<PAGE> 1
As filed with the Securities and Exchange Commission on July 14, 2000
Registration Nos. 811-8437 and 333-37711
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 8 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 10
(Check appropriate box or boxes)
UNDISCOVERED MANAGERS FUNDS
(Exact Name of Registrant as Specified in Charter)
Plaza of the Americas
700 North Pearl Street
Dallas, Texas 75201
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, including Area Code: (214) 999-7200
Mark P. Hurley
Undiscovered Managers, LLC
Plaza of the Americas
700 North Pearl Street
Dallas, Texas 75201
(Name and Address of Agent for Service)
Copy to:
John M. Loder, Esq.
Ropes & Gray
One International Place
Boston, MA 02110
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Amendment.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
This post-effective amendment relates to the addition of three new series of the
Registrant. No prospectus or statement of additional information contained in
the Registrant's registration statement relating to any other series of the
Registrant is amended or superceded hereby.
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[LOGO] undiscovered managers (TM)
UNDISCOVERED MANAGERS FUNDS
PROSPECTUS
______, 2000
Institutional Class shares of:
Undiscovered Managers Behavioral Large Cap Fund
Undiscovered Managers Merger & Acquisition Fund
Undiscovered Managers Small Cap Growth Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Funds.........................................................................................................3
WHAT YOU SHOULD KNOW ABOUT EACH FUND'S INVESTMENT
STRATEGIES, RISKS, PERFORMANCE, EXPENSES AND MANAGEMENT
Undiscovered Managers Behavioral Large Cap Fund...................................................................3
Undiscovered Managers Merger & Acquisition Fund...................................................................5
Undiscovered Managers Small Cap Growth Fund.......................................................................7
The Funds' Fees and Expenses......................................................................................9
Other Policies and Additional Disclosure on Risks................................................................10
The Funds' Management............................................................................................11
Your Investment..................................................................................................14
OPENING AND MAINTAINING YOUR UNDISCOVERED
MANAGERS ACCOUNT
Institutional Class Shares.......................................................................................14
How Shares are Priced............................................................................................14
Buying Shares....................................................................................................15
General Shareholder Services.....................................................................................16
Selling Shares...................................................................................................17
Dividends, Distributions and Taxes...............................................................................18
Where to get More Information about the Funds............................................................Back Cover
</TABLE>
2
<PAGE> 4
THE FUNDS
Undiscovered Managers Funds has fourteen investment portfolios. This Prospectus
offers Institutional Class shares of three of the portfolios (each a "Fund," and
collectively, the "Funds").
UNDISCOVERED MANAGERS BEHAVIORAL LARGE CAP FUND
(THE "BEHAVIORAL LARGE CAP FUND")
Investment Objective
LONG-TERM GROWTH OF CAPITAL
Principal Investment Strategies
The Behavioral Large Cap Fund seeks to achieve its objective by investing
primarily in common stocks of U.S. companies that are included in Standard &
Poor's Composite Stock Price Index (the "S&P 500"), that have either growth or
value characteristics and that are believed to be undervalued by the Fund's
sub-adviser, Fuller & Thaler Asset Management, Inc. ("Fuller & Thaler").
In selecting stocks for the Behavioral Large Cap Fund, Fuller & Thaler applies
principles based on behavioral studies. Fuller & Thaler believes that behavioral
biases on the part of investors may cause the market to underreact to new,
positive information and overreact to old, negative information concerning a
company.
In an effort to take advantage of such behavioral biases, Fuller & Thaler
divides companies in the S&P 500 into 40 to 50 groups defined by market
capitalization and economic sectors. Fuller & Thaler ordinarily selects two
stocks from each group - a growth stock and a value stock. In selecting the
growth stock, Fuller & Thaler analyzes companies that have recently announced
positive news, and then determines whether the stock price fully reflects Fuller
& Thaler's expectations regarding the company's future earnings and growth
prospects. In selecting the value stock, Fuller & Thaler considers companies
that have price-to-earnings ratios below the median in their industry group or
decreasing stock values on an absolute basis and then selects stocks within this
universe based on factors such as recent underperformance of the company's stock
relative to the market, and signals from management that their company's stock
is undervalued.
Under normal market conditions, the Fund will invest substantially all of its
assets in common stocks.
Principal Risks
Investing in the Behavioral Large Cap Fund involves risks. The Fund may not
perform as well as other investments, and as with all mutual funds, there is the
risk that you could lose money on your investment in the Fund. Factors that
could harm the investment performance of the Fund include:
o A general decline in the U.S. stock markets,
o Poor performance of individual stocks held by the Fund and
o Potentially rapid price changes (volatility) of equity securities.
3
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Fund Performance
The Behavioral Large Cap Fund's performance is variable. Since the Fund is
commencing investment operations as of ______, 2000, this Prospectus does not
include a bar chart showing annual total returns or a table showing average
annual total returns compared against an appropriate broad-based securities
market index.
4
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UNDISCOVERED MANAGERS MERGER & ACQUISITION FUND
(THE "MERGER & ACQUISITION FUND")
Investment Objective
LONG TERM GROWTH OF CAPITAL
Principal Investment Strategies
The Merger & Acquisition Fund seeks to achieve its objective by investing
primarily in stocks of companies that have either recently received purchase or
merger offers from other publicly traded companies or have publicly announced
they are pursuing "Strategic Alternatives". J.L. Kaplan Associates, LLC ("Kaplan
Associates") believes companies that have received buyout offers are not
necessarily efficiently priced by the market due to a variety of factors.
Kaplan Associates will potentially invest in companies of all different sizes,
as well as companies across different industries and sectors. When selecting
investments, Kaplan Associates will analyze the probability of the transaction
closing, the intrinsic value of both the acquirer and target in a stock
transaction, the time value of money during the period between announcement and
potential closing and the regulatory issues involved.
Under normal market conditions, the Merger & Acquisition Fund will invest at
least 65% of its assets in common stocks of companies that are involved in
potential merger or acquisition activity, either as an acquisition target or as
the acquiring company.
Principal Risks
Investing in the Merger & Acquisition Fund involves risks. The Fund may not
perform as well as other investments, and as with all mutual funds, there is the
risk that you could lose money on your investment in the Fund. Factors that
could harm the investment performance of the Fund include:
o A general decline in the U.S. stock markets,
o Poor performance of individual stocks held by the Fund,
o Potentially rapid changes (volatility) of equity securities and
o The risks associated with investment in small capitalization companies
(such as more abrupt price movements, greater dependence on individual
personnel or products, limited markets and less liquidity than larger, more
established companies)
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Fund Performance
The Merger & Acquisition Fund's performance is variable. Since the Fund is
commencing investment operations as of ______, 2000, this Prospectus does not
include a bar chart showing annual total returns or a table showing average
annual total returns compared against an appropriate broad-based securities
market index.
6
<PAGE> 8
UNDISCOVERED MANAGERS SMALL CAP GROWTH FUND
(THE "SMALL CAP GROWTH FUND")
Investment Objective
LONG-TERM CAPITAL APPRECIATION
Principal Investment Strategies
The Small Cap Growth Fund seeks to achieve its objective by investing primarily
in common stocks of U.S. companies with market capitalizations of $2.5 billion
or less that the fund's sub-adviser, Mazama Capital Management, Inc. ("Mazama")
believes possess superior growth characteristics. Mazama utilizes a proprietary
price performance model to assist it in identifying growth companies it believes
are undervalued relative to their management quality and earnings potential.
Under normal market conditions, the Small Cap Growth Fund will invest
substantially all of its assets in common stocks.
Principal Risks
Investing in the Small Cap Growth Fund involves risks. The Fund may not perform
as well as other investments, and as with all mutual funds, there is the risk
that you could lose money on your investment in the Fund. Factors that could
harm the investment performance of the Fund include:
o A general decline in the U.S. stocks markets,
o Poor performance of individual stocks held by the Fund,
o Potentially rapid price changes (volatility) of equity securities and
o The risks associated with investment in small capitalization companies
(such as more abrupt price movements, greater dependence on individual
personnel or products, limited markets and less liquidity than larger, more
established companies).
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Fund Performance
The Small Cap Growth Fund's performance is variable. Since the Fund is
commencing investment operations as of ______, 2000, this Prospectus does not
include a bar chart showing annual total returns or a table showing average
annual total returns compared against an appropriate broad-based securities
market index.
8
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THE FUNDS' FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
Institutional Class shares of the Funds.
<TABLE>
<CAPTION>
Behavioral Merger & Small Cap
Large Cap Fund Acquisition Fund Growth Fund
-------------- ---------------- -------------
Institutional Institutional Institutional
Class Class Class
-------------- ---------------- -------------
<S> <C> <C> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases......................... none none none
Maximum Deferred Sales Charge (Load)..................................... none none none
Maximum Sales Charge (Load) Imposed on Reinvested Dividends.............. none none none
Redemption Fees(1)....................................................... none none none
Exchange Fees............................................................ none none none
ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)
Management Fees.......................................................... 0.74% 0.95% 0.95%
Distribution (12b-1) Fees................................................ none none none
Other Expenses(2)........................................................ 25.43% 25.43% 26.93%
Total Annual Fund Operating Expenses..................................... 26.17% 26.38% 27.88%
Fee Reduction and/or Expense Reimbursement(3)............................ (25.18)% (25.08)% (26.68)%
Net Expenses(3).......................................................... 0.99% 1.30% 1.20%
</TABLE>
EXAMPLE (4)
This Example is intended to help you compare the cost of investing in the Funds
with the cost of investing in other mutual funds.
This Example assumes that (i) you invest $10,000 in each Fund for the time
periods indicated, (ii) your investment has a 5% return each year, (iii) you
redeem all of your shares at the end of those periods and (iv) each Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
Behavioral Merger & Small Cap
Large Cap Fund Acquisition Fund Growth Fund
-------------- ---------------- -----------
<S> <C> <C> <C>
One Year......................... $101 $132 $122
Three Years...................... $4,453 $4,582 $4,662
</TABLE>
(1) Redemptions by wire transfer are subject to a wire fee (currently $5) that
is deducted from the redemption proceeds.
(2) Since the Funds are newly-organized, Other Expenses are based on estimated
amounts for the current fiscal year.
(3) Undiscovered Managers, LLC, the Funds' investment adviser, has
contractually agreed, through December 31, 2001, to reduce its fees and/or
pay the expenses of the Funds' Institutional Class shares in order to limit
such class's expenses (exclusive of brokerage costs, interest, taxes and
extraordinary expenses) to the percentages of net assets shown above,
subject to later reimbursement by such Funds in certain circumstances. See
THE FUNDS' MANAGEMENT -- FUND EXPENSES below.
(4) Under SEC rules, newly-organized funds, such as the Funds, are required to
show expenses in an example for one- and three-year periods only.
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OTHER POLICIES AND ADDITIONAL DISCLOSURE ON RISKS
OTHER POLICIES
ADDITIONAL FUND INVESTMENTS
Each Fund may invest its cash in repurchase agreements and other cash
instruments pending investment in equity securities.
PORTFOLIO TURNOVER
The Funds are actively managed and consequently may engage in frequent trading
of portfolio securities. High portfolio turnover results in higher brokerage and
other expenses, which could reduce Fund performance. High portfolio turnover
also may increase the amount of taxes payable by a Fund's shareholders.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The investment objectives and policies of the Funds can be changed without
shareholder approval, except for the policies that are identified in the Funds'
Statement of Additional Information (the "SAI") as "fundamental."
MORE ABOUT RISK
COMMON STOCKS AND OTHER EQUITY SECURITIES
The Funds invest mostly in "common stocks." Common stocks represent an ownership
interest in a company. The Funds can also invest in securities that can be
exercised for or converted into common stocks (such as warrants or convertible
preferred stock). While offering greater potential for long-term growth, common
stocks and similar equity securities are more volatile and more risky than some
other forms of investment. Therefore, the value of your investment in a Fund may
sometimes decrease instead of increase. Each Fund may invest in equity
securities of companies with relatively small market capitalization. Securities
of such companies may be more volatile than the securities of larger, more
established companies and the broad equity market indices. See SMALL COMPANIES
below. Each Fund's investments may include securities traded "over-the-counter"
as well as those traded on a securities exchange. Some over-the-counter
securities may be more difficult to sell under some market conditions.
Convertible securities include other securities, such as warrants, that provide
an opportunity for equity participation. Because convertible securities can be
converted into equity securities, their values will normally increase or
decrease as the values of the underlying equity securities increase or decrease.
The movements in the prices of convertible securities, however, may be smaller
than the movements in the value of the underlying equity securities.
SMALL COMPANIES
All of the Funds may invest in companies with relatively small market
capitalization, and the Small Cap Growth Fund and the Merger and Acquisition
Fund will invest primarily in such companies.
Investments in companies with relatively small capitalization may involve
greater risk than is usually associated with stocks of larger companies. These
companies often have sales and earnings growth rates which exceed those of
companies with larger capitalization. Such growth rates may in turn be reflected
in more rapid share price appreciation. However, companies with smaller
capitalization often have limited product lines, markets or financial resources
and may be dependent upon a relatively small management group. The securities
may have limited marketability and may be subject to more abrupt or erratic
movements in price than securities of companies with larger capitalization or
market averages in general. The net asset value per share of Funds that invest
in companies with smaller capitalization therefore may fluctuate more widely
than market averages.
10
<PAGE> 12
THE FUNDS' MANAGEMENT
INVESTMENT ADVISER
The Funds are advised by Undiscovered Managers, LLC ("Undiscovered Managers"),
700 North Pearl Street, Dallas, Texas 75201. Undiscovered Managers was organized
in 1997 and has responsibility for the management of the Funds' affairs, under
the supervision of Undiscovered Managers Funds' Board of Trustees. Each Fund's
investment portfolio is managed on a day-to-day basis by that Fund's
sub-adviser, under the general oversight of Undiscovered Managers and the Board
of Trustees. Undiscovered Managers monitors and evaluates each sub-adviser to
help assure that the sub-adviser is managing its Fund consistently with the
Fund's investment objective and restrictions and applicable laws and guidelines.
Undiscovered Managers does not, however, determine what investments will be
purchased or sold for a Fund. Undiscovered Managers also has the responsibility
for the management of the affairs of the other investment portfolios of
Undiscovered Managers Funds.
Each Fund pays to Undiscovered Managers a management fee at the following annual
percentage rates of such Fund's daily net assets, subject to the fee deferral
arrangements described below:
<TABLE>
<CAPTION>
FUND FEE RATE
---- --------
<S> <C>
Behavioral Large Cap Fund 0.74%
Merger & Acquisition Fund 0.95%
Small Cap Growth Fund 0.95%
</TABLE>
SUB-ADVISERS AND PORTFOLIO MANAGERS
FULLER & THALER, formerly known as RJF Asset Management, Inc., is the
sub-adviser to the BEHAVIORAL LARGE CAP FUND. As sub-adviser, Fuller & Thaler
provides day-to-day management of the Fund's portfolio. Fuller & Thaler, 411
Borel Avenue, Suite 402, San Mateo, California 94402, was founded in 1993, and
currently serves as an investment adviser to three other investment portfolios
of Undiscovered Managers Funds, and to certain pension and profit sharing plans,
academic institutions and other institutional investors.
Russell J. Fuller, Frederick W. Stanske, John L. Kling and Mark Moon have
day-to-day responsibility for managing the BEHAVIORAL LARGE CAP FUND'S
portfolio. Mr. Fuller founded Fuller & Thaler and has served as its President
since 1993. He was a Vice President of Strategic Development of Concord Capital
Management from 1990 to 1993, and a Professor of Finance and Chair of the
Department of Finance at Washington State University from 1984 to 1990. Mr.
