MUTUAL FUND VARIABLE ANNUITY TRUST
125 WEST 55TH STREET
NEW YORK, NEW YORK 10019
(800) 90-VISTA
Dear Valued 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 contractual 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 Portfolios, and is being provided as a
supplement to, not a substitute for, your proxy materials which we urge you
carefully review.
Q. WHY ARE THE PROPOSALS BEING RECOMMENDED?
A. The Holding Company Merger will affect the administration of the
Portfolios by virtue of the fact that under the Investment Company Act
of 1940, consummation of the Holding Company Merger causes the
automatic termination of the advisory contracts between each Portfolio
and the Adviser. Therefore, in order to ensure continuity in the
management of the Portfolios, shareholders are being asked to approve
new advisory contracts between the Portfolios and the Adviser. Further,
the management of the Portfolios is also taking this opportunity to
modernize, clarify and standardize certain matters relating to the
Portfolios' operations in an effort to improve efficiency in the
delivery of investment management services to shareholders of the
Portfolios.
Q. HOW WILL THE FEES AND EXPENSES OF THE PORTFOLIOS BE AFFECTED?
A. The annual rate of the contractual investment advisory, administrative
and distribution fees applicable to each Portfolio will not be
increased. It is also anticipated that the actual expenses of all
Portfolios will not increase or be reduced. Please be assured that
there are no increases to the contractual advisory fees in the proposed
advisory agreements.
Q. WILL THERE BE ANY CHANGE IN THE WAY THE PORTFOLIOS ARE MANAGED?
A. Vista has built a reputation as one of the mutual fund industry's most
consistent performers. The Portfolios have no current intention of
altering their investment strategies and the proposals which request
approval of modifications to the Portfolios' investment objectives,
policies and/or restrictions are not expected to have any immediate
effect upon the management of the Portfolios. Note, however, that U.S.
Treasury Income Portfolio shareholders are being asked to approve a
modification which would expand the universe of U.S. Government
securities in which the Portfolio may invest.
Q. AS A SHAREHOLDER, WHAT DO I NEED TO DO?
A. Please read the enclosed proxy statement and vote now by completing,
signing and returning the enclosed proxy ballot form(s) in the prepaid
envelope by March 29, 1996.
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 The Vista Service Center at 800-34- VISTA.
Very truly yours,
Fergus Reid
Chairman
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 APRIL 2, 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 April 2, 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.
(and the successor entity thereto) (the "Adviser") which will
take effect upon the merger of The Chase Manhattan Corporation
(the parent company of the Adviser) and Chemical Banking
Corporation (to be voted on separately by the shareholders of
each Portfolio).
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:
Proposals 6a-k apply to each Portfolio.
6. To consider the following proposals pertaining primarily to each
Portfolio's fundamental investment restrictions;
a. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning borrowing to
clarify permissible borrowings and allow each Portfolio to
engage in reverse repurchase transactions;
b. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning investment for
purposes of exercising control to allow, subject to certain
percentage limitations, 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 to clarify the basic limitation on securities lending
and to exclude those transactions, which current regulatory
policies and interpretations allow;
d. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning purchases of
securities on margin to allow short sales of securities
"against the box";
e. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning concentration
to clarify the restriction and specifically exclude certain
securities from the limitations imposed by the restriction;
f. To approve or disapprove an amendment to each Portfolio's
fundamental investment restriction concerning commodities
and real estate to clarify its applicability with respect to
certain securities;
g. To approve or disapprove an amendment of each Portfolio's
fundamental investment restriction regarding investments in
restricted and illiquid securities to allow investments in
certain securities which, although technically restricted,
may be classified as liquid in accordance with procedures
established by the Board of Trustees;
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 to allow each Portfolio to engage in investment
activities allowed by current regulatory interpretations and
policies;
j. To approve or disapprove the elimination of each Portfolio's
fundamental investment restriction regarding short sales of
securities; and
k. To approve or disapprove a proposal to adopt a new
investment policy that would allow each Portfolio the
flexibility to convert to a Master/Feeder Structure whereby
the Portfolio would invest all of its investable assets in a
corresponding portfolio of an open-end investment company
having substantially the same investment objective and
policies as the Portfolio.
Proposal 6l is related to the ASSET ALLOCATION PORTFOLIO ONLY:
1. 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 February 29, 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
March 15, 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.
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 April 2,
1996 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.
The Board of Trustees has fixed the close of business on February 29, 1996 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Meeting (the "Record Date"). As of the Record Date, there
were 255,984.473 shares of International Equity Portfolio, 381,994.277 shares of
Capital Growth Portfolio, 375,043.278 shares of Growth and Income Portfolio,
282,969.281 shares of Asset Allocation Portfolio, 277,466.176 shares of U.S.
Treasury Income Portfolio, and 2,430,412.408 shares of Money Market Portfolio
outstanding. See page 43 for information concerning the substantial shareholders
of voting securities of the Trust.
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 and the proposed amendment to the
Declaration of 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 April 1, 1996 as the last day for which
voting instructions will be accepted.
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.
Insofar as such expenses relate to those portions of the Proxy Statement
concerning the amendment to the Trust's Declaration of Trust, election of
Trustees, ratification of independent accountants, and the proposed changes to
each Portfolio's investment restrictions, it is expected that the relevant
Portfolio will pay all or a portion of such expenses.
A copy of each Portfolio's Annual Report (which contains information pertaining
to the Portfolio) may be obtained, without charge, by calling The Vista Service
Center at (800) 90-VISTA.
This proxy statement and the enclosed notice of meeting and proxy card are first
being mailed to shareholders on or about March 20, 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 which will take effect upon 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 (and its successor in the Bank Merger)
and a Sub-Advisory Agreement between the Adviser (and its successor in the Bank
Merger) 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
Declaration of Trust and to transact such other business as may properly come
before the Meeting or any adjournment thereof.
Each of the following Proposals apply only to certain Portfolios (the Portfolios
to which each of the Proposals apply are specified below and on the charts set
forth below). (6) to approve or disapprove amendments to each Portfolio's
fundamental investment restrictions (each Portfolio except as noted); and (7)
with respect to the U.S. Treasury Income Portfolio only, to approve or
disapprove a modification of the Portfolio's fundamental policy regarding
permissible investments in U.S. Government Securities.
PROPOSAL NUMBER
NAME OF PORTFOLIO 1 2 3 4 5 6^1 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 x
Growth & Income Portfolio x x x x x x
Capital Growth Portfolio x x x x x x
International Equity Portfolio x x x x x x
- --------
1 See Subchart below for Proposals 6a-l.
-2-
SUBCHART FOR PROPOSALS 6A-L
NAME OF PORTFOLIO a b c d e f g h i j k l
Asset Allocation Portfolio X X X X X X X X X X X X
MONEY MARKET PORTFOLIO X 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 X
GROWTH & INCOME PORTFOLIO X X X X X X X X X X X
CAPITAL GROWTH PORTFOLIO X X X X X X X X X X X
INTERNATIONAL EQUITY PORTFOLIO X X X X X X X X X X X
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 accountants (Proposal 4) 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 accountants under
Proposal 4 and the amendment to the Declaration of Trust (Proposal 5) would be
effective immediately. If Proposal 1 is approved, it is anticipated that the
Interim Advisory Agreement will become effective upon the occurrence of the
Holding Company Merger (and remain effective after the Bank Merger). If Proposal
2 is approved, it is anticipated that the New Advisory Agreement and CAM Inc.
