Registration No. 2-87377
Investment Company Act File No. 811-3886
As filed with the Securities and Exchange Commission on May 1,
1995
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. ___ | |
Post-Effective Amendment No. 24 |X|
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 25 |X|
(Check appropriate box or boxes)
THE EBI FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
1315 Peachtree Street, N.E., Atlanta, Georgia 30309
(Address of Principal Executive Offices)
Registrant's Telephone Number: (800) 554-1156
Jeffrey L. Steele, Esq.
1500 K Street, N.W. Suite 500
Washington, D.C. 20005
(Name and Address of Agent for Service)
Copies to:
Edward F. O'Keefe, Esq. Clifford J. Alexander, Esq.
Moye, Giles, O'Keefe, Kirkpatrick & Lockhart
Vermeire & Gorrell 1800 M Street, N.W., Suite 900
1225 17th Street, Suite 2900 Washington, D.C. 20036
Denver, Colorado 80202
It is proposed that this filing will become effective (check
appropriate box):
| X | immediately upon filing pursuant to paragraph (b)
| | on____________ pursuant to paragraph (b)
| | 60 days after filing pursuant to paragraph (a)(1)
| | on ----------- pursuant to paragraph (a)(1)
| | 75 days after filing pursuant to paragraph (a)(2)
| | on ----------- pursuant to paragraph (a)(2) of
Rule 485
Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule
24f-2 under the Investment Company Act of 1940. Registrant
filed the notice required by Rule 24f-2 with respect to its
fiscal year ended December 31, 1994 on February 27, 1995.
Approximate date of proposed public offering: as soon as
practicable after the effective date of this Registration
Statement.
THE EBI FUNDS, INC.
CROSS REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
The enclosed Prospectus, Statement of Additional
Information, and Part C relate to The EBI Funds, Inc. (the
"Registrant"), an investment company currently consisting of
eight separate series (the "Portfolios").
PART A
INFORMATION REQUIRED IN PROSPECTUS
ITEM NUMBER PROSPECTUS CAPTION
Item 1. Cover Page Cover Page
Item 2. Synopsis Summary; Fee Table
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description The Fund; Investment
of Registrant Objectives and Policies
Item 5. Management of the Management of the Fund;
Fund Miscellaneous
Item 5A. Management's Not applicable
Discussion of Fund
Performance
Item 6. Capital Stock and Capitalization
Other Securities
Item 7. Purchase of How to Buy Shares;
Securities Being The Distributor; Plan
Offered of Distribution
Item 8. Redemption or How to Redeem Shares; How to
Repurchase Exchange Shares
Item 9. Pending Legal Not applicable
Proceedings
PART B
INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF ADDITIONAL
ITEM NUMBER INFORMATION CAPTION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information Prospectus - The Fund
and History
Item 13. Investment Investment Objectives and
Objectives and Policies; Portfolio Securities
Policies Loans; Investment Restrictions
Item 14. Management of the Management of the Fund --
Fund Directors and Officers;
Management of the Fund --
Director Compensation
Item 15. Control Persons and Miscellaneous - Principal
Principal Holders of Shareholders
Securities
Item 16. Investment Advisory The Advisory and Sub-Advisory
and Other Services Agreements; Operating Services
Agreement
Item 17. Brokerage Allocation Brokerage and Portfolio
and Other Practices Transactions
Item 18. Capital Stock and Prospectus - Capitalization
Other Securities
Item 19. Purchase, Redemption Prospectus - How to Buy
and Pricing of Shares; Prospectus - How to
Securities Being Redeem Shares; Prospectus -
Offered Computation of Net Asset
Value; Distribution of Shares;
Miscellaneous - Net Asset
Value
Item 20. Tax Status Distributions and Tax
Information
Item 21. Underwriters The Distributor
Item 22. Calculation of Performance Information
Performance Data
Item 23. Financial Statements Financial Statements
THE EBI FUNDS, INC.
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telephone: 800/554-1156
The EBI Funds, Inc. (the "Fund") is an open-end, diversified
management investment company consisting of eight separate
investment portfolios (the "Portfolios"), as follows:
EQUITY PORTFOLIO INCOME PORTFOLIO
FLEX PORTFOLIO MULTIFLEX PORTFOLIO
RELATIVE RETURN BOND PORTFOLIO REAL ESTATE PORTFOLIO
INTERNATIONAL VALUE PORTFOLIO CASH MANAGEMENT PORTFOLIO
Each Portfolio's investment objective (except the Cash
Management Portfolio) is to achieve a high total return on
investment through capital appreciation and current income,
without regard to federal income tax considerations. The Cash
Management Portfolio's investment objective is to achieve as high
a level of current income, without regard to federal income tax
considerations, as is consistent with the preservation of capital
and the maintenance of liquidity. Each of the Portfolios has
separate investment policies. Shares of the Fund are not
deposits or obligations of, or guaranteed or endorsed by, any
bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency. AN INVESTMENT IN THE CASH MANAGEMENT PORTFOLIO IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN
BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO MAINTAIN A
STABLE NET ASSET VALUE OF $1.00 PER SHARE. PRICES OF SHARES OF
THE OTHER PORTFOLIOS CAN BE EXPECTED TO FLUCTUATE.
INVESCO Services, Inc.
Investment Adviser
Manager
Distributor
INVESCO Capital Management, Inc.
Sub-Adviser: Equity Portfolio
Income Portfolio
Flex Portfolio
International Value Portfolio
Cash Management Portfolio
INVESCO Management & Research, Inc.
Sub-Adviser: MultiFlex Portfolio
Relative Return Bond Portfolio
INVESCO Realty Advisors, Inc.
Sub-Adviser: Real Estate Portfolio
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE.
This Prospectus is designed to set forth concisely the
information that you should know before investing in any of the
Portfolios. A Statement of Additional Information (dated May 1,
1995) for the Fund has been filed with the Securities and
Exchange Commission and is incorporated herein by reference. The
Statement of Additional Information is available without charge
from INVESCO Services, Inc., 1355 Peachtree Street, N.E.,
Atlanta, Georgia 30309, telephone number 1-800-972-9030.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION ("SEC") OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
PROSPECTUS
May 1, 1995
<PAGE>
TABLE OF CONTENTS
SUMMARY
FEE TABLE
FINANCIAL HIGHLIGHTS
THE FUND
INVESTMENT OBJECTIVES AND POLICIES
Equity Portfolio
Income Portfolio
Flex Portfolio
MultiFlex Portfolio
Relative Return Bond Portfolio
Real Estate Portfolio
International Value Portfolio
Cash Management Portfolio
RISK FACTORS AND POLICIES RELEVANT TO THE PORTFOLIOS
INVESTMENT RESTRICTIONS
MANAGEMENT OF THE FUND
THE DISTRIBUTOR
PLAN OF DISTRIBUTION
THE EBI FUNDS, INC. SHAREHOLDER SERVICES GUIDE
HOW TO BUY SHARES
Contingent Deferred Sales Charges
General Information
HOW TO REDEEM SHARES
To Sell through Your Broker-Dealer
To Sell Directly with the Fund
Redemption by Letter
Redemption by Telephone
Redemption by Check
Systematic Withdrawal Plan
General Information
HOW TO EXCHANGE SHARES
Automatic Monthly Exchange
BankDraft
COMPUTATION OF NET ASSET VALUE
CAPITALIZATION
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Federal Taxes
Automatic Dividend Reinvestment Plan
SHAREHOLDER REPORTS
PERFORMANCE INFORMATION
MISCELLANEOUS
LEGAL OPINIONS
<PAGE>
SUMMARY
THE FUND:
The securities offered by this Prospectus consist of shares
of eight separate investment portfolios of The EBI Funds,
Inc., an open-end, diversified management investment company
incorporated under the laws of the State of Maryland (the
"Fund"). These eight portfolios are the Equity Portfolio,
the Income Portfolio, the Flex Portfolio, the MultiFlex
Portfolio, the Relative Return Bond Portfolio, the Real
Estate Portfolio, the International Value Portfolio and the
Cash Management Portfolio (collectively, the "Portfolios").
Investments of the Equity, Income, Flex, MultiFlex, Relative
Return Bond, Real Estate and International Value Portfolios
will be managed without regard to whether their
distributions to shareholders will be characterized as
ordinary income or long-term capital gains. The Cash
Management Portfolio is designed for investment by
corporations, partnerships, individuals and pension and
profit sharing plans.
INVESTMENT OBJECTIVES:
The investment objective of each Portfolio (except the Cash
Management Portfolio) is to achieve a high total return on
investment through capital appreciation and current income,
without regard to federal income tax considerations. The
investment objective of the Cash Management Portfolio is to
achieve as high a level of current income, without regard to
federal income tax considerations, as is consistent with the
preservation of capital and the maintenance of liquidity.
Each of the Portfolios has separate investment policies.
See "Investment Objectives and Policies".
MANAGEMENT OF THE FUND:
INVESCO Services, Inc., a Georgia corporation and the
adviser and manager for each of the Portfolios ("ISI" or the
"Adviser" or the "Manager"), is a registered investment
adviser and broker-dealer furnishing investment counseling
services to private and institutional clients. ISI is a
wholly owned subsidiary of INVESCO Capital Management, Inc.
INVESCO Capital Management, Inc., a Delaware corporation and
the sub-adviser for the Equity, Income, Flex, International
Value and Cash Management Portfolios ("ICM"), acts as
investment adviser to other investment companies and
furnishes investment counseling services to private and
institutional clients.
INVESCO Management & Research, Inc., a Massachusetts
corporation and the sub-adviser for the MultiFlex and
Relative Return Bond Portfolios ("IMR"), acts as investment
adviser to other investment companies and manages primarily
pension and endowment accounts.
INVESCO Realty Advisors, Inc., a Texas corporation and the
sub-adviser for the Real Estate Portfolio ("IRA"), acts as
investment adviser to corporate plans and public pension
funds as well as endowment and foundation accounts. See
"Management of the Fund".
PRINCIPAL UNDERWRITER AND DISTRIBUTOR:
ISI (the "Distributor") also serves as the principal
underwriter and distributor of shares of the Fund.
PURCHASES:
Shares of each Portfolio, except the Cash Management
Portfolio, are offered at net asset value without a sales
charge, but are subject to a contingent deferred sales
charge ("CDSC") of 1% of the dollar amount subject thereto
during the first year after purchase. Shares of the Cash
Management Portfolio are offered at net asset value. The
minimum initial purchase of shares in one or more of the
Portfolios is $25,000, except that the minimum initial
purchase of shares in the Cash Management Portfolio is
$1,000. Subsequent investments in any of the Portfolios may
be made in amounts of $1,000 or more at any time, except
that retirement plans may make subsequent investments of
$250 or more. The Portfolios reserve the right to reduce or
waive the minimum purchase requirements in certain cases.
See "The EBI Funds, Inc. Shareholder Services Guide - How to
Buy Shares".
Each Portfolio, except the Cash Management Portfolio, has
adopted a plan of distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940. Under the plan, the
Portfolios may incur certain distribution costs; however,
such costs may not exceed a maximum amount equal to 0.50%
per annum of the Relative Return Bond Portfolio's average
daily net assets and 1.0% per annum of each other
Portfolio's average daily net assets (except the Cash
Management Portfolio). Pursuant to the plan, the Portfolios
make payments to the Distributor, subject to the maximum
annual limitations described above, to reimburse the
Distributor for expenses incurred in the distribution of
their shares. Generally, an asset-based fee for selling
Fund shares and providing services to shareholders will be
paid at least quarterly by the Distributor to broker-dealers
who sell shares of these Portfolios. On each purchase, a 1%
sales commission may be paid by the Distributor to the
selling broker-dealer. There are no charges to the
shareholder on purchases of shares at the time of purchase.
See "Plan of Distribution".
REDEMPTIONS:
A CDSC of 1.0% is applicable to shares purchased by new
investors on or after May 1, 1995 and redeemed within the
first year after purchase. There is no CDSC applicable to
additional purchases of shares in any of the Portfolios by
shareholders of record on April 30, 1995 that are redeemed
within the first year after purchase. Redemptions of shares
of the Cash Management Portfolio are generally not subject
to a CDSC; however, a CDSC may be applicable to redemptions
of shares of the Cash Management Portfolio following an
exchange of shares from another Portfolio. The 1% CDSC is
assessed on an amount equal to the lesser of the original
purchase price or the redemption price of the shares
redeemed. The amount paid upon redemption will be the net
asset value per share next determined after the redemption
request is received in proper form, less the amount of any
applicable CDSC. Payment will be made no later than three
days after receipt of a redemption request in good order.
Shares may be redeemed by writing or calling Fund/Plan
Services, Inc. (the "Transfer Agent"). Redemptions may also
be effected through the shareholder's securities dealer of
record.
Each Portfolio has the right to redeem shareholder accounts
which fall below a minimum level ($10,000 or less for the
Equity, Income, Flex, MultiFlex, Relative Return Bond, Real
Estate and International Value Portfolios and $1,000 or less
for the Cash Management Portfolio) as a result of
redemptions of shares. See "The EBI Funds, Inc. Shareholder
Services Guide - How to Redeem Shares".
DIVIDENDS AND DISTRIBUTIONS:
The Equity, Flex, MultiFlex and Real Estate Portfolios
intend to make quarterly distributions of net investment
income and annual distributions of net realized long-term
capital gains. The International Value Portfolio intends to
make semiannual distributions of net investment income, and
annual distributions of net realized long-term capital
gains. The Income and Relative Return Bond Portfolios
intend to make monthly distributions of net investment
income, and annual distributions of net realized long-term
capital gains. The Cash Management Portfolio intends to
declare net income daily and distribute dividends monthly.
All distributions made to a shareholder will be reinvested
automatically in additional shares pursuant to the
Portfolios' Automatic Dividend Reinvestment Plans unless the
shareholder specifically elects to receive declared
dividends and other distributions in excess of $10.00 in
cash. See "Automatic Dividend Reinvestment Plan".
