereby agrees that it will supply to any sub-adviser or
administrator (the "Administrator") of a Fund all necessary financial
information in connection with the Administrator's duties under any Agreement
between the Administrator and the Trust.
(b) Except as provided in subparagraph (a), the Trust shall be
responsible for all of the Funds' expenses and liabilities, including, but not
limited to, taxes; interest; fees (including fees paid to its trustees who are
not affiliated with the Adviser or any of its affiliates); fees payable to the
Securities and Exchange Commission; state securities qualification fees;
association membership dues; costs of preparing and printing Prospectuses for
regulatory purposes and for distribution to existing shareholders; advisory and
administration fees; charges of the custodian and transfer agent; insurance
premiums; auditing and legal expenses; costs of shareholders' reports and
shareholders' meetings; any extraordinary expenses; and brokerage fees and
commissions, if any, in connection with the purchase or sale of portfolio
securities.
6. Compensation. (a) In consideration of the services to be rendered by
the Adviser under this Agreement, the Trust shall pay the Adviser monthly fees
on the first Business Day (as defined in the Prospectuses) of each month based
upon the average daily net assets of each Fund during the preceding month (as
determined on the days and at the time set forth in the Prospectuses for
determining net asset value per share) at the annual rate set forth opposite the
Fund's name on Schedule A attached hereto. If the fees payable to the Adviser
pursuant to this paragraph begin to accrue before the end of any month or if
this Agreement terminates before the end of any month, the fees for the period
from such date to the end of such month or from the beginning of such month to
the date of termination, as the case may be, shall be prorated according to the
proportion which such period bears to the full month in which such effectiveness
or termination occurs. For purposes of calculating each such monthly fee, the
value of the Funds' net assets shall be computed in the manner specified in the
Prospectuses and the Articles for the computation of the value of the Funds' net
assets in connection with the determination of the net asset value of shares of
the Funds' capital stock.
(b) If the aggregate expenses incurred by, or allocated to, each Fund
in any fiscal year shall exceed the lowest expense limitation, if applicable to
such Fund, imposed by state securities laws or regulations thereunder, as such
limitations may be raised or lowered from time to time, the Adviser shall reduce
its investment advisory fee, but not below zero, to the
6
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis and shall be based upon
the expense limitation applicable to the Fund as at the end of the last business
day of the month. Should two or more of such expense limitations be applicable
at the end of the last business day of the month, that expense limitation which
results in the largest reduction in the Adviser's fee shall be applicable. For
the purposes of this paragraph, the Adviser's share of any excess expenses shall
be computed by multiplying such excess expenses by a fraction, the numerator of
which is the amount of the investment advisory fee which would otherwise be
payable to the Adviser for such fiscal year were it not for this subsection 6(b)
and the denominator of which is the sum of all investment advisory and
administrative fees which would otherwise be payable by the Fund were it not for
the expense limitation provisions of any investment advisory or administrative
agreement to which the Fund is a party.
(c) In consideration of the Adviser's undertaking to render the
services described in this Agreement, the Trust agrees that the Adviser shall
not be liable under this Agreement for any error of judgment or mistake of law
or for any act or omission or loss suffered by the Trust in connection with the
performance of this Agreement, provided that nothing in this Agreement shall be
deemed to protect or purport to protect the Investment Adviser against any
liability to the Trust or its stockholders to which the Adviser would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of the Adviser's duties under this Agreement or by reason of the
Adviser's reckless disregard of its obligations and duties hereunder or breach
of fiduciary duty with respect to receipt of compensation.
7. Non-Exclusive Services. Except to the extent necessary to perform
the Investment Adviser's obligations under this Agreement, nothing herein shall
be deemed to limit or restrict the right of the Adviser, or any affiliate of the
Adviser, including any employee of the Adviser, to engage in any other business
or to devote time and attention to the management or other aspects of any other
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, firm, individual or association.
8. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date hereof (the "Effective Date"), provided that it
shall have been approved by a majority of the outstanding voting securities of
each Fund, in accordance with the requirements of the 1940 Act, or such later
date as may be agreed by the parties following such shareholder approval.