Agreement will become effective as soon as practicable after approval by
shareholders (and remain effective after the Bank Merger). If Proposals 6 and 7
are approved, it is anticipated that the changes effected thereby will become
effective as soon as practicable after approval by shareholders.
PROPOSAL 1
APPROVAL OR DISAPPROVAL OF AN INTERIM INVESTMENT
ADVISORY AGREEMENT BETWEEN EACH PORTFOLIO
AND THE CHASE MANHATTAN BANK, N.A. (AND 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
-3-
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 on or about March 31, 1996. On December 11,
1995, the respective shareholders of The Chase Manhattan Corporation and
Chemical voted to approve the Holding Company Merger.
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 during 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 $57 billion in assets, including approximately $6.9
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 14, 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 Trust, 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 Interim
Advisory Agreement after the Bank Merger, if applicable. THE INTERIM ADVISORY
AGREEMENT IS IDENTICAL TO THE CURRENT ADVISORY AGREEMENT, EXCEPT FOR ITS
EFFECTIVE AND TERMINATION DATES. 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 Income 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 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
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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 such costs of the shareholders' meetings
related to the Mergers.
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 and
termination dates. A copy of the form of the Interim 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 the largest commercial banks in the United
States, with assets of $100.2 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 $121.2 billion. As of September 30, 1995,
The Chase Manhattan Corporation through various subsidiaries provided personal,
corporate and institutional investment management services for more than $55
billion in assets, of which Chase provided investment management services to
portfolios containing approximately $10.4 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 serves as investment adviser, their
assets as of December 31, 1995, and their annual advisory fees are:
-5-
Total Assets
as of 12/31/95
Mutual Fund Trust Advisory Fee (In Millions)
- ----------------- ------------ --------------
Vista California Tax Free Money Market Fund 0.10% $ 42.822
Vista New York Tax Free Money Market Fund 0.10 438.386
Vista Tax Free Money Market Fund 0.10 430.000
Vista U.S. Government Money Market Fund 0.10 2263.872
Vista Global Money Market Fund 0.10 1715.658
Vista Federal Money Market Fund 0.10 496.456
Vista Treasury Plus Money Market Fund 0.10 195.220
Vista Prime Money Market Fund 0.10 1198.243
Vista Tax Free Income Fund 0.30 103.047
Vista New York Tax Free Income Fund 0.30 110.567
Vista California Intermediate Tax Free Income Fund 0.30 32.191
Total Assets
as of 12/31/95
Mutual Fund Group Advisory Fee (In Millions)
------------ --------------
Vista Short Term Bond Fund 0.25% $ 36.493
Vista U.S. Treasury Income Fund 0.30 114.170
Vista Bond Fund 0.30 59.191
Vista Equity Income Fund 0.40 11.564
Vista Equity Fund 0.40 49.847
Vista Balanced Fund 0.50 41.393
IEEE Balanced Fund 0.60 11.459
Vista Small Cap Equity Fund 0.65 80.898
Vista Southeast Asian Fund 1.00 4.724
Vista Japan Fund 1.00 3.620
Vista European Fund 1.00 4.518
Total Assets
as of 12/31/95
Portfolios Advisory Fee (In Millions)
------------ --------------
Vista International Equity Portfolio 1.00% $ 33.361
Vista Capital Growth Portfolio 0.40 994.268
Vista Growth and Income Portfolio 0.40 1,842.903
Vista Global Fixed Income Portfolio 0.75 2.837
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 principal executive officers and Directors of the Adviser are as follows:
Thomas G. Labreque, Chairman of the Board, Chief Executive Officer and Director.
Richard J. Boyle, Vice Chairman of the Board and Director.
-6-
Donald L. Boudreau, Vice Chairman of the Board and Director.
E. Michel Kruse, Vice Chairman of the Board and Director.
Susan V. Berresford, Director. Ms. Berresford is also an Executive Vice
President of The Ford Foundation.
M. Anthony Burns, Director. Mr. Burns is also Chairman of the Board, President
and Chief Executive Officer of Ryder System, Inc.
James L. Ferguson, Director. Mr. Ferguson is also a retired Chairman and Chief
Executive Officer of General Foods Corporation.
H. Laurence Fuller, Director. Mr. Fuller is also Chairman and Chief Executive
Officer of Amoco Corporation.
William H. Gray, III, Director. Mr. Gray is also President and Chief Executive
Officer of the United Negro College Fund, Inc.
David T. Kearns, Director. Mr. Kearns is also a retired Chairman and Chief
Executive Officer of The Xerox Corporation.
Delano E. Lewis, Director. Mr. Lewis is also the President and Chief Executive
Officer of National Public Radio.
Paul W. MacAvoy, Director. Mr. MacAvoy is also the Williams Brothers Professor
of Management Studies at the Yale School of Management.
John H. McArthur, Director. Mr. McArthur is also a Professor of the Harvard
Graduate School of Business Administration.
David T. McLaughlin, Director. Mr. McLaughlin is also Chairman of the Board and
Chief Executive Officer of The Aspen Institute.
Edmund T. Pratt, Jr., Director. Mr. Pratt is also Chairman Emeritus of Pfizer
Inc.
Henry B. Schacht, Director. Mr. Schacht is also a Member of the Board of
Directors of Cummins Engine Company, Inc.
Donald H. Trautlein, Director. Mr. Trautlein is also a retired Chairman and
Chief Executive Officer of Bethlehem Steel Corporation.
The business address of the above persons is One Chase Manhattan Plaza, New
York, New York 10081.
CURRENT AND INTERIM ADVISORY AGREEMENTS
The Current and Interim Advisory Agreements for each Portfolio are identical,
except for their effective and termination 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
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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 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 Agreement will terminate on May 30, 1996
with respect to each Portfolio, unless the applicable Portfolio's shareholders
approve the Interim Agreement prior to such scheduled termination date (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 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
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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.
ADDITIONAL INFORMATION
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 May 30, 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.
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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 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 its Interim Advisory Agreement.
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
Approval of each 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 consummation of the Holding Company Merger will not be
affected, the Current Advisory Agreement for that Portfolio will have terminated
or will terminate upon the consummation of the Holding Company Merger and the
Interim Advisory Agreement for that Portfolio will terminate on May 30, 1996. In
that event, if the shareholders shall not have approved new advisory
arrangements in accordance with Proposal 2, 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.
(AND THE SUCCESSOR ENTITY THERETO), AND A SUB-ADVISORY AGREEMENT BETWEEN
THE CHASE MANHATTAN BANK, N.A. (AND 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 Chase 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. In addition, the Board of Trustees approved
the continuation of the New Advisory and CAM Inc. 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 New
Advisory and CAM Inc. Agreements are deemed to terminate as a result of the Bank
Merger. Approval of Proposal 2 will be deemed approval of such continuation of
the New Advisory and CAM Inc. Agreements after the Bank Merger. If approved, the
New Advisory and CAM Inc. Agreements will become effective as soon as
practicable after the approval of shareholders.