Stanske joined Fuller & Thaler in 1996 as Vice President and Portfolio Manager
and became Senior Vice President and Portfolio Manager in 1997. Prior to joining
Fuller & Thaler, Mr. Stanske was employed as a Securities Analyst at Farmers
Insurance Group from 1987 to 1989 and as a Vice President and Research Analyst
at Fisher Investments from 1989 to 1996. Mr. Kling joined Fuller & Thaler in May
2000 as Senior Vice President and Director of Research. Prior to joining Fuller
& Thaler, Mr. Kling was employed by Washington State University as an Associate
Professor from 1988 to 2000. Mr. Kling has been a board member for Fuller &
Thaler (and previously, RJF Asset Management) since 1993. Mr. Moon joined
Fuller & Thaler in 1999 as Vice President and Portfolio Manager. Prior to
joining Fuller & Thaler, Mr. Moon was Chief Investment Officer at Heidt Capital
Group LLC from 1997-1998 and Assistant Treasurer at AMGEN, Inc. from 1990 to
1997.
KAPLAN ASSOCIATES is the sub-adviser to the MERGER & ACQUISITION FUND. As
sub-adviser, Kaplan Associates provides day-to-day management of the Fund's
portfolio. Kaplan Associates, 222 Berkeley Street, Suite 2010, Boston,
Massachusetts 02116, is the successor firm to J.L. Kaplan Associates, an
investment advisory firm founded in 1976. Kaplan Associates serves as an
investment adviser to two other investment portfolios of Undiscovered Managers
Funds, and to certain pension and profit sharing plans, trusts, charitable
organizations and other institutional and private investors.
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<PAGE> 13
James L. Kaplan, Paul Weisman and Regina Wiedenski have day-to-day
responsibility for managing the portfolio of the MERGER & ACQUISITION FUND. Mr.
Kaplan has been the Principal of Kaplan Associates and its predecessor since
founding the firm in 1976. From 1972 to 1984, he was Associate Professor of
Mathematics at Boston University. Mr. Weisman has been a Portfolio Manager at
the firm since 1986. From 1984 to 1986, Mr. Weisman was an Investment Analyst at
Delphi Management, Inc. Ms. Wiedenski joined Kaplan Associates in January 1998
as a Portfolio Manager. Prior to joining Kaplan Associates she was an Investment
Analyst for Advest, Inc. from 1993 to 1997.
MAZAMA is the sub-adviser to the SMALL CAP GROWTH FUND. As sub-adviser, Mazama,
provides day-to-day management of the Fund's portfolio. Mazama, One SW Columbia
Street, Suite 1860, Portland, Oregon 97258, is the successor firm to Mazama
Capital Management, LLC, which firm was organized in 1997 in connection with the
acquisition by such firm of substantially all of the assets of Black & Company
Asset Management, Inc. an investment advisory firm founded in 1993. Mazama
serves as investment adviser to certain pension and profit sharing plans,
trusts, charitable organizations and other institutional and private investors.
Ronald Sauer, Stephen Brink, CFA and Gretchen Schroeder have day-to-day
responsibility for managing the portfolio of the SMALL CAP GROWTH FUND. Mr.
Sauer has been President and Senior Portfolio Manager of Mazama since 1997.
Prior to joining Mazama, he was President/Director of Research at Black &
Company, Inc. from 1994 to 1997 and was a Technology Analyst at Black & Company,
Inc. from 1983 to 1994. Mr. Brink joined Mazama in 1997 as Vice
President/Director of Research. From 1991 to 1997, he served as CIO of US Trust
of Pacific Northwest. Ms. Schroeder has been Assistant Vice President, Research
Analyst for Mazama since 1999. Prior to joining Mazama, she was Assistant Vice
President, Research Analyst for Cramer Rosenthal McGlynn, LLC from 1997 to 1999
and Research Associate for Black & Company, Inc. from 1994 to 1997.
Undiscovered Managers pays each Fund's sub-adviser a sub-advisory fee at the
following annual percentage rates of the specified levels of the Fund's average
daily net assets:
<TABLE>
<CAPTION>
FUND SUB-ADVISER FEE RATE AS % OF FUND'S NET ASSETS
---- ----------- ----------------------------------
<S> <C> <C>
Behavioral Large Cap Fund Fuller & Thaler 0.40% of the first $200 million
0.35% of the next $100 million
0.30% of assets in excess of $300 million
Merger & Acquisition Fund Kaplan Associates 0.60% of the first $200 million
0.55% of the next $100 million
0.50% of assets in excess of $300 million
Small Cap Growth Fund Mazama 0.60% of the first $200 million
0.55% of the next $100 million
0.50% of assets in excess of $300 million
</TABLE>
FUND EXPENSES
Undiscovered Managers has contractually agreed to reduce its management fees and
pay the expenses of each Fund's Institutional Class shares in order to limit
such class's expenses (exclusive of brokerage costs, interest, taxes and
extraordinary expenses) to the following annual percentage rate of the average
daily net assets of such class, subject to the obligation of a Fund to repay
Undiscovered Managers such deferred fees and expenses in future years, if any,
when such Fund's Institutional Class expenses (exclusive of brokerage costs,
interest, taxes and extraordinary expenses) fall below the stated percentage
rate, but only to the extent that such repayment would not cause such Fund's
Institutional Class expenses (exclusive of brokerage costs, interest, taxes and
extraordinary expenses) in any such future year to exceed the stated percentage
rate, and provided that such Fund is not obligated to repay any such deferred
fees and expenses more than three years after the end of the fiscal year in
which they were
12
<PAGE> 14
incurred: 0.99% for the Behavioral Large Cap Fund, 1.20% for the Small Cap
Growth Fund and 1.30% for the Merger & Acquisition Fund. These agreements have
terms running through December 31, 2001 and are renewable from year to year
thereafter.
OTHER ARRANGEMENTS
Undiscovered Managers Funds has applied for an exemptive order from the
Securities and Exchange Commission to permit Undiscovered Managers, subject to
the approval of Undiscovered Managers Funds' Board of Trustees and certain other
conditions, to enter into sub-advisory agreements with sub-advisers other than
the current sub-adviser of any Fund without obtaining shareholder approval. The
exemptive request also seeks to permit the terms of an existing sub-advisory
agreement to be changed or the employment of an existing sub-adviser to be
continued without shareholder approval after events that would otherwise cause
an automatic termination of a sub-advisory agreement if such changes or
continuation are approved by Undiscovered Managers Funds' Board of Trustees.
There is no assurance that the Securities and Exchange Commission will issue the
exemptive order. This Prospectus would be revised and shareholders notified if
the sub-adviser of any Fund is changed.
13
<PAGE> 15
YOUR INVESTMENT
INSTITUTIONAL CLASS SHARES
The Funds' Institutional Class shares are offered without a front-end or
contingent deferred sales charge and are not subject to any 12b-1 fees.
HOW SHARES ARE PRICED
The price of a Fund's shares is based on its net asset value ("NAV"). For a
Fund, the NAV per share of a class equals the total value of the assets
allocable to the class, minus the class's liabilities, divided by the number of
the class's outstanding shares.
Excluding any transaction-based or other fees charged by your broker-dealer, the
price you will pay to buy Institutional Class shares of a Fund is the NAV of
such class of shares next calculated after your order is received by the Funds'
transfer or other agent or sub-agent with complete information and meeting all
of the requirements discussed in this Prospectus. Excluding any
transaction-based or other fees charged by your broker-dealer, the amount you
will receive when you sell Institutional Class shares of a Fund is the NAV of
such class of shares next calculated after your order is received by the Funds'
transfer or other agent or sub-agent with complete information and meeting all
of the requirements discussed in this Prospectus.
A Fund's NAV is determined each day the New York Stock Exchange ("NYSE") is open
for regular business, at the earlier of 4:00 p.m. Eastern Time or the close of
regular trading on the NYSE. The NYSE is closed on weekends and national
holidays.
If the Funds' transfer or other agent or sub-agent receives your buy or sell
request in good order before the close of regular trading on the NYSE, you will
pay or receive that day's NAV. If the Funds' transfer or other agent or
sub-agent receives your buy or sell request in good order after the close of
regular trading on the NYSE, you will pay or receive the next day's NAV.
The Funds' securities for which market quotations are readily available are
valued at market value. Other securities for which current market quotations are
not readily available (including restricted securities, if any) and all other
assets are taken at fair value.
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<PAGE> 16
BUYING SHARES
An investor may make an initial purchase of Institutional Class shares of any
Fund by submitting a completed application form and payment to:
Undiscovered Managers Funds
4400 Computer Drive
P.O. Box 5181
Westborough, MA 01581-5181
The minimum initial investment in any Fund is $250,000 in that Fund. A minimum
investment of $10,000 applies to the Trustees of Undiscovered Managers Funds,
investment advisory clients of the sub-advisers (and their directors, officers
and employees), and employees of Undiscovered Managers and the parents, spouses
and children of the foregoing. The minimum investment may be waived by
Undiscovered Managers in its sole discretion and will be waived for you if you
are a new shareholder in Undiscovered Managers Funds and you initially invest
less than $250,000 but sign a letter of intent stating your intention to bring
your balance to $250,000 within six months after your initial purchase. If you
purchase shares through a financial intermediary and hold such shares through an
omnibus account with that financial intermediary, the minimum initial investment
applies to the omnibus account and not to you individually. Undiscovered
Managers reserves the right to redeem your account at net asset value if you
have signed a letter of intent but fail to meet the minimum investment within
the specified time or to waive any minimum investment in its sole discretion.
Subsequent investments must be at least $50,000.
You may purchase shares of any Fund (i) with cash, (ii) by exchanging securities
on deposit with a custodian acceptable to Undiscovered Managers or (iii) with
any combination of such securities and cash. If you would like to purchase
shares of a Fund in exchange for securities please call 1-888-242-3514 for
additional information on the terms and conditions in order to do so.
All purchases made by check should be in U.S. dollars and made payable to
Undiscovered Managers Funds. Third party checks will not be accepted. When you
make a purchase by check, redemption proceeds will not be sent to you until the
check paying for the investment has cleared, which may take up to 15 calendar
days.
Upon acceptance of your order, the Funds' transfer agent opens an account,
applies the payment to the purchase of full and fractional Fund shares and mails
to you a statement of account confirming the transaction.
After an account has been established, you may send subsequent investments at
any time directly to the Funds at the above address. The remittance must be
accompanied by either the account identification slip detached from a statement
of account or a note containing sufficient information to identify the account,
i.e., the Fund name and your account number or your name and social security
number.
Initial and subsequent investments can also be made by federal funds wire. You
should instruct your bank to wire federal funds to Boston Safe Deposit & Trust
Company, ABA #011001234. The text of the wire should read as follows:
Boston Safe Deposit & Trust Company
ABA #011001234
Account #145483
FBO: Shareholder Name and Account Number
FOR: Undiscovered Managers Funds
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<PAGE> 17
A bank may charge a fee for transmitting funds by wire.
Each Fund and the Funds' distributor reserve the right to reject any purchase
order, including orders in connection with exchanges, for any reason which the
Fund or the distributor in its sole discretion deems appropriate. Although the
Funds do not presently anticipate that they will do so, each Fund reserves the
right to suspend or change the terms of the offering of its shares.
The Funds' distributor may accept telephone orders from broker-dealers, and
other intermediaries designated by such broker-dealers, who have been previously
approved by the distributor. A Fund will be deemed to have received a purchase
order when an approved broker-dealer or its authorized designee accepts such
order. It is the responsibility of such broker-dealers to promptly forward
purchase or redemption orders to the distributor. Although there are no
front-end or contingent deferred sales charges imposed by the Funds or the
distributor in connection with the Funds' offering of Institutional Class
shares, broker-dealers may charge you a transaction-based fee or other fee for
their services at either the time of purchase or the time of redemption. Such
charges may vary among broker-dealers but in all cases will be retained by the
broker-dealers and not remitted to the Funds.
GENERAL SHAREHOLDER SERVICES
The Funds offer the following shareholder services, which are more fully
described in the SAI. Explanations and forms are available from the Funds.
Telephone redemption and exchange privileges will be established automatically
when you open an account unless you elect on the application to decline the
privileges. Other privileges must be specifically elected. A signature guarantee
may be required to establish these privileges after an account is opened.
FREE EXCHANGE PRIVILEGE. You may exchange Institutional Class shares of any Fund
for Institutional Class shares of any other Fund or other investment portfolio
of Undiscovered Managers Funds. You may not exchange Institutional Class shares
for Investor Class shares or Class C shares. You may make an exchange by written
instructions or by telephone (unless you have elected on the application to
decline telephone exchange privileges). The exchange privilege should not be
viewed as a means for taking advantage of short-term swings in the market, and
the Funds reserve the right to terminate or limit the privilege of any
shareholder who makes more than four exchanges in any calendar year. An exchange
of shares of one Fund for shares of another Fund or other investment portfolio
of Undiscovered Managers Funds will generally be treated as a sale of the
exchanged shares for federal income tax purposes. The Funds may terminate or
change the terms of the exchange privilege at any time, upon 60 days' notice to
shareholders.
RETIREMENT PLANS. The Funds' Institutional Class shares may be purchased by all
types of tax-deferred retirement plans. The Funds' distributor makes available
retirement plan forms for IRAs.
SYSTEMATIC WITHDRAWAL PLAN. If the value of your account is at least $25,000,
you may have periodic cash withdrawals automatically paid to you or any person
designated by you.
AUTOMATIC INVESTMENT PLAN. Voluntary monthly investments of at least $1,000 may
be made automatically by pre-authorized withdrawals from your checking account.
16
<PAGE> 18
SELLING SHARES
You can redeem shares of any Fund by sending a written request to:
PFPC Inc.
4400 Computer Drive
P.O. Box 5181
Westborough, MA 01581-5181
Attn: Undiscovered Managers Funds
As described below, you may also redeem your shares in any Fund by calling
Undiscovered Managers at 1-800-667-1224. Proceeds resulting from a written or
telephonic redemption request can be wired to your bank account or sent by check
in your name(es) (if multiple registered owners) to your record address(es).
Your written request must include the name of the Fund, the class of shares, the
account number, the exact name(s) in which the shares are registered, and the
number of shares or the dollar amount to be redeemed. All owners of the shares
must sign the request in the exact names in which the shares are registered
(this appears on your confirmation statement) and should indicate any special
capacity in which you are signing (such as trustee or custodian or on behalf of
a partnership, corporation or other entity). If you request that redemption
proceeds be wired to your bank account you must provide specific wire
instructions.
If (1) you are redeeming shares worth more than $50,000, (2) you are requesting
that the proceeds check be made out to someone other than you (as the registered
owner) or be sent to an address other than the record address, (3) the account
registration has changed within the last 30 days or (4) you are providing
instructions to wire the proceeds to a bank account not designated on the
application, you must have your signature guaranteed by a medallion signature
guarantor. A medallion signature guarantee may be obtained from a domestic bank
or trust company, broker, dealer, clearing agency, savings association, or other
financial institution which is participating in a medallion program recognized
by the Securities Transfer Association. The three recognized medallion programs
are Securities Transfer Agents Medallion Program (STAMP), Stock Exchanges
Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Signature
Program (NYSE MSP). Signature guarantees from financial institutions which are
not participating in one of these programs will not be accepted. Before
submitting the redemption request, you should verify with the guarantor
institution that it is an medallion guarantor. Signature guarantees by notaries
public are not acceptable.