(a) Subject to prior termination as provided in sub-paragraph (d) of
this paragraph, this Agreement shall continue in force for two years from the
Effective Date and
7
shall continue in effect from year to year thereafter, but only so long as the
continuance after such date shall be specifically approved at least annually by
vote of the Trustees of the Trust or by vote of a majority of the outstanding
voting securities of each Fund.
(b) This Agreement may be modified by mutual consent, such consent on
the part of the Trust to be authorized by vote of a majority of the outstanding
voting securities of each Fund.
(c) In addition to the requirements of sub-paragraphs (a) and (b) of
this paragraph, the terms of any continuance or modification of this Agreement
must have been approved by the vote of a majority of those Trustees of the Trust
who are not parties to this Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
(d) Either party hereto may, at any time on sixty (60) days prior
written notice to the other, terminate this Agreement, without payment of any
penalty, by action of its Trustees or Board of Trustees, as the case may be, or
by action of its authorized officers or, with respect to a Fund, by vote of a
majority of the outstanding voting securities of that Fund. This Agreement may
remain in effect with respect to a Fund even if it has been terminated in
accordance with this paragraph with respect to the other Funds. This Agreement
shall terminate automatically in the event of its assignment as that term is
defined under the 1940 Act..
9. Board of Trustees Meetings. The Trust agrees that notice of each
meeting of the Board of Trustees of the Trust will be sent to the Adviser and
that the Trust will make appropriate arrangements for the attendance (as persons
present by invitation) of such person or persons as the Adviser may designate.
10. Governing Law. This Agreement shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, and their
respective seals to be hereunto affixed, all as of the date written above.
THE CHASE MANHATTAN BANK MUTUAL FUND ____________________
By: _________________________ By:_______________________
8
EXHIBIT C
PROPOSED SUB-ADVISORY AGREEMENT
FORM OF
PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
between
THE CHASE MANHATTAN BANK
and
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the ______ day of _______________, 1996, by and between The
Chase Manhattan Bank, a New York State chartered bank (the "Adviser"), and Chase
Asset Management, Inc., a [New York] corporation (the "Sub-Adviser").
WHEREAS, the Adviser is a registered investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, the Adviser provides investment advisory services to the
series of Mutual Fund ________________________, a Massachusetts business trust
(the "Trust"), an open-end, management investment company registered under the
Investment Trust Act of 1940, as amended (the "1940 Act") which serves as the
underlying investment for certain variable annuity contracts issued by insurance
company separate accounts, pursuant to an Investment Advisory Agreement dated
________, 1996 (the "Advisory Agreement"); and
WHEREAS, the Adviser desires to retain the Sub-Adviser to furnish
investment subadvisory services in connection with the series of the Trust
listed on Schedule A (each, a "Portfolio" and collectively, the "Portfolios"),
and the Sub-Adviser represents that it is willing and possesses legal authority
to so furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) General. The Adviser hereby appoints the Sub-Adviser to act as
investment subadviser to the Portfolios for the period and on the
terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth
for the compensation herein provided.
(b) Employees of Affiliates. The Sub-Adviser may, in its discretion,
provide such services through its own employees or the employees
of one or more affiliated companies that are qualified to act as
an investment subadviser to the Portfolios under applicable laws
and are under the control of New Chase, the parent of the
Sub-Adviser; provided that (i) all persons, when providing
services hereunder, are functioning as part of an organized group
of persons, and (ii) such organized group of persons is managed
at all times by authorized officers of the SubAdviser.
2. Delivery of Documents. The Adviser has delivered to the Sub-Adviser
copies of each of the following documents along with all amendments thereto
through the date hereof, and will promptly deliver to it all future amendments
and supplements thereto, if any:
(a) the Trust's Declaration of Trust;
(b) the By-Laws of the Trust;
(c) resolutions of the Board of Trustees of the Trust authorizing the
execution and delivery of the Advisory Agreement and this
Agreement;
(d) the most recent Post-Effective Amendment to the Trust's
Registration Statement under the Securities Act of 1933, as
amended (the "1933 Act"), and the 1940 Act, on Form N-1A as filed
with the Securities and Exchange Commission (the "Commission");
(e) Notification of Registration of the Trust under the 1940 Act on
Form N-8A as filed with the Commission; and
(f) the currently effective Prospectuses and Statements of Additional
Information of the Portfolios.