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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
Appendix 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. If the Interim Advisory Agreement is not
approved by shareholders, the Board will consider the appropriate course of
action for the effected Portfolio or Portfolios. The New 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 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 Current
and New Advisory 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.
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Under the Current and New Advisory Agreements, 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 Current and New Advisory Agreements 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 New Advisory Agreement on 60 days' written notice to
the Trust. The Current and New Advisory Agreements each terminate 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.
Details Regarding the Adviser's Duties. The New Advisory Agreement clearly
specifies the duties of the Adviser. For example, 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 its
obligations under 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 Sub-Adviser. 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.
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"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 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 New 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 sub-adviser 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 Appendix 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 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.
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
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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 under the Agreements.
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 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.
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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.
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 14, 1995.
FEES AND FEE WAIVERS
Under the Current Advisory Agreements which are dated August 23, 1994, 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%
-15-
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 August
31, 1995, the Adviser accrued aggregate investment advisory fees, and waived
such fees with respect to each Portfolio, as follows:
Amount of Fee
Name of Portfolio Fees Earned Waiver*
- ----------------- ----------- -------------
International Equity Portfolio $21,099 $21,099
Capital Growth Portfolio 16,843 16,843
Growth and Income Portfolio 16,671 16,671
Asset Allocation Portfolio 14,637 14,637
Treasury Portfolio 13,126 13,126
Money Market Portfolio 6,468 6,468
Chase also serves as the Administrator to each Portfolio. For the fiscal period
ended August 31, 1995, Chase accrued aggregate administration fees, and waived
such fees with respect to each Portfolio, as follows:
Amount of Fee
Name of Portfolio Fees Earned Waiver*
- ----------------- ----------- -------------
International Equity Portfolio $1,139 $1,319
Capital Growth Portfolio 1,403 1,403
Growth and Income Portfolio 1,389 1,389
Asset Allocation Portfolio 1,331 1,331
Treasury Portfolio 1,313 1,313
Money Market Portfolio 1,294 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 Interim Advisory
Agreement, assuming Proposal 1 is approved. If the Interim Agreement is not
approved by shareholders, the Board will take such further action as it may deem
to be in the best interests of the Portfolio's shareholders.
-16-
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE FOREGOING PROPOSAL
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 Trustee 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:
Year First
Principal Occupations Became
NOMINEE Age for the Last Five Years a Trustee
- ------- --- ----------------------- ---------
Fergus Reid 63 Chairman and Chief 1984
971 West Road Executive Officer,
New Canaan, CT 06840 Lumelite
Corporation, since
September 1985;
Trustee, Morgan
Stanley Funds; from
1982 through 1984,
Managing Director,
Bernhard Associates
(venture capital
firm).
Dr. Richard E. Ten Haken 61 Former District 1984
4 Barnfield Road Superintendent of
Pittsford, NY 14534 Schools, Monroe No.
2 and 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.
William J. Armstrong 54 Vice President and 1987
49 Aspen Way Treasurer,
Upper Saddle River, NJ 07458 Ingersoll-Rand
Company.
John R.H. Blum 66 Attorney in Private 1984
322 Main Street Practice; formerly,
Lakeville, CT 06039 a Partner in the law
firm of Richards,
O'Neil & Allegaert;
Commissioner of
Agriculture - State
of Connecticut,
1992-1995.
-17-
Year First
Principal Occupations Became
NOMINEE Age for the Last Five Years a Trustee
- ------- --- ----------------------- ---------
*Joseph J. Harkins 64 Retired; formerly 1990
257 Plantation Circle South Commercial Sector
Ponte Vedra Beach, FL 32082 Executive and
Executive Vice
President of The
Chase Manhattan
Bank, N.A. from 1985
through 1989. He had
been employed by
Chase in numerous
capacities and
offices since 1954.
Director of
Blessings
Corporation,
Jefferson Insurance
Company of New York,
Monticello Insurance
Company and
National.
*H. Richard Vartabedian 60 Consultant, Republic 1992
P.O. Box 296 Bank of New York;
Beach Road formerly, Senior
Hendrick's Head Investment Officer,
Southport, ME 04576 Division Executive
of the Investment
Management Division
of The Chase
Manhattan Bank,
N.A., 1980 through
1991.
Stuart W. Cragin, Jr. 63 Retired; formerly 1992
108 Valley Road President, Fairfield
Cos Cob, CT 06807 Testing Laboratory,
Inc. He has
previously served in
a variety of
marketing,
manufacturing and
general management
positions with Union
Camp Corp., Trinity
Paper & Plastics
Corp., and Conover
Industries.
Irving L. Thode 64 Retired; Vice 1992
80 Perkins Road President of Quotron
Greenwich, CT 06830 Systems. He has
previously served in
a number of
executive positions
with Control Data
Corp., including
President of its
Latin American
Operations, and
General Manager of
its Data Services
business.
*W. Perry Neff 68 Independent Proposed
RR 1 Box 102A Financial
Weston, VT 05181 Consultant; Director
of North America
Life Assurance Co.,
Petroleum &
Resources Corp. and
The Adams Express
Co.; Director and
Chairman of The
Hanover Funds, Inc.;
Director, Chairman
and President of The
Hanover Investment
Funds, Inc.
Roland R. Eppley, Jr. 63 Retired: formerly Proposed
105 Ceventry Place President and Chief
Palm Beach Gardens, Executive Officer,
FL 33418 Eastern States
Bankcard Association
Inc, (1971- 1988);
Director, Janel
Hydraulics, Inc. and
The Hanover Funds,
Inc.
-18-
Year First
Principal Occupations Became
NOMINEE Age for the Last Five Years a Trustee
- ------- --- ----------------------- ---------
W.D. MacCallan 68 Director of The Proposed
624 East 45th Street Adams Express Co.,
Savannah, GA 31405 Petroleum &
Resources Corp., The
Hanover Funds, Inc.
and The Hanover
Investment Funds,
Inc.; 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. It is anticipated
that as of the date of the reorganization of certain mutual funds
affiliated with Chemical into certain Funds advised by the Adviser, Mr.
Harkins will no longer be considered an Interested Trustee.
The Board of Trustees met seven times during the twelve months ended December
31, 1995, and each of the Trustees attended at least 75% of those meetings.
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.
* Interested Trustee, see above.