RISK FACTORS AND POLICIES:
Certain of the Portfolios may engage in investment
techniques that involve certain risks that are described
more fully under "Risk Factors and Policies Relevant to the
Portfolios." For instance, all of the Portfolios, except
the Real Estate Portfolio, may invest in securities of
foreign issuers, which may be subject to additional risk
factors, including foreign currency and political risks, not
applicable to securities of U.S. issuers. The International
Value Portfolio will invest primarily in foreign securities.
The MultiFlex and Relative Return Bond Portfolios may invest
in securities rated lower than Baa by Moody's Investors
Service, Inc. ("Moody's") or BBB by Standard & Poor's
Corporation ("S&P") but rated at least Ba by Moody's or BB
by S&P at the time of purchase. Such securities carry a
high degree of credit risk and are considered speculative by
the major rating agencies. Each Portfolio, except the
Equity and Cash Management Portfolios, may write covered
call options and cash secured put options. The MultiFlex
and Relative Return Bond Portfolios may enter into commodity
futures contracts and options thereon; the MultiFlex,
Relative Return Bond and International Value Portfolios may
enter into foreign currency futures contracts and options
thereon; the MultiFlex Portfolio may enter into stock index
futures contracts and options thereon; and the MultiFlex and
International Value Portfolios may enter into swap
agreements. Each of these techniques involves risk, as
discussed more fully in the description of the techniques
under "Risk Factors and Policies Relevant to the
Portfolios."
FEE TABLE
Shareholder Transaction Expenses:
Maximum Sales Charge Imposed on Purchase
of Shares (as a percentage of offering price) . . . . . None
Contingent Deferred Sales Charge
(as a percentage of original purchase price
or redemption price, whichever is lower) . . . . . . .
1%
first
year,
0%
after
first
year
Annual Operating Expenses (as a percentage of average net
assets):
Total
Advisory 12b-1 Other Operating
Portfolio Fees Fees(1) Expenses Expenses(2)
Equity Portfolio . . . 0.75% 1.00% 0.50% 2.25%
Income Portfolio . . . 0.75% 1.00% 0.50% 2.25%
Flex Portfolio . . . . 0.75% 1.00% 0.50% 2.25%
MultiFlex Portfolio . . 1.00% 1.00% 0.50% 2.50%
Relative Return Bond 0.50% 0.50% 0.50% 1.50%
Portfolio . . . . . . .
Real Estate Portfolio . 0.90% 1.00% 0.50% 2.40%
International Value 1.00% 1.00% 0.50% 2.50%
Portfolio . . . . . . .
Cash Management 0.50% N/A 0.50% 1.00%
Portfolio . . . . . . .
(1) Under rules of the National Association of Securities
Dealers, Inc. ("NASD"), a 12b-1 fee may be treated as a sales
charge for certain purposes under those rules. Because the 12b-1
fee is an annual fee charged against the assets of a Portfolio,
long-term shareholders may indirectly pay more in total sales
charges than the economic equivalent of the maximum front-end
sales charge permitted by rules of the NASD.
(2) ISI has voluntarily agreed to limit the Total Operating
Expenses of the Portfolios to assure that Portfolio expenses do
not exceed the designated maximum amounts shown above. The
expense ceilings include reductions at larger asset sizes to
reflect anticipated economies of scale as the Portfolios grow in
size. See "Management of the Fund".
Example of Portfolio Expenses:
A shareholder would pay the following expenses on a $1,000
investment, assuming (1) a hypothetical 5% annual return, and (2)
redemption at the end of each time period:
1 year 3 years5 years 10 years
Equity Portfolio . . . . . . $23 $73 $127 $290
Income Portfolio . . . . . . $23 $73 $127 $290
Flex Portfolio . . . . . . . $23 $73 $127 $290
MultiFlex Portfolio . . . . . $26 $81 $142 $322
Relative Return Bond $15 $49 $ 85 $193
Portfolio . . . . . . . . . .
Real Estate Portfolio . . . . $25 $78 N/A N/A
International Value Portfolio $26 $81 N/A N/A
Cash Management Portfolio . . $10 $32 $ 57 $129
The foregoing Fee Table is intended to assist investors in
understanding the costs and expenses that a shareholder in the
applicable Portfolios will bear directly or indirectly. Those
investment advisory fees which equal or exceed 0.75% of average
net assets are higher than those generally charged by investment
advisers to similar funds for advisory services. However, the
Adviser also provides certain supervisory and administrative
services to the Portfolios pursuant to the Investment Advisory
Agreement. For a more detailed description of such costs and
expenses, see "Management of the Fund" and "Plan of
Distribution." The Examples set forth above assume reinvestment
of all dividends and distributions. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES, AND
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE ASSUMED FOR
PURPOSES OF THE EXAMPLES. The assumed 5% return is hypothetical
and should not be considered a representation of past or future
annual returns.
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial information for the years ended
December 31, 1994, 1993, 1992, 1991 and 1990, has been audited by
Price Waterhouse LLP, independent accountants, whose report
thereon appears in the Statement of Additional Information. The
Real Estate and International Value Portfolios were not
operational during those periods. The Statement of Additional
Information and the Fund's 1994 Annual Report to Shareholders
(containing the report of independent accountants and additional
information relating to the Fund's performance) are available at
no charge. All per share data for the Equity, Income and Flex
Portfolios has been adjusted to reflect a 25 share for 1 share
stock split which was effected on December 31, 1991.
Equity Portfolio
(For a Share Outstanding throughout Each Period)
Year Ended December 31
1994 1993 1992
Net asset value
Beginning of period $59.61 $63.27 $63.38
INVESTMENT OPERATIONS
Net investment income . . . . . . . 0.36 0.41 0.60
Net gains or losses on securities
(both realized and unrealized) 1.26 5.40 2.44
Total from investment
operations . . . . . . . . . . . 1.62 5.81 3.04
DISTRIBUTIONS
Dividends (from net investment
income) . . . . . . . . . . . . (0.36) (0.41) (0.57)
Distributions (from capital
gains) . . . . . . . . . . . . . (5.04) (9.06) (2.58)
Total Distributions . . . . . . . . (5.40) (9.47) (3.15)
Net asset value end of period . . $55.83 $ 59.61 $ 63.27
TOTAL RETURN . . . . . . . . . . . 2.69% 9.16% 4.84%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(000 Omitted) . . . . . . . . . . $77,929 $86,659 $91,146
Ratio of expenses to average net
assets* . . . . . . . . . . . . . 2.25% 2.25% 2.18%
Ratio of net investment income
to average net assets* . . . . . 0.61% 0.62% 0.90%
Portfolio turnover rate . . . . . . 21% 47% 41%
<PAGE>
Equity Portfolio
(For a Share Outstanding throughout Each Period)
Year Ended December 31
1991 1990 1989
Net asset value
beginning of period . . . . . . $ 54.70 $ 62.01 $ 56.89
INVESTMENT OPERATIONS
Net investment income . . . . . . 0.66 1.04 1.20
Net gains or losses on securities
Total from investment
operations . . . . . . . . . . 18.29 (2.36) 12.32
DISTRIBUTIONS
Dividends (from net investment
income) . . . . . . . . . . . (0.69) (1.21) (1.26)
Distributions (from capital
gains) . . . . . . . . . . . . (8.92) (3.74) (5.94)
Total Distributions . . . . . . . (9.61) (4.95) (7.20)
Net asset value end of period . $ 63.38 $ 54.70 $ 62.01
TOTAL RETURN . . . . . . . . . . 33.59% (3.75%) 21.81%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(000 Omitted) . . . . . . . . . $81,732 $69,279 $87,968
Ratio of expenses to average net
assets* . . . . . . . . . . . . 2.22% 2.25% 2.24%
Ratio of net investment income
to average net assets* . . . . 1.04% 1.71% 1.84%
Portfolio turnover rate . . . . . 47% 12% 21%
<PAGE>
Equity Portfolio
(For a Share Outstanding throughout Each Period)
Year Ended December 31
1988 1987 1986 1985
Net asset value
beginning of period $ 54.16 $ 56.05 $ 53.75 $ 42.34
INVESTMENT OPERATIONS
Net investment income 1.21 1.04 0.85 0.93
Net gains or losses on
securities (both 6.23 2.91 3.21 11.43
realized and
unrealized)
Total from investment
operations . . . . 7.44 3.95 4.06 12.36
DISTRIBUTIONS
Dividends (from net
investment income) (1.24) (1.24) (0.78) (0.95)
Distributions (from
capital gains) . . (3.47) (4.60) (0.98) 0.00
Total Distributions . (4.71) (5.84) (1.76) (0.95)
Net asset value end $ 56.89 $ 54.16 $ 56.05 $ 53.75
of period . . . .
TOTAL RETURN . . . . 14.02% 7.20% 7.76% 29.54%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period (000 Omitted) $92,983 $119,312 $92,380 $46,105
Ratio of expenses to
average net assets* 2.21% 2.01% 2.31% 2.35%
Ratio of net
investment income 1.81% 1.79% 1.45% 2.26%
to average net
assets* . . . . . .
Portfolio turnover 10% 20% 31% 21%
rate . . . . . . .
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Portfolio aggregating $3,227 and
$23,818 for 1993 and 1990, respectively. If such expenses
had not been absorbed, the ratio of expenses to average net
assets for 1993 and 1990 would have been 2.25% and 2.28%,
respectively and the ratio of net investment income to
average net assets for 1993 and 1990 would have been 0.62%
and 1.68%, respectively.
<PAGE>
Income Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1994 1993 1992
Net asset value
beginning of period . . . . . . $48.60 $ 47.41 $ 47.77
INVESTMENT OPERATIONS
Net investment income . . . . . . 2.40 2.28 2.57
Net gains or losses on securities
(both realized and unrealized) (3.27) 1.20 (0.37)
Total from investment
operations . . . . . . . . . . (0.87) 3.48 2.20
DISTRIBUTIONS
Dividends (from net
investment income) . . . . . . (2.40) (2.29) (2.56)
Distributions (from
capital gains) . . . . . . . . 0.00 0.00 0.00
Total Distributions . . . . . . . (2.40) (2.29) (2.56)
Net asset value end $45.33 $ 48.60 $ 47.41
of period . . . . . . . . . .
TOTAL RETURN . . . . . . . . . . (1.80%) 7.39% 4.74%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000
Omitted) . . . . . . . . . . . $25,467 $42,872 $47,096
Ratio of expenses to average net
assets* . . . . . . . . . . . 2.25% 2.25% 2.25%
Ratio of net investment income
to average net assets* . . . . 5.09% 4.56% 5.48%
Portfolio turnover rate . . . . . 59% 92% 16%
<PAGE>
Income Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1991 1990 1989
Net asset value
beginning of period . . . . $ 45.42 $ 45.48 $ 44.45
INVESTMENT OPERATIONS
Net investment income . . . . 3.03 3.43 3.32
Net gains or losses on
securities (both 2.43 (0.03) 0.88
realized and
unrealized)
Total from investment
operations . . . . . . . . 5.46 3.40 4.20
DISTRIBUTIONS
Dividends (from net
investment income) . . . . (3.11) (3.46) (3.27)
Distributions (from
capital gains) . . . . . . 0.00 0.00 0.00
Total Distributions . . . . . (3.11) (3.46) (3.27)
Net asset value end $ 47.77 $ 45.42 $ 45.48
of period . . . . . . . .
TOTAL RETURN . . . . . . . . 12.46% 7.81% 9.12%
RATIOS/SUPPLEMENTAL DATA
Net assets end of
period (000 Omitted) . . . . $39,104 $41,004 $58,774
Ratio of expenses to
average net assets* . . . . 2.29% 2.30% 2.35%
Ratio of net investment
income to average net assets* 6.48% 7.08% 6.98%
Portfolio turnover rate . . . 37% 25% 33%
<PAGE>
Income Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1988 1987 1986 1985
Net asset value
beginning of period $ 45.45 $ 50.42 $ 47.36 $ 43.07
INVESTMENT OPERATIONS
Net investment income 3.32 2.71 2.77 2.81
Net gains or losses
on securities (0.92) (3.18) 3.23 4.52
(both realized and
unrealized)
Total from investment
operations . . . . 2.40 (0.47) 6.00 7.33
DISTRIBUTIONS
Dividends (from net
investment (3.30) (3.35) (2.73) (3.04)
income) . . . . .
Distributions (from
capital gains) . . 0.00 (1.15) (0.21) 0.00
Total Distributions . (3.30) (4.50) (2.94) (3.04)
Net asset value end $ 44.55 $ 45.45 $ 50.42 $ 47.36
of period . . . . . .
TOTAL RETURN . . . . 5.59% (0.90%) 13.06% 17.98%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period $74,309 $81,882 $51,669 $19,369
(000 Omitted) . . .
Ratio of expenses to
average net 2.16% 1.99% 2.37% 2.35%
assets* . . . . . .
Ratio of net
investment income 6.89% 6.29% 6.24% 7.78%
to average net
assets* . . . . . .
Portfolio turnover 49% 64% 73% 19%
rate . . . . . . .
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Portfolio aggregating $17,632 and
$11,540 for 1993 and 1990, respectively. If such expenses
had not been absorbed, the ratio of expenses to average net
assets for 1993 and 1990 would have been 2.29% and 2.32%,
respectively and the ratio of net investment income to
average net assets for 1993 and 1990 would have been 4.52%
and 5.41%, respectively.
<PAGE>
Flex Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1994 1993 1992
Net asset value
beginning of period . . . . . . $54.16 $ 51.04 $ 49.35
INVESTMENT OPERATIONS
Net investment income . . . . . . 1.26 1.10 1.39
Net gains or losses on securities
(both realized and (0.91) 4.22 2.37
unrealized)
Total from investment operations 0.35 5.32 3.76
DISTRIBUTIONS
Dividends (from net investment (1.25) (1.09) (1.35)
income) . . . . . . . . . . . . .
Distributions (from capital gains) (2.76) (1.11) (0.72)
Total Distributions . . . . . . . (4.01) (2.20) (2.07)
Net asset value end of period . $ 50.50 $ 54.16 $ 51.04
TOTAL RETURN . . . . . . . . . . 0.64% 10.48% 7.72%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000 $243,848 $274,349 $165,727
Omitted) . . . . . . . . . . . .