When you telephone a redemption request, the proceeds are wired to the bank
account previously chosen by you. A wire fee (currently $5) will be deducted
from the proceeds.
If you decide to change the bank account to which proceeds are to be wired, you
must send in this change on the Service Options Form with a medallion signature
guarantee. Telephonic redemptions may only be made if your bank is a member of
the Federal Reserve System or has a correspondent bank that is a member of the
System. Unless you indicate otherwise on the account application, Undiscovered
Managers will be authorized to act upon redemption and exchange instructions
received by telephone from you or any person claiming to act as your
representative who can provide Undiscovered Managers with your account
registration and address as it appears on the records of Undiscovered Managers
Funds. Undiscovered Managers will employ these or other reasonable procedures to
confirm that instructions communicated by telephone are genuine. Undiscovered
Managers Funds, the Funds' transfer agent, the Funds' distributor, Undiscovered
Managers and the sub-advisers will not be liable for any losses due to
unauthorized or fraudulent instructions if these or other reasonable procedures
are followed, but may be liable for any losses due to unauthorized or fraudulent
instructions in the event reasonable procedures are not followed. For further
information, consult Undiscovered Managers. In times of heavy market
17
<PAGE> 19
activity, if you encounter difficulty in placing a redemption or exchange order
by telephone, you may wish to place the order by mail as described above.
Proceeds resulting from a written redemption request will normally be mailed to
you within seven days after receipt of your request, if the request is in good
order. Telephonic redemption proceeds will normally be wired to your bank on the
first business day following receipt of a proper redemption request. If you
purchased shares by check and the check was deposited less than 15 calendar days
prior to the redemption request, the Fund may withhold redemption proceeds until
the check has cleared.
Each Fund will normally redeem your shares for cash; however, each Fund reserves
the right to pay the redemption price wholly or partly in kind if the Board of
Trustees of Undiscovered Managers Funds determines it to be advisable in the
interest of the remaining shareholders. If portfolio securities are distributed
in lieu of cash, you will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, Undiscovered Managers Funds is
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of
Undiscovered Managers Funds at the beginning of such period.
If the balance in your account with a Fund is less than a minimum amount set by
the Trustees of Undiscovered Managers Funds from time to time (currently
$250,000 for all accounts), that Fund may close the account and send the
proceeds to you. If you are affected by this policy, you will be notified of the
Fund's intention to close the account and will have 60 days immediately
following the notice to bring the account up to the minimum. The minimum does
not apply to automatic investment plans or accounts that have fallen below the
minimum solely because of fluctuations in a Fund's net asset value per share.
Undiscovered Managers Funds may suspend the right of redemption and may postpone
payment for more than seven days when the NYSE is closed for other than weekends
or holidays, or if permitted by the rules of the Securities and Exchange
Commission when trading on the NYSE is restricted or during an emergency which
makes it impracticable for the Funds to dispose of their securities or to
determine fairly the value of their net assets, or during any other period
permitted by the Securities and Exchange Commission for the protection of
investors.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds declare and pay their net investment income to shareholders as
dividends annually. Each Fund also distributes all of its net capital gains
realized from the sale of portfolio securities. Any capital gain distributions
are normally made annually, but may, to the extent permitted by law, be made
more frequently as deemed advisable by the Trustees of Undiscovered Managers
Funds. The Trustees may change the frequency with which the Funds declare or pay
dividends.
Dividends and capital gain distributions will automatically be reinvested in
additional shares of the same Fund on the record date unless an investor has
elected to receive cash.
Each Fund intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, as amended. As a regulated investment company,
and provided that the Fund distributes substantially all its net investment
income to its shareholders, the Fund itself will not pay any federal income tax
on its distributed income and gains.
Income dividends and short-term capital gain distributions are taxable as
ordinary income. Long-term capital gain distributions from all Funds are taxable
as long-term capital gains regardless of how long an investor has owned shares
of a Fund. Distributions are taxable to a shareholder of a Fund even if they are
paid from income or gains earned by the Fund prior to the shareholder's
investment (and thus were included in the price paid by the shareholder).
Distributions are taxable as described above regardless of whether they are
distributed in cash or additional shares.
18
<PAGE> 20
Certain designated dividends from the Funds are expected to be eligible for the
dividends-received deduction for corporate shareholders (subject to a holding
period requirement).
The Funds' transfer agent will send each investor and the Internal Revenue
Service an annual statement detailing federal tax information, including
information about dividends and distributions paid to the investor during the
preceding year.
Any gain resulting from the sale or exchange of shares of a Fund will generally
be subject to tax.
NOTE: The foregoing summarizes certain tax consequences of investing in the
Funds for shareholders who are U.S. citizens or corporations. Before
investing, an investor should consult his or her own tax adviser for more
information concerning the federal, state, local and foreign tax
consequences of investing in, redeeming or exchanging Fund shares.
19
<PAGE> 21
WHERE TO GET MORE INFORMATION ABOUT THE FUNDS
To find out more information about Undiscovered Managers Funds, ask for a free
copy of the following:
STATEMENT OF ADDITIONAL INFORMATION
The SAI provides more information about the Funds and the other investment
portfolios of Undiscovered Managers Funds. It is filed with the Securities and
Exchange Commission and is incorporated by reference into this Prospectus, which
means that it is legally part of this Prospectus.
The SAI is available, without charge, upon request. In addition, after the
Funds' annual and semi-annual reports to shareholders are required to be
delivered to the Funds' shareholders, such reports will be available, without
charge, upon request. To obtain free copies of the SAI, the Funds' annual and
semi-annual reports to shareholders (after such reports are required to be
delivered to the Funds' shareholders in the future), request other information
and discuss your questions about any of the Funds and the other investment
portfolios of Undiscovered Managers Funds, you may call toll free 1-888-242-3514
or write to:
Undiscovered Managers Funds
Plaza of the Americas
700 North Pearl Street, Suite 1700
Dallas, Texas 75201
You may also view or download this Prospectus, the SAI and other information
about the Funds and the other investment portfolios of Undiscovered Managers
Funds on our Internet site at http://www.undiscoveredmanagers.com.
You can also review and copy the SAI and other information about the Funds and
the other investment portfolios of Undiscovered Managers Funds at the Securities
and Exchange Commission Public Reference Room in Washington, D.C. Call
1-202-942-8090 for information on the operations of the Public Reference Room.
Reports and other information about the Funds and the other investment
portfolios of Undiscovered Managers Funds are available on the Securities and
Exchange Commission's Internet site at http://www.sec.gov, and copies of this
information may be obtained, upon payment of a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing to
the Securities and Exchange Commission's Public Reference Section, Washington,
D.C. 20549-6009.
(Undiscovered Managers Funds' SEC Investment
Company Act file number is 811-8437)
20
<PAGE> 22
[COMPANY NAME LOGO]
STATEMENT OF ADDITIONAL INFORMATION
_____, 2000
for
UNDISCOVERED MANAGERS BEHAVIORAL LARGE CAP FUND
UNDISCOVERED MANAGERS MERGER & ACQUISITION FUND
UNDISCOVERED MANAGERS SMALL CAP GROWTH FUND
Each a Series of
UNDISCOVERED MANAGERS FUNDS
This Statement of Additional Information ("SAI") is not a prospectus but
contains information that may be useful to investors that is not included in the
relevant Prospectus. This SAI relates to the Undiscovered Managers Funds'
Institutional Class Prospectus dated ______, 2000, of the series of Undiscovered
Managers Funds listed above (the "Funds" and each a "Fund"), and is only
authorized for distribution when accompanied or preceded by such Prospectus.
This SAI should be read together with the aforementioned Prospectus. A free copy
of the aforementioned Prospectus may be obtained by calling 1-888-242-3514 or by
sending a request to Undiscovered Managers Funds, Plaza of the Americas, 700
North Pearl Street, Suite 1700, Dallas, Texas 75201.
<PAGE> 23
TABLE OF CONTENTS
<TABLE>
<S> <C>
Organization and Classification..............................................3
Investment Objectives, Policies and Restrictions.............................3
Additional Description of Investments, Investment Practices and Risks........6
Management of the Trust......................................................7
Ownership of Shares of the Funds.............................................9
Investment Advisory and Other Services.......................................9
Portfolio Transactions and Brokerage........................................13
Description of the Trust....................................................14
Additional Purchase and Redemption Information..............................16
Net Asset Value.............................................................20
Income Dividends, Capital Gain Distributions and Tax Status.................21
Calculation of Total Return.................................................23
Performance Comparisons.....................................................24
Appendix A--Publications That May Contain Fund Information.................A-1
Appendix B--Advertising and Promotional Literature.........................B-1
</TABLE>
-2-
<PAGE> 24
ORGANIZATION AND CLASSIFICATION
Undiscovered Managers Funds (the "Trust") is an open-end management investment
company organized under the laws of Massachusetts as a Massachusetts business
trust by an Agreement and Declaration of Trust dated September 29, 1997 (as
amended, the "Declaration of Trust"). Each Fund is a series of the Trust. The
Trust is authorized to issue an unlimited number of full and fractional shares
of beneficial interest in multiple series. The Trustees of the Trust may,
without shareholder approval, divide the shares of any series into multiple
classes of shares having such preferences and special or relative rights and
privileges as the Trustees of the Trust determine.
Each Fund is a "diversified" fund, as defined in the Investment Company Act of
1940 (the "1940 Act"). With respect to 75% of its assets, a diversified fund may
not invest more than 5% of its total assets in the securities of any one issuer
(except U.S. government securities) while the remaining 25% of its total assets
are not subject to such restriction. A non-diversified fund is restricted with
respect to 50% of its total assets from investing more than 5% of its total
assets in the securities of any one issuer (except U.S. government securities),
and with respect to the remaining 50% of its total assets, it is restricted from
investing more than 25% of its total assets in the securities of any one issuer.
A non-diversified fund may invest a greater percentage of its total assets in
securities of individual issuers, or may invest in a smaller number of different
issuers, than a diversified fund. Accordingly, a non-diversified fund is more
susceptible to risks associated with particular issuers than a diversified fund.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective and policies of each Fund are summarized in the
Prospectus under "The Funds." The investment policies of each Fund set forth in
the Prospectus and in this SAI may be changed by the Fund's adviser, subject to
review and approval by the Trust's Board of Trustees, without shareholder
approval except that any Fund policy explicitly identified as "fundamental" may
not be changed without the approval of the holders of a majority of the
outstanding shares of the Fund (which in the Prospectus and this SAI means the
lesser of (i) 67% of the shares of the Fund represented at a meeting at which at
least 50% of the outstanding shares are represented or (ii) more than 50% of the
outstanding shares).
INVESTMENT RESTRICTIONS--UNDISCOVERED MANAGERS BEHAVIORAL LARGE CAP FUND,
UNDISCOVERED MANAGERS MERGER & ACQUISITION FUND AND UNDISCOVERED MANAGERS SMALL
CAP GROWTH FUND.
The following investment restrictions are fundamental policies of Undiscovered
Managers Behavioral Large Cap Fund (the "Behavioral Large Cap Fund"),
Undiscovered Managers Merger & Acquisition Fund (the "Merger & Acquisition
Fund") and Undiscovered Managers Small Cap Growth Fund (the "Small Cap Growth
Fund").
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<PAGE> 25
Each Fund will not:
1. Borrow money in excess of 33 1/3% of the value of its total assets (not
including the amount borrowed) at the time the borrowing is made.
2. Underwrite securities issued by other persons except to the extent that, in
connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities laws.
3. Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in real
estate, and it may acquire and dispose of real estate or interests in real
estate acquired through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
4. Purchase or sell commodities or commodity contracts, except that the Fund
may purchase and sell financial futures contracts and options, and may
enter into swap agreements, foreign exchange contracts and other financial
transactions not involving physical commodities.
5. Make loans, except by purchase of debt obligations in which the Fund may
invest consistent with its investment policies, by entering into repurchase
agreements, or by lending its portfolio securities.
6. Purchase securities (other than securities of the U.S. government, its
agencies or instrumentalities) if, as a result of such purchase, more than
25% of the Fund's total assets would be invested in any one industry.
7. Issue any class of securities which is senior to the Fund's shares of
beneficial interest, except for permitted borrowings.
Although the Funds are permitted to borrow money to a limited extent, no Fund
currently intends to do so.
In addition to the foregoing fundamental investment restrictions, it is contrary
to each Fund's present policy, which may be changed without shareholder
approval, to:
Invest in (a) securities which at the time of such investment are not readily
marketable, (b) securities restricted as to resale (excluding securities
determined by the Trustees of the Trust (or the person designated by the
Trustees to make such determinations) to be readily marketable), and (c)
repurchase agreements maturing in more than seven days, if, as a result, more
than 15% of the Fund's net assets (taken at current value) would be invested in
securities described in (a), (b) and (c) above.
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<PAGE> 26
All percentage limitations on investments will apply at the time of the making
of an investment (except for the non-fundamental restriction set forth in the
immediately preceding paragraph) and shall not be considered violated unless an
excess or deficiency occurs or exists immediately after and as a result of such
investment.
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<PAGE> 27
ADDITIONAL DESCRIPTION OF INVESTMENTS,
INVESTMENT PRACTICES AND RISKS
The following is an additional description of certain investments, investment
practices and risks of certain of the Funds.
REPURCHASE AGREEMENTS
Any assets of the Funds not invested in common stocks or other equity securities
will generally be held in the form of cash or in repurchase agreements. Under a
repurchase agreement, a Fund buys securities from a seller, usually a bank or
brokerage firm, with the understanding that the seller will repurchase the
securities at a higher price at a later date. If the seller fails to repurchase
the securities, the Fund has rights to sell the securities to third parties.
Repurchase agreements can be regarded as loans by the Fund to the seller,
collateralized by the securities that are the subject of the agreement.
Repurchase agreements afford an opportunity for the Fund to earn a return on
available cash at relatively low credit risk, although the Fund may be subject
to various delays and risks of loss if the seller fails to meet its obligation
to repurchase. The staff of the Securities and Exchange Commission is currently
of the view that repurchase agreements maturing in more than seven days are
illiquid securities.
LOANS OF SECURITIES
The Funds may lend their portfolio securities, provided that cash or equivalent
collateral equal to at least 100% of the market value of the securities loaned
is continuously maintained by the borrower with the Funds. During the time
securities are on loan, the borrower will pay the Fund an amount equivalent to
any dividends or interest paid on such securities, and the Fund 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. These loans are subject to termination at the option of the Fund or
the borrower. A Fund may pay reasonable administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest earned
on the cash or equivalent collateral to the borrower or placing broker. It is
not currently anticipated that any Fund will have on loan at any given time
securities totaling more than one-third of its net assets. A Fund runs the risk
that the counterparty to a loan transaction will default on its obligation and
that the value of the collateral received may be insufficient to
-6-
<PAGE> 28
cover the securities loaned as a result of an increase in the value of the
securities or decline in the value of the collateral.
LEVERAGE
Although it is not the current intention of any of the Funds to engage in
borrowing, each Fund may borrow money provided that the total amount borrowed
and outstanding at the time the borrowing is made does not exceed 33 1/3% of the
value of such Fund's total assets (not including the amount borrowed). The use
of leverage through borrowing creates an opportunity for increased net income,
but, at the same time, creates special risks. There can be no assurance that a
leveraging strategy will be successful during any period in which it is
employed. The intent of using leverage would be to provide the holders of a
Fund's shares with a potentially higher return. Leverage creates risks for a
Fund, including the likelihood of greater volatility of the net asset value and
market price of the Fund's shares. To the extent the income derived from
securities purchased with funds received from leverage exceeds the cost of
leverage, a Fund's return will be greater than if leverage had not been used.