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 August 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, Trustee 0 0 $78,456.65
Richard E. Ten Haken, 0 0 52,304.39
Trustee
-19-
Pension or Total
All Retirement Compensation
Portfolios Benefits Accrued from "Fund
of the Trust as Fund Expenses Complex"(1)
------------ ---------------- -----------
William J. Armstrong, 0 0 52,304.39
Trustee
John R.H. Blum, Trustee 0 0 51,304.37
Joseph J. Harkins, 0 0 52,304.39
Trustee
H. Richard Vartabedian, 0 0 74,804.44
Trustee
Stuart W. Cragin, Jr., 0 0 52,304.39
Trustee
Irving L. Thode, Trustee 0 0 52,304.39
(1) Data reflects total compensation earned during the period January 1,
1995 to December 31, 1995 for service as a Trustee to all thirty-two
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 in the table below are the estimated annual benefits payable to an
eligible Trustee upon retirement assuming various compensation and years of
service classifications. As of December 31, 1995, the estimated credited years
of service for Messrs. Reid, Ten Haken, Armstrong, Blum, Harkins, Vartabedian,
Cragin, and Thode are 11, 11, 8, 11, 5, 3, 3 and 3 respectively.
HIGHEST ANNUAL COMPENSATION PAID BY ALL VISTA FUNDS
$ 40,000 $ 45,000 $ 50,000 $ 55,000
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT UPON RETIREMENT
--------------------------------------------------------
10 $ 40,000 $ 45,000 $ 50,000 $ 55,000
9 36,000 40,500 45,000 49,500
-20-
YEARS OF
SERVICE ESTIMATED ANNUAL BENEFIT UPON RETIREMENT
--------------------------------------------------------
8 32,000 36,000 40,000 44,000
7 28,000 31,500 35,000 38,500
6 24,000 27,000 30,000 33,000
5 20,000 22,500 25,000 27,500
Effective August 21, 1995, the Trustees instituted a Deferred Compensation Plan
for Eligible Trustees (the "Deferred Compensation Plan") pursuant to which each
Trustee (who is not an employee of any of the Portfolios, the Adviser,
Administrator or Distributor or any of their affiliates) may enter into
agreements with the Portfolios 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 a
Portfolio on whose Board the Trustee sits subject to the Trustees election. The
deferred amounts are paid out in a lump sum or over a period of several years as
elected by the Trustee at the time of deferral. If a deferring Trustee dies
prior to the distribution of amounts held in the deferral account, the balance
of the deferral account will be distributed to the Trustee's designated
beneficiary in a single lump sum payment as soon as practicable after such
deferring Trustee's death. The following Eligible Trustees have executed a
deferred compensation agreement for the 1996 calendar year:
Messrs. Ten Haken, Thode and Vartabedian.
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 Funds
Group, Inc.
Ann Bergin - Secretary and Assistant Treasurer; Vice President, BISYS Funds
Group, Inc.; Secretary, Vista BrokerDealer 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 majority of all 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
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 Portfolio for each Portfolio's 1996 fiscal year,
subject to the right of the Portfolio to terminate such employment immediately
without penalty by vote of a majority of the outstanding voting securities of
the Portfolio at any meeting called for such purpose. The Board's selection is
hereby submitted to the shareholders for ratification.
-21-
Price Waterhouse LLP served as the independent accountants 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 Portfolio 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 relevant
Portfolio.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE FOREGOING PROPOSAL
PROPOSAL 5
APPROVAL OR DISAPPROVAL OF AN
AMENDMENT TO THE TRUST'S DECLARATION OF TRUST
INTRODUCTION
The Trust is organized as a Massachusetts business trust under the laws of the
Commonwealth of Massachusetts. 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 any item
provided that such amendment, alteration, modification or repeal does not
adversely affect 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
Massachusetts and other regulatory laws and to provide maximum flexibility to
the Trust and, therefore, the Portfolios and their shareholders.
Section 9.3.(a) of the Trust's Declaration of Trust currently provides "This
Declaration may be amended by Majority Shareholder Vote of the Shareholders of
the Trust or by any instrument in writing, without a meeting, signed by a
majority of the Trustees and consented to by the holders of not less than a
majority of the Shares of the Trust. The Trustees may also amend this
Declaration without the vote or consent of Shareholders to designate series in
accordance with Section 6.9 hereof (or to modify any provision of this
Declaration to the extent deemed necessary or appropriate by the Trustees to
reflect such designation), to change the name of the Trust, to supply any
omission, to cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or if they may deem it necessary or advisable to
conform this Declaration 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, but the Trustees shall not be
liable for failing to do so."
If this Proposal is approved, Section 9.3.(a) will be revised to read as follows
(revised text in brackets): "This Declaration may be amended by Majority
Shareholder Vote of the Shareholders of the Trust or by any instrument in
writing, without a meeting, signed by a majority of the Trustees and consented
to by the holders of not less than a majority of the Shares of the Trust. The
Trustees may also amend this Declaration without the vote or consent of
Shareholders to designate series in accordance with Section 6.9 hereof (or to
modify any provision of this Declaration to the extent deemed necessary or
appropriate by the Trustees to reflect such designation), to change the name of
the Trust, [TO AMEND, ALTER, MODIFY OR REPEAL ANY PROVISION OF THIS DECLARATION
WITH RESPECT TO ANY ITEM PROVIDED THAT SUCH AMENDMENT, ALTERATION, MODIFICATION
OR REPEAL DOES NOT ADVERSELY AFFECT THE ECONOMIC VALUE OR LEGAL RIGHTS OF A
SHAREHOLDER] or if they may deem it necessary or advisable to conform this
Declaration
-22-
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, but the Trustees shall not be liable for
failing to do so."
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 relates
to Restrictions of a Portfolio which are presently classified as "fundamental,"
which means that they can only be changed by a vote of the majority 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:
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' Restrictions are derived from 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
-23-
appropriate, to conform to current regulations 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 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 6a-l,
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.
-24-
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 assets, of the value of its total assets at
including the amount borrowed, and the time when the loan is made and
may pledge, mortgage or hypothecate may pledge, mortgage or hypothecate
not more than 1/3 of such assets to no more than 1/3 of its net assets
secure such borrowings (it is to secure such borrowings. Any
intended that money would be borrowings representing more than 5%
borrowed by a Portfolio only from of a Portfolio's total assets must
banks and only to accommodate be repaid before the Portfolio may
requests for the repurchase of make additional investments.
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.
EXPLANATION OF THE PROPOSED CHANGE: The proposed amendment clarifies and
modernizes the restriction on borrowing. The proposed restriction will treat
borrowings for temporary or emergency purposes separately from other borrowings.
Borrowing may be necessary to address excessive or unanticipated liquidations of
Portfolio shares that exceed available cash. The proposed amendment also would
allow each Portfolio to enter into reverse repurchase agreements, subject to a
limitation of 33 1/3% of a Portfolio's assets.
Reverse repurchase agreements involve the sale of securities by a Portfolio with
an agreement that the Portfolio will repurchase such securities at an agreed
upon price and date. A Portfolio may employ reverse repurchase agreements when
necessary to meet unanticipated net redemptions so as to avoid liquidating
portfolio investments during unfavorable market conditions. At the time it
enters into a reverse repurchase agreement, a Portfolio will place in a
segregated custodial account high-quality liquid debt securities having a dollar
value equal to the repurchase price.