Ratio of expenses to average net 2.25% 2.25% 2.17%
assets* . . . . . . . . . . . . .
Ratio of net investment income to
average net 2.32% 2.10% 2.81%
assets* . . . . . . . . . . . .
Portfolio turnover rate . . . . . 36% 27% 15%
<PAGE>
Flex Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31 Period
Ended
December 31
1991 1990 1989 1988*
Net asset value
beginning of $ 42.26 $ 45.32 $ 40.40 $ 40.00
period . . . . . .
INVESTMENT
OPERATIONS
Net investment 1.47 1.64 1.70 0.88
income . . . . . .
Net gains or losses
on securities (both 8.90 (2.42) 5.18 0.40
realized and
unrealized)
Total from 10.37 (0.78) 6.88 1.28
investment
operations . . . .
DISTRIBUTIONS
Dividends (from net (1.49) (1.75) (1.65) (0.88)
investment income)
Distributions (from (1.79) (0.53) (0.31) --
capital gains) . .
Total Distributions (3.28) (2.28) (1.96) (0.88)
Net asset value $ 49.35 $ 42.26 $ 45.32 $ 40.40
end of period . . .
TOTAL RETURN . . . 24.80% (1.68%) 17.26% 4.45%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of $104,204 $96,772 $101,260 $54,941
period (000 Omitted)
Ratio of expenses to 2.21% 2.25% 2.33% 2.31%#
average net assets+
Ratio of net
investment income to 3.12% 3.77% 4.08% 4.06%#
average net
assets+ . . . . .
Portfolio turnover 24% 31% 20% 2%
rate . . . . . . .
___________
* From February 24, 1988, commencement of operations, to
December 31, 1988.
+ INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Portfolio aggregating $18,993 for
1993. If such expenses had not been absorbed, the ratio of
expenses to average net assets would have been 2.26%, and
the ratio of net investment income to average net assets
would have been 2.09%.
# Annualized.
<PAGE>
MultiFlex Portfolio
(For a Share Outstanding throughout the Period) (Continued)
For the period
November 17,
Year Ended 1993*
December 31, to Dec. 31, 1993
1994
Net asset value
beginning of period . . . . . . . $ 40.16 $ 40.00
INVESTMENT OPERATIONS
Net investment income . . . . . . . 0.62 0.02
Net gains or losses on securities (1.03) 0.16
(both realized and unrealized) . .
Total from investment operations . (0.41) 0.18
DISTRIBUTIONS
Dividends (from net investment (0.62) (0.02)
income) . . . . . . . . . . . . . .
Total distributions . . . . . . . . (0.62) (0.02)
Net asset value end of period . . $ 39.13 $ 40.16
TOTAL RETURN . . . . . . . . . . . (1.02%) 0.46%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000 $120,220 $12,241
Omitted) . . . . . . . . . . . . .
Ratio of expenses to average net 2.49% 2.50%#
assets . . . . . . . . . . . . . .
Ratio of net investment income to
average net assets . . . . . . . 2.01% 1.09%#
Portfolio turnover rate . . . . . . 81% 0.53%
* Commencement of operations.
# Annualized.
<PAGE>
Relative Return Bond Portfolio
(For a Share Outstanding throughout the Period) (Continued)
For the period
November 15,
Year Ended 1993*
December 31, to Dec. 31, 1993
1994
Net asset value
beginning of period . . . . . . . $ 39.80 $ 40.00
INVESTMENT OPERATIONS
Net investment income . . . . . . . 1.81 0.21
Net gains or losses on securities (2.60) (0.21)
(both realized and unrealized) . .
Total from investment operations . (0.79) 0.00
DISTRIBUTIONS
Dividends (from net investment (1.81) (0.20)
income) . . . . . . . . . . . . . .
Total distributions . . . . . . . . (1.81) (0.20)
Net asset value end of period . . $ 37.20 $ 39.80
TOTAL RETURN . . . . . . . . . . . (1.99%) 0.01%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (000 $3,168 $1,257
Omitted) . . . . . . . . . . . . .
Ratio of expenses to average net 1.50% 1.50%#
assets . . . . . . . . . . . . . .
Ratio of net investment income to
average net assets . . . . . . . 4.89% 4.61%#
Portfolio turnover rate . . . . . . 47% 5%
* Commencement of operations.
# Annualized.
<PAGE>
Cash Management Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1994 1993 1992
Net asset value
beginning of period . . . . $1.00 $ 1.00 $ 1.00
INVESTMENT OPERATIONS
Net investment income . . . . 0.03 0.02 0.03
DISTRIBUTIONS
Dividends (from net
investment income) . . . . . (0.02) (0.03) (0.03)
Net asset value end of $1.00 $ 1.00 $ 1.00
period . . . . . . . . . . .
TOTAL RETURN . . . . . . . . 3.30% 2.20% 3.00%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(000 Omitted) . . . . . . . $15,212 $13,827 $20,431
Ratio of expenses to average
net assets* . . . . . . . . . 1.00% 0.95% 0.73%
Ratio of net investment
income to average net assets* 3.23% 2.17% 2.94%
<PAGE>
Cash Management Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1991 1990 1989
Net asset value
beginning of period . . . . . $ 1.00 $ 1.00 $ 1.00
INVESTMENT OPERATIONS
Net investment income . . . . . 0.05 0.07 0.08
DISTRIBUTIONS
Dividends (from net investment
income) . . . . . . . . . . (0.05) (0.07) (0.08)
Net asset value end of period $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN . . . . . . . . . 5.08% 7.35% 8.63%
RATIOS/SUPPLEMENTAL DATA
Net assets end of period
(000 Omitted) . . . . . . . . $17,730 $20,701 $19,902
Ratio of expenses to average net
assets* . . . . . . . . . . . 1.00% 1.09% 1.00%
Ratio of net investment income
to average net assets* . . . 5.04% 7.11% 8.31%
<PAGE>
Cash Management Portfolio
(For a Share Outstanding throughout Each Period) (Continued)
Year Ended December 31
1988 1987 1986 1985
Net asset value
beginning of period . $ 1.00 $ 1.00 $ 1.00 $ 1.00
INVESTMENT OPERATIONS
Net investment income . 0.07 0.06 0.05 0.07
DISTRIBUTIONS
Dividends (from net
investment (0.07) (0.06) (0.05) (0.07)
income) . . . . . .
Net asset value end $ 1.00 $ 1.00 $ 1.00 $ 1.00
of period . . . . . . .
TOTAL RETURN . . . . . 6.90% 5.67% 5.33% 6.71%
RATIOS/SUPPLEMENTAL
DATA
Net assets end of
period $32,309 $27,683 $14,203 $ 4,937
(000 Omitted) . . . .
Ratio of expenses to
average net 0.88% 1.25% 1.21% 1.26%
assets* . . . . . . .
Ratio of net investment
income 6.90% 5.67% 5.33% 6.71%
to average net
assets* . . . . . . . .
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Portfolio aggregating $15,099,
$38,925, $5,536 and $27,402 for 1993, 1992, 1990, and 1989,
respectively. If such expenses had not been absorbed, the
ratio of expenses to average net assets would have been
1.03%, 0.92%, 1.12%, and 1.11% for the above periods,
respectively, and the ratio of net investment income to
average net assets would have been 2.09%, 2.75%, 4.92%, and
8.20%, respectively.
<PAGE>
THE FUND
The Portfolios are separate series of The EBI Funds, Inc.
(the "Fund"), an open-end, diversified management investment
company incorporated under the laws of the State of Maryland on
September 19, 1989.
The address of each Portfolio is 1315 Peachtree Street,
N.E., Atlanta, Georgia 30309, and the telephone number of each
Portfolio is (800) 554-1156. The address of the Distributor,
INVESCO Services, Inc., is 1355 Peachtree Street, N.E., Atlanta,
Georgia 30309 and its telephone number is (800) 972-9030.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each of the Portfolios (except
the Cash Management Portfolio) is to achieve a high total return
on investment through capital appreciation and current income,
without regard to federal income tax considerations. The
investment objective of the Cash Management Portfolio is to
achieve as high a level of current income, without regard to
federal income tax considerations, as is consistent with the
preservation of capital and the maintenance of liquidity. The
investment objective of each Portfolio is a fundamental policy
which may not be changed without the approval of a vote of a
majority of the outstanding shares of that Portfolio.
Investments of the Equity, Income, Flex, MultiFlex, Relative
Return Bond, Real Estate and International Value Portfolios will
be managed without regard to whether their distributions to
shareholders will be characterized as ordinary income or
long-term capital gains (I.E., will not be managed so as to
minimize or avoid taxable capital gain distributions), and
therefore may be particularly applicable for investors who are
tax-exempt. The Cash Management Portfolio is designed for
investment by corporations, partnerships, individuals and pension
and profit-sharing plans. A more detailed discussion of each
Portfolio's investment objective and policies follows.
Equity Portfolio
The investment objective of the Equity Portfolio is to
achieve a high total return on investment through capital
appreciation and current income, without regard to federal income
tax considerations. Substantially all of the Portfolio's assets
will be invested in common stocks and, to a lesser extent,
securities convertible into common stocks. Such securities will
generally be issued by companies which are listed on a national
securities exchange (e.g., the New York Stock Exchange), or
traded in the over-the-counter market, and which usually pay
regular dividends. At least 65% of the Equity Portfolio's
investments will consist of equity securities. The Equity
Portfolio has established minimum investment standards with
respect to its investments in common stocks which are identical
to those established by ICM, the Portfolio's sub-adviser, with
respect to the management of large capitalization value
portfolios for its private advisory clients. These standards
include utilization of a proprietary database consisting of 800
of the largest companies in the United States, each of which is
required to have 10 years of financial history in order to be
included in the database. The database relates the current price
of each stock to each company's historical record and ranks the
800 stocks based on the best relative value. The top 250 stocks
are then subjected to fundamental investment analysis, based on
which a purchase list of 100 stocks is created, from which
investments are selected. When market, business or economic
conditions warrant, in the judgment of the Adviser and ICM, that
temporary defensive measures should be employed, all or part of
the assets of the Portfolio may be invested temporarily in other
securities, including high quality corporate preferred stocks,
bonds, debentures or other evidences of indebtedness, and in
obligations issued or guaranteed by the United States or any
instrumentality thereof, or held in cash.
Income Portfolio
The investment objective of the Income Portfolio is to
achieve a high total return on investment through capital
appreciation and current income, without regard to federal income
tax considerations. During normal market conditions at least 65%
of the Income Portfolio's investments will consist of
income-producing securities. The Income Portfolio hopes to
achieve its goal of capital appreciation by selecting fixed
income obligations which ICM, the Portfolio's sub-adviser,
believes are of a higher quality than has been generally
recognized by the marketplace. If ICM's analysis is correct in
these cases, the value of these obligations should increase as
the marketplace recognizes the higher quality of the obligations.
ICM intends to identify investments which it believes to be
underrated (and therefore higher yielding) in light of, among
other things, historic and current financial condition of the
issuer, current and anticipated cash flow and borrowing
requirements, strength of management, responsiveness to business
conditions, credit standing and historic and current results of
operations. Investors should note that investments in fixed
income obligations will generally be subject to both credit risk
and market risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments, or both, as they
come due. Market risk relates to the fact that the market values
of fixed income obligations in which the Portfolio invests
generally will be affected by changes in the level of interest
rates. An increase in interest rates will generally reduce the
value of portfolio investments, and a decline in interest rates
will generally increase the value of portfolio investments.
Securities in which the Income Portfolio invests consist
primarily of U.S. Government obligations and carefully selected
fixed income corporate obligations which ICM considers to be of
investment grade quality. The Income Portfolio invests only in
those corporate obligations which in ICM's opinion have the
investment characteristics described by Moody's in rating
corporate obligations within its four highest ratings of Aaa, Aa,
A and Baa and by S&P in rating corporate obligations within its
four highest ratings of AAA, AA, A and BBB. It is possible that
the ability of the Portfolio to achieve its objective of high
total return could be diminished by its restriction on the use of
non-investment grade corporate obligations. For a description of
these ratings, see Appendix A to the Statement of Additional
Information. Investments in government obligations will include
direct obligations of the U.S. Government, such as U.S. Treasury
Bills, Notes and Bonds, obligations guaranteed by the U.S.
Government, such as Government National Mortgage Association
obligations, and obligations of U.S. Government authorities,
agencies and instrumentalities, such as Federal National Mortgage
Association, Federal Home Loan Bank, Federal Financing Bank and
Federal Farm Credit Bank obligations.
The Income Portfolio may invest up to 35% of its assets in
mortgage-backed securities, including mortgage pass-through
securities and collateralized mortgage obligations ("CMOs"),
which carry a guarantee from an agency of the U.S. Government or
a private issuer of the timely payment of principal and interest
or, in the case of unrated securities, are considered by the sub-
adviser to be investment grade quality. For a description of the
risks associated with these securities, see "Risk Factors and
Policies Relevant to the Portfolios--Mortgage-Related Securities"
below and "Mortgage-Related Securities" in the Statement of
Additional Information.
The Income Portfolio does not require that its investments
in corporate obligations actually be rated by Moody's or S&P, and
it may acquire such unrated obligations which in the opinion of
ICM are of a quality at least equal to a rating of Baa by Moody's
or BBB by S&P. With respect to investments in unrated
obligations, the Portfolio will be more reliant on ICM's judgment
and experience than would be the case if the Income Portfolio
invested solely in rated obligations. Obligations rated Baa by
Moody's or BBB by S&P may have speculative characteristics. A
rating of Baa by Moody's indicates that the obligation is of
"medium grade," neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the
present, but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. A
rating of BBB by S&P indicates that the obligation is in the
lowest "investment grade" security rating. Obligations rated BBB
are regarded as having an adequate capacity to pay principal and
interest. Whereas such obligations normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to
pay principal and interest than obligations in the top three
"investment grade" categories. Both credit and market risks as
described above are increased by investing in fixed income
obligations rated Baa by Moody's and BBB by S&P. For a more
detailed description of these ratings, see Appendix A to the
Statement of Additional Information.