Conversely, if the income from the securities purchased with such funds is not
sufficient to cover the cost of leverage, the return to a Fund will be less than
if leverage had not been used, and therefore the amounts available for
distribution to such Fund's shareholders as dividends and other distributions
will be reduced or eliminated. In the latter case, a Fund's sub-adviser in its
best judgment nevertheless may determine to maintain the Fund's leveraged
position if it deems such action to be appropriate under the circumstances.
During periods in which a Fund is using leverage, the fees paid by such Fund to
Undiscovered Managers, LLC ("Undiscovered Managers"), for investment advisory
and administrative services will be higher than if the Fund did not use leverage
because the fees paid will be calculated on the basis of the Fund's total net
assets, including the amount borrowed.
MANAGEMENT OF THE TRUST
The Trustees of the Trust are responsible for generally overseeing the conduct
of the Trust's business. Subject to such policies as the Trustees of the Trust
may determine, Undiscovered Managers, the Funds' investment adviser, has
responsibility for the management of the Funds' affairs. Each Fund's investment
portfolio is managed on a day-to-day basis by that Fund's sub-adviser, under the
general oversight of Undiscovered Managers and the Trustees of the Trust.
The Trustees and officers of the Trust, their ages, addresses and principal
occupations during the past five years are as follows:
*MARK P. HURLEY (41)--Trustee and President. President and Chief Executive
Officer of Undiscovered Managers since September, 1997; formerly Managing
Director of Merrill Lynch & Company from February, 1996 to January, 1997;
formerly Vice President of Goldman, Sachs & Co. from August, 1992 to February,
1996.
ROGER B. KEATING (39)--Trustee. 808 Brannan Street, 2nd Floor, San Francisco,
California 94103; President and Chief Executive Officer of Zatso (formerly known
as ReacTV), an online news broadcasting firm, since March, 1998; Senior Vice
President of Online Division of Comcast Cable Communications from May, 1996 to
March, 1998; Area Vice President and
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<PAGE> 29
General Manager of West Florida area of Comcast Cable Communications from
August, 1993 to May, 1996.
MATTHEW J. KILEY (38)--Trustee. 849 Foxfield Road, Lower Gwynedd, Pennsylvania
19002; self-employed; formerly Executive Vice President of Campus Services at
ARAMARK from May, 1998 to October, 1999 and Executive Vice President of Sports
and Entertainment and Vice President of Global Food and Support Services at
ARAMARK Corp. from September, 1996 to May, 1998; formerly Manager at McKinsey &
Company from January, 1990 to September, 1996.
ROBERT P. SCHMERMUND (45)--Trustee. 900 19th Street, N.W., Suite 400,
Washington, D.C. 20006; Communications Director of America's Community Bankers
since January, 1993.
BRIAN J. O'NEILL (32)--Treasurer. 3200 Horizon Drive, King of Prussia,
Pennsylvania 19406; Director of Financial Reporting Department for PFPC Inc.,
since June, 1994.
PATRICIA L. DUNCAN (37)--Secretary. Vice President-Fund Operations of
Undiscovered Managers since January 2000, formerly Registered Marketing
Administrator of Undiscovered Managers from December, 1997; formerly Executive
Secretary at Prentiss Properties Trust from April, 1994 to December, 1997.
----------
* Trustees who are "interested persons" (as defined in the 1940 Act) of the
Trust or of Undiscovered Managers.
The address of each Trustee and officer of the Trust affiliated with
Undiscovered Managers is Plaza of the Americas, 700 North Pearl Street, Dallas,
Texas 75201.
The Trust pays no compensation to any of its officers or to the Trustees listed
above who are officers or employees of Undiscovered Managers. Each Trustee who
is not an officer or employee of Undiscovered Managers is compensated at the
rate of $10,000 per annum. The Trust provides no pension or retirement benefits
to the Trustees but has adopted a deferred payment arrangement under which each
Trustee who is to receive fees from the Trust may elect not to receive such fees
on a current basis but to receive in a subsequent period an amount equal to the
value that such fees would have if they had been invested in one or more of the
Funds or the other investment portfolios of the Trust on the normal payment date
for such fees. As a result of this method of calculating the deferred payments,
each Fund, upon making the deferred payments, will be in the same financial
position as if the fees had been paid on the normal payment dates.
The following table sets forth information covering the total compensation paid
(or deferred in lieu of current payment) by the Trust during its fiscal year
ended August 31, 2000 to the persons who served as Trustees during such period:
-8-
<PAGE> 30
<TABLE>
<CAPTION>
TOTAL COMPENSATION
AGGREGATE COMPENSATION FROM TRUST AND
PERSON FROM TRUST FUND COMPLEX*
------ ---------------------- ------------------
<S> <C> <C>
Mark P. Hurley $0 $0
Roger B. Keating $10,000(1) $10,000
Matthew J. Kiley $10,000 $10,000
Robert P. Schmermund $10,000 $10,000
</TABLE>
----------
* No Trustee received any compensation from any mutual fund affiliated with
Undiscovered Managers, other than the Trust.
(1) Roger B. Keating deferred receipt of $10,000 of such compensation pursuant
to the fee deferral arrangements described above.
OWNERSHIP OF SHARES OF THE FUNDS
As of _______, 2000, Undiscovered Managers owned of record and beneficially 100%
of the outstanding shares of each of the Funds, and as a result, may be deemed
to "control" the Funds as that term is defined in the 1940 Act. As of such date,
the Trustees and officers of the Trust did not own beneficially any shares of
the Funds except for such ownership that may be attributed to Mark Hurley,
Trustee and President of the Trust, through Undiscovered Managers' ownership of
shares of the Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER AND SUB-ADVISERS
As described in the Prospectus, Undiscovered Managers is the investment adviser
of each Fund and as such, has responsibility for the management of each Fund's
affairs, under the supervision of the Trust's Board of Trustees. Each Fund's
investment portfolio is managed on a day-to-day basis by that Fund's
sub-adviser, under the general oversight of Undiscovered Managers and the Board
of Trustees. See "The Funds" in the Prospectus. Undiscovered Managers is a
limited liability company organized under the laws of Delaware. Mark P. Hurley
and AMRESCO, Inc., a publicly traded corporation engaged in residential mortgage
banking, commercial mortgage banking, asset management and commercial finance,
each own beneficially more than 25% of the voting securities of Undiscovered
Managers and therefore may be regarded to control Undiscovered Managers for
purposes of the 1940 Act. As disclosed in this SAI under the heading "Management
of the Trust," (i) Mark P. Hurley is a Trustee and the President of the Trust as
well as the President and Chief Executive Officer and a controlling member of
Undiscovered Managers, and (ii) Patricia L. Duncan is the Secretary of the Trust
as well as Vice President-Fund Operations of Undiscovered Managers. Undiscovered
Managers is further affiliated with the Funds through its ownership as of
_______, 2000, of 100% of the outstanding shares of the Funds.
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<PAGE> 31
Under each Fund's advisory agreement with Undiscovered Managers, Undiscovered
Managers is entitled to fees, payable monthly, of a certain percentage of the
average daily net asset value of such Fund. For a description of such fees, see
"The Funds -- The Funds' Management" in the Prospectus.
As described in the Prospectus, Undiscovered Managers has contractually agreed
to certain arrangements to limit each Fund's expenses. See "Trust Expenses"
below.
Each Fund's investment portfolio is managed on a day-to-day basis by that Fund's
sub-adviser. Each of the sub-advisers is regarded for purposes of the 1940 Act
as being controlled by the following persons, each of whom is a principal of the
firm and owns more than 25% of the voting securities of the firm: Russell J.
Fuller (Fuller & Thaler Asset Management, Inc.); James L. Kaplan (J.L. Kaplan
Associates, LLC); and Ronald A. Sauer (Mazama Capital Management, Inc.).
Under each sub-advisory agreement relating to the Funds between Undiscovered
Managers and such Fund's sub-adviser, the sub-adviser is entitled to fees,
payable monthly by Undiscovered Managers out of the fees it receives, of a
certain percentage of the average daily net asset value of such Fund. For a
description of such fees, see "The Funds -- The Funds' Management" in the
Prospectus.
Each Fund's advisory agreement and related sub-advisory agreement provides that
it will continue in effect for two years from its date of execution and
thereafter from year to year if its continuance is approved at least annually
(i) by the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the relevant Fund and (ii) by vote of a
majority of the Trustees who are not "interested persons" of the Trust,
Undiscovered Managers or, in the case of the related sub-advisory agreement, the
relevant sub-adviser, as that term is defined in the 1940 Act, cast in person at
a meeting called for the purpose of voting on such approval. Any amendment to a
Fund's advisory agreement must be approved by vote of a majority of the
outstanding voting securities of the relevant Fund and by vote of a majority of
the Trustees who are not interested persons, cast in person at a meeting called
for the purpose of voting on such approval. Any amendment to a sub-advisory
agreement relating to a Fund must be approved by vote of a majority of the
outstanding voting securities of such Fund and by vote of a majority of the
Trustees who are not interested persons, cast in person at a meeting called for
the purpose of voting on such approval, unless such approvals are no longer
required by law.
Each Fund's advisory agreement may be terminated without penalty by vote of the
Board of Trustees of the Trust or by vote of a majority of the outstanding
securities of the relevant Fund, upon sixty days' written notice, and by
Undiscovered Managers upon ninety days' written notice, and shall automatically
terminate in the event of its assignment. Each Fund's advisory agreement
provides that Undiscovered Managers owns all rights to and control of the name
"Undiscovered Managers." Each Fund's advisory agreement will automatically
terminate if the Trust or the relevant Fund shall at any time be required by
Undiscovered Managers to eliminate all reference to the words "Undiscovered
Managers" in the name of the Trust or the relevant Fund, unless the continuance
of the agreement after such change of name is approved by a majority of the
outstanding voting securities of the relevant Fund and by a majority of the
Trustees who are not interested persons of the Trust or Undiscovered Managers,
cast in person at a meeting called for the purpose of voting on such approval.
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<PAGE> 32
Each sub-advisory agreement relating to a Fund may be terminated without penalty
by Undiscovered Managers, by vote of the Board of Trustees or by vote of a
majority of the outstanding voting securities of the relevant Fund, upon sixty
days' written notice, and each terminates automatically in the event of its
assignment and upon termination of the related advisory agreement. Certain of
the sub-advisory agreements relating to the Funds may be terminated by the
relevant sub-adviser in certain circumstances.
Each Fund's advisory agreement and related sub-advisory agreement provides that
Undiscovered Managers or the applicable sub-adviser shall not be subject to any
liability in connection with the performance of its services thereunder in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties.
The Trust has applied for an exemptive order from the Securities and Exchange
Commission to permit Undiscovered Managers, subject to the approval of the
Trust's Board of Trustees and certain other conditions, to enter into
sub-advisory agreements with sub-advisers other than the current sub-adviser of
any Fund or any other investment portfolio of the Trust and amend sub-advisory
agreements with sub-advisers without obtaining shareholder approval. See "The
Funds -- The Funds' Management" in the Prospectus.
TRUST EXPENSES
The Trust pays the compensation of its Trustees who are not officers or
employees of Undiscovered Managers; registration, filing and other fees in
connection with requirements of regulatory authorities; all charges and expenses
of its custodian and transfer agent; the charges and expenses of its independent
accountants; all brokerage commissions and transfer taxes in connection with
portfolio transactions; all taxes and fees payable to governmental agencies; the
cost of any certificates representing shares of the Funds; the expenses of
meetings of the shareholders and Trustees of the Trust; the charges and expenses
of the Trust's legal counsel; interest on any borrowings by the Funds; the cost
of services, including services of counsel, required in connection with the
preparation of, and the cost of printing, the Trust's registration statements
and prospectuses, including amendments and revisions thereto, annual, semiannual
and other periodic reports of the Trust, and notices and proxy solicitation
material furnished to shareholders or regulatory authorities, to the extent that
any such materials relate to the Trust or its shareholders; and the Trust's
expenses of bookkeeping, accounting, auditing and financial reporting, including
related clerical expenses.
As described in the Prospectus, Undiscovered Managers has contractually agreed
to reduce its management fees and pay the expenses of each Fund's shares in
order to limit such Funds' expenses (exclusive of brokerage costs, interest,
taxes and extraordinary expenses) to the following annual percentage rates of
their respective average daily net assets, subject to the obligation of each
Fund to repay Undiscovered Managers such Fund's deferred fees and expenses in
future years, if any, when such Fund's expenses (exclusive of brokerage costs,
interest, taxes and extraordinary expenses) fall below the stated percentage
rate, but only to the extent that such repayment would not cause such Fund's
expenses (exclusive of brokerage costs, interest, taxes and extraordinary
expenses) in any such future year to exceed the stated percentage rate, and
provided that such Fund is not obligated to repay any such deferred fees and
expenses more than three years after the end of the fiscal year in which they
were incurred:
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<TABLE>
<CAPTION>
FUND EXPENSE LIMITATIONS
---- -------------------
<S> <C>
Behavioral Large Cap Fund 0.99%
Merger & Acquisition Fund 1.30%
Small Cap Growth Fund 1.20%
</TABLE>
These agreements have a term ending on December 31, 2001 and are renewable year
to year thereafter.
ADMINISTRATOR
Pursuant to an Administrative Services Agreement between the Trust and
Undiscovered Managers, Undiscovered Managers has agreed to provide all
administrative services to the Funds, including but not limited to corporate
secretarial, treasury, blue sky and fund accounting services. For these
services, each Fund pays Undiscovered Managers a monthly fee at the annual rate
of 0.25% of such Fund's average net asset value.
Undiscovered Managers has entered into an agreement with PFPC Inc. to provide
certain of the foregoing administrative services, at the expense of Undiscovered
Managers.
DISTRIBUTOR
The Funds' shares are sold on a continuous basis by the Trust's distributor,
Provident Distributors, Inc. (the "Distributor"), 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406. Under the Distribution Agreement between the Trust
and the Distributor, the Distributor is not obligated to sell any specific
amount of shares of the Trust, but will use efforts deemed appropriate by it to
solicit orders for the sale of the Trust's shares and to undertake such
advertising and promotion as it believes reasonable in connection with such
solicitation.
ADDITIONAL ARRANGEMENTS
CUSTODIAL ARRANGEMENTS. The Bank of New York, 1 Wall Street, New York, New York
10286, is the custodian for each Fund. The custodian holds in safekeeping
certificated securities and cash belonging to the Funds and, in such capacity,
is the registered owner of securities held in book entry form belonging to the
Funds. Upon instruction, the custodian receives and delivers cash and securities
of the Funds in connection with Fund transactions and collects all dividends and
other distributions made with respect to Fund portfolio securities. The
custodian also maintains certain accounts and records of the Funds.
INDEPENDENT AUDITORS. The Funds' independent auditors are Deloitte & Touche LLP,
116-300 Village Blvd., Princeton, New Jersey 08540. Deloitte & Touche LLP
conducts an annual audit of the Funds' financial statements, assists in the
preparation of the Funds' federal and state income tax returns and consults with
the Funds as to matters of accounting and federal and state income taxation.
TRANSFER AND DIVIDEND PAYING AGENT. PFPC Inc., 4400 Computer Drive, Westborough,
Massachusetts 01581, is the transfer and dividend paying agent of the Funds.