3. Investment Advisory Services.
(a) Management of the Portfolios. The Sub-Adviser hereby undertakes
to act as investment subadviser to the Portfolios. The
Sub-Adviser shall regularly provide investment advice to the
Portfolios and continuously supervise the investment and
reinvestment of cash, securities and other property composing the
assets of the Portfolios and, in furtherance thereof, shall:
(i) obtain and evaluate pertinent economic, statistical and
financial data, as well as other significant events and
developments, which affect the economy generally, the
Portfolios' investment programs, and the issuers of
securities included in the portfolio of each Portfolio and
the industries in which they engage, or which may relate to
securities or other investments which the Sub-Adviser may
deem desirable for inclusion in a Portfolio's portfolio;
2
(ii) determine which issuers and securities shall be included in
the portfolio of each Portfolio;
(iii) furnish a continuous investment program for each Portfolio;
(iv) in its discretion, and without prior consultation, buy,
sell, lend and otherwise trade any stocks, bonds and other
securities and investment instruments on behalf of each
Portfolio; and
(v) take, on behalf of each Portfolio, all actions the
Sub-Adviser may deem necessary in order to carry into
effect such investment program and the Sub-Adviser's
functions as provided above, including the making of
appropriate periodic reports to the Adviser and the Trust's
Board of Trustees.
(b) Covenants. The Sub-Adviser shall carry out its investment
subadvisory responsibilities in a manner consistent with the
investment objectives, policies, and restrictions provided in:
(i) each Portfolio's Prospectus and Statement of Additional
Information as revised and in effect from time to time; (ii) the
Trust's Declaration of Trust, By-Laws or other governing
instruments, as amended from time to time; (iii) the 1940 Act;
(iv) the provisions of the Internal Revenue Code of 1986, as
amended, including Subchapters L and M, relating to Variable
Contracts and regulated investment companies, respectively, (v)
other applicable laws; and (vi) such other investment policies,
procedures and/or limitations as may be adopted by the Trust with
respect to a Portfolio and provided to the Adviser in writing.
The management of the Portfolios by the Adviser shall at all
times be subject to the review of the Trust's Board of Trustees.
(c) Books and Records. Pursuant to applicable law, the Sub-Adviser
shall keep each Portfolio's books and records required to be
maintained by, or on behalf of, the Portfolios with respect to
subadvisory services rendered hereunder. The Sub- Adviser agrees
that all records which it maintains for a Portfolio are the
property of the Portfolio and it will promptly surrender any of
such records to the Portfolio upon the Portfolio's request. The
Sub-Adviser further agrees to preserve for the periods prescribed
by Rule 31a-2 under the 1940 Act any such records of the
Portfolio required to be preserved by such Rule.
(d) Reports, Evaluations and other services. The Sub-Adviser shall
furnish reports, evaluations, information or analyses to the
Adviser and the Trust with respect to the Portfolios and in
connection with the Sub-Adviser's services hereunder as the
Adviser and/or the Trust's Board of Trustees may request from
time to time or as the Sub-Adviser may otherwise deem to be
desirable. The Sub-Adviser shall make recommendations to the
Adviser and the Trust's Board of Trustees with
3
respect to the Trust's policies, and shall carry out such
policies as are adopted by the Board of Trustees. The Sub-Adviser
may, subject to review by the Adviser, furnish such other
services as the Sub-Adviser shall from time to time determine to
be necessary or useful to perform its obligations under this
Agreement.
(e) Purchase and Sale of Securities. The Sub-Adviser shall place all
orders for the purchase and sale of portfolio securities for each
Portfolio with brokers or dealers selected by the Sub-Adviser,
which may include brokers or dealers affiliated with the Adviser
or the Sub-Adviser to the extent permitted by the 1940 Act and
the Trust's policies and procedures applicable to the Portfolios.
The Sub-Adviser shall use its best efforts to seek to execute
portfolio transactions at prices which, under the circumstances,
result in total costs or proceeds being the most favorable to the
Portfolios. In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors it deems
relevant, including the breadth of the market in the security,
the price of the security, the financial condition and execution
capability of the broker or dealer, research services provided to
the Sub- Adviser, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis.