ICM will attempt to limit fluctuations in the market value
of the portfolio by adopting a more defensive posture during
periods of economic difficulty. During such periods the Income
Portfolio may acquire high quality short-term money market
instruments rated Prime-1 by Moody's or A or better by S&P or, if
unrated, of comparable quality as determined by ICM, at such
times, and in such amounts, as in the opinion of ICM seems
appropriate. Short-term money market instruments will include,
among others, Treasury bills, bankers' acceptances, certificates
of deposit, time deposits, and commercial paper. For a
description of these instruments, see Appendix A to the Statement
of Additional Information.
The Income Portfolio may enter into contracts for the future
delivery of fixed income securities commonly referred to as
"interest rate futures contracts." These futures contracts will
not be used for speculation but only as a hedge against
anticipated interest rate changes. The Income Portfolio also may
use options to purchase or sell covered interest rate futures
contracts or debt securities and may write covered call options
and cash secured puts. Covered call options and cash secured
puts will not exceed 25% of total assets. For a discussion of
these types of instruments, including the risks associated
therewith, see "Risk Factors and Policies Relevant to the
Portfolios."
The Income Portfolio is subject to certain restrictions on
its use of financial futures contracts and options. The Income
Portfolio will invest only in futures contracts or options on
underlying instruments in which the Portfolio may invest. The
Income Portfolio will not enter into financial futures contracts
or purchase options on financial futures contracts if, after such
a transaction, the sum of initial margin deposits on the open
financial futures contracts and of premiums paid on open options
on financial futures contracts would exceed 5% of the Portfolio's
total assets. Subject to the provisions of the Portfolio's
fundamental investment policies, the Income Portfolio will not
enter into financial futures contracts or write options (except
to close out open positions) if, after such a transaction, the
aggregate principal amount of all open financial futures
contracts and all options under which the Portfolio is obligated
would exceed 100% of the Portfolio's total assets. The Income
Portfolio will not write call options until it owns U.S.
government securities or financial futures contracts which may be
delivered to satisfy the options or has the right to obtain
deliverable securities without further consideration (or has
segregated cash in the amount of any such consideration). The
Income Portfolio will not write put options unless it has
segregated cash or cash equivalents in amounts sufficient to
satisfy the options. The Income Portfolio will maintain such
securities, rights, or segregated cash until the options are
exercised, closed or expire. The Income Portfolio will not
purchase put and call options on debt securities if, after such a
transaction, the sum invested for premiums in such options
exceeds 2% of the Portfolio's total assets.
Flex Portfolio
The investment objective of the Flex Portfolio is to achieve
a high total return on investment through capital appreciation
and current income, without regard to federal income tax
considerations. The Flex Portfolio invests in a combination of
equity securities and fixed and variable income securities. The
equity securities acquired by the Flex Portfolio are subject to
the same standards as those equity securities acquired by the
Equity Portfolio. The income securities acquired by the Flex
Portfolio are subject to the same investment standards applicable
to income securities acquired by the Income Portfolio. It is
possible that the ability of the Portfolio to achieve its
objective of high total return could be diminished by its
restriction on the use of non-investment grade corporate
obligations in the income securities portion of its portfolio.
Typically, a minimum of 30% of the total assets of the Flex
Portfolio will be invested in equity securities and a minimum of
30% of total assets will be invested in fixed and variable income
securities. The remaining 40% of its portfolio will vary in
asset allocation according to ICM's assessment of business,
economic, and market conditions. ICM's analytical processes
associated with making allocation decisions are based upon a
combination of historical financial results and current prices
for stocks and the current yield to maturity available in the
market for bonds. The premium return available from one category
relative to the other determines the actual asset deployment.
ICM's asset allocation processes are systematic and are based on
current information rather than forecasted change. The Flex
Portfolio seeks reasonably consistent returns over a variety of
market cycles.
MultiFlex Portfolio
The investment objective of the MultiFlex Portfolio is to
achieve a high total return on investment through capital
appreciation and current income, without regard to federal income
tax considerations. The Portfolio seeks to achieve its objective
by investing in a combination of equity securities (consisting of
common stocks and, to a lesser degree, preferred stocks and
securities convertible into common stock) and fixed-income
securities, through allocation of its assets among the following
five asset classes: stocks of large capitalization companies
("large cap stocks"), stocks of small capitalization companies
("small cap stocks"), fixed-income securities, real estate
securities (primarily securities of real estate investment trusts
("REITs")), and international stocks (primarily American
Depositary Receipts ("ADRs")). Allocating assets among different
types of securities allows the Portfolio to take advantage of
performance opportunities in various sectors of the capital
market, while simultaneously providing diversification to reduce
the risks of each investment.
The Portfolio may invest up to 40% of its assets in each
asset class; however, the Portfolio will normally invest
approximately 20% of its assets in each of the five asset
classes, which represents the expected allocation when projected
returns for the five classes are all normal relative to one
another. If the anticipated return for a particular asset class
is higher than normal relative to the others on an historical
basis, it will be weighted more heavily than it would under
"normal" conditions. Conversely, if the anticipated return for a
particular asset class is lower than normal relative to the other
classes on an historical basis, a smaller percentage of assets
(I.E., less than 20%) would be invested in that class. Each
asset class is briefly described below:
Large Cap Stocks. The MultiFlex Portfolio may invest in
equity securities of large companies, defined as companies with
market capitalizations among the largest 800 publicly traded U.S.
corporations at the time of initial purchase. These securities
are traded principally on the national securities exchanges in
the United States, but also may be traded on regional stock
exchanges or in the over-the-counter market. Such stocks are
more likely to pay regular dividends than the stocks of smaller
companies.
Small Cap Stocks. The MultiFlex Portfolio may invest in
small cap securities (I.E.,those issued by companies having
smaller market capitalizations than the largest 1,000 publicly
traded U.S. corporations). These securities typically pay no or
minimal dividends and possess higher rates of return on invested
capital and are subject to greater risk than securities of larger
companies, such as large price fluctuations which could increase
the potential for short-term gains and losses.
Fixed Income Securities. The fixed income securities in
which the MultiFlex Portfolio may invest consist of securities
issued by the U.S. Government, its agencies and
instrumentalities, corporate securities, mortgage- and asset-
backed securities, zero coupon bonds, municipal obligations and
foreign currency denominated securities. The MultiFlex Portfolio
may invest up to 5% of its assets in corporate bonds rated below
Baa by Moody's or BBB by S&P but rated at least Ba by Moody's or
BB by S&P at the time of purchase. Investments in corporate
bonds rated below "investment grade," I.E., rated below Baa by
Moody's or BBB by S&P, are described as "speculative" by both
Moody's and S&P. Such securities are sometimes referred to as
"junk bonds," and may be subject to greater market fluctuations,
less liquidity, and greater risk. For a further discussion of
the special risks associated with investments in lower rated
securities, see "Risk Factors and Policies Relevant to the
Portfolios - High Yield/High Risk Securities." The average
maturity of the MultiFlex Portfolio's investments in fixed income
securities will vary depending upon economic and market
conditions. During normal market conditions, the MultiFlex
Portfolio's overall maturity will be in the 3.5 to 6.5 year range
and is expected to average at approximately 5 years over a market
cycle. The sub-adviser will seek to adjust the portfolio of
fixed income securities held by the Portfolio to maximize current
income consistent with liquidity and the preservation of
principal.
Real Estate Securities. The MultiFlex Portfolio may invest
in common stocks of real estate companies, real estate investment
trusts ("REITs"), and other real estate related securities.
REITs are trusts which sell shares to investors and use the
proceeds to invest in real estate or interests therein. A REIT
may focus on particular projects, such as apartment complexes, or
geographic regions, such as the Southeastern United States, or
both. Health care REITs invest primarily in hospitals, nursing
homes, and similar facilities, and are usually nationwide in
scope. By investing in REITs indirectly through the Portfolio, a
shareholder will bear not only his proportionate share of the
expenses of the Portfolio, but also, indirectly, similar expenses
of the REIT.
International Stocks. The MultiFlex Portfolio may invest in
international securities directly or by means of sponsored or
unsponsored ADRs. Up to 40% of total assets, measured at the
time of purchase, may be invested directly in foreign securities;
securities of Canadian issuers and securities purchased by means
of sponsored ADRs are not subject to this 40% limitation. See
"Risk Factors and Policies Relevant to the Portfolios - Foreign
Securities."
IMR, the Portfolio's sub-adviser, regularly monitors the
Portfolio's investment allocations, and may vary the amount
invested in each class depending upon its assessment of business,
economic and market conditions. The investment results of the
Portfolio depend upon the sub-adviser's ability to determine
correctly the relative attractiveness of various asset classes on
a consistent basis. However, market valuations change not only
in response to economic factors but to psychological and
emotional factors as well. These factors are difficult to
interpret and quantify. It is therefore possible that the
Portfolio may have a minimum allocation in stocks during a
significant advance in overall stock prices. Similarly, it is
possible that the Portfolio may have a minimum allocation in
bonds during a significant advance in overall bond prices.
There may be temporary periods during which the allocation
of assets to each asset class deviates from the specified
percentage allocation because of inflows or outflows of cash from
the Portfolio. This is most likely to occur when the sub-adviser
has positioned the portfolio assets close to a minimum or maximum
constraint for one or more asset classes and the Portfolio's cash
position is altered as a result of purchases and/or redemptions
of the Portfolio's shares. In such cases, IMR will deploy cash
or reallocate portfolio assets in a timely fashion (not to exceed
seven days) to bring portfolio composition within the specified
asset allocation.
In periods of uncertain economic and market conditions, as
determined by the sub-adviser, the Portfolio may depart from its
basic investment objective and assume a temporary defensive
position, with a portion of its assets invested in cash or cash
equivalents and, within the fixed income asset class, U.S.
Government and agency securities and investment grade corporate
bonds. Cash may be held for defensive purposes up to a maximum
of 30% of the Portfolio's total assets. While the Portfolio is
in a defensive position, the opportunity to achieve capital
growth will be limited; however, the ability to maintain a
defensive position enables the Portfolio to seek to minimize
capital losses during market downturns. Under normal market
conditions, the Portfolio does not intend to invest a significant
portion of its assets in cash or cash equivalents.
In managing the equity portion of the portfolio, IMR will
apply a combination of quantitative strategies and traditional
stock selection methods to a very broad universe of stocks in
order to uncover the best possible values. Typically, stocks
will be examined quantitatively for their exposure to certain
factors which the sub-adviser has identified as helpful in
selecting equities which can be expected to have superior future
performance. These factors may include earnings-to-price and
book value-to-price ratios, earnings estimate revision momentum,
relative market strength compared to competitors, inventory/sales
trend, and financial leverage. A stock's expected return is
estimated based upon its exposure to these and other factors, and
when combined with proprietary estimates of trading costs, a
risk-controlled optimal portfolio is generated. Once an initial
suggested portfolio has been generated through the computer
optimization process, traditional fundamental analysis is
utilized to provide a final review before stocks are selected for
purchase by the Portfolio.
The MultiFlex Portfolio may purchase and write covered
options on securities (including index options and options on
foreign securities), may purchase and sell covered interest rate
futures contracts, and may invest in futures contracts for the
purchase or sale of foreign currencies, fixed income securities,
commodities and instruments based on securities indices
(collectively, "futures contracts"), options on futures
contracts, forward commitments and swap agreements. See "Risk
Factors and Policies Relevant to the Portfolios." For a
discussion of the tax considerations relating to swap agreements,
see the Statement of Additional Information under "Tax
Information."
Relative Return Bond Portfolio
The investment objective of the Relative Return Bond
Portfolio is to achieve a high total return on investment through
current income and capital appreciation, without regard to
federal income tax considerations. The Portfolio seeks to
provide investment results which approximate or exceed the total
return performance of fixed income securities in the aggregate,
as represented by the Lehman Brothers Aggregate Bond Index, but
does not attempt to precisely replicate the Lehman Brothers
Aggregate Bond Index and is not an index fund in that sense. The
Portfolio attempts to achieve its objective by investing in a
diversified portfolio of U.S. Government obligations, including
Treasury and agency obligations, corporate securities, mortgage-
and asset-backed securities, zero coupon bonds, municipal
obligations, dollar-denominated obligations of U.S. branches of
foreign banks ("Yankee Bonds") and foreign currency denominated
securities. IMR, the sub-adviser, seeks to add value primarily
through sector rotation and value selection rather than through
interest rate anticipation.
The sub-adviser's sector analysis focuses on the yield
advantage of corporate securities or mortgage-related securities
over U.S. Treasuries. When the advantage is significant, IMR
evaluates the fundamental trends affecting that sector to
determine if it is likely to narrow sufficiently to generate an
attractive incremental return. Substantial commitments will be
made to those sectors with the most favorable return potential.
Valuation analysis assesses the attractiveness of bonds with
respect to other asset classes, the U.S. inflation rate, and the
level of foreign interest rates. Yield curve analysis is used to
determine the optimal combination of maturities to achieve the
desired average maturity for the portfolio. Fundamental analysis
focuses on economic and market trends - in particular, the impact
of Federal Reserve policy, supply and demand (both public and
private), real income growth rates, inflationary expectations,
foreign participation in the U.S. markets, and the political
climate. During normal market conditions, the Portfolio's
overall average maturity will be in the 3.5 to 6.5 year range and
is expected to average at approximately 5 years over a market
cycle. During periods of economic uncertainty, as a temporary
defensive measure, the Relative Return Bond Portfolio may acquire
high quality money market instruments similar to those acquired
by the Income Portfolio, in such amounts as IMR, in its opinion,
deems appropriate.
IMR also applies yield spread analysis to the various
corporate quality ratings to identify attractive values, and
seeks issues with stable to improving fundamentals and the
potential for superior returns through the narrowing of yield
spreads. At least 90% of the portfolio will range from Aaa to
Baa. However, the Portfolio may also invest up to 10% of its
assets in corporate bonds rated below Baa by Moody's or BBB by
S&P but rated at least Ba by Moody's or BB by S&P at the time of
purchase. Investments in corporate bonds rated below "investment
grade," I.E., rated below Baa by Moody's or BBB by S&P, are
described as "speculative" by both Moody's and S&P. Such
securities are sometimes referred to as "junk bonds," and may be
subject to greater market fluctuations, less liquidity, and
greater risk. For a further discussion of the special risks
associated with investments in lower rated securities, see "Risk
Factors and Policies Relevant to the Portfolios - High Yield/High
Risk Securities." The Relative Return Bond Portfolio may also
purchase and sell interest rate futures contracts, foreign
currency futures contracts and commodity futures contracts, may
use forward commitments and options to purchase or sell interest
rate futures contracts or debt securities, and may write covered
call options and cash secured puts. See "Risk Factors and
Policies Relevant to the Portfolios."