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CODE OF ETHICS
The Trust, Undiscovered Managers, the subadvisers of the Funds and the
Distributor have adopted Codes of Ethics pursuant to the requirements of the
1940 Act. These Codes of Ethics permit personnel subject to the Codes to invest
in securities, including securities that may be purchased or held by the Funds.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Transactions on stock exchanges and other agency transactions for the account of
the Funds involve the payment by the Funds of negotiated brokerage commissions.
Such commissions vary among different brokers. A particular broker may charge
different commissions according to such factors as the difficulty and size of
the transaction. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by the
Funds usually includes an undisclosed dealer commission, markup or markdown. In
underwritten offerings, the price paid by the Funds includes a disclosed, fixed
commission or discount retained by the underwriter or dealer.
In addition to selecting portfolio investments for the Fund it manages, each
sub-adviser selects brokers or dealers to execute securities purchases and sales
for the Fund's account. Each sub-adviser selects only brokers or dealers which
it believes are financially responsible, will provide efficient and effective
services in executing, clearing and settling an order and will charge commission
rates which, when combined with the quality of the foregoing services, will
produce best price and execution for the transaction. This does not necessarily
mean that the lowest available brokerage commission will be paid. However, the
commissions are believed to be competitive with generally prevailing rates. Each
sub-adviser uses its best efforts to obtain information as to the general level
of commission rates being charged by the brokerage community from time to time
and evaluates the overall reasonableness of brokerage commissions paid on
transactions by reference to such data. In making such evaluation, all factors
affecting liquidity and execution of the order, as well as the amount of the
capital commitment by the broker in connection with the order, are taken into
account.
A sub-adviser's receipt of research services from brokers may sometimes be a
factor in its selection of a broker that it believes will provide best price and
execution for a transaction. These research services include not only a wide
variety of reports on such matters as economic and political developments,
industries, companies, securities, portfolio strategy, account performance,
daily prices of securities, stock and bond market conditions and projections,
asset allocation and portfolio structure, but also meetings with management
representatives of issuers and with other analysts and specialists. Although it
is in many cases not possible to assign an exact dollar value to these services,
they may, to the extent used, tend to reduce the sub-adviser's expenses. Such
services may be used by a sub-adviser in managing other client accounts and in
some cases may not be used with respect to the Funds. Receipt of services or
products other than research from brokers is not a factor in the selection of
brokers. Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best price and execution,
purchases of shares of a Fund by customers of broker-dealers may be considered
as a factor in the selection of broker-dealers to execute the Fund's securities
transactions.
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<PAGE> 35
A sub-adviser may cause a Fund to pay a broker-dealer that provides brokerage
and research services to the sub-adviser an amount of commission for effecting a
securities transaction for that Fund in excess of the amount another
broker-dealer would have charged for effecting that transaction. The sub-adviser
must determine in good faith that such greater commission is reasonable in
relation to the value of the brokerage and research services provided by the
executing broker-dealer viewed in terms of that particular transaction or the
sub-adviser's overall responsibilities to the Fund and its other clients. The
sub-adviser's authority to cause a Fund to pay greater commissions is also
subject to such policies as the Trustees of the Trust may adopt from time to
time.
Transactions in unlisted securities are carried out through broker-dealers who
make the primary market for such securities unless, in the judgment of each
sub-adviser, a more favorable price can be obtained by carrying out such
transactions through other brokers or dealers.
DESCRIPTION OF THE TRUST
As stated previously, the Trust was organized as a Massachusetts business trust
by the Declaration of Trust dated September 29, 1997. The Declaration of Trust
currently permits the Trustees to issue an unlimited number of full and
fractional shares of each series. The Trust currently has fourteen series, three
of which are the Funds. Each share of each Fund represents an equal
proportionate interest in such Fund with each other share of that Fund and is
entitled to a proportionate interest in the dividends and distributions from
that Fund. The shares of each Fund do not have any preemptive rights. Upon
termination of any Fund, whether pursuant to liquidation of the Trust or
otherwise, shareholders of that Fund are entitled to share pro rata in the net
assets of that Fund available for distribution to shareholders. Shares are
freely transferable, are not convertible and may be redeemed in accordance with
the terms and provisions in the Prospectus. The Declaration of Trust permits the
Trustees to charge shareholders directly for custodial, transfer agency and
servicing expenses.
The Declaration of Trust also permits the Trustees, without shareholder
approval, to subdivide any series of shares into various classes of shares with
such preferences and other rights as the Trustees may designate. The Trustees
may also, without shareholder approval, establish one or more additional
separate portfolios for investments in the Trust. Shareholders' investments in
such an additional portfolio would be evidenced by a separate series of shares
(i.e., a new "Fund").
The Declaration of Trust provides for the perpetual existence of the Trust. The
Trust or any Fund, however, may be terminated at any time by vote of at least
two-thirds of the outstanding shares of each Fund affected. The Declaration of
Trust further provides that the Trustees may also terminate the Trust or any
Fund upon written notice to the shareholders.
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<PAGE> 36
Currently, the Funds only offer the Institutional class of shares. In general,
expenses of each Fund are borne by all the shares in such Fund, regardless of
class, on a pro rata basis relative to the net assets of each class.
VOTING RIGHTS
Shareholders are entitled to one vote for each full share held (with fractional
votes for each fractional share held) and may vote (to the extent provided in
the Declaration of Trust) on the election of Trustees and the termination of the
Trust and on other matters submitted to the vote of shareholders.
The Declaration of Trust provides that on any matter submitted to a vote of all
Trust shareholders, all Trust shares entitled to vote shall be voted together
irrespective of series or class unless the rights of a particular series or
class would be adversely affected by the vote, in which case a separate vote of
that series or class shall be required to decide the question. Also, a separate
vote shall be held whenever required by the 1940 Act or any rule thereunder.
Rule 18f-2 under the 1940 Act provides in effect that a series or class shall be
deemed to be affected by a matter unless it is clear that the interests of each
series or class in the matter are substantially identical or that the matter
does not affect any interest of such series or class. On matters affecting an
individual series or class, only shareholders of that series or class are
entitled to vote. Consistent with the current position of the SEC, shareholders
of all series and classes vote together, irrespective of series or class, on the
election of Trustees and the selection of the Trust's independent accountants,
but shareholders of each series vote separately on other matters requiring
shareholder approval, such as certain changes in investment policies of that
series or the approval of the investment advisory and sub-advisory agreements
relating to that series.
There will normally be no meetings of shareholders for the purpose of electing
Trustees except that, in accordance with the 1940 Act, (i) the Trust will hold a
shareholders' meeting for the election of Trustees at such time as less than a
majority of the Trustees holding office have been elected by shareholders, and
(ii) if, as a result of a vacancy on the Board of Trustees, less than two-thirds
of the Trustees holding office have been elected by the shareholders, that
vacancy may be filled only by a vote of the shareholders. In addition, Trustees
may be removed from office by a written consent signed by the holders of
two-thirds of the outstanding shares and filed with the Trust's custodian or by
a vote of the holders of two-thirds of the outstanding shares at a meeting duly
called for that purpose, which meeting shall be held upon the written request of
the holders of not less than 10% of the outstanding shares.
Upon written request by 10 shareholders of record, who have been such for at
least six months preceding the date of such request and who hold shares in the
aggregate having a net asset value of at least one percent (1%) of the
outstanding shares, stating that such shareholders wish to communicate with the
other shareholders for the purpose of obtaining the signatures necessary to
demand a meeting to consider removal of a Trustee, the Trust has undertaken to
provide a list of shareholders or to disseminate appropriate materials (at the
expense of the requesting shareholders).
Except as set forth above, the Trustees shall continue to hold office and may
appoint successor Trustees. Voting rights are not cumulative.
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<PAGE> 37
No amendment may be made to the Declaration of Trust without the affirmative
vote of a majority of the outstanding shares of the Trust, except (i) to change
the Trust's name or to cure technical problems in the Declaration of Trust and
(ii) to establish, change or eliminate the par value of any shares (currently
all shares have no par value).
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
each Fund and requires that notice of such disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees. The Declaration of Trust provides for indemnification out of assets of
a Fund or assets attributable to the particular class of a Fund for all loss and
expense of any shareholder held personally liable for the obligations of such
Fund or such class. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is considered remote since it is limited to
circumstances in which the disclaimer is inoperative and the Fund itself would
be unable to meet its obligations.
The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, nothing in the
Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office. The By-Laws of the Trust provide for indemnification by the Trust of
the Trustees and officers of the Trust except with respect to any matter as to
which any such person is found after final adjudication in an action, suit or
proceeding not to have acted in good faith in the reasonable belief that such
action was in the best interests of the Trust. No officer or Trustee may be
indemnified against any liability to the Trust or the Trust's shareholders to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
HOW TO BUY SHARES
Subject to minimum initial investment requirements and certain other conditions,
an investor may make an initial purchase of shares of any Fund by submitting a
completed application form and payment to:
Undiscovered Managers Funds
4400 Computer Drive
P.O. Box 5181
Westborough, MA 01581-5181
The procedures for purchasing shares of any Fund are summarized in "Your
Investment -- Buying Shares" in the Prospectus. The Prospectus also explains
total offering price of the shares.
As described in the Prospectus, shares of any Fund may be purchased by
exchanging securities on deposit with a custodian acceptable to Undiscovered
Managers. Such a purchase is subject in each case
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<PAGE> 38
to the determination by Undiscovered Managers that the securities to be
exchanged are acceptable for purchase by the Fund. In all cases, Undiscovered
Managers reserves the right to reject any securities that are proposed for
exchange. Securities accepted by Undiscovered Managers in exchange for Fund
shares will be valued in the same manner as the Fund's assets as of the time of
the Fund's next determination of net asset value after such acceptance. All
dividends and subscription or other rights which are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund upon receipt by the investor from the
issuer. Generally, a gain or loss for federal income tax purposes would be
realized upon the exchange of securities by an investor that is subject to
federal income taxation, depending upon the investor's basis in the securities
tendered.
Undiscovered Managers will not approve the acceptance of securities in exchange
for shares of any Fund unless (1) Undiscovered Managers and the applicable
sub-adviser in their discretion, believes the securities are appropriate
investments for the Fund; (2) the investor represents and agrees that all
securities offered to the Fund can be resold by the Fund without restriction
under the Securities Act of 1933, as amended, or otherwise; and (3) the
securities are eligible to be acquired under the Fund's investment policies and
restrictions. No investor owning 5% or more of a Fund's shares may purchase
additional shares of that Fund by an exchange of securities.
OFFERING PRICE
The public offering price of shares of a Fund is the net asset value of such
Fund. On each purchase of shares, the net asset value is invested in the
applicable Fund. Shares are purchased at the public offering price next
determined after PFPC Inc. or another agent or sub-agent of the Fund receives
the investor's order in proper form. If PFPC Inc. or another agent or sub-agent
of the Fund receives an order in proper form before the close of regular trading
on the New York Stock Exchange (the "NYSE"), the investor will pay or receive
that day's net asset value. If PFPC Inc. or another agent or sub-agent of the
Fund receives an order in proper form after the close of regular trading on the
NYSE, the investor will pay or receive the next day's net asset value.
SHAREHOLDER SERVICES
OPEN ACCOUNTS
A shareholder's investment in any Fund is automatically credited to an open
account maintained for the shareholder by PFPC Inc. Following each transaction
in the account, a shareholder will receive an account statement disclosing the
current balance of shares owned and the details of recent transactions in the
account. After the close of each fiscal year PFPC Inc. will send each
shareholder a statement providing federal tax information on dividends and
distributions paid to the shareholder during the year. This statement should be
retained as a permanent record. Shareholders will be charged a fee for duplicate
information. The open account system permits the purchase of full and fractional
shares and, by making the issuance and delivery of certificates representing
shares unnecessary, eliminates the problems of handling and safekeeping
certificates and the cost and inconvenience of replacing lost, stolen, mutilated
or destroyed certificates.
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<PAGE> 39
The costs of maintaining the open account system are borne by the Trust, and no
direct charges are made to shareholders. Although the Trust has no present
intention of making such direct charges to shareholders, it reserves the right
to do so. Shareholders will receive prior notice before any such charges are
made.
SYSTEMATIC WITHDRAWAL PLAN
A Systematic Withdrawal Plan, referred to in the Prospectus under "Your
Investment -- General Shareholder Services," provides for monthly, quarterly,
semiannual or annual withdrawal payments of $1,000 or more from the account of a
shareholder provided that the account has a value of at least $25,000 at the
time the plan is established.
Payments will be made either to the shareholder or to any other person
designated by the shareholder. If payments are issued to an individual other
than the registered owner(s), a medallion signature guarantee will be required
on the Plan application. Income dividends and capital gain distributions will be
reinvested at the net asset value determined as of the close of regular trading
on the NYSE on the record date for the dividend or distribution.
Since withdrawal payments represent proceeds from liquidation of shares, the
shareholder should recognize that withdrawals may reduce and possibly exhaust
the value of the account, particularly in the event of a decline in net asset
value. Accordingly, the shareholder should consider whether a Systematic
Withdrawal Plan and the specified amounts to be withdrawn are appropriate in the
circumstances. The Trust makes no recommendations or representations in this
regard. It may be appropriate for the shareholder to consult a tax adviser
before establishing such a plan. See "Redemptions" and "Income Dividends,
Capital Gain Distributions and Tax Status" below for certain information as to
federal income taxes.
EXCHANGE PRIVILEGE
Shareholders may redeem their shares of any Fund and have the
proceeds applied on the same day to purchase the same class of shares of any
other Fund or any other investment portfolio of the Trust. The value of shares
exchanged must be at least $1,000 and all exchanges are subject to the minimum
investment requirement of the Fund or other investment portfolio of the Trust
into which the exchange is being made. This option is summarized in the
Prospectus under "Your Investment -- General Shareholder Services."
Exchanges may be effected by (1) making a telephone request by calling
1-800-667-1224, provided that a special authorization form is on file with PFPC
Inc., or (2) sending a written exchange request to PFPC Inc. accompanied by an
account application for the appropriate Fund or other investment portfolio of
the Trust. The Trust reserves the right to modify this exchange privilege
without prior notice.
An exchange constitutes a sale of the shares for federal income tax purposes on
which the investor may realize a capital gain or loss.
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<PAGE> 40
IRAs
Under "Your Investment -- General Shareholder Services," the Prospectus refers
to IRAs established under a prototype plan made available by the Distributor.
These plans may be funded with shares of any Fund. All income dividends and
capital gain distributions of plan participants must be reinvested. Plan
documents and further information can be obtained from the Distributor.
Check with your financial or tax adviser as to the suitability of Fund shares
for your retirement plan.
REDEMPTIONS
The procedures for redemption of shares of any class of any Fund are summarized
in the Prospectus under "Your Investment -- Selling Shares."
Except as noted below, signatures on redemption requests must be guaranteed by a
medallion signature guarantor. A medallion signature guarantee may be obtained
from a domestic bank or trust company, broker, dealer, clearing agency, savings
association, or other financial institution which is participating in a
medallion program recognized by the Securities Transfer Association. The three
recognized medallion programs are Securities Transfer Agents Medallion Program
(STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange,
Inc. Medallion Signature Program (NYSE MSP). Signature guarantees from financial
institutions which are not participating in one of these programs will not be
accepted. Signature guarantees by notaries public are not acceptable. However,
as noted in the Prospectus, a medallion signature guarantee will not be required
if the proceeds of the redemption do not exceed $50,000 and the proceeds check
is made payable to the registered owner(s) and mailed to the record address.