In no event shall the Sub-Adviser be under any duty to obtain the
lowest commission or the best net price for any Portfolio on any
particular transaction, nor shall the Sub-Adviser be under any
duty to execute any order in a fashion either preferential to any
Portfolio relative to other accounts managed by the Sub-Adviser
or otherwise materially adverse to such other accounts.
(f) Selection of Brokers or Dealers. In selecting brokers or dealers
qualified to execute a particular transaction, brokers or dealers
may be selected who also provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Sub-Adviser, the Portfolios, and/or
the other accounts over which the Sub-Adviser exercises
investment discretion. The Sub-Adviser is authorized to pay a
broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for a
Portfolio which is in excess of the amount of commission another
broker or dealer would have charged for effecting that
transaction if the Sub- Adviser determines in good faith that the
total commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or
dealer, viewed in terms of either that particular transaction or
the overall responsibilities of the Sub-Adviser with respect to
accounts over which it exercises investment discretion. The
Sub-Adviser shall report to the Board of Trustees of the Trust
regarding overall commissions paid by the Portfolios and their
reasonableness in relation to their benefits to the Portfolios.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Portfolio, the Sub-Adviser may, to the extent
permitted by applicable laws and
4
regulations, but shall not be obligated to, aggregate the
securities to be sold or purchased with those of other Portfolios
or its other clients if, in the Sub-Adviser's reasonable
judgment, such aggregation (i) will result in an overall economic
benefit to the Portfolio, 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 Portfolio's Prospectus and
Statement of Additional Information. In such event, the
Sub-Adviser will allocate the securities so purchased or sold,
and the expenses incurred in the transaction, in an equitable
manner, consistent with its fiduciary obligations to the
Portfolio and such other clients.
4. Representations and Warranties.
(a) The Sub-Adviser hereby represents and warrants to the Adviser as
follows:
(i) The Sub-Adviser is a corporation duly organized and in good
standing under the laws of the State of [New York] and is
fully authorized to enter into this Agreement and carry out
its duties and obligations hereunder.
(ii) The Sub-Adviser is registered as an investment adviser with
the Commission under the Advisers Act, and is registered or
licensed as an investment adviser under the laws of all
applicable jurisdictions. The SubAdviser shall maintain
such registrations or licenses in effect at all times
during the term of this Agreement.
(iii) The Sub-Adviser at all times shall provide its best
judgment and effort to the Adviser in carrying out the
Sub-Adviser's obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser as
follows:
(i) The Adviser is a state chartered bank duly organized and in
good standing under the laws of the State of New York and
is fully authorized to enter into this Agreement and carry
out its duties and obligations hereunder.
(ii) The Trust has been duly organized as a business trust under
the laws of the State of Massachusetts.
(iii) The Trust is registered as an investment company with the
Commission under the 1940 Act, and shares of the each
Portfolio are registered for offer and sale to the public
under the 1933 Act and all applicable state securities laws
where currently sold. Such registrations will be kept in
effect during the term of this Agreement.
5
5. Compensation. (a) As compensation for the services which the
Sub-Adviser is to provide or cause to be provided pursuant to Paragraph 3, with
respect to each Portfolio, the Adviser shall pay to the Sub-Adviser (or cause to
be paid by the Trust directly to the SubAdviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate to be determined between the parties hereto from time to time, as a
percentage of the average daily net assets of the Portfolio during the preceding
month (computed in the manner set forth in the Portfolio's most recent
Prospectus and Statement of Additional Information). Average daily net assets
shall be based upon determinations of net assets made as of the close of
business on each business day throughout such month. The fee for any partial
month shall be calculated on a proportionate basis, based upon average daily net
assets for such partial month. As a percentage of average daily net assets.
(b) The Sub-Adviser shall have the right, but not the obligation, to
voluntarily waive any portion of the sub-advisory fee from time to time. Any
such voluntary waiver will be irrevocable and determined in advance of rendering
sub-investment advisory services by the Sub-Adviser, and shall be in writing and
signed by the parties hereto.