-25-
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 an issuer is a limitation based upon the outstanding voting securities of the
issuer as provided for in Sub-chapter M of the Internal Revenue Code and would
not be applicable outside the diversification requirements which are applicable
only to 50% (75% with respect to the Money Market Portfolio) of a Portfolio's
assets. Although the restrictions as restated would allow the non-diversified
Portfolios to hold a larger portion of each Portfolio's assets in the
outstanding voting securities of one issuer, there is no current intention for
any of the Portfolios to do so. The diversified Portfolios would still be
required to meet the additional diversification requirements of the 1940 Act. In
addition, the reclassification as nonfundamental and restatement of the
restriction would clarify and help standardize the restriction.
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 Portfolio may: (i)
portfolio securities and provided purchase 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
-26-
agreements) unless it receives collateral that is at least 102% of the value of
the loan, including accrued interest. During the time portfolio securities are
on loan, the borrower pays the Portfolio any dividends or interest paid on such
securities, and the Portfolio may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or a letter of credit. As with
other extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower of any loaned securities fail
financially.
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 and
specifically permits the Fund to make short sales "against the box". The
reclassification as nonfundamental could enable the Portfolios to respond more
quickly to changes in financial markets.
In a short sale, an investor sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. In an investment
technique known as a short sale "against the box", an investor sells securities
short while owning the same securities in the same amount, or having the right
to obtain equivalent securities. Certain state regulations currently prohibit
mutual funds from entering into any short sales, other than short sales against
the box. If the proposal is approved, however, the Board of Trustees would be
able to change the proposed non-fundamental restriction in the future, without a
vote of shareholders, if state regulations were to change to permit other types
of short sales, or if waivers from existing requirements were available, subject
to appropriate disclosure to investors. Although elimination of the Portfolios'
fundamental restriction on short selling will not affect the Portfolios'
investment techniques at this time, in the event of a change in state regulatory
requirements, a Portfolio may alter its investment practices in the future.
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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 in U.S.
government securities, positions in
such 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
specifically exclude government securities (and repurchase agreements secured
thereby), securities issued by banks (and repurchase agreements secured thereby)
and positions in options and futures from the limitations imposed by the
restriction.
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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 a 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 conform the
application of the restrictions pertaining to commodities and real estate to the
current regulations of the 1940 Act by clarifying that certain real
estate-related financial instruments may be purchased by the Portfolios. To a
large extent, the proposed amendment would also standardize the restrictions
applicable to each of the respective Portfolios by allowing all the Portfolios
to engage in certain transactions such as forward purchases when it is
consistent with a Portfolio's investment objectives and policies.
-29-
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
legal or contractual restrictions 15% (10% with respect to the Money
on resale (including securities Market Portfolio) of its net assets
that are not readily marketable, in illiquid securities.
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: The current fundamental restrictions limit
purchases of all securities that are subject to restrictions on resale,
including securities that are not readily marketable and repurchase agreements
maturing in more than seven days. These restrictions include securities eligible
for resale under Rule 144A and Section 4(2) commercial obligations. The proposed
non-fundamental restriction incorporates recent developments in securities
markets. Under the proposed restriction, securities issued under such exemptions
from registration, although restricted, may still be classified as liquid in
accordance with procedures adopted by the Board of Trustees. This investment
practice could have the effect of increasing the level of illiquidity in a
Portfolio. Furthermore, to the extent that a market fails to develop or ceases
to exist with respect to these restricted securities, illiquidity levels will
increase.
When purchasing securities which could not be sold without registration under
the Securities Act of 1933, a Portfolio will endeavor to obtain the right to
registration at the expense of the issuer. Generally, there will be a lapse of
time between a Portfolio's decision to sell any such security and the
registration of the security permitting sale. During any such period, the price
of the securities will be subject to market fluctuations.
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.
-30-
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 change 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.
-31-
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) a 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 above, 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.
EXPLANATION OF PROPOSED CHANGE: 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. Under the proposed
fundamental restriction, 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 even though such
transactions may result in the issuance of senior securities.
-32-
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 has been
of securities or restriction be combined with a nonfundamental
eliminated, as it maintain a short restriction concerning purchases of
position; except that all securities on margin. (See Proposal
Portfolios other than the Money 6d above.)
Market Portfolio, may only make
such short sales of securities or
maintain a short position if when a
short position is open the
Portfolio owns an equal amount of
such securities 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. For an explanation of short sales see
Proposal 6d above.
-33-
PROPOSAL 6K
APPROVAL OF A NEW FUNDAMENTAL INVESTMENT
POLICY PERMITTING EACH
PORTFOLIO TO INVEST ALL OF ITS INVESTABLE
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 Portfolio which would allow each Portfolio 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 substantially
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 which may result in certain economies of scale.
There is no present intention to convert any Portfolio to a Master/Feeder Fund
structure. In adopting this new fundamental investment policy, a Portfolio would
be given the flexibility to convert to a Master/Feeder Fund Structure and pursue
investment opportunities consistent with its investment objective with the
approval of the Board, without the requirement of submitting such matter to a
vote of shareholders, which is a time-consuming and expensive process. The Board
will consider and evaluate specific proposals prior to the implementation of any
conversion to a Master/Feeder Fund Structure. A Portfolio's prospectus and
statement of additional information would be amended to reflect the
implementation of the Portfolio's conversion to a Master/Feeder Fund Structure
and its shareholders would be notified.
Under a Master/Feeder Fund Structure, a Portfolio will have the ability to
invest all of its investable assets in another investment company (the "Master
Portfolio") having substantially the same investment objectives and policies as
the Portfolio in exchange for shares of beneficial interest in the Master
Portfolio. This could mean that the only investment securities that will be held
by a Portfolio will be the Portfolio's interest in the Master Portfolio. Each
Master Portfolio will be a series of an investment company ("Master Trust"), as
each Portfolio 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 Portfolio. 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
Portfolio who may prefer to offer separate, proprietary investment vehicles and
who otherwise might establish such vehicles outside of a Portfolio's current
operational structure. Conversion to a Master/Feeder Fund Structure may allow a
Portfolio 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 Portfolio stabilizing its expenses or achieving
greater operational efficiencies.
NEW INVESTMENT POLICY
The Board has approved with respect to each Portfolio, subject to shareholder
approval, the adoption of a new fundamental investment policy that would permit
a Portfolio to convert to the Master/Feeder Fund Structure by investing all of
its investable assets in another appropriate investment fund. As discussed above
under "Introduction: Master/Feeder Fund Structure," the purpose of this Proposal
is to allow a Portfolio to enhance its flexibility and permit it to take
advantage of potential efficiencies available through investment of all of its
investable assets in another investment company. At present, certain of the
fundamental investment restrictions of each Portfolio, such as those limiting
investment in a single issuer or concentration in an industry, may prevent it
from investing all of its investable assets in another registered investment
company. The Board proposes that these restrictions be modified by adding the
following fundamental investment policy:
-34-
Notwithstanding any other investment policy or restriction, a Portfolio
may seek to achieve its investment objective by investing all of its
investable assets in another investment company having substantially
the same investment objective and policies as the Portfolio.
A Portfolio'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 Portfolio may be managed as part of a larger pool.