If a shareholder selects the telephone redemption service in the manner
described in the next paragraph, Fund shares may be redeemed by making a
telephone call directly to Undiscovered Managers at 1-800-667-1224. When a
telephonic redemption request is received, the proceeds are wired to the bank
account previously chosen by the shareholder and a nominal wire fee (currently
$5.00) is deducted. Telephonic redemption requests must be received by
Undiscovered Managers prior to the close of regular trading on the NYSE on a day
when the NYSE is open for business. Requests made after that time or on a day
when the NYSE is not open for business cannot be accepted by Undiscovered
Managers and a new request will be necessary.
In order to redeem shares by telephone, a shareholder must either select this
service when completing the Fund application or must do so subsequently on the
Service Options Form available from PFPC Inc. When selecting the service, a
shareholder must designate a bank account to which the redemption proceeds
should be wired. Any change in the bank account so designated must be made by
furnishing to PFPC Inc. a completed Service Options Form with a signature
guarantee. Whenever the Service Options Form is used, the shareholder's
signature must be guaranteed as described above. Telephone redemptions may only
be made if an investor's bank is a member of the Federal Reserve System or has a
correspondent bank that is a member of the System. If the account is with a
savings bank, it must have only one correspondent bank that is a member of the
System. The Trust, PFPC Inc., the Distributor, Undiscovered Managers and the
sub-advisers are not responsible for the authenticity of withdrawal instructions
received by telephone. In the event that reasonable procedures are not followed
in the
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<PAGE> 41
verification of withdrawal instructions, the foregoing parties may be liable for
any losses due to unauthorized instructions.
The redemption price will be the net asset value per share next determined after
the redemption request and any necessary special documentation are received by
PFPC Inc. or an approved broker-dealer or its authorized designee in proper
form. Proceeds resulting from a written redemption request will normally be
mailed to you within seven days after receipt of your request in good order.
Telephonic redemption proceeds will normally be wired on the first business day
following receipt of a proper redemption request. In those cases where you have
recently purchased your shares by check and your check was received less than
fifteen days prior to the redemption request, the Fund may withhold redemption
proceeds until your check has cleared.
Each Fund will normally redeem shares for cash; however, each Fund reserves the
right to pay the redemption price wholly or partly in kind if the Board of
Trustees of the Trust determines it to be advisable in the interest of the
remaining shareholders. If portfolio securities are distributed in lieu of cash,
the shareholder will normally incur brokerage commissions upon subsequent
disposition of any such securities. However, the Trust has elected to be
governed by Rule 18f-1 under the 1940 Act pursuant to which the Trust is
obligated to redeem shares solely in cash for any shareholder during any 90-day
period up to the lesser of $250,000 or 1% of the total net asset value of the
Trust at the beginning of such period.
A redemption constitutes a sale of shares for federal income tax purposes on
which the investor may realize a long- or short-term capital gain or loss. See
"Income Dividends, Capital Gain Distributions and Tax Status."
NET ASSET VALUE
As indicated in the Prospectus, the net asset value of each Fund is determined
and the shares of each Fund are priced as of the earlier of 4:00 p.m., Eastern
Time, or the close of regular trading on the NYSE, on each Business Day. A
"Business Day" is any day the NYSE is open for regular business. Currently the
NYSE is closed in observance of the following holidays: New Year's Day, Martin
Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
Valuations of securities purchased by the Funds are supplied by independent
pricing services used by PFPC Inc., as sub-administrator. Equity securities
which are listed or admitted to trading on a national securities exchange or
other market trading system which reports actual transaction prices on a
contemporaneous basis will be valued at the last sales price on the exchange on
which the security is principally traded. Equity securities for which there is
no sale on that day and equity securities traded only in the over-the-counter
market will be valued at their closing bid prices obtained from one or more
dealers making markets for such securities or, if market quotations are not
readily available, at their fair value as determined in good faith by or under
the direction of the Board of Trustees of the Trust.
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<PAGE> 42
Generally, trading in foreign securities markets is substantially completed each
day at various times prior to the close of regular trading on the NYSE.
Occasionally, events affecting the value of equity securities of non-U.S.
issuers not traded on a U.S. exchange may occur between the completion of
substantial trading of such securities for the day and the close of regular
trading on the NYSE. If events materially affecting the value of any Fund's
portfolio securities of non-U.S. issuers occur during such period, then these
securities will be valued at their fair value as determined in good faith by or
in accordance with procedures approved by the Board of Trustees.
INCOME DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX STATUS
As described in the Prospectus under "Dividends, Distributions and Taxes" it is
the policy of each Fund to pay its shareholders, as dividends, substantially all
net investment income and to distribute at least annually all net realized
capital gains, if any, after offsetting any capital loss carryovers.
Income dividends and capital gain distributions are payable in full and
fractional shares of the particular Fund based upon the net asset value
determined as of the close of regular trading on the NYSE on the record date for
each dividend or distribution. Shareholders, however, may elect to receive their
income dividends or capital gain distributions, or both, in cash. The election
may be made at any time by submitting a written request directly to PFPC Inc. In
order for a change to be in effect for any dividend or distribution, it must be
received by PFPC Inc. on or before the record date for such dividend or
distribution.
As required by federal law, detailed federal tax information will be furnished
to each shareholder for each calendar year on or before January 31 of the
succeeding year.
Each Fund intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code") and to qualify
for the special tax treatment accorded regulated investment companies and their
shareholders. In order so to qualify, the Fund must, among other things, (i)
derive at least 90% of its gross income from dividends, interest, payments with
respect to certain securities loans, gains from the sale of stock, securities or
foreign currencies, or other income (including but not limited to gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; (ii) distribute with respect
to each taxable year at least 90% of the sum of its taxable net investment
income, its net tax-exempt income (if any), and the excess, if any, of net
short-term capital gains over net long-term capital losses for such year; and
(iii) at the end of each fiscal quarter maintain at least 50% of the value of
its total assets in cash, cash items (including receivables), government
securities, securities of other regulated investment companies, and other
securities of issuers which represent, with respect to each issuer, no more than
5% of the value of the Fund's total assets and 10% of the outstanding voting
securities of such issuer, and with no more than 25% of the value of its total
assets invested in the securities (other than those of the U.S. government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Fund controls and which are engaged in the same, similar or
related trades and businesses. If it qualifies for treatment as a regulated
investment company, the Fund will not be subject to federal income tax on income
paid to its shareholders in the form of dividends or capital gain distributions.
If the Fund does not qualify for taxation as a regulated investment company for
any taxable year, the Fund's income will be subject to corporate income taxes
imposed at the Fund level, and all distributions
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<PAGE> 43
from earnings and profits, including distributions of net exempt-interest income
and net capital gain (i.e., the excess, if any, of net long-term capital gain
over net short-term capital loss), will be taxable to shareholders as ordinary
income. In addition, in order to requalify for taxation as a regulated
investment company, the Fund may be required to recognize unrealized gains, pay
substantial taxes and interest, and make certain distributions.
An excise tax at the rate of 4% will be imposed on the excess, if any, of each
Fund's "required distribution" over its actual distributions in any calendar
year. Generally, the "required distribution" is an amount at least equal to the
sum of 98% of the Fund's ordinary income for the calendar year plus 98% of its
capital gain net income recognized during the one-year period ending on October
31 plus undistributed amounts from prior years. Each Fund intends to make
distributions sufficient to avoid imposition of the excise tax. Distributions
declared by a Fund during October, November or December to shareholders of
record on a date in any such month and paid by the Fund during the following
January will be treated for federal tax purposes as paid by the Fund and
received by shareholders on December 31 of the year in which declared.
Dividends and distributions on a Fund's shares are generally subject to federal
income tax as described herein to the extent they do not exceed the Fund's
realized income and gains, even though such dividends and distributions may
economically represent a return of a particular shareholder's investment. Such
distributions are likely to occur in respect of shares purchased at a time when
a Fund's net asset value reflects gains that are either unrealized, or realized
but not distributed. Such realized gains may be required to be distributed even
when a Fund's net asset value also reflects unrealized losses. Shareholders of
each Fund will be subject to federal income taxes on distributions made by the
Fund whether received in cash or additional shares of the Fund. Distributions by
each Fund of net income and short-term capital gains, if any, will be taxable to
shareholders as ordinary income. Distributions of long-term capital gains
(generally subject to a maximum tax rate of 20% for shareholders who are
individuals), if any, will be taxable to shareholders as such, without regard to
how long a shareholder has held shares of the Fund.
In general, sales, redemptions and exchanges of each Fund's shares are taxable
events and, accordingly, shareholders may realize gains and losses on these
transactions. If shares have been held for more than one year, gain or loss
realized will be long-term capital gain or loss, provided the shareholder holds
the shares as a capital asset. If shares have been held for one year or less,
the gain or loss on the sale, redemption or exchange of such shares will be
treated as short-term capital gain. In general, if a shareholder sells Fund
shares at a loss within six months after purchasing the shares, the loss will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received by the shareholder. Furthermore, no loss will be allowed
on the sale of Fund shares to the extent the shareholder acquired other shares
of the same Fund within 30 days prior to the sale of the loss shares or 30 days
after such sale.
The foregoing is a general and abbreviated summary of the applicable provisions
of the Code and regulations currently in effect. For the complete provisions,
reference should be made to the pertinent Code sections and regulations. The
Code and regulations are subject to change by legislative or administrative
action.
-22-
<PAGE> 44
Dividends and distributions also may be subject to state and local taxes.
Shareholders are urged to consult their tax advisers regarding specific
questions as to federal, state and local taxes.
The foregoing discussion relates solely to U.S. federal income tax law. Non-U.S.
investors should consult their tax advisers concerning the tax consequences of
ownership of shares of a Fund, including the possibility that distributions may
be subject to a 30% U.S. withholding tax (or a reduced rate of withholding
provided by treaty).
A Fund is generally required to withhold and remit to the U.S. Treasury 31% of
the taxable dividends and other distributions paid to any individual shareholder
who fails to furnish the Fund with a correct taxpayer identification number
(TIN), who has under-reported dividends or interest income, or who fails to
certify to the Fund that he or she is not subject to such withholding.
The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding tax
rules discussed above. The new regulations will generally be effective for
payments made after December 31, 2000. In some circumstances, the new rules will
increase the certification and filing requirements imposed on foreign investors
in order to qualify for exemption from the 31% back-up withholding tax and for
reduced withholding tax rates under income tax treaties. Foreign investors in a
Fund should consult their tax advisers with respect to the potential application
of these new regulations.
CALCULATION OF TOTAL RETURN
Quotations of average annual total return for a Fund will be expressed in terms
of the average annual compounded rate of return of a hypothetical investment in
the Fund or class for periods of one, five, and ten years (or for such shorter
periods as shares of the Fund or class have been offered), calculated pursuant
to the following formula: P (1 + T) [n exponent]= ERV (where P = a hypothetical
initial payment of $1,000, T = the average annual total return, n = the number
of years, and ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period). Except as noted below, all total return
figures reflect the deduction of a proportional share of Fund expenses on an
annual basis, and assume that (i) the maximum sales load (or other charges
deducted from payments) is deducted from the initial $1,000 payment, (ii) any
deferred sales load will be deducted at the times, in the amounts and under the
terms disclosed in the Prospectus and (iii) all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period.
Quotations of total return may also be shown for other periods and without the
deduction of front-end or contingent deferred sales charges. Aggregate total
return may also be shown and is calculated in a similar manner, except that the
results are not annualized. The Fund may also, with respect to certain periods
of less than one year, provide total return information for that period that is
unannualized. Any such information would be accompanied by standardized total
return information. Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the limitation had not
been in effect.
As of the date hereof, the Funds have had no investment operations.
-23-
<PAGE> 45
PERFORMANCE COMPARISONS
TOTAL RETURN. Each Fund may from time to time include its total return
information in advertisements or in information furnished to present or
prospective shareholders. Each Fund may from time to time also include in
advertisements or information furnished to present or prospective shareholders
(i) the ranking of performance figures relative to such figures for groups of
mutual funds categorized by Lipper Analytical Services, Inc. or Micropal, Inc.
as having similar investment objectives, (ii) the rating assigned to the Fund by
Morningstar, Inc. based on the Fund's risk-adjusted performance relative to
other mutual funds in its broad investment class, and/or (iii) the ranking of
performance figures relative to such figures for mutual funds in its general
investment category as determined by CDA/Weisenberger's Management Results.
LIPPER ANALYTICAL SERVICES, INC. ("Lipper") distributes mutual fund rankings
monthly. The rankings are based on total return performance calculated by
Lipper, generally reflecting changes in net asset value adjusted for
reinvestment of capital gains and income dividends. The rankings do not reflect
deduction of any sales charges. Lipper rankings cover a variety of performance
periods, including year-to-date, 1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset category.
MICROPAL, INC. ("Micropal") distributes mutual fund rankings weekly and monthly.
The rankings are based upon performance calculated by Micropal, generally
reflecting changes in net asset value that can be adjusted for the reinvestment
of capital gains and dividends. If deemed appropriate by the user, performance
can also reflect deductions for sales charges. Micropal rankings cover a variety
of performance periods, including year-to-date, 1-year, 5-year and 10-year
performance. Micropal classifies mutual funds by investment objective and asset
category.
MORNINGSTAR, INC. ("Morningstar") distributes mutual fund ratings twice a month.
The ratings are divided into five groups: highest, above average, neutral, below
average and lowest. They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as determined by
Morningstar. Morningstar ratings cover a variety of performance periods,
including 3-year, 5-year, 10-year and overall performance. The performance
factor for the overall rating is a weighted-average return performance (if
available) reflecting deduction of expenses and sales charges. Performance is
adjusted using quantitative techniques to reflect the risk profile of the fund.
The ratings are derived from a purely quantitative system that does not utilize
the subjective criteria customarily employed by rating agencies such as Standard
& Poor's and Moody's Investors Service, Inc.
CDA/WIESENBERGER'S MANAGEMENT RESULTS ("Wiesenberger") publishes mutual fund
rankings and is distributed monthly. The rankings are based entirely on total
return calculated by Wiesenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in general categories (e.g.,
international bond, international equity, municipal bond, and maximum capital
gain). Wiesenberger rankings do not reflect deduction of sales charges or fees.
As is discussed in greater detail below, performance information may also be
used to compare the performance of the Funds to certain widely acknowledged
standards or indices for stock market performance, such as those listed below.
-24-
<PAGE> 46
CONSUMER PRICE INDEX. The Consumer Price Index, published by the U.S. Bureau of
Labor Statistics, is a statistical measure of changes, over time, in the prices
of goods and services in major expenditure groups.
DOW JONES INDUSTRIAL AVERAGE. The Dow Jones Industrial Average is a market
value-weighted and unmanaged index of 30 large industrial stocks traded on the
NYSE.
RUSSELL 2000 GROWTH INDEX. The Russell 2000 Growth Index is comprised of the
2000 smallest of the 3000 largest U.S.-domiciled companies, with higher
price-to-book ratios and higher forecasted growth values.
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX (the "S&P 500"). The S&P 500
is a market value-weighted and unmanaged index showing the changes in the
aggregate market value of 500 stocks relative to the base period 1941-43. The
S&P 500 is composed almost entirely of common stocks of companies listed on the
NYSE, although the common stocks of a few companies listed on the American Stock
Exchange or traded over-the-counter are included. The 500 companies represented
include 400 industrial, 60 transportation and 40 financial services concerns.
The S&P 500 represents about 80% of the market value of all issues traded on the
NYSE. The S&P 500 is the most common index for the overall U.S. stock market.