(c) If the aggregate expenses incurred by, or allocated to, each
Portfolio in any fiscal year shall exceed the lowest expense limitation, if
applicable to such Portfolio, imposed by state securities laws or regulations
thereunder, as such limitations may be raised or lowered from time to time, the
Sub-Adviser shall reduce its investment advisory fee, but not below zero, to the
extent of its share of such excess expenses; provided, however, there shall be
excluded from such expenses the amount of any interest, taxes, brokerage
commissions and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Portfolio. Such reduction, if any, shall be
computed and accrued daily, shall be settled on a monthly basis and shall be
based upon the expense limitation applicable to the Portfolio as at the end of
the last business day of the month. Should two or more of such expense
limitations be applicable at the end of the last business day of the month, that
expense limitation which results in the largest reduction in the Sub-Adviser's
fee shall be applicable. For the purposes of this paragraph, the Sub-Adviser's
share of any excess expenses shall be computed by multiplying such excess
expenses by a fraction, the numerator of which is the amount of the investment
advisory fee which would otherwise be payable to the Sub-Adviser for such fiscal
year were it not for this subsection 5(b) and the denominator of which is the
sum of all investment advisory and administrative fees which would otherwise be
payable by the Portfolio were it not for the expense limitation provisions of
any investment advisory or administrative agreement to which the Portfolio is a
party.
6. Interested Persons. It is understood that, to the extent consistent
with applicable laws, the Trustees, officers and shareholders of the Trust or
the Adviser are or may be or become interested in the Sub-Adviser as directors,
officers or otherwise and that directors, officers and
6
shareholders of the Sub-Adviser are or may be or become similarly interested in
the Trust or the Adviser.
7. Expenses. The Sub-Adviser will pay all expenses incurred by it in
connection with its activities under this Agreement other than the cost of
securities (including brokerage commissions) purchased for or sold by the
Portfolios.
8. Non-Exclusive Services; Limitation of Sub-Adviser's Liability. The
services of the Sub-Adviser hereunder are not to be deemed exclusive, and the
Sub-Adviser may render similar services to others and engage in other
activities. The Sub-Adviser and its affiliates may enter into other agreements
with the Portfolios, the Trust or the Adviser for providing additional services
to the Portfolios, the Trust or the Adviser which are not covered by this
Agreement, and to receive additional compensation for such services. In the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of obligations or duties hereunder on the part of the Sub-Adviser, or
a breach of fiduciary duty with respect to receipt of compensation, neither the
Sub-Adviser nor any of its directors, officers, shareholders, agents, or
employees shall be liable or responsible to the Adviser, the Trust, the
Portfolios or to any shareholder of the Portfolios for any error of judgment or
mistake of law or for any act or omission in the course of, or connected with,
rendering services hereunder or for any loss suffered by the Adviser, the Trust,
a Portfolio, or any shareholder of a Portfolio in connection with the
performance of this Agreement.
9. Effective Date; Modifications; Termination. This Agreement shall
become effective on the date hereof (the "Effective Date") provided that it
shall have been approved by a majority of the outstanding voting securities of
each Portfolio, in accordance with the requirements of the 1940 Act, or such
later date as may be agreed by the parties following such shareholder approval.
(a) This Agreement shall continue in force for two years from the
Effective Date. Thereafter, this Agreement shall continue in
effect as to each Portfolio for successive annual periods,
provided such continuance is specifically approved at least
annually (i) by a vote of the majority of the Trustees of the
Trust who are not parties to this Agreement or interested persons
of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by a vote of the
Board of Trustees of the Trust or a majority of the outstanding
voting securities of the Portfolio.
(b) The modification of any of the non-material terms of this
Agreement may be approved by a vote of a majority of those
Trustees of the Trust who are not interested persons of any party
to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval.
(c) Notwithstanding the foregoing provisions of this Paragraph 9,
either party hereto may terminate this Agreement as to any
Portfolio(s) at any time on sixty (60)
7
days' prior written notice to the other, without payment of any
penalty. A termination of the Sub-Adviser may be effected as to
any particular Portfolio by the Adviser, by a vote of the Trust's
Board of Trustees, or by vote of a majority of the outstanding
voting securities of the Portfolio. This Agreement shall
terminate automatically in the event of its assignment.