When the sub-adviser's analysis indicates that market,
business or economic conditions are favorable, the Relative
Return Bond Portfolio may invest in foreign fixed income
securities. The Fund has not established any minimum investment
standards, such as an issuer's asset level, earnings history,
etc., with respect to the Relative Return Bond Portfolio's
investments in foreign (fixed income) securities and, therefore,
investors should consider that the Portfolio's investments may
consist in part of securities which may be deemed to be
speculative. See "Risk Factors and Policies Relevant to the
Portfolios - Foreign Securities."
Real Estate Portfolio
The investment objective of the Real Estate Portfolio is to
achieve a high total return on investment through capital
appreciation and current income, without regard to federal income
tax considerations. The Portfolio seeks to achieve its objective
by investing primarily in publicly traded securities of companies
related to the real estate industry. The Portfolio will not
invest directly in private real estate assets.
Under normal circumstances, the Portfolio will invest at
least 65% of its total assets in equity securities of companies
which are principally engaged in the real estate industry and are
listed on U.S. securities exchanges or the National Association
of Securities Dealers Automated Quotation System ("NASDAQ").
Companies listed on NASDAQ are generally smaller-capitalization
companies whose securities may be subject to large price
fluctuations which could increase the potential for short-term
gains or losses. A company is "principally engaged in the real
estate industry" if at least 50% of its assets, gross income or
net profits are attributable to ownership, construction,
management, or sale of residential, commercial or industrial real
estate, including listed equity REITs which own properties, and
listed mortgage REITs which make short-term construction and
development mortgage loans or which invest in long-term mortgages
or mortgage pools. By investing in REITs indirectly through the
Portfolio, a shareholder will bear not only his proportionate
share of the expenses of the Portfolio, but also, indirectly,
similar expenses of the REIT. See "Risk Factors and Policies
Relevant to the Portfolios -- Real Estate Industry Securities."
The Portfolio may also invest up to 35% of its total assets
in equity, debt, or convertible securities of companies whose
products and services are related to the real estate industry,
such as manufacturers and distributors of building supplies and
financial institutions which issue or service mortgages. The
Portfolio also may invest up to 35% of its total assets in
securities of companies unrelated to the real estate industry
which are believed by the sub-adviser to be undervalued and to
have capital appreciation potential. Moreover, consistent with
its objective of current income, the Portfolio may invest all or
part of its assets in debt securities of companies related to the
real estate industry. Debt securities purchased by the Portfolio
will be limited to those rated at the time of the investment as
investment grade by Moody's or S&P or, if unrated, determined by
the sub-adviser to be of comparable quality. For a description
of these ratings and a discussion of factors relevant to a
determination that an unrated security is of comparable quality,
see Appendix A to the Statement of Additional Information.
IRA, the Portfolio's sub-adviser, utilizes both fundamental
real estate analysis and quantitative securities analysis to
select investments for the Portfolio. The fundamental real
estate characteristics of securities included in the qualifying
universe are determined by analysis of a company's management and
strategic focus and an evaluation of the location, physical
attributes and cash flow generating capacity of a company's
properties. Each component of the analysis is assigned a weight
and each company is systematically ranked to determine which
company's securities are to be emphasized in the selection of
Portfolio investments.
IRA's quantitative analysis applies a proprietary database
and multi-factor regression model to rank individual securities
in the qualifying universe from highest to lowest expected
returns. Investment consideration is limited to those actively
traded securities which are expected to outperform the NAREIT
Equity Index over the subsequent three-month period. The NAREIT
Equity Index is composed of common stocks of all tax-qualified
equity REITs listed on the New York Stock Exchange, the American
Stock Exchange and the NASDAQ National Market System.
After ranking each security fundamentally and
quantitatively, diversified portfolios are created through a
statistical optimization process. This technique incorporates
such factors as expected return, volatility, correlation to other
stocks already held in the portfolio, and turnover costs.
If, in the opinion of the sub-adviser, market conditions
warrant a temporary defensive investment strategy, the
Portfolio's assets may be invested in money market instruments
and U.S. government securities, or held in cash or equivalents.
The Portfolio may purchase and write put and call options on
securities and securities indices. See "Risk Factors and
Policies Relevant to the Portfolios."
For taxable clients, a portion of the dividends paid by a
REIT may be considered return on capital and would not currently
be regarded as taxable income. Therefore, depending upon an
individual's tax bracket, the dividend yield may have a higher
tax effective yield.
International Value Portfolio
The investment objective of the International Value
Portfolio is to achieve a high total return on investment through
capital appreciation and current income, without regard to U.S.
or foreign tax considerations. The Portfolio seeks to achieve
its objective by investing at least 65% of its total assets in a
diversified portfolio of foreign equity securities, consisting of
common stocks, preferred stocks, warrants, and securities
convertible into common stock. Equity securities may include
foreign securities registered and traded in U.S. markets, foreign
securities traded in foreign markets and ADRs issued as evidence
of ownership of foreign securities. The subadviser intends to
hold securities in its portfolio of companies domiciled in at
least four countries. Moreover, consistent with its objective of
current income, the Portfolio may invest up to 35% of its total
assets in debt securities rated at the time of investment as
investment grade or, if unrated, determined by the sub-adviser to
be of comparable quality. For a description of these ratings and
a discussion of factors relevant to a determination that an
unrated security is of comparable quality, see Appendix A to the
Statement of Additional Information.
Although the Portfolio intends to invest principally in
securities of companies in developed nations, including Europe
and the Pacific Rim, it may also invest up to 20% of its total
assets in equity securities of companies domiciled in emerging
market countries. See "Risk Factors and Policies Relevant to the
Portfolios - Foreign Securities, Emerging Markets" below for a
discussion of the risks associated with such investments.
ICM has access to the data and research of the Global Asset
Allocation Committee of its parent company, INVESCO PLC. This
worldwide data and research from the parent company, together
with the sub-adviser's proprietary database consisting primarily
of large and medium capitalization non-U.S. companies, provide
investment research and information which aid ICM in determining
which stocks are selected for the Portfolio.
Stocks within the sub-adviser's database are subjected to
proprietary computer analytical systems designed to compare the
price of each stock to various factors which include
shareholders' equity per share, historic return on equity, and
the company's ability to reinvest earnings for future growth or
to pay earnings in the form of dividends. The results of this
analysis are then used to assist ICM in determining the relative
value of each stock. Each stock's final selection is based
primarily upon ICM's opinion of the relative value of the stock
and takes into account the company's historic and current
operating results combined with an analysis of the likelihood of
favorable operating results being extended into future years.
The final selection of a stock for the portfolio may also take
into account the sub-adviser's opinion of the attractiveness of
the stock to the portfolio as a whole based on diversification
and risk considerations.
ICM does not make country or industry allocation decisions
based on worldwide market or industry forecasts. Consequently,
the industry and country weightings in the portfolio tend to be a
by-product of the stock selection process and portfolio
construction. Given the difficulty of profitably applying
aggressive currency management over long periods of time, ICM
tends to incorporate currency hedging strategies only at the
extremes of relative valuation ranges.
When, in the judgment of the sub-adviser, market, business
or economic conditions warrant employing temporary defensive
measures, the sub-adviser may invest all or part of the assets of
the Portfolio temporarily in securities of U.S. issuers and may,
for temporary defensive purposes, invest without limit in (i)
money market securities denominated in dollars or in the currency
of any foreign country and issued by entities organized in the
U.S. or any foreign country, such as short-term (less than 12
months to maturity) and medium-term (not greater than five years
to maturity) obligations issued or guaranteed by the U.S.
Government or the government of a foreign country, their agencies
or instrumentalities, (ii) finance company and corporate
commercial paper and other short-term corporate obligations, in
each case rated Prime-1 by Moody's or A or better by S&P or, if
unrated, of comparable quality as determined by the sub-adviser,
and (iii) repurchase agreements with banks and broker-dealers
with respect to such securities.
Although the Portfolio invests principally in common stocks,
it may also enter into transactions in options on securities,
securities indices and currencies, forward currency contracts,
futures contracts and related options, and swap agreements. See
"Risk Factors and Policies Relevant to the Portfolios."
Cash Management Portfolio
The Cash Management Portfolio's investment objective is to
achieve as high a level of current income, without regard to
federal income tax considerations, as is consistent with the
preservation of capital and the maintenance of liquidity. The
Portfolio seeks to achieve its objective through investment in a
diversified portfolio of high-quality, short-term "money market"
instruments. These instruments consist of obligations issued or
guaranteed by the U.S. Government or any of its agencies or
instrumentalities, and U.S. dollar-denominated certificates of
deposit, time deposits, bankers' acceptances, commercial paper,
repurchase agreements, and corporate obligations. For a
description of these instruments, see Appendix A to the Statement
of Additional Information. The Portfolio may also place a
portion of its assets in interest-bearing accounts with
qualifying banks provided the Portfolio is free to withdraw its
assets at any time without suffering any interest reduction or
other penalty. Because the Portfolio invests in high quality,
short-term debt obligations, its ability to achieve a high level
of current income is limited in comparison to mutual funds that
invest in securities which present a greater credit risk.
The Portfolio will not purchase any security which has a
maturity in excess of 12 months. Notwithstanding this
limitation, the Portfolio may purchase a security with a maturity
greater than 375 days which is subject to a demand feature which
reduces the remaining maturity to 375 days or less, if the demand
feature is unconditional and is rated by at least two major
rating agencies, or by the only rating agency that has assigned a
rating, in the highest short term rating category, or comparable
unrated securities. The dollar-weighted average maturity of the
Portfolio will not exceed 90 days. The Portfolio seeks to
maintain a constant net asset value of $1.00 per share, although
there can be no assurance that this will be achieved. See
"Computation of Net Asset Value".
Investments by the Portfolio must present minimal credit
risk and be rated within one of the two highest rating categories
for short-term debt obligations by at least two nationally
recognized statistical rating organizations ("NRSROs") or, if
only one NRSRO has assigned a rating, by that agency. Purchases
of securities which are unrated or rated only by one rating
agency must be approved or ratified by the Directors. Securities
which are rated (or that have been issued by an issuer that is
rated with respect to a class of short-term debt obligations, or
any security within that class, comparable in priority and
quality with such securities) in the highest category by at least
two NRSROs are designated "First Tier Securities." Securities
rated in the top two categories by at least two NRSROs, but which
are not rated in the highest category by two or more NRSROs, are
designated "Second Tier Securities." Securities which are unrated
may be purchased only if they are deemed to be of comparable
quality to rated securities. ISI, as investment adviser, shall
determine whether a security presents minimal credit risk under
procedures adopted by the Board of Directors.
The Portfolio may not invest more than 5% of its total
assets in the securities of any one issuer, except this
limitation shall not apply to U.S. Government securities and
repurchase agreements thereon. The Portfolio may, however,
invest more than 5% of its total assets in the First Tier
Securities of a single issuer for a period of up to three
business days after the purchase thereof, although the Portfolio
may not make more than one such investment at any one time.
Further, the Portfolio will not invest more than the greater of
1% of its total assets or one million dollars, measured at the
time of investment, in the securities of a single issuer which
were Second Tier Securities when acquired by the Portfolio. In
addition, the Portfolio may not invest more than 5% of its total
assets in securities which were Second Tier Securities when
acquired.
RISK FACTORS AND POLICIES RELEVANT TO THE PORTFOLIOS
Repurchase Agreements. Each of the Portfolios, except the
Equity Portfolio, may engage in repurchase agreements. A
repurchase agreement, which may be considered a "loan" under the
Investment Company Act of 1940, as amended (the "1940 Act"), is a
transaction in which a fund purchases a security and
simultaneously commits to sell the security to the seller at an
agreed-upon price and date (usually not more than seven days)
after the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which
is unrelated to the coupon rate or maturity of the purchased
security. A fund's risk is limited to the ability of the seller
to pay the agreed-upon amount on the delivery date. In the
opinion of management this risk is not material; if the seller
defaults, the underlying security constitutes collateral for the
seller's obligations to pay. This collateral, equal to or in
excess of 100% of the repurchase agreement, will be held by the
custodian for the particular Portfolio's assets. However, in the
absence of compelling legal precedents in this area, there can be
no assurance that the Portfolio will be able to maintain its
rights to such collateral upon default of the issuer of the
repurchase agreement. To the extent that the proceeds from a
sale upon a default in the obligation to repurchase are less than
the repurchase price, the particular Portfolio would suffer a
loss. It is intended (but not required) that at no time will the
market value of any of the Portfolio's securities subject to
repurchase agreements exceed 50% (75% as to the Cash Management
Portfolio) of the total assets of such Portfolio entering into
such agreement. It is intended for these Portfolios to enter
into repurchase agreements with commercial banks and securities
dealers. The Board of Directors will monitor the
creditworthiness of such entities.
Foreign Securities. The MultiFlex and International Value
Portfolios may invest directly in foreign equity securities and
the Equity, Flex, MultiFlex and International Value Portfolios
may invest in foreign securities represented by ADRs, as
described below. The MultiFlex, International Value and Relative
Return Bond Portfolios may also invest in foreign
currency-denominated fixed income securities. Investing in
securities issued by companies whose principal business
activities are outside the United States may involve significant
risks not present in domestic investments. For example, there is
generally less publicly available information about foreign
companies, particularly those not subject to the disclosure and
reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing,
and financial reporting requirements and standards of practice
comparable to those applicable to domestic issuers. Investments
in foreign securities also involve the risk of possible adverse
changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal
of cash or other assets of the Portfolio, political or financial
instability, or diplomatic and other developments which could
affect such investments. Further, economies of particular
countries or areas of the world may differ favorably or
unfavorably from the economy of the United States. Foreign
securities often trade with less frequency and volume than
domestic securities and therefore may exhibit greater price
volatility. Additional costs associated with an investment in
foreign securities may include higher custodial fees than apply
to domestic custodial arrangements, and transaction costs of
foreign currency conversions.