WILSHIRE 5000 TOTAL MARKET INDEX. The Wilshire 5000 Index Total Market Index
includes all publicly traded stocks headquartered in the U.S. and holds over
7,000 stocks.
Performance information about the Funds will be provided in the Funds' annual
reports to shareholders, which will be available upon request and without
charge. In addition, from time to time, articles about the Funds regarding
performance, rankings and other characteristics of the Funds may appear in
publications including, but not limited to, the publications included in
Appendix A. In particular, the performance of the Funds may be compared in some
or all of these publications to the performance of various indices and
investments for which reliable performance data is available and to averages,
performance rankings, or other information prepared by recognized mutual fund
statistical services. Such publications may also publish their own rankings or
performance reviews of mutual funds, including the Funds. References to or
reprints of such articles may be used in the Funds' promotional literature.
References to articles regarding personnel of the sub-advisers who have
portfolio management responsibility may also be used in the Funds' promotional
literature. For additional information about the Funds' advertising and
promotional literature, see Appendix B.
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<PAGE> 47
APPENDIX A
PUBLICATIONS THAT MAY CONTAIN FUND INFORMATION
ABC and affiliates Financial Planning on Wall Street
Adam Smith's Money World Financial Research Corp.
America On Line Financial Services Week
Anchorage Daily News Financial World
Atlanta Journal-Constitution Fitch Insights
Arizona Republic Forbes
Austin American Statesman Fort Lauderdale Sun Sentinel
Baltimore Sun Fort Worth Star-Telegram
Bank Investment Marketing Fortune
Barron's Fox Network and affiliates
Bergen County Record (NJ) Fund Action
Bloomberg Business News Fund Decoder
Bloomberg Wealth Manager Global Finance
Bond Buyer (The) Guarantor
Boston Business Journal Hartford Courant
Boston Globe Houston Chronicle
Boston Herald INC
Broker World Indianapolis Star
Business Radio Network Individual Investor
Business Week Institutional Investor
CBS and affiliates International Herald Tribune
CDA Investment Technologies Internet
CFO Investment Advisor
Changing Times Investment Company Institute
Chicago Sun Times Investment Dealers Digest
Chicago Tribune Investment Profiles
Christian Science Monitor Investment Vision
Christian Science Monitor News Service Investor's Business Daily
Cincinnati Enquirer IRA Reporter
Cincinnati Post Journal of Commerce
CNBC Kansas City Star
CNN KCMO (Kansas City)
Columbus Dispatch KOA-AM (Denver)
CompuServe LA Times
Dallas Business Journal Leckey, Andrew (syndicated column)
Dallas Morning News Lear's
Denver Post Life Association News
Des Moines Register Lifetime Channel
Detroit Free Press Miami Herald
Donoghues Money Fund Report Milwaukee Sentinel
Dorman, Dan (syndicated column) Money Magazine
Dow Jones News Service Money Maker
Economist Money Management Letter
FACS of the Week Morningstar
Fee Adviser Mutual Fund Market News
Financial News Network Mutual Funds Magazine
Financial Planning National Public Radio
A-1
<PAGE> 48
National Underwriter Wall Street Journal
NBC and affiliates Wall Street Letter
New England Business Wall Street Week
New England Cable News Washington Post
New Orleans Times-Picayune WBZ
New York Daily News WBZ-TV
New York Times WCVB-TV
Newark Star Ledger WEEI
Newsday WHDH
Newsweek Worcester Telegram
Nightly Business Report World Wide Web
Orange County Register Worth Magazine
Orlando Sentinel WRKO
Palm Beach Post
Pension World
Pensions and Investments
Personal Investor
Philadelphia Inquirer
Porter, Sylvia (syndicated column)
Portland Oregonian
Prodigy
Public Broadcasting Service
Quinn, Jane Bryant (syndicated column)
Registered Representative
Research Magazine
Resource
Reuters
Rocky Mountain News
Rukeyser's Business (syndicated column)
Sacramento Bee
San Diego Tribune
San Francisco Chronicle
San Francisco Examiner
San Jose Mercury News
Seattle Post-Intelligencer
Seattle Times
Securities Industry Management
Smart Money
St. Louis Post Dispatch
St. Petersburg Times
Standard & Poor's Outlook
Standard & Poor's Stock Guide
Stanger's Investment Advisor
Stockbroker's Register
Strategic Insight
Tampa Tribune
Time
Tobias, Andrew (syndicated column)
Toledo Blade
UPI
US News and World Report
USA Today
USA TV Network
Value Line
A-2
<PAGE> 49
APPENDIX B
ADVERTISING AND PROMOTIONAL LITERATURE
Undiscovered Managers Funds' advertising and promotional material may include,
but is not limited to, discussions of the following information:
o Undiscovered Managers Funds' participation in wrap fee and no transaction
fee programs
o Characteristics of the various sub-advisers, including the locations of
offices, investment practices and clients
o Specific and general investment philosophies, strategies, processes and
techniques
o Specific and general sources of information, economic models, forecasts and
data services utilized, consulted or considered in the course of providing
advisory or other services
o Industry conferences at which the various sub-advisers participate
o Current capitalization, levels of profitability and other financial
information
o Identification of portfolio managers, researchers, economists, principals
and other staff members and employees
o The specific credentials of the above individuals, including but not
limited to, previous employment, current and past positions, titles and
duties performed, industry experience, educational background and degrees,
awards and honors
o Specific identification of, and general reference to, current individual,
corporate and institutional clients, including pension and profit sharing
plans
o Current and historical statistics relating to:
-- total dollar amount of assets managed
-- Undiscovered Managers Funds' assets managed in total and by Fund
-- the growth of assets
-- asset types managed
References may be included in Undiscovered Managers Funds' advertising and
promotional literature about 401(k) and retirement plans that offer the Funds.
The information may include, but is not limited to:
o Specific and general references to industry statistics regarding 401(k) and
retirement plans including historical information and industry trends and
forecasts regarding the growth of assets, numbers or plans, funding
vehicles, participants, sponsors and other demographic data relating to
plans, participants and sponsors, third party and other administrators,
benefits consultants and firms with whom Undiscovered Managers Funds may or
may not have a relationship.
o Specific and general reference to comparative ratings, rankings and other
forms of evaluation as well as statistics regarding the Funds as 401(k) or
retirement plan funding vehicles produced by industry authorities, research
organizations and publications.
B-1
<PAGE> 50
Undiscovered Managers Funds
Part C. Other Information
Item 23. Financial Statements and Exhibits
a. Amended and Restated Agreement and Declaration of Trust of
Undiscovered Managers Funds (the "Trust") -- Incorporated by
reference to Pre-Effective Amendment No. 2 to the Trust's
Registration Statement on Form N-1A.
b. By-Laws of the Trust -- Incorporated by reference to
Post-Effective Amendment No. 1 to the Trust's Registration
Statement on Form N-1A.
c. See Articles III, V, VI and IX in the Trust's Declaration of
Trust (Exhibit a hereto) and Article XI in the Trust's By-Laws
(Exhibit b hereto).
d.(i) Form of Management Agreement between the Trust and Undiscovered
Managers, LLC ("Undiscovered Managers") -- Incorporated by
reference to the Trust's Registration Statement on Form N-1A.
(ii) Form of Sub-Advisory Agreements between Undiscovered Managers
and each sub-adviser relating to each series of the Trust.
(1) Undiscovered Managers Behavioral Growth Fund (the
"Behavioral Growth Fund"): Fuller & Thaler Asset
Management, Inc. ("Fuller & Thaler") (formerly known as
RJF Asset Management, Inc.) -- Incorporated by reference
to the Trust's Registration Statement on Form N-1A.
(2) Undiscovered Managers Behavioral Value Fund (the
"Behavioral Value Fund"): Fuller & Thaler -- Incorporated
by reference to Post-Effective Amendment No. 3 to the
Trust's Registration Statement on Form N-1A.
(3) Undiscovered Managers Behavioral Long/Short Fund (the
"Behavioral Long/Short Fund"): Fuller & Thaler --
Incorporated by reference to Post-Effective Amendment No.
3 to the Trust's Registration Statement on Form N-1A.
(4) Undiscovered Managers Behavioral Large Cap Fund (the
"Behavioral Large Cap Fund"): Fuller & Thaler, is filed
herewith.
(5) Undiscovered Managers Special Small Cap Fund (the
"Special Small Cap Fund"): Kestrel Investment Management
Corporation ("Kestrel Management") -- Incorporated by
reference to Post-Effective Amendment No. 1 to the
Trust's Registration Statement on Form N-1A.
(6) Undiscovered Managers REIT Fund (the "REIT Fund"): Bay
Isle Financial Corporation ("Bay Isle") -- Incorporated
by reference to the Trust's Registration Statement on
Form N-1A.
(7) Undiscovered Managers Small Cap Value Fund (the "Small
Cap Value Fund") and Undiscovered Managers Hidden Value
Fund (the "Hidden Value Fund"): J.L. Kaplan Associates,
LLC ("Kaplan Associates") -- Incorporated by reference to
Pre-Effective Amendment No. 2 to the Trust's
Registration Statement on Form N-1A.
(8) Undiscovered Managers Merger & Acquisition Fund (the
"Merger & Acquisition Fund"): Kaplan Associates, is filed
herewith.
(9) Undiscovered Managers Core Equity Fund (the "Core Equity
Fund"): Waite & Associates, L.L.C. ("Waite") --
Incorporated
<PAGE> 51
by reference to the Trust's Registration Statement on
Form N-1A.
(10) Undiscovered Managers All Cap Value Fund (the "All Cap
Value Fund"): E.R. Taylor Investments, Inc. ("E.R.
Taylor") -- Incorporated by reference to the Trust's
Registration Statement on Form N-1A.
(11) UM International Equity Fund (the "International Equity
Fund"): Unibank Securities, Inc. ("Unibank") --
Incorporated by reference to Post-Effective Amendment No.
3 to the Trust's Registration Statement on Form N-1A.
(12) UM International Small Cap Equity Fund (the
"International Small Cap Equity Fund"): Unibank --
Incorporated by reference to Post-Effective Amendment No.
3 to the Trust's Registration Statement on Form N-1A.
(13) Undiscovered Managers Small Cap Growth Fund (the "Small
Cap Growth Fund"): Mazama Capital Management, Inc.
("Mazama"), is filed herewith.
e. Distribution Agreement between the Trust and Provident
Distributors, Inc. Incorporated by reference to Post-Effective
Amendment No. 7 to the Trust's Registration Statement on Form
N-1A.
f. None.
g.(i) Form of Custodian Agreement between the Trust and The Bank of
New York -- Incorporated by reference to Pre-Effective
Amendment No. 2 to the Trust's Registration Statement on Form
N-1A.
(ii) Form of Custody Agreement between the Trust and Custodial Trust
Company -- Incorporated by reference to Post-Effective
Amendment No. 4 to the Trust's Registration Statement on Form
N-1A.
(iii) Form of Special Custody Account Agreement by and among the
Trust, Custodial Trust Company and Bear, Stearns Securities
Corp. -- Incorporated by reference to Post-Effective Amendment
No. 4 to the Trust's Registration Statement on Form N-1A.
h.(i) Form of Transfer Agency and Services Agreement between the
Trust and PFPC Inc. (formerly known as First Data Investor
Services Group, Inc.) -- Incorporated by reference to
Pre-Effective Amendment No. 2 to the Trust's Registration
Statement on Form N-1A.
(ii) Form of Organizational Expense Reimbursement Agreement between
the Trust and Undiscovered Managers -- Incorporated by
reference to Pre-Effective Amendment No. 2 to the Trust's
Registration Statement on Form N-1A.
(iii) Form of Amended and Restated Expense Deferral Agreement between
the Trust and Undiscovered Managers relating to each of the
Funds. Incorporated by reference to Post-Effective Amendment
No. 7 to the Trust's Registration Statement on Form N-1A.
(iv) Form of Administrative Services Agreement between the Trust and
Undiscovered Managers -- Incorporated by reference to
Pre-Effective Amendment No. 2 to the Trust's Registration
Statement on Form N-1A.
(v) (1) Form of Sub-Administration Agreement between
Undiscovered Managers and PFPC Inc. -- Incorporated by
reference to Pre-Effective Amendment No. 2 to the Trust's
Registration Statement on Form N-1A.
<PAGE> 52
(2) Amendment to Sub-Administration Agreement dated November
30, 1999 between Undiscovered Managers and PFPC Inc.--
Incorporated by reference to Post-Effective Amendment No.
7 to the Trust's Registration Statement on Form N-1A.
i.(i) Opinion and Consent of Counsel, dated December 17, 1997
relating to the Behavioral Growth Fund, the Special Small Cap
Fund, the REIT Fund, the Small Cap Value Fund, the Hidden Value
Fund, the Core Equity Fund and the All Cap Value Fund --
Incorporated by reference to Pre-Effective Amendment No. 2 to
the Trust's Registration Statement on Form N-1A.
(ii) Opinion and Consent of Counsel, dated December 18, 1998
relating to the Behavioral Value Fund, the Behavioral
Long/Short Fund, the International Equity Fund and the
International Small Cap Equity Fund -- Incorporated by
reference to Post-Effective Amendment No. 5 to the Trust's
Registration Statement on Form N-1A.
(iii) Form of Opinion and Consent of Counsel relating to the
Behavioral Large Cap Fund, the Merger & Acquisition Fund and
the Small Cap Growth Fund is filed herewith.
j.(i) Consent of Independent Auditors -- not required for this
filing.
(ii) Powers of Attorney for each of Roger B. Keating, Matthew J.
Kiley and Robert P. Schmermund, designating Mark P. Hurley,
John J. Burke III, Mary Chris Sayre and Neil Forrest --
Incorporated by reference to Pre- Effective Amendment No. 2 to
the Trust's Registration Statement on Form N-1A.
(iii) Power of Attorney for Brian O'Neill, designating Mark P. Hurley
and Mary Chris Sayre -- Incorporated by reference to
Post-Effective Amendment No. 6 to the Trust's Registration
Statement on Form N-1A.
k. Omitted Financial Statements -- None.
l. Investment Representation Letter -- Incorporated by reference
to Pre-Effective Amendment No. 2 to the Trust's Registration
Statement on Form N-1A.
m.(i) Service and Distribution Plan relating to Investor Class
Shares -- Incorporated by reference to Post-Effective Amendment
No. 5 to the Trust's Registration Statement on Form N-1A.
(ii) Service and Distribution Plan relating to Class C shares --
Incorporated by reference to Post-Effective Amendment No. 6 to
the Trust's Registration Statement on Form N-1A.
n. Amended Rule 18f-3 Plan -- Incorporated by reference to
Post-Effective Amendment No. 6 to the Trust's Registration
Statement on Form N-1A.
o. Reserved.
p. Codes of Ethics.
(i) Code of Ethics of the Trust, Undiscovered Managers, Bay
Isle, E.R. Taylor, Fuller & Thaler, Kaplan Associates,
Kestrel Management and Waite is filed herewith.
(ii) Code of Ethics of Unibank is filed herewith.
(iii) Code of Ethics of Mazama is filed herewith.
(iv) Code of Ethics of Provident Distributors, Inc. is filed
herewith.
<PAGE> 53
Item 24. Persons Controlled by or Under Common Control with the Trust
As of the date of this Amendment to the Registration Statement, there
are no persons controlled by or under common control with the Trust.