10. Limitation of Liability of Trustees and Shareholders. The
Sub-Adviser acknowledges the following limitation of liability:
The terms "Mutual Fund Variable Annuity Trust" and "Trustees of Mutual
Fund Variable Annuity Trust" refer, respectively, to the trust created and the
Trustees, as trustees but not individually or personally, acting from time to
time under the Declaration of Trust, to which reference is hereby made and a
copy of which is on file at the office of the Secretary of State of the State of
Massachusetts, such reference being inclusive of any and all amendments thereto
so filed or hereafter filed. The obligations of "Mutual Fund Variable Annuity
Trust" entered into in the name or on behalf thereof by any of the Trustees,
representatives or agents are made not individually, but in such capacities and
are not binding upon any of the Trustees, shareholders or representatives of the
Trust personally, but bind only the assets of the Trust, and all persons dealing
with the Trust or a Portfolio must look solely to the assets of the Trust or
Portfolio for the enforcement of any claims against the Trust or Portfolio.
11. Certain Definitions. The terms "vote of a majority of the
outstanding voting securities," "assignment," "control," and "interested
persons," when used herein, shall have the respective meanings specified in the
1940 Act. References in this Agreement to the 1940 Act and the Advisers Act
shall be construed as references to such laws as now in effect or as hereafter
amended, and shall be understood as inclusive of any applicable rules,
interpretations and/or orders adopted or issued thereunder by the Commission.
12. Independent Contractor. The Sub-Adviser shall for all purposes
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Board of Trustees of the Trust
from time to time, have no authority to act for or represent a Portfolio in any
way or otherwise be deemed an agent of a Portfolio.
13. Structure of Agreement. The Adviser and Sub-Adviser are entering
into this Agreement with regard to the respective Portfolios severally and not
jointly. The responsibilities and benefits set forth in this Agreement shall be
deemed to be effective as between the Adviser and Sub-Adviser in connection with
each Portfolio severally and not jointly. This Agreement is intended to govern
only the relationships between the Adviser, on the one hand, and the SubAdviser,
on the other hand, and is not intended to and shall not govern (i) the
relationship between the Adviser or Sub-Adviser and any Portfolio, or (ii) the
relationships among the respective Portfolios.
8
14. Governing Law. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
15. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
16. Notices. Notices of any kind to be given to the Adviser hereunder
by the SubAdviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at ________________________________________________ or
at such other address or to such individual as shall be so specified by the
Adviser to the SubAdviser. Notices of any kind to be given to the Sub-Adviser
hereunder by the Adviser shall be in writing and shall be duly given if mailed
or delivered to the Sub-Adviser at ___________________________________________
or at such other address or to such individual as shall be so specified by the
Sub-Adviser to the Adviser. Notices shall be effective upon delivery.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
written above.
CHASE ASSET MANAGEMENT, INC. THE CHASE MANHATTAN BANK
By:____________________________ By:________________________________
Name: Name:
Title: Title:
9
MUTUAL FUND VARIABLE ANNUITY TRUST
_____________- PORTFOLIO
SPECIAL MEETING OF SHAREHOLDERS -- MARCH 15, 1996
THE UNDERSIGNED HOLDER OF SHARES OF BENEFICIAL INTEREST OF THE __________
PORTFOLIO (THE "PORTFOLIO") OF THE MUTUAL FUND VARIABLE ANNUITY TRUST (THE
"TRUST"), A MASSACHUSETTS BUSINESS TRUST, DOES HEREBY CONSTITUTE AND APPOINT
___________, ___________ AND _________, OR EITHER OF THEM, THE ATTORNEYS AND
PROXIES OF THE UNDERSIGNED WITH FULL POWER OF SUBSTITUTION AND APPOINTMENT, FOR,
AND IN THE NAME, PLACE AND STEAD, OF THE UNDERSIGNED TO VOTE ALL THE
UNDERSIGNED'S SHARES OF BENEFICIAL INTEREST OF THE PORTFOLIO AT THE SPECIAL
MEETING OF SHAREHOLDERS OF THE PORTFOLIO TO BE HELD AT 101 PARK AVENUE, 17TH
FLOOR, NEW YORK, NEW YORK ON MARCH 15, 1996, AT 12:00 P.M., EASTERN TIME, AND AT
ANY AND ALL ADJOURNMENTS THEREOF, IN THE MANNER SET FORTH BELOW. To vote, mark
an X in blue or black ink on the proxy card below. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF TRUSTEES OF MUTUAL FUND
VARIABLE ANNUITY TRUST. Please refer to the Proxy Statement for a discussion of
the proposals set forth below. NOTE: The numerical designation of each item
below corresponds to its Proposal number in the Proxy Statement; any Proxy
Statement Proposals that are inapplicable to the Portfolio have been omitted
from this Proxy Card.