ADRs provide a method whereby the Equity, Flex, MultiFlex
and International Value Portfolios may invest in securities
issued by companies whose principal business activities are
outside the United States. These securities will not be
denominated in the same currency as the securities into which
they may be converted. Generally, ADRs, in registered form, are
designed for use in U.S. securities markets.
ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities, and
may be issued as sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities
trade in the form of ADRs. In unsponsored programs, the issuer
may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may
be easier to obtain financial information from an issuer that has
participated in the creation of a sponsored program. The Equity
and Flex Portfolios intend to invest only in sponsored ADRs. The
MultiFlex and International Value Portfolios may invest in both
sponsored and unsponsored ADRs.
Since certain Portfolios are authorized to invest in
securities denominated or quoted in currencies other than the
U.S. dollar, changes in foreign currency exchange rates relative
to the U.S. dollar will affect the value of securities in the
Portfolios and the unrealized appreciation or depreciation of
such investments. Changes in foreign currency exchange rates
relative to the U.S. dollar will also affect a Portfolio's yield
on assets denominated in currencies other than the U.S. dollar.
Emerging Markets. The International Value Portfolio may
invest in securities of companies domiciled in emerging market
countries. Investment in emerging market countries presents
risks greater in degree than, and in addition to, those presented
by investment in foreign issuers in general. A number of
emerging market countries restrict, to varying degrees, foreign
investment in stocks. Repatriation of investment income,
capital, and the proceeds of sales by foreign investors may
require governmental registration and/or approval in some
emerging market countries. A number of the currencies of
developing countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may
occur subsequent to investments in these currencies by the
International Value Portfolio. Inflation and rapid fluctuations
in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain
emerging market countries. Many of the emerging securities
markets are relatively small, have low trading volumes, suffer
periods of relative illiquidity, and are characterized by
significant price volatility. There is a risk in emerging market
countries that a future economic or political crisis could lead
to price controls, forced mergers of companies, expropriation or
confiscatory taxation, seizure, nationalization, or creation of
government monopolies, any of which may have a detrimental effect
on the Portfolio's investments.
Options. Each Portfolio, except the Equity and Cash
Management Portfolios, may purchase and write put and call
options on securities, as described in this Prospectus and in the
Statement of Additional Information. A Portfolio may write a
call or put option only if the option is "covered" by the
Portfolio holding a position in the underlying securities or by
other means which would permit immediate satisfaction of the
Portfolio's obligation as writer of the option. The purchase and
writing of options involves certain risks. During the option
period, the covered call writer has, in return for the premium on
the option, given up the opportunity to profit from a price
increase in the underlying securities above the exercise price,
but, as long as its obligation as a writer continues, has
retained the risk of loss should the price of the underlying
security decline. The writer of an option has no control over
the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an
exercise notice, it cannot effect a closing purchase transaction
in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price. If a
put or call option purchased by the Portfolio is not sold when it
has remaining value, and if the market price of the underlying
security, in the case of a put, remains equal to or greater than
the exercise price or, in the case of a call, remains less than
or equal to the exercise price, the Portfolio will lose its
entire investment in the option. Also, where a put or call
option on a particular security is purchased to hedge against
price movements in a related security, the price of the put or
call option may move more or less than the price of the related
security. There can be no assurance that a liquid market will
exist when a Portfolio seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed
on the options markets, a Portfolio may be unable to close out a
position.
The MultiFlex and International Value Portfolios may also
buy or sell put and call options on foreign securities and
foreign currencies. Currency options traded on U.S. or other
exchanges may be subject to position limits which may limit the
ability of the Portfolios to reduce foreign currency risk using
such options. Over-the-counter options differ from traded
options in that they are two-party contracts with price and other
terms negotiated between buyer and seller and generally do not
have as much market liquidity as exchange-traded options.
Futures Contracts and Options on Futures Contracts. As
described under "Investment Objectives and Policies," the Income,
Flex, MultiFlex, Relative Return Bond and International Value
Portfolios may invest in interest rate futures contracts and
options thereon ("futures options"); the MultiFlex and Relative
Return Bond Portfolios may enter into commodity futures contracts
and options; the MultiFlex, Relative Return Bond and
International Value Portfolios may enter into foreign currency
futures contracts and options; and the MultiFlex Portfolio may
enter into stock index futures contracts and options thereon.
Such contracts may not be entered into for speculative purposes.
When a Portfolio purchases a futures contract, an amount of cash,
U.S. Government securities, or money market instruments equal to
the fair market value less initial and variation margin of the
futures contract will be deposited in a segregated account to
collateralize the position and thereby ensure that such futures
contract is "covered."
There are several risks associated with the use of futures
and futures options. The value of a futures contract may
decline. With respect to transactions for hedging, there can be
no guarantee that there will be a correlation between price
movements in the hedging vehicle and in the portfolio securities
being hedged. An incorrect correlation could result in a loss on
both the hedged securities in a Portfolio and the hedging vehicle
so that the portfolio return might have been greater had hedging
not been attempted. There can be no assurance that a liquid
market will exist at a time when a Portfolio seeks to close out a
futures contract or a futures option position. Most futures
exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once
the daily limit has been reached on a particular contract, no
trades may be made that day at a price beyond that limit. In
addition, certain of these instruments are relatively new and
without a significant trading history. As a result, there is no
assurance that an active secondary market will develop or
continue to exist. Lack of a liquid market for any reason may
prevent a Portfolio from liquidating an unfavorable position and
the Portfolio would remain obligated to meet margin requirements
until the position is closed.
The Portfolios will only enter into futures contracts or
futures options which are standardized and traded on a U.S. or
foreign exchange or board of trade, or similar entity, or quoted
on an automated quotation system. A Portfolio will use financial
futures contracts and related options only for "bona fide
hedging" purposes, as such term is defined in applicable
regulations of the Commodity Futures Trading Commission, or, with
respect to positions in financial futures and related options
that do not qualify as "bona fide hedging" positions, will enter
into such non-hedging positions only to the extent that aggregate
initial margin deposits plus premiums paid by it for open futures
option positions, less the amount by which any such positions are
"in-the-money," would not exceed 5% of the Portfolio's total
assets.
Forward Foreign Currency Exchange Contracts. The MultiFlex
and International Value Portfolios may enter into forward foreign
currency exchange contracts ("forward contracts") to attempt to
minimize the risk to the Portfolio from adverse changes in the
relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific
currency for an agreed price at a future date which is
individually negotiated and privately traded by currency traders
and their customers. Such contracts may not be entered into for
speculative purposes. A Portfolio will not enter into forward
contracts if, as a result, more than 10% of the value of its
total assets would be committed to the consummation of such
contracts, and will segregate assets or "cover" its positions
consistent with requirements under the 1940 Act to avoid any
potential leveraging of the Portfolio.
Swap Agreements. The MultiFlex and International Value
Portfolios may enter into interest rate, index and currency
exchange rate swap agreements for purposes of attempting to
obtain a particular desired return at a lower cost to the
Portfolio than if it had invested directly in an instrument that
yielded that desired return. Swap agreements are two-party
contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a
standard "swap" transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized
on particular predetermined investments or instruments. The
gross returns to be exchanged or "swapped" between the parties
are calculated with respect to a "notional amount," I.E., the
return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a
particular index. Commonly used swap agreements include interest
rate caps, under which, in return for a premium, one party agrees
to make payments to the other to the extent that interest rates
exceed a specified rate, or "cap"; interest rate floors, under
which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates fall below a
specified level, or "floor"; and interest rate collars, under
which a party sells a cap and purchases a floor or vice versa in
an attempt to protect itself against interest rate movements
exceeding given minimum or maximum levels.
The "notional amount" of the swap agreement is only a
fictive basis on which to calculate the obligations which the
parties to a swap agreement have agreed to exchange. Most swap
agreements entered into by a Portfolio would calculate the
obligations of the parties to the agreement on a "net basis."
Consequently, a Portfolio's obligations (or rights) under a swap
agreement will generally be equal only to the net amount to be
paid or received under the agreement based on the relative values
of the positions held by each party to the agreement (the "net
amount"). Obligations under a swap agreement will be accrued
daily (offset against amounts owing to the Portfolio) and any
accrued but unpaid net amounts owed to a swap counterparty will
be covered by the maintenance of a segregated account consisting
of cash, U.S. Government securities, or high grade debt
obligations, to avoid any potential leveraging of the portfolio.
A Portfolio will not enter into a swap agreement with any single
party if the net amount owed or to be received under existing
contracts with that party would exceed 5% of the Portfolio's
total assets.
Mortgage-Related Securities. As described under "Investment
Objectives and Policies," the Income Portfolio may invest in
mortgage pass-through securities and CMOs, and the MultiFlex and
Relative Return Bond Portfolios may invest in mortgage-related
securities, including CMOs and mortgage-backed bonds, and asset-
backed securities.
Mortgage pass-through securities are securities representing
interests in "pools" of mortgage loans in which payments of both
interest and principal on the securities are generally made
monthly, in effect "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the
securities (net of fees paid to the issuer or guarantor of the
securities).
Payment of principal and interest on some mortgage pass-
through securities may be guaranteed by the full faith and credit
of the U.S. Government (in the case of securities guaranteed by
the Government National Mortgage Association ("GNMA")); or
guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by the Federal
National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"), which are supported only by the
discretionary authority of the U.S. Government to purchase the
agency's obligations). For more information on GNMA certificates
and FNMA and FHLMC mortgage-backed obligations, see "Mortgage-
Related Securities" in the Statement of Additional Information.
CMOs are securities which are typically collateralized by
portfolios of mortgage pass-through securities guaranteed by
GNMA, FNMA, or FHLMC. Similar to a bond, interest and pre-paid
principal on a CMO are paid, in most cases, semiannually. CMOs
are structured into multiple classes, with each class bearing a
different stated maturity. Monthly payments of principal,
including prepayments, are first returned to investors holding
the shortest maturity class; investors holding the longer
maturity classes will receive principal only after the first
class has been retired. CMOs that are issued or guaranteed by
the U.S. Government or by any of its agencies or
instrumentalities will be considered U.S. Government securities
by the Portfolios, while other CMOs, even if collateralized by
U.S. Government securities, will have the same status as other
privately issued securities for purposes of applying a
Portfolio's diversification tests.
Mortgage-backed bonds are general obligations of the issuer
fully collateralized directly or indirectly by a pool of
mortgages. The mortgages serve as collateral for the issuer's
payment obligations on the bonds but interest and principal
payments on the mortgages are not passed through either directly
(as with GNMA certificates and FNMA and FHLMC pass-through
securities) or on a modified basis (as with CMOs). Accordingly,
a change in the rate of prepayments on the pool of mortgages
could change the effective maturity of a CMO but not that of a
mortgage-backed bond (although, like many bonds, mortgage-backed
bonds can provide that they are callable by the issuer prior to
maturity).
Asset-backed securities are securities representing
interests in other types of financial assets, such as automobile-
finance receivables or credit-card receivables. Such securities
are subject to many of the same risks as are mortgage-backed
securities, including prepayment risks and risks of foreclosure.
They may or may not be secured by the receivables themselves or
may be unsecured obligations of their issuers. For further
information on these securities, see the Statement of Additional
Information.
Risks of mortgage-related securities. Investment in
mortgage-backed securities poses several risks, including
prepayment, market, and credit risk. Prepayment risk reflects
the risk that borrowers may prepay their mortgages faster than
expected, thereby affecting the investment's average life and
perhaps its yield. Whether or not a mortgage loan is prepaid is
almost entirely controlled by the borrower. Borrowers are most
likely to exercise prepayment options at the time when it is
least advantageous to investors, generally prepaying mortgages as
interest rates fall, and slowing payments as interest rates rise.
Besides the effect of prevailing interest rates, the rate of
prepayment and refinancing of mortgages may also be affected by
home value appreciation, ease of the refinancing process and
local economic conditions.
Market risk reflects the risk that the price of the security
may fluctuate over time. The price of mortgage-backed securities
may be particularly sensitive to prevailing interest rates, the
length of time the security is expected to be outstanding, and
the liquidity of the issue. In a period of unstable interest
rates, there may be decreased demand for certain types of
mortgage-backed securities, and a fund invested in such
securities wishing to sell them may find it difficult to find a
buyer, which may in turn decrease the price at which they may be
sold.
Credit risk reflects the risk that a Portfolio may not
receive all or part of its principal because the issuer or credit
enhancer has defaulted on its obligations. Obligations issued by
U.S. government-related entities are guaranteed as to the payment
of principal and interest, but are not backed by the full faith
and credit of the U.S. government. The performance of private
label mortgage-backed securities, issued by private institutions,
is based on the financial health of those institutions. With
respect to GNMA certificates, although GNMA guarantees timely
payment even if homeowners delay or default, tracking the "pass-
through" payments may, at times, be difficult.
For further information, see the Statement of Additional
Information.
Zero Coupon Obligations. The MultiFlex and Relative Return
Bond Portfolios may invest in zero coupon obligations, which are
fixed-income securities that do not make regular interest
payments. Instead, zero coupon obligations are sold at
substantial discounts from their face value. The Portfolio
accrues income on these investments for tax and accounting
purposes, which is distributable to shareholders and which,
because no cash is received at the time of accrual, may require
the liquidation of other portfolio securities to satisfy
distribution obligations, in which case the Portfolio will forego
the purchase of additional income-producing assets with these
funds. The difference between a zero coupon obligation's issue
or purchase price and its face value represents the imputed
interest an investor will earn if the obligation is held until
maturity. Zero coupon obligations may offer investors the
opportunity to earn higher yields than those available on
ordinary interest-paying obligations of similar credit quality
and maturity. However, zero coupon obligation prices may also
exhibit greater price volatility than ordinary fixed-income
securities because of the manner in which their principal and
interest are returned to the investor.