If a Portfolio invested all of its assets in a Master Portfolio, it would hold
only beneficial interests in the Master Portfolio; the Master Portfolio would
directly invest in individual securities of other issuers. The Portfolio would
otherwise continue its normal operation. The Board would retain the right to
withdraw a Portfolio's investment from its corresponding Master Portfolio at any
time it determines that it would be in the best interest of shareholders; the
Portfolio would then resume investing directly in individual securities of other
issuers or invest in another Master Portfolio.
ADDITIONAL INFORMATION REGARDING EACH MASTER PORTFOLIO
Each Master Portfolio would be a series of a Master Trust which, like the Trust,
would be an open-end management investment company under the 1940 Act. It is
expected that the Master Trust would 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 would be
substantially the same as those of the corresponding Portfolio; in seeking to
achieve the same objective as the Portfolio, the Master Portfolio would invest
in the same type of securities and engage in the same transactions permitted by
the investment policies and restrictions of the corresponding Portfolio.
The Adviser, or its successor in the Bank Merger would be the investment adviser
of each Portfolio's corresponding Master Portfolio. Similarly, CAM Inc. would
serve as Sub-Adviser to the Master Portfolio. See Proposal 2. Entities or their
successors in the Bank Merger that currently perform services with respect to
each Portfolio, such as administrative or custodial services, would perform
substantially similar services for each Master Portfolio.
Each Master Portfolio normally would not hold meetings of investors except as
required under the 1940 Act. As an investor in the Master Portfolio, a Portfolio
would be entitled to vote in proportion to its relative interest in the Master
Portfolio. As to any issue on which Portfolio shareholders vote, a Portfolio
would vote its interest in the Master Portfolio in proportion to the votes cast
by its shareholders. If there were other investors in the Master Portfolio,
there could be no assurance that any issue that receives a majority of the votes
cast by a Portfolio's shareholders would receive a majority of votes cast by all
Master Portfolio shareholders.
Changing a fundamental policy of a Master Portfolio would require approval of
the holders of a majority of interests in the Master Portfolio. The Board of
Trustees of the Master Trust would have the ability to change nonfundamental
policies without prior interestholder approval.
In addition to a vote to change a fundamental policy, examples of matters that
would 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 Portfolio would 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, a Portfolio would not seek
instructions from its shareholders with respect to (i) any proposal relating to
the Master Portfolio which, if made with respect to a Portfolio, would not
require the vote of Portfolio shareholders, or (ii) any proposal relating to the
Master Portfolio that is identical in all material respects to a proposal
previously approved by the Portfolio's shareholders.
The Master Trust's operations would be governed by its Trust Instrument and
applicable law. The operations of the Master Trust and the Master Portfolios,
like those of the Trust and the Portfolios, would be subject to the provisions
of the 1940 Act and the rules and regulations of the SEC thereunder and
applicable state securities laws.
-35-
Examples of proposals with respect to a Master Portfolio that may not require
the approval of shareholders of its corresponding Portfolio would include the
following, subject to applicable statutory and regulatory requirements: (i)
approval of an Advisory Agreement with the Adviser or its successor in the Bank
Merger (or a subsidiary or affiliate) on terms that do not differ in any
material respect from an Advisory Agreement currently in effect with respect to
that Portfolio; (ii) election of Trustees of the Master Trust who had previously
been elected as Trustees of the Trust; and (iii) selection, or ratification of
the selection of, a firm of independent certified public accountants that had
previously been approved by shareholders of that Portfolio. Examples of matters
that would be submitted to shareholders of a Master Portfolio's corresponding
Portfolio would include the following: (i) approval of an Advisory Agreement
with an investment adviser other than the Adviser, or its successor in the Bank
Merger (or a subsidiary or affiliate), or one that provided for compensation in
excess of the amount of compensation payable to the Adviser pursuant to the
Advisory Agreement in effect with respect to that Portfolio, (ii) election when
required by the 1940 Act of Trustees of the Master Trust who had not previously
been elected by shareholders as Trustees of the Trust; or (iii) selection of, or
the ratification of the selection of, a firm of independent certified public
accountants that had not previously been approved by the shareholders of the
Portfolio. Any proposal submitted to holders in a Master Portfolio, and that is
not required to be voted on by shareholders of that Master Portfolio's
corresponding Portfolio, would nonetheless be voted on by the Trustees of the
Trust.
TRUSTEES AND OFFICERS OF THE MASTER TRUST
The initial interestholders of the Master Trust would be expected to elect as
Trustees of the Master Trust, the individuals serving as members of the Board of
Trustees of the Trust. See Proposal 3. Subject to the provisions of its Trust
Instrument, the business of the Master Trust would be supervised by its
Trustees, who would serve indefinite terms and who would have all powers
necessary or convenient to carry out their responsibilities. The Trustees of the
Master Trust would elect officers of the Master Trust whom they deemed
appropriate.
TAX CONSEQUENCES OF INVESTMENT IN A MASTER PORTFOLIO
The Trust would apply for a ruling from the Internal Revenue Service ("IRS") or
would obtain an opinion of the tax counsel to the effect that its contribution
of assets of a Portfolio to its corresponding Master Portfolio in exchange for
an interest in that Master Portfolio would not result in the recognition of gain
or loss to that Portfolio and would not affect the treatment of any Variable
Contracts as variable annuities for federal income tax purposes. If the IRS were
to decline to issue a ruling for procedural or administrative reasons,
management of the Trust may proceed with the transfer based upon an opinion of
tax counsel.
It is intended that each Portfolio would continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986. In
each taxable year that a Portfolio so qualified, the Portfolio (but not its
shareholders) would 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 a Portfolio nor the Master Portfolio would be expected
to be required to pay any Federal income or excise taxes. Distributions from a
Portfolio, except for distributions from a Portfolio designated as long-term
capital gain distributions, would continue to be taxable to its shareholders as
ordinary income, whether received in cash or reinvested in Portfolio shares.
-36-
PROPOSAL 6L
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. The Asset Allocation 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.
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-l are
not approved by shareholders, the current Restriction will remain unchanged.
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,
which for this purpose means the affirmative vote of the lesser of (1) more than
50% of the outstanding shares of the Portfolio or (2) 67% or more of the shares
of the 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.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE FOREGOING PROPOSALS
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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."
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 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.
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 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. 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:
-38-
"The U.S. Treasury Income Portfolio seeks to provide
shareholders with monthly dividends and to protect the value
of their investment. "
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. These instrumentalities
include obligations of the Farm Credit System Financial Assistance Corporation
(FCSFAC) the Farmers Home Administration (FMHA) and the Federal Financing Bank
(FFB). 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
nonfundamental 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 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.
-39-
REQUIRED VOTE AND BOARD OF TRUSTEES' RECOMMENDATION
If the proposal is approved by shareholders, the new investment objective and
the new non-fundamental 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 Funds 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:
Officer of
Position With the the Trust
NAME Trust Age Since
Ann Bergin ................ Secretary and 35 1995
Assistant Treasurer
Martin R. Dean ............ Treasurer and 31 1995
Assistant Secretary
SUBSTANTIAL SHAREHOLDE. As of February 29, 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.