- ------Detach card at perforation and mail in postage paid envelope provided----
1. Vote on Proposal to approve an Interim
Investment Advisory Agreement.
FOR AGAINST ABSTAIN Approval of an Interim Investment
Advisory Agreement between the
Portfolio and The Chase Manhattan
|-| |-| |-| Bank, N. A. (or the successor
entity thereto).
2. Vote on Proposal to approve a New
Investment Advisory Agreement and a Sub-
Advisory Agreement.
FOR AGAINST ABSTAIN Approval of a New Investment
Advisory Agreement between the
Portfolio and The Chase Manhattan
|-| |-| |-| Bank, N. A. (or the successor
entity thereto) and a Sub-Advisory
agreement between The Chase
Manhattan Bank, N. A. (or the
successor entity thereto) and Chase
Asset Management, Inc.
3. Votes on Proposal to elect new Trustees, the
nominees are: Fergus Reid, III, Richard E.
Ten Haken, William J. Armstrong, John R.
H. Blum, Joseph J. Harkins, H. Richard
Vartabedian, Stuart W. Cragin, Jr., Irving L.
Thode, W. Perry Neff, Roland R. Eppley,
Jr.and W. D. MacCallan.
FOR WITHHOLD FOR ALL TO WITHHOLD AUTHORITY TO VOTE
EXCEPT FOR ANY INDIVIDUAL NOMINEE, MARK
THE "FOR ALL EXCEPT" BOX, AND
|-| |-| |-| STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST ABOVE.
4. Vote on Proposal to ratify the selection of
independent accountants.
FOR AGAINST ABSTAIN Approval of ratification of the
selection of Price Waterhouse LLP
as independent accountants.
|-| |-| |-|
5. Vote on Proposal to approve an amendment to
the Trust's Declaration of Trust.
FOR AGAINST ABSTAIN Approval of an amendment to the
Trust's Declaration of Trust.
|-| |-| |-|
6. Votes on Proposals to approve of changes to
the Portfolio's fundamental investment
restrictions. The lettering of the boxes match
the lettering of the Proposals.
|_| FOR the changes to each restriction |_| ABSTAIN
listed as (a)-(k) below (except as
marked to the contrary below)
PLEASE CHECK THE BOX for any changes you do NOT wish to approve.
AGAINST AGAINST
CHANGES TO: CHANGES TO:
|_| (a) Borrowing |_| (f) Commodities and Real Estate
|_| (b) Investment for Purpose of Exercising Control |_| (g) Investments in Restricted and Illiquid Securities
|_| (c) Making of Loans |_| (h) Use of Options
|_| (d) Purchases of Securities on Margin |_| (i) Senior Securities
|_| (e) Concentration of Investments |_| (j) Short Sales of Securities
|_| (k) Investments in other Investment Companies
7. Vote on Proposal to approve a modification to the
Portfolio's policy with respect to permissible investments
in government securities.
FOR AGAINST ABSTAIN Approval of modification to the
Portfolio's policy with respect to
permissible investments in
|-| |-| |-| government securities.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
Detach card at perforation and mail
in postage paid envelope provided
--------------------------------------------------------------
MUTUAL FUND VARIABLE ANNUITY TRUST
_____________ FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MARKED AS TO ANY
PROPOSAL(S), THIS PROXY WILL BE VOTED FOR APPROVAL OF SUCH PROPOSAL(S).
Please sign exactly as name appears on this card. When shares are held by joint
tenants, all should sign. When signing as executor, administrator, trustee or
guardian, please give title. If a corporation or partnership, sign in entity's
name and by authorized person.
x________________________________________________________
SIGNATURE
x________________________________________________________
SIGNATURE (if held jointly)
Dated:______________________________________________, 1996