Real Estate Industry Securities. Because each of the
MultiFlex and Real Estate Portfolios invests in securities of
companies engaged in the real estate industry, it could
conceivably own real estate directly as a result of a default on
debt securities it owns. The Portfolio, therefore, may be
subject to certain risks associated with the direct ownership of
real estate, including declines in the value of real estate,
risks related to general and local economic conditions, adverse
changes in the climate for real estate, increases in property
taxes and operating expenses, changes in zoning laws, casualty or
condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants, and
increases in interest rates.
In addition to the risks described above, equity REITs may
be affected by any changes in the value of the underlying
property owned by the trusts, while mortgage REITs may be
affected by the quality of any credit extended. Equity and
mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing
single or a limited number of projects. Such trusts are also
subject to heavy cash flow dependency, defaults by borrowers,
self-liquidation, and the possibility of failing to qualify for
tax-free pass-through of income under the Internal Revenue Code
and of failing to maintain exemption from the 1940 Act. Changes
in interest rates may also affect the value of debt securities
held by the Portfolio. By investing in REITs indirectly through
the Portfolio, a shareholder will bear not only his proportionate
share of the expenses of the Portfolio, but also, indirectly,
similar expenses of the REITs.
High Yield/High Risk Securities. The MultiFlex and Relative
Return Bond Portfolios may invest up to 5% and up to 10% of
assets, respectively, in securities rated lower than Baa by
Moody's or BBB by S&P, but rated at least Ba by Moody's or BB by
S&P or, if unrated, determined by the Portfolio's sub-adviser to
be of comparable quality. Securities rated lower than Baa by
Moody's or lower than BBB by S&P are sometimes referred to as
"high yield," "high risk," or "junk" bonds. In addition,
securities rated Baa are considered by Moody's to have some
speculative characteristics.
Investing in high yield securities involves special risks in
addition to the risks associated with investments in higher rated
debt securities. High yield securities may be regarded as
predominately speculative with respect to the issuer's continuing
ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers of high yield securities may be more
complex than for issuers of higher quality debt securities, and
the ability of a Portfolio to achieve its investment objective
may, to the extent of its investments in high yield securities,
be more dependent upon such creditworthiness analysis than would
be the case if the Portfolio were investing in higher quality
securities.
High yield securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than higher grade securities. The prices of high yield
securities have been found to be less sensitive to interest rate
changes than more highly rated investments, but more sensitive to
adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in high yield
security prices because the advent of a recession could lessen
the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If the issuer of high
yield securities defaults, a Portfolio may incur additional
expenses to seek recovery. In the case of high yield securities
structured as zero coupon or payment-in-kind securities, the
market prices of such securities are affected to a greater extent
by interest rate changes, and therefore tend to be more volatile
than securities which pay interest periodically and in cash.
The secondary markets on which high yield securities are
traded may be less liquid than the market for higher grade
securities. Less liquidity in the secondary trading markets
could adversely affect and cause large fluctuations in the daily
net asset value of a Portfolio's shares. Adverse publicity and
investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield
securities, especially in a thinly traded market.
There may be special tax considerations associated with
investing in high yield securities structured as zero coupon or
payment-in-kind securities. A Portfolio records the interest on
these securities as income even though it receives no cash
interest until the security's maturity or payment date. A
Portfolio will be required to distribute all or substantially all
such amounts annually and may have to obtain the cash to do so by
selling securities which otherwise would continue to be held.
Shareholders will be taxed on these distributions.
The use of credit ratings as the sole method of evaluating
high yield securities can involve certain risks. For example,
credit ratings evaluate the safety of principal and interest
payments, not the market value risk of high yield securities.
Also, credit rating agencies may fail to change credit ratings in
a timely fashion to reflect events since the security was last
rated. The sub-adviser does not rely solely on credit ratings
when selecting securities for the Portfolios, and develops its
own independent analysis of issuer credit quality. If a credit
rating agency changes the rating of a portfolio security held by
the Portfolio, the Portfolio may retain the security if the
sub-adviser deems it in the best interest of the shareholders.
Delayed Delivery Transactions ("Forward Commitments"). The
MultiFlex, Relative Return Bond, Real Estate and International
Value Portfolios may purchase or sell securities on a when-issued
or delayed delivery basis. These transactions involve a
commitment by the Portfolio to purchase or sell securities for a
predetermined price or yield, with payment and delivery taking
place more than three days in the future, or after a period
longer than the customary settlement period for that type of
security. When delayed delivery purchases are outstanding, the
Portfolio will set aside and maintain until the settlement date
in a segregated account, cash, U.S. Government securities or high
grade debt obligations in an amount sufficient to meet the
purchase price. Typically, no income accrues on securities
purchased on a delayed delivery basis prior to the time delivery
of the securities is made, although a Portfolio may earn income
on securities it has deposited in a segregated account. When
purchasing a security on a delayed delivery basis, a Portfolio
assumes the rights and risks of ownership of the security,
including the risk of price and yield fluctuations, and takes
such fluctuations into account when determining its net asset
value. Because a Portfolio is not required to pay for the
security until the delivery date, these risks are in addition to
the risks associated with the Portfolio's other investments. If
the Portfolio remains substantially fully invested at a time when
delayed delivery purchases are outstanding, the delayed delivery
purchases may result in a form of leverage. When the Portfolio
has sold a security on a delayed delivery basis, the Portfolio
does not participate in future gains or losses with respect to
the security. If the other party to a delayed delivery
transaction fails to deliver or pay for the securities, the
Portfolio could miss a favorable price or yield opportunity or
could suffer a loss. A Portfolio may dispose of or renegotiate a
delayed delivery transaction after it is entered into, and may
sell when-issued securities before they are delivered, which may
result in a capital gain or loss.
Yankee Bonds. The Relative Return Bond Portfolio may invest
in Yankee Bonds, which are dollar-denominated obligations issued
in the U.S. capital markets by foreign banks. Yankee Bond
obligations are subject to the same risks that pertain to
domestic bond issues, notably credit risk, market risk and
liquidity risk. Such obligations are also subject, to a limited
extent, to certain sovereign risks. One such risk is the
possibility that a sovereign country might prevent capital, in
the form of dollars, from flowing across its borders. Other
risks include adverse political and economic developments, the
extent and quality of government regulation of financial markets
and institutions, the imposition of foreign withholding taxes,
and the expropriation or nationalization of foreign issuers.
Portfolio Securities Loans. Each of the Portfolios, except
the Cash Management Portfolio, may lend limited amounts of
portfolio securities (not to exceed 40% of total assets for the
Relative Return Bond Portfolio and 10% of total assets for the
Equity, Income, Flex, MultiFlex, Real Estate and International
Value Portfolios) to broker-dealers or other institutional
investors. See the Statement of Additional Information.
Portfolio Turnover. Generally, the rate of portfolio
turnover will not be a limiting factor when the Portfolios deem
changes appropriate; however, it is anticipated that no
Portfolio's annual portfolio turnover rate generally will exceed
100%. In any particular year, however, market conditions could
result in portfolio activity at a greater rate than anticipated.
Portfolio turnover rate, along with the Fund's brokerage
allocation policies, are discussed in the Statement of Additional
Information.
General. No assurance is or can be given that any of the
Portfolios will accomplish its investment objectives, as there is
some degree of uncertainty in every investment.
INVESTMENT RESTRICTIONS
The Directors of the Fund, on behalf of the Portfolios, have
adopted certain investment restrictions which are fundamental
policies and may not be changed as to any Portfolio without the
approval of the holders of a majority of such Portfolio's
outstanding voting securities (which in this Prospectus means, as
to each Portfolio, the vote of the lesser of (i) 67% or more of
the voting securities present at a meeting, if the holders of
more than 50% of the outstanding voting securities are present or
represented by proxy, or (ii) more than 50% of the outstanding
voting securities). The Statement of Additional Information
contains, under the heading "Investment Restrictions," specific
enumerated investment restrictions which govern the investments
of each Portfolio. The Fund's investment restrictions include,
among others, limitations with respect to the percentage of the
value of any Portfolio's total assets that may be invested in any
one company or any one industry.
All of the Portfolios are "diversified" for purposes of the
1940 Act. It is a fundamental restriction applicable to the
MultiFlex, Relative Return Bond, Real Estate and International
Value Portfolios that, with respect to 75% of its portfolio, the
Portfolio will not purchase a security (other than a security
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, as a result, more than 5% of the assets of
the Portfolio would be invested in the securities of the issuer.
With respect to the Equity, Income, Flex and Cash Management
Portfolios, these diversification requirements are applied to
100% of the Portfolio's total assets.
Except for those investment objectives of a Portfolio
specifically identified as fundamental, all investment policies
and practices described in this Prospectus and in the Statement
of Additional Information are not fundamental and therefore may
be changed by the Board of Directors without shareholder
approval. Such changes may result in a Portfolio having
investment policies different from the investment policies which
the shareholder considered appropriate at the time of investment
in the Fund. For a description of each Portfolio's fundamental
and non-fundamental investment policies, see "Investment
Restrictions" in the Statement of Additional Information.
<PAGE>
MANAGEMENT OF THE FUND
The investment adviser to each of the Portfolios is INVESCO
Services, Inc. ("ISI" or the "Adviser"), a Georgia corporation
having its principal office at 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309. ISI has been engaged in the investment
advisory business since 1983, and is a wholly owned subsidiary of
INVESCO Capital Management, Inc., whose business is described
below.
The sub-adviser to the Equity, Income, Flex, Cash Management
and International Value Portfolios is INVESCO Capital Management,
Inc. ("ICM"), a Delaware corporation having its principal office
at 1315 Peachtree Street, N.E., Atlanta, Georgia 30309. ICM also
has an advisory office in Coral Gables, Florida, and a marketing
office in San Francisco, California and has been engaged in the
investment advisory business since 1979. ICM currently manages
in excess of $27 billion of assets for its customers, and it
believes it has one of the nation's largest discretionary
portfolios of tax-exempt accounts (such as pension and
profit-sharing funds for corporations and state and local
governments). ICM currently sponsors one investment company,
INVESCO Treasurer's Series Trust, which consists of four
portfolios. In addition, ICM furnishes investment advice to the
following other investment companies: The Large Cap Value Fund of
the Prudential Target Portfolio Trust, the Chaconia Growth &
Income Fund, certain portfolios of the INVESCO Variable
Investment Funds, Inc., and certain portfolios of INVESCO Value
Trust. Portfolios are supervised by investment managers who
utilize ICM's facilities for investment research and analysis,
review of current economic conditions and trends, and
consideration of long-range investment policy matters.
The sub-adviser to the MultiFlex and Relative Return Bond
Portfolios is INVESCO Management & Research, Inc. ("IMR"),
formerly Gardner and Preston Moss, Inc., a Massachusetts
corporation having its principal office at 101 Federal Street,
Boston, Massachusetts 02110. IMR has been engaged in the
investment advisory business since 1969. IMR currently manages
$1.7 billion of assets for its customers, predominately in
pension and endowment accounts. IMR currently sponsors one
investment company, The Commonwealth Investment Trust, which
consists of one portfolio.
The sub-adviser to the Real Estate Portfolio is INVESCO
Realty Advisors, Inc. ("IRA"), a Texas corporation having its
principal office at One Lincoln Centre, Suite 1200, 5400 LBJ
Freeway/LB-2, Dallas, Texas 75240. IRA has been a registered
investment adviser and qualified professional asset manager since
1983. IRA currently manages $2.3 billion of assets for its
customers. As of December 31, 1994, IRA's portfolio contained 74
properties totalling over 18.2 million square feet of commercial
real estate and 3,686 apartment units. IRA does not currently
advise any other investment companies.
ISI and ICM provide general investment advice and portfolio
management to the Equity, Income, Flex, Cash Management and
International Value Portfolios. ISI and IMR provide general
investment advice and portfolio management to the MultiFlex and
Relative Return Bond Portfolios. ISI and IRA provide general
investment advice and portfolio management to the Real Estate
Portfolio. The controlling person of ISI, ICM, IRA and IMR is
INVESCO PLC, an English public limited company which is a holding
company of global investment managers.
Under the respective Investment Advisory and Sub-Advisory
Agreements (the "Advisory Agreements") with the Fund, the
Adviser, subject to the supervision of the Directors, and the
sub-advisers, subject to the supervision of the Adviser and the
Directors (see the Statement of Additional Information under
"Management of the Fund-Directors and Officers"), and in
conformance with each Portfolio's stated policies, manage the
Portfolios' investment operations. In this regard, it will be
the responsibility of the respective sub-adviser (subject to the
supervision of the Adviser) not only to make investment decisions
for the Portfolios, but also to place purchase and sale orders
for the portfolio transactions of the Portfolios. The Adviser
and sub-advisers may follow a policy of considering sales of
shares of the Fund as a factor in the selection of broker-dealers
to execute portfolio transactions. (See the Statement of
Additional Information under "Brokerage and Portfolio
Transactions"). In fulfilling its responsibilities, the Adviser
may engage the services of other investment managers with respect
to one or more of the Portfolios, subject to approval of the
Board of Directors.
Information about the individual portfolio managers
responsible for management of the Fund, including their business
experience for the past five years, is provided below.
<PAGE>
EQUITY PORTFOLIO
Michael C. Harhai, Portfolio Manager, ICM (March 1993 to
C.F.A. present); Senior Vice President and
Portfolio Manager Manager, Sovran Capital Management Corp.
(Jan. 1992 to March 1993); Senior Vice
President and Portfolio Manager,
C&S/Sovran Capital Management (July 1991
to Jan. 1992); Senior Vice President and
Portfolio Manager, Citizens & Southern
Investment Advisors, Inc. (Jan. 1984 to
July 1991). Chartered Financial Analyst.
Trustee, Atlanta Society of Financial
Analysts. Mr. Harhai has managed the
Equity Portfolio since July 1993.
R. Terrence Irrgang, Portfolio Manager, ICM (April 1992 to
C.F.A. present); Consultant, Towers, Perrin,
Assistant Portfolio Forster & Crosby (Oct. 1988 to April
Manager 1992). Chartered Financial Analyst.
Atlanta Society of Financial Analysts. Mr.