Ownership by certain beneficial owners. The Life Companies have advised the
Trust that as of February 29, 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. As of
February 29, 1996, SunAmerica Inc. owned the following percentages of each
Portfolio attributable to its seed capital investment in the Trust: Money Market
Portfolio (92%), Growth and Income Portfolio (70%), Capital Growth Portfolio
(69%), Asset Allocation Portfolio (93%), U.S. Treasury Income Portfolio (96%)
and International Equity Portfolio (92%).
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
-40-
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.
March 15, 1996
BY ORDER OF THE BOARD OF
OF TRUSTEES OF MUTUAL FUND
VARIABLE ANNUITY TRUST
Ann Bergin,
Secretary
-41-
FORM OF INTERIM APPENDIX A
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND VARIABLE ANNUITY TRUST
AND THE CHASE MANHATTAN BANK, N.A.
AGREEMENT made this day of , by and between MUTUAL FUND VARIABLE
ANNUITY TRUST (the "Trust") on behalf of the series of the Trust (the "Fund")
and THE CHASE MANHATTAN BANK, N.A. (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.
A-1
(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 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 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
A-2
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; (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 % [see attached
Schedule] 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, subadvisory 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
A-3
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 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.
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
A-4
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 VARIABLE ANNUITY TRUST
-----------------------------------
Name:
Title:
ATTEST:
- -------------
THE CHASE MANHATTAN BANK, N.A.
-----------------------------------
Name:
Title:
ATTEST:
- -------------
A-5
SCHEDULE A
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%
A-6
APPENDIX B
FORM OF NEW
INVESTMENT ADVISORY AGREEMENT
BETWEEN
MUTUAL FUND VARIABLE ANNUITY TRUST
AND
THE CHASE MANHATTAN BANK, N.A.
AND ITS SUCCESSOR
AGREEMENT made this _____ day of __________, 1996, by and between Mutual Fund
Variable Annuity Trust, a Massachusetts business trust which may issue one or
more series of shares (hereinafter the "Trust"), and The Chase Manhattan Bank,
N.A., a National Banking Association, and its successor, 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 serves as the underlying investment for certain variable annuity contracts
issued by insurance company separate accounts; 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 "Portfolio" and collectively, the "Portfolios"), 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 Portfolios severally and not jointly. The
responsibilities and benefits set forth in this Agreement shall refer to each
Portfolio severally and not jointly. No individual Portfolio shall have any
responsibility for any obligation with respect to any other Portfolio 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 Portfolio shall not create a right or
obligation with respect to any other Portfolio;
(b) under no circumstances shall the Adviser have the right to set
off claims relating to a Portfolio by applying property of any
other Portfolio; 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 Portfolio 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
B-1
as filed with the Securities and Exchange Commission (the
"Commission") on July 18, 1994 and all subsequent amendments
thereto relating to the Portfolios (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
Portfolios (collectively, the "Prospectuses").
3. APPOINTMENT.
(a) General. The Trust hereby appoints the Adviser to act as
investment adviser to the Portfolios 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.
(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
Portfolio or Portfolios (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
Portfolio 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 Portfolio 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 Portfolio 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 Portfolios. The Adviser hereby undertakes to
act as investment adviser to the Portfolios. The 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) supervise all aspects of the operations of the Trust
and each Portfolio;
(ii) 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 Portfolios' 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
Portfolio's portfolio;
(iii) determine which issuers and securities shall be
included in the portfolio of each Portfolio;
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(iv) furnish a continuous investment program for each
Portfolio;
(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 Portfolio; and
(vi) take, on behalf of each Portfolio, 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 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. The Adviser shall keep each Portfolio's
books and records required by applicable law to be maintained
by the Portfolios with respect to advisory services. The
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 Adviser further agrees to
preserve for the periods prescribed by the 1940 Act any such
records of the Portfolio 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 Portfolios 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.
(e) Purchase and Sale of Securities. The Adviser shall place all
orders for the purchase and sale of portfolio securities for
each Portfolio 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 Portfolios.
The Adviser shall execute portfolio transactions for the
Portfolios in such a manner that the Portfolio's total cost or
proceeds in each transaction is the most favorable to the
Portfolio under the circumstances. The Trust understands that
a substantial majority of each Portfolio'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 Portfolio. 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 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 Portfolio on any particular transaction, nor shall the
Adviser be under any duty to execute any
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order in a fashion either preferential to any Portfolio
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
Portfolios 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 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 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 Portfolios and their reasonableness in relation to the
benefits to the Portfolios.
(g) Aggregation of Securities Transactions. In executing portfolio
transactions for a Portfolio, 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 Portfolios or its other clients if, in the
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 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.
5. EXPENSES. (a) 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 pursuant to this
Agreement. The Adviser also hereby agrees that it will supply to any sub-adviser
or administrator (the "Administrator") of a Portfolio 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 Portfolios' 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 Portfolio 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
Portfolio'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 Portfolios' net assets shall be computed in the
manner specified in the Prospectuses and the Articles for the computation of the
value of the Portfolios' net assets in connection with the determination of the
net asset value of shares of the Portfolios' capital stock.
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(b) 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
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 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 Portfolio were it not for the expense limitation provisions of any
investment advisory or administrative agreement to which the Portfolio 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 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) 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 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 Portfolio.
(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 Portfolio.
(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.
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(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 Portfolio, by vote of
a majority of the outstanding voting securities of that Portfolio. This
Agreement may remain in effect with respect to a Portfolio even if it has been
terminated in accordance with this paragraph with respect to the other
Portfolios. 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, N.A. MUTUAL FUND VARIABLE
ANNUITY TRUST
By: _________________________ By:_______________________
Name: Name:
Title: Title:
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APPENDIX C
FORM OF
PROPOSED
INVESTMENT SUBADVISORY AGREEMENT
BETWEEN
THE CHASE MANHATTAN BANK, N.A.
AND ITS SUCCESSOR
AND
CHASE ASSET MANAGEMENT, INC.
AGREEMENT made as of the______ day of ________, 1996, by and between
The Chase Manhattan Bank, N.A., a national banking association, and its
successor, The Chase Manhattan Bank, a New York State chartered bank (the
"Adviser"), and Chase Asset Management, Inc., a Delaware 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 Variable Annuity Trust, 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 Sub-Adviser.
2. DELIVERY OF DOCUMENTS. The Adviser has delivered to the Sub-Adviser
copies of each of the following documents along with all amendments thereto
through the date hereof, and will promptly deliver to it all future amendments
and supplements thereto, if any:
(a) the Trust's Declaration of Trust;
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(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
SubAdviser may deem desirable for inclusion in a
Portfolio's portfolio;
(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
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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 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 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
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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 Delaware
and is fully authorized to enter into this Agreement
and carry out its duties and obligations hereunder.
(ii) The Sub-Adviser is registered as an investment adviser
with the Commission under the Advisers Act, and is
registered or licensed as an investment adviser under
the laws of all applicable jurisdictions. The
Sub-Adviser shall maintain such registrations or
licenses in effect at all times during the term of this
Agreement.
(iii) The Sub-Adviser at all times shall provide its best
judgment and effort to the Adviser in carrying out the
Sub-Adviser's obligations hereunder.