Item 25. Indemnification
Article VIII of the Trust's Agreement and Declaration of Trust (Exhibit
a of Item 23 hereto) and Article 4 of the Trust's By-Laws (Exhibit b of
Item 23 hereto) provides for indemnification of its Trustees and
officers. The effect of these provisions is to provide indemnification
for each of the Trust's Trustees and officers against liabilities and
counsel fees reasonably incurred in connection with the defense of any
legal proceeding in which such Trustee or officer may be involved by
reason of being or having been a Trustee or officer, except with
respect to any matter as to which such Trustee or officer shall have
been adjudicated not to have acted in good faith in the reasonable
belief that such Trustee's or officer's action was in the best interest
of the Trust, and except that no Trustee or officer shall be
indemnified against any liability to the Trust or its shareholders to
which such Trustee or officer otherwise would be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Trustee's or officer's
office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling
persons of the Trust pursuant to the foregoing provisions, or
otherwise, the Trust has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Securities Act of 1933, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Trust of
expenses incurred or paid by a Trustee, officer or controlling person
of the Trust in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling person
in connection with the securities being registered, the Trust will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
Item 26. Business and Other Connections of Investment Adviser
(a) Undiscovered Managers is the investment adviser to all series
of the Trust, and its business is summarized in "The Funds --
The Funds' Management" in the Prospectus. Undiscovered
Managers' management committee members and officers have been
engaged during the past two fiscal years in the following
businesses, professions, vocations or employments of a
substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Undiscovered Managers Other Affiliations Connection
--------------------- ------------------- ----------
<S> <C> <C>
Mark P. Hurley None None
President, Chief
Executive Officer and
Management
Committee Member
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
<S> <C> <C>
Randolph E. Brown AMRESCO, INC. President Commercial
Management Committee Plaza of the Americas Finance
Member 700 North Pearl Street
Dallas, Texas 75201
Robert H. Lutz, Jr. AMRESCO, INC. President and COO
Management Committee Plaza of the Americas
Member 700 North Pearl Street
Dallas, Texas 75201
*Amresco Advisors, Inc. Director
Plaza of the Americas
700 North Pearl Street
Dallas, Texas 75201
Thomas F. O'Toole None None
Management Committee
Member
Harris Weinstein Covington & Burling Partner
Management Committee 1201 Pennsylvania Avenue
Member 8th Floor
Washington, D.C. 20004
Keith Blackwell AMRESCO, INC. Senior Vice President
Management Committee Plaza of the Americas General Counsel & Security
Member 700 North Pearl Street
Dallas, Texas 75201
</TABLE>
(b) Fuller & Thaler is the sub-adviser to the Behavioral Growth,
Behavioral Value, Behavioral Long/Short Funds and Behavior
Large Cap Fund and its business is summarized in "The Funds" in
the Prospectus. Fuller & Thaler's directors and officers have
been engaged during the past two fiscal years in the following
businesses, professions, vocations or employments of a
substantial nature (former affiliations are marked with an
asterisk):
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Fuller & Thaler Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Russell J. Fuller *Fuller Partners, Ltd. General Partner
Director and President 411 Borel Avenue
Suite 402
San Mateo, CA 94402
Anne Fuller *San Francisco Society of Education Director
Director Security Analysts
P.O. Box 27278
San Francisco, CA 94127
John L. Kling *Fuller Partners, Ltd. General Partner
Director
Senior Vice President Washington State University Professor of Finance
Todd Hall Department of Finance
483 College of Business
and Economics
Pullman, Washington 99164
Frederick W. Stanske None None
Director
Senior Vice President
Richard Thaler University of Chicago Professor of
Director Graduate School of Business Behavioral Science and Economics
1101 East 58th Street
Chicago, Illinois 60637
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
<S> <C> <C>
Crystal Kwok None None
Vice President
Mark Moon *Heidt Capital Group, LLC Chief Investment
Vice President 5657 Wilshire Blvd. Officer
Number 330
Los Angeles, CA 90036
</TABLE>
(c) Kestrel Management is the sub-adviser to the Special Small Cap
Fund, and its business is summarized in "The Funds" in the
Prospectus. Kestrel Management's directors and officers have
been engaged during the past two fiscal years in the following
businesses, professions, vocations or employments of a
substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Kestrel Management Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Abbott J. Keller None None
Director and President
David J. Steirman None None
Director and Chief
Investment Officer
</TABLE>
d) Bay Isle is the sub-adviser to the REIT Fund, and its business
is summarized in "The Funds" in the Prospectus. Bay Isle's
directors and officers have been engaged during the past two
fiscal years in the following businesses, professions,
vocations or employments of a substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Bay Isle Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Gary Pollock None None
Director and President
William Schaff None None
Director and Chief
Investment Officer
Ralph L. Block None None
Director
</TABLE>
(e) Kaplan Associates is the sub-adviser to the Small Cap Value
Fund, Hidden Value Fund and Merger & Acquisition Fund and its
business is summarized in "The Funds" in the Prospectus. The
following persons affiliated with Kaplan Associates have been
engaged during the past two fiscal years in the following
businesses, professions, vocations or employments of a
substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Kaplan Associates Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
James L. Kaplan None None
Member
Paul Weisman None None
Portfolio Manager
</TABLE>
(f) Waite is the sub-adviser to the Core Equity Fund and its
business is summarized in "The Funds" in the Prospectus.
<PAGE> 56
Waite's officers have been engaged during the past two fiscal
years in the following businesses, professions, vocations or
employments of a substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Waite Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Leslie A. Waite None None
President
Peter D. Tamny None None
Managing Director
Peter C. Brockett None None
Managing Director
Patrick Westmoreland None None
Managing Director
Diana Calhoun None None
Managing Director
</TABLE>
(g) E.R. Taylor is the sub-adviser to the All Cap Value Fund, and
its business is summarized in "The Funds" in the Prospectus.
E.R. Taylor's directors and officers have been engaged during
the past two fiscal years in the following businesses,
professions, vocations or employments of a substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
E.R. Taylor Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Sherwood T. Small None None
President
Martha E. Cottrill None None
Vice President
Kenneth E. DeWitt None None
Vice President
John S. Tamagni Lazard Freres & Co. LLC Managing Director
Director One Rockefeller Plaza
New York, NY 10020
Salvatore J. Cozzolino None None
Director
C. Michael Hazard Westfield Capital Management CEO & Chairman
Director One Financial Center of the Board
Boston, MA 02111
John C. Hou Prince Capital Management, LLC President
Director 240 Madison Avenue
New York, NY 10016
</TABLE>
(h) Unibank is the sub-adviser to the International Equity and
International Small Cap Equity Funds, and its business is
summarized in "The Funds" in the Prospectus. Unibank's
directors and officers have been engaged during the past two
fiscal years in the following businesses, professions,
vocations or employments of a substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Unibank Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Henrik Bak None None
Director and President
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
<S> <C> <C>
Peter Vilhelm Caroe Unibank, New York General Manager
Chairman of the Board 13-15 West 54th Street
New York, New York 10019
Peter Egelund Jensen Unibank, New York First Vice President
Chief Financial Officer 13-15 West 54th Street and Comptroller
New York, New York 10019
Christian Clausen Unibank A/S Managing Director
Director 2 Torvegade
DK-1786
Copenhagen, Denmark
Peter Nyegaard Unibank A/S Senior Vice
Chief Financial Officer 2 Torvegade President
DK-1786
Copenhagen, Denmark
</TABLE>
(i) Mazama is the sub-adviser to the Small Cap Growth Fund,
and its business is summarized in "The Funds" in the
Prospectus. Mazama's directors and officers have been engaged
during the past two fiscal years in the following businesses,
professions, vocations or employments of a substantial nature:
<TABLE>
<CAPTION>
Name and Office with Name and Address of Nature of
Mazama Other Affiliations Connection
-------------------- ------------------- ----------
<S> <C> <C>
Ronald A. Sauer None None
Chairman and President
Jill Ronne Collins None None
Vice President
Brian P. Alfrey None None
Director, Vice President
and Chief Operating Officer
Stephen C. Brink None None
Vice President
Helen M. Degener Fiduciary Trust Co. Intl. Senior Vice
Chief Investment Officer Two World Trade Center President
Contracted Advisor New York, NY 10048-0772
Director
</TABLE>
Item 27.
(a) Provident Distributors, Inc., acts as distributor for the
Trust. Provident Distributors, Inc., also distributes the
securities of the following investment companies:
International Dollar Reserve Fund I, Ltd., Provident
Institutional Funds Trust, Columbia Common Stock Fund, Inc.,
Columbia Growth Fund, Inc., Columbia International Stock Fund,
Inc., Columbia Special Fund, Inc., Columbia Small Cap Fund,
Inc., Columbia Real Estate Equity Fund, Inc., Columbia
Balanced Fund, Inc., Columbia Daily Income Company, Columbia
U.S. Government Securities Fund, Inc., Columbia Fixed Income
Securities Fund, Inc., Columbia Municipal Bond Fund, Inc.,
Columbia High Yield Fund, Inc., Columbia National Municipal
Bond Fund, Inc., GAMNA Series Funds, Inc., WT Investment
Trust, Kalmar Pooled Investment Trust, The RBB Fund, Inc.,
Robertson Stephens Investment Trust, HT Insight Funds, Inc.,
Harris Insight Funds Trust, Hilliard-Lyons Research Trust,
Warburg Pincus Trust, ABN AMRO Funds, Alleghany Funds, BT
Insurance Funds Trust, First Choice Funds Trust, Forward
Funds, Inc., IAA Trust Asset Allocation Fund, Inc., IAA Trust
Growth Fund, Inc., IAA Trust Tax Exempt Bond Fund, Inc., IAA
Trust Taxable Fixed Income Series Fund, Inc., IBJ Funds Trust,
Light Index Funds, Inc., LKCM Funds,
<PAGE> 58
Matthews International Funds, McM Funds, Metropolitan West
Funds, New Covenant Funds, Inc., Panorama Trust, Smith Breeden
Series Funds, Smith Breeden Trust, Stratton Growth Fund, Inc.,
Stratton Monthly Dividend REIT Shares, Inc., The Stratton
Funds, Inc., The Galaxy Fund, The Galaxy VIP Fund, Galaxy Fund
II, The Govett Funds, Inc., Trainer, Wortham First Mutual
Funds, Wilshire Target Funds, Inc., Weiss, Peck & Greer Funds
Trust, Weiss, Peck & Greer International Fund, WPG Growth and
Income Fund, WPG Growth Fund, WPG Tudor Fund, RWB/WPG U.S.
Large Stock Fund and Tomorrow Funds Retirement Trust.
Provident Distributors, Inc. is registered with the Securities
and Exchange Commission as a broker-dealer and is a member of
the National Association of Securities Dealers. Provident
Distributors, Inc. is located at 3200 Horizon Drive, King of
Prussia, PA 19406.
(b) (i)
<TABLE>
<CAPTION>
Name and Principal Positions and Officers with Positions and
Business Address Provident Distributors Inc. Offices with Trust
------------------ --------------------------- ------------------
<S> <C> <C>
Philip H. Rinnander* President & Treasurer None
Jane Haegele* Director & Secretary None
Jason A. Greim* Vice President None
Barbara A. Rice* Vice President None
Jennifer K Rinnander* Vice President None
Lisa M Buono* Vice President & Compliance None
Officer
</TABLE>
* The principal business address of each individual is 3200 Horizon Drive, King
of Prussia, PA 19406.
(ii) The information required by this Item 27(b) with respect to
each director, officer, or partner of First Data Distributors,
Inc., the Trust's former distributor, is incorporated by
reference to Schedule A of Form BD filed by First Data
Distributors, Inc., with the Securities and Exchange
Commission pursuant to the Securities Act of 1934 (file no.
8-45467).
(c) During the fiscal year ended August 31, 1999, First Data
Distributors, Inc., the principal distributor of the Trust
until November 30, 1999, received, directly or indirectly,
from the Trust $3,628 in net underwriting discounts and
commissions and $745 in compensation on redemptions and
repurchases.
Item 28. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are the
Trust's Secretary, Patricia L. Duncan; the Trust's investment adviser,
Undiscovered Managers; the custodian of each Fund except of the
Behavioral Long/Short Fund, The Bank of New York; the custodian of the
Behavioral Long/Short Fund, Custodial Trust Company; and the Trust's
transfer agent, PFPC Inc. The address of the Secretary and the
investment adviser is Plaza of the Americas, 700 North Pearl Street,
Dallas, Texas 75201; the address of The Bank of New York is 1 Wall
Street, New York, New York 10286; the address of Custodial Trust
Company is 101 Carnegie Center, Princeton, New Jersey 08540; and the
address of the transfer agent is 4400 Computer Drive, Westborough,
Massachusetts 01581.
<PAGE> 59
Item 29. Management Services
There are no management-related service contracts not discussed in
Parts A and B.
Item 30. Undertakings
(a) The undersigned Trust hereby undertakes to call a meeting of
shareholders for the purpose of voting on the removal of a trustee or
trustees when requested in writing to do so by the holders of at least
10% of the Trust's outstanding voting securities and in connection
with such meeting to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to shareholder
communications.
(b) The Trust hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Trust's latest Annual
Report to shareholders upon request and without charge.
<PAGE> 60
NOTICE
A copy of the Agreement and Declaration of Trust of the Trust is on file with
the Secretary of State of The Commonwealth of Massachusetts and notice is hereby
given that this instrument is executed on behalf of the Trust by an officer of
the Trust as an officer and not individually and the obligations of or arising
out of this instrument are not binding upon any of the Trustees or shareholders
individually but are binding only upon the assets and property of the Trust.
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant, Undiscovered Managers Funds, has duly
caused this amendment to its registration statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Dallas, and State
of Texas on the 14th day of July, 2000.
UNDISCOVERED MANAGERS FUNDS
By: /s/ Mark P. Hurley
Mark P. Hurley
Title: President
Pursuant to the requirements of the Securities Act of 1933, this amendment to
the registration statement of Undiscovered Managers Funds has been signed below
by the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Mark P. Hurley President and Trustee July 14, 2000
--------------------
Mark P. Hurley
/s/ * Mark P. Hurley Trustee July 14, 2000
--------------------
Roger B. Keating
/s/ * Mark P. Hurley Trustee July 14, 2000
--------------------
Matthew J. Kiley
/s/ * Mark P. Hurley Trustee July 14, 2000
--------------------
Robert P. Schmermund
/s/ * Mark P. Hurley Treasurer July 14, 2000
--------------------
Brian O'Neill
</TABLE>
*Signed by Mark P. Hurley as Attorney-In-Fact
<PAGE> 62
UNDISCOVERED MANAGERS FUNDS
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
(d)(ii)(4) Form of Sub-Advisory Agreement between Undiscovered Managers
and Fuller & Thaler relating to the Behavioral Large Cap
Fund.
(d)(ii)(8) Form of Sub-Advisory Agreement between Undiscovered Managers
and Kaplan Associates relating to the Merger & Acquisition
Fund.
(d)(ii)(13) Form of Sub-Advisory Agreement between Undiscovered Managers
and Mazama relating to the Small Cap Growth Fund.
(i)(iii) Form of Opinion and Consent of Counsel relating to the
Behavioral Large Cap Fund, the Merger & Acquisition Fund and
the Small Cap Growth Fund.
(p)(i) Code of Ethics of the Trust, Undiscovered Managers, Bay Isle,
E.R. Taylor, Fuller & Thaler, Kaplan Associates, Kestrel
Management and Waite.
(p)(ii) Code of Ethics of Unibank.
(p)(iii) Code of Ethics of Mazama.
(p)(iv) Code of Ethics of Provident Distributors, Inc.
</TABLE>