(b) The Adviser hereby represents and warrants to the Sub-Adviser
as follows:
(i) The Adviser is a national bank duly organized and in
good standing under the laws of the United States 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. 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 Sub-Adviser) a fee, which shall be accrued
daily and paid in arrears on the first business day of each month, at an annual
rate to be determined between the parties hereto from time to time, as a
percentage of the average daily net assets of the 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
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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 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) 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
C-5
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
Sub-Adviser, on the other hand, and is not intended to and shall not govern (i)
the relationship between the Adviser or Sub-Adviser and any Portfolio, or (ii)
the relationships among the respective Portfolios.
14. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New York, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or the Advisers Act.
15. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby and, to this extent, the provisions
of this Agreement shall be deemed to be severable.
16. NOTICES. Notices of any kind to be given to the Adviser hereunder
by the Sub-Adviser shall be in writing and shall be duly given if mailed or
delivered to the Adviser at One Chase Manhattan Plaza, New York, New York or at
such other address or to such individual as shall be so specified by the Adviser
to the Sub-Adviser. Notices of any kind to
C-6
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 1211 Avenue of
the Americas, New York, New York 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, N.A.
By:_________________________________ By:________________________________
Name: Name:
Title: Title:
C-7
SCHEDULE A
Portfolio:
International Equity Portfolio
Capital Growth Portfolio
Growth and Income Portfolio
Asset Allocation Portfolio
Treasury Portfolio
Money Market Portfolio
C-8
|X| PLEASE MARK VOTES
AS IN THIS EXAMPLE
For Against Abstain
Proposal 1 |_| |_| |_|
Proposal 2 |_| |_| |_|
With- For All
For hold Except
Proposal 3
Election of
Trustees |_| |_| |_|
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. EPPY, JR.,
W.D. MACCALLAN
IF YOU WISH TO WITHHOLD YOUR
VOTE FROM ANY INDIVIDUAL
NOMINEE, MARK THE "FOR ALL
EXCEPT" BOX AND STRIKE A LINE
THROUGH THE NAME OF THE
NOMINEE.
For Against Abstain
Proposal 4 |_| |_| |_|
Proposal 5 |_| |_| |_|
Proposal 6a |_| |_| |_|
Proposal 6b |_| |_| |_|
Proposal 6c |_| |_| |_|
Proposal 6d |_| |_| |_|
Proposal 6e |_| |_| |_|
Proposal 6f |_| |_| |_|
Proposal 6g |_| |_| |_|
Proposal 6h |_| |_| |_|
Proposal 6i |_| |_| |_|
Proposal 6j |_| |_| |_|
Proposal 6k |_| |_| |_|
PLEASE BE SURE TO SIGN
AND DATE THIS PROXY. Date____________
" SEE BELOW FOR PROPOSALS"
_____________________________________________________
Shareholder sign here Co-owner sign here
PROPOSALS
1. To approve or disapprove an interim investment advisory agreement
between the Portfolio and The Chase Manhattan Bank, N.A. (and the
successor entity thereto) (the "Adviser") which will take effect upon
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
the Portfolio and the Adviser, and a sub-advisory agreement between the
Adviser and Chase Asset Management, Inc., to take effect as soon as
practicable after approval by shareholders. No fee increase is
proposed.
RADO1
3. To elect 11 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 the Portfolio.
5. To approve or disapprove an amendment to the Trust's Declaration of
Trust.
6. To consider the following proposals pertaining primarily to the
Portfolio's fundamental investment restrictions.
6a. To approve or disapprove an amendment to the Portfolio's
fundamental investment restrictions;
6b. To approve or disapprove an amendment to the Portfolio's
fundamental restriction concerning investment for the purpose
of exercising control;
6c. To approve or disapprove an amendment to the Portfolio's
fundamental restriction concerning the making of loans;
6d. To approve or disapprove an amendment to the Portfolio's
fundamental restriction concerning purchases of securities on
margin;
6e. To approve or disapprove an amendment to the Portfolio's
fundamental restriction concerning concentration of
investment;
6f. To approve or disapprove an amendment to the Portfolio's
fundamental restriction concerning commodities and real
estate;
6g. To approve or disapprove an amendment to the Portfolio's
fundamental restriction regarding investments in restricted
and illiquid securities;
6h. To approve or disapprove of a reclassification, as
nonfundamental, of the Portfolio's fundamental restriction
concerning the use of options;
6i. To approve or disapprove an amendment to the Portfolio's
fundamental restriction concerning senior securities;
6j. To approve or disapprove an amendment to the Portfolio's
fundamental restriction regarding short sales of securities;
and
6k. To approve or disapprove a proposal to adopt a new investment
policy that authorizes the Portfolio to invest all of its
investable assets in a corresponding portfolio of an open-end
investment company having substantially the same investment
objective and policies as the Portfolio.
RADO1
VOTING INSTRUCTIONS FOR THE SPECIAL MEETING OF SHAREHOLDERS
OF THE ___________PORTFOLIO (THE "PORTFOLIO") OF
MUTUAL FUND VARIABLE ANNUITY TRUST (THE "TRUST") TO BE HELD APRIL 2, 1996
THIS INSTRUCTION FORM IS SOLICITED BY ANCHOR NATIONAL LIFE INSURANCE COMPANY
("ANCHOR NATIONAL") FROM OWNERS OF VARIABLE ANNUITY CONTRACTS ISSUED BY ANCHOR
NATIONAL WHO HAVE SPECIFIED THAT A PORTION OF THEIR INVESTMENT BE ALLOCATED TO
THE PORTFOLIO.
The undersigned Contract Owner, having received notice of the Special Meeting
and management's proxy statement therefor, and revoking all prior instructions,
hereby instructs that the votes attributable to the undersigned interests with
respect to the Portfolio be case a designated on the reverse side of the Special
Meeting of Shareholders of the Trust to be held at 12:00 p.m. (Eastern time) on
Tuesday, April 2, 1996 at 101 Park Avenue, 17th Floor, New York, New York (the
"Meeting"), and any adjournments thereof.
IN ITS DISCRETION, ANCHOR NATIONAL IS
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OR ANY ADJOURNMENT
THEREOF.
THE INTERESTS TO WHICH THIS FORM OF
INSTRUCTION RELATES WILL BE VOTED BY
ANCHOR NATIONAL IN THE MANNER DIRECTED
ON THE REVERSE SIDE BY THE UNDERSIGNED.
IF NO INSTRUCTION IS MADE, THE VOTES
ATTRIBUTABLE TO THIS INSTRUCTION FORM
WILL BE VOTED IN THE SAME RATIO AS VOTES
FOR WHICH INSTRUCTIONS HAVE BEEN
RECEIVED BY ANCHOR NATIONAL.
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR ON THIS CARD. When
signing as an attorney, executor,
administrator or other fiduciary, please
give your full title as such. Joint
owners should each sign personally.
THESE VOTING INSTRUCTIONS ARE SOLICITED
ON BEHALF OF THE BOARD OF TRUSTEES OF
THE TRUST.
RADO1