Irrgang has assisted in managing the
Equity Portfolio since July 1993.
INCOME PORTFOLIO
James O. Baker Portfolio Manager, ICM (Oct. 1992 to
Portfolio Manager present); Portfolio Manager, Willis
Investment Counsel (Dec. 1990 to Oct.
1992); Broker, Morgan Keegan (Dec. 1989 to
Dec. 1990); Broker, Drexel Burnham Lambert
(April 1985 to Dec. 1990). Mr. Baker has
managed the Income Portfolio since July
1993.
Ralph H. Jenkins, Vice President, ICM (Dec. 1991 to
Jr., C.F.A. present); Portfolio Manager, ICM (Jan.
Assistant Portfolio 1988 to present). Chartered Financial
Manager Analyst. Chartered Investment Counselor.
Atlanta Society of Financial Analysts.
Mr. Jenkins has assisted in managing the
Income Portfolio since 1989.
FLEX PORTFOLIO
Edward C. Mitchell, President and Director, ICM (Jan. 1992 to
Jr., C.F.A. present); Vice President and Director, ICM
Portfolio Manager (Jan. 1979 to Dec. 1991). Chartered
Financial Analyst. Chartered Investment
Counselor. Past President, Atlanta
Society of Financial Analysts. Mr.
Mitchell has managed the Flex Portfolio
since its commencement of operations in
February 1988.
David S. Griffin, Portfolio Manager, ICM (March 1991 to
C.F.A. present); Mutual Fund Sales, ISI (Feb.
Assistant Portfolio 1986 to March 1991). Chartered Financial
Manager Analyst. Atlanta Society of Financial
Analysts. Mr. Griffin has assisted in
managing the Flex Portfolio since July
1993.
MULTIFLEX PORTFOLIO
Robert S. Slotpole Vice President and Portfolio Manager, IMR
(June 1993 to present); Portfolio Manager,
Hamilton Partners (February 1992 to June
1993); Vice President and Portfolio
Manager, The First Boston Corporation (May
1985 to February 1992). Mr. Slotpole is
responsible for the asset allocation
decision regarding the Portfolio's
investments in its five asset classes.
Mr. Slotpole is assisted by a team of
analysts, each of whom specializes in one
of the asset classes in which the
Portfolio may invest. Each analyst is
also responsible for the security
selection in his asset class within the
overall asset allocation parameters and
security selection methodologies
established by IMR. Mr. Slotpole has
managed the MultiFlex Portfolio since July
1, 1994.
RELATIVE RETURN BOND PORTFOLIO
William M. McCarthy, Senior Vice President and Portfolio
C.F.A. Manager, IMR (Oct. 1987 to present).
Chartered Financial Analyst. Mr. McCarthy
has managed the Relative Return Bond
Portfolio since its commencement of
operations in November 1993.
REAL ESTATE PORTFOLIO
Daniel P. O'Connor, Portfolio Manager, IRA (July 1994 to
C.F.A. present); Supervisor - Investments, Delta
Air Lines, Inc. (November 1993 to June
1994); Senior Investment Analyst, Delta
Air Lines, Inc. (November 1985 to November
1993). Chartered Financial Analyst.
Dallas Association of Investment Analysts.
Mr. O'Connor has managed the Real Estate
Portfolio since its commencement of
operations in May 1995. Mr. O'Connor
leads an investment team of three
analysts, each of whom is responsible for
specific sectors of the market.
INTERNATIONAL VALUE PORTFOLIO
W. Lindsay Davidson Portfolio Manager, ICM (April 1993 to
present); Portfolio Manager, INVESCO Asset
Management Limited (May 1984 to March
1993). Mr. Davidson has managed the
International Value Portfolio since its
commencement of operations in May 1995.
CASH MANAGEMENT PORTFOLIO
George S. Robinson, Vice President, ICM (Dec. 1991 to
Jr. present); Portfolio Manager, ICM (Jan.
1987 to present); Registered
Representative, ISI (Jan. 1987 to
present); President, INVESCO Treasurer's
Series Trust (Jan. 1987 to present).
Insurance and Money Market Specialist.
Atlanta Society of Financial Analysts.
Mr. Robinson has managed the Cash
Management Portfolio since 1988.
For the services to be rendered and the expenses to be
assumed by the Adviser under the Investment Advisory Agreement,
each of the Portfolios pays to the Adviser an advisory fee which
is computed daily and paid as of the last day of each month on
the basis of each Portfolio's daily net asset value, using for
each daily calculation the most recently determined net asset
value of the Portfolio. (See "Computation of Net Asset Value").
On an annual basis, the advisory fee is equal to 0.75% of the
average net asset value of the Portfolio for each of the Equity,
Income and Flex Portfolios; 0.90% of the average net asset value
of the Real Estate Portfolio; 1.00% of the average net asset
value of each of the MultiFlex and International Value
Portfolios; and 0.50%of the average net asset value of the
Portfolio for each of the Cash Management and Relative Return
Bond Portfolios. Those fees which are equal to or higher than
0.75% of average net assets are higher than those generally
charged by investment advisers to similar funds for advisory
services. However, the Adviser also provides certain supervisory
and administrative services to the Fund pursuant to the
Investment Advisory Agreement.
For services to be rendered to the Equity, Income, Flex,
Cash Management and International Value Portfolios by ICM under a
Sub-Advisory Agreement, ISI will pay to ICM a sub-advisory fee
which will be computed daily and paid as of the last day of each
month on the basis of each Portfolio's daily net asset value
using for each daily calculation the most recently determined net
asset value of the Portfolio. On an annual basis, the
sub-advisory fee is equal to 0.20% of the average net asset value
of the Portfolio for each of the Equity and Flex Portfolios,
0.10% of the average net asset value of the Portfolio for each of
the Income and Cash Management Portfolios, and, for the
International Value Portfolio, 0.35% of average net assets on the
first $50 million of assets, 0.30% of average net assets on the
next $50 million of assets, and 0.25% of average net assets on
assets in excess of $100 million.
For services to be rendered to the MultiFlex and Relative
Return Bond Portfolios by IMR under a Sub-Advisory Agreement, ISI
will pay to IMR a sub-advisory fee which will be computed daily
and paid as of the last day of each month on the basis of each
Portfolio's daily net asset value using for each daily
calculation the most recently determined net asset value of the
Portfolio. On an annual basis, the sub-advisory fees are equal
to the following: for the MultiFlex Portfolio, 0.35% of average
net assets on the first $500 million of assets and 0.25% of
average net assets on assets in excess of $500 million; for the
Relative Return Bond Portfolio, 0.10% of the average net asset
value of the Portfolio.
For services to be rendered to the Real Estate Portfolio by
IRA under a Sub-Advisory Agreements, ISI will pay to IRA a sub-
advisory fee which will be computed daily and paid as of the last
day of each month on the basis of the Portfolio's daily net asset
value using for each daily calculation the most recently
determined net asset value of the Portfolio. On an annual basis,
the sub-advisory fee is equal to 0.35% of average net assets on
the first $100 million of assets and 0.25% of average net assets
on assets in excess of $100 million.
As manager to the Fund, ISI also provides operating services
pursuant to an Operating Services Agreement with the Fund. Under
the Operating Services Agreement, each Portfolio pays to the
Manager an annual fee of 0.50% of daily net assets of the
Portfolio for providing or arranging to provide accounting, legal
(except litigation), dividend disbursing, transfer agent,
registrar, custodial, shareholder reporting, sub-accounting and
recordkeeping services and functions. The agreement provides
that the Manager pays all fees and expenses associated with these
and other functions, including, but not limited to, registration
fees, shareholder meeting fees, and proxy statement and
shareholder report expenses.
The combined effect of the Advisory Agreements, Operating
Services Agreement, and Plan of Distribution of the Fund (see
"Plan of Distribution" below) is to place a cap or ceiling on the
total expenses of each Portfolio, other than brokerage
commissions, interest, taxes, litigation, directors' fees and
expenses, and other extraordinary expenses. ISI has voluntarily
agreed to adhere to maximum expense ratios for the Portfolios.
To the extent that expenses exceed the amounts listed below, ISI
will waive its fees or reimburse the Portfolio to assure that
expenses do not exceed the designated maximum amounts. The
expense ceilings include reductions at larger asset sizes to
reflect anticipated economies of scale as the Portfolios grow in
size.
If, in any calendar quarter, the average net assets of the
Equity or Flex Portfolios are less than $500 million, expenses
shall not exceed 2.25%; on the next $500 million of net assets,
expenses shall not exceed 2.15%; on the next $1 billion of net
assets, expenses shall not exceed 2.10%; and on all assets over
$2 billion, expenses shall not exceed 2.05%. If, in any calendar
quarter, the average net assets of the Income Portfolio are less
than $250 million, expenses shall not exceed 2.25%; on the next
$250 million of net assets, expenses shall not exceed 2.15%; on
the next $250 million of net assets, expenses shall not exceed
2.10%; and on all assets over $750 million, expenses shall not
exceed 2.05%. If, in any calendar quarter, the average net
assets of the MultiFlex or International Value Portfolios are
less than $100 million, expenses shall not exceed 2.50%; on the
next $400 million of net assets, expenses shall not exceed 2.40%;
on the next $500 million of net assets, expenses shall not exceed
2.35%; on the next $1 billion of net assets, expenses shall not
exceed 2.30%; and on all assets over $2 billion, expenses shall
not exceed 2.25%. If, in any calendar quarter, the average net
assets of the Real Estate Portfolio are less than $100 million,
expenses shall not exceed 2.40%; on the next $400 million of net
assets, expenses shall not exceed 2.35%; on the next $500 million
of net assets, expenses shall not exceed 2.30%; and on all assets
over $1 billion, expenses shall not exceed 2.25%. In any
calendar year, the expenses of the Relative Return Bond Portfolio
may not exceed 1.50% of average net assets, and the expenses of
the Cash Management Portfolio may not exceed 1% of average net
assets.
THE DISTRIBUTOR
ISI, the Fund's distributor (the "Distributor"), a Georgia
corporation, is the principal underwriter of the Fund under a
separate Distribution Agreement (the "Distribution Agreement").
All of the Distributor's outstanding shares of voting stock are
owned by ICM. The Distributor is also the principal underwriter
for other investment companies. The Distributor acts as agent
upon the receipt of orders from investors. The Distributor's
principal office is located at 1355 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
The Distributor will be reimbursed for distribution-related
expenses by the Equity, Income, Flex, MultiFlex, Relative Return
Bond, Real Estate and International Value Portfolios pursuant to
the plan of distribution promulgated pursuant to Rule 12b-1 under
the 1940 Act, as described under "Plan of Distribution" herein
and in the Statement of Additional Information under
"Distribution of Shares." The Cash Management Portfolio does not
have a plan of distribution under Rule 12b-1. Shares purchased
on or after May 1, 1995 by new investors are subject to a 1% CDSC
on redemptions made within one year of purchase, the proceeds of
which are paid to the Distributor to defray its expenses in
providing certain distribution-related services to the Fund,
including the payment of a 1% sales commission to broker-dealers
who sell shares of the Fund, as described below.
PLAN OF DISTRIBUTION
Rule 12b-1 under the 1940 Act ("Rule 12b-1") permits
investment companies to use their assets to bear expenses of
distributing their shares if they comply with various conditions.
Pursuant to Rule 12b-1, the Equity, Income, Flex, MultiFlex,
Relative Return Bond, Real Estate and International Value
Portfolios, but not the Cash Management Portfolio, have adopted a
plan of distribution (the "Plan") which provides that each
Portfolio may incur certain distribution and maintenance fees
which may not exceed a maximum amount equal to 0.50% per annum of
the average net assets of the Relative Return Bond Portfolio, and
1.0% of the average annual net assets for the other Portfolios.
This expense includes the payment of 0.25% of average annual net
assets to broker-dealers as a "service fee" for providing account
maintenance or personal service to existing shareholders.
The Plan provides for payments by each Portfolio (except the
Cash Management Portfolio) to ISI at the annual rate of 1% of the
Portfolio's average net assets (0.50% for the Relative Return
Bond Portfolio), subject to the authority of the directors to
reduce the amount of payments or to suspend the Plan for such
periods as they may determine.
Although shares are sold without an initial sales charge,
ISI may pay a sales commission equal to 1% of the amount invested
to dealers who sell shares of the relevant Portfolios. These
commissions are not paid on sales to investors exempt from the
CDSC, including shareholders of record on April 30, 1995 who
purchase additional shares in any of the Portfolios on or after
May 1, 1995, and in circumstances where ISI grants an exemption
on particular transactions. In addition, in order to further
compensate dealers (including, for this purpose, certain other
financial institutions) for services provided in connection with
sales of shares and the maintenance of shareholder accounts, ISI
makes quarterly payments to qualifying dealers based on the
average net asset value of shares which are attributable to
shareholders for whom the dealers are designated as the dealer of
record. ISI makes such payments up to a maximum annual rate of
1.0% (0.50% for the Relative Return Bond Portfolio) of the
average net asset value of shares sold by broker-dealers, which
are outstanding on the books of such Portfolios for each month,
subject to the annual limitations described above. When a sales
commission has been paid to the selling broker-dealer, additional
quarterly payments will not be made until after the first full
year. ISI may suspend or modify the payments made to dealers
described above, and such payments are subject to the
continuation of the Plan to the Portfolios, the terms of selling
or shareholder servicing agreements between dealers and ISI, and
any applicable limits imposed by the NASD.
For additional information concerning the Fund's plan of
distribution, see the Statement of Additional Information under
"Distribution of Shares."
<PAGE>
THE EBI FUNDS, INC. SHAREHOLDER SERVICES GUIDE
HOW TO BUY SHARES
All opening of accounts and initial purchases are to be made
through a professional financial consultant whose firm has a
Selling/Servicing Agreement with ISI.
Method Initial Investment Additional Investment
Directly with Visit your registered Made with your
your financial financial consultant financial consultant
consultant who has a selling or
servicing agreement
with the Distributor.
By mail: Make check payable Use stub from most
to the appropriate recent statement,
Portfolio and enclose attach check payable
with fully completed to that Portfolio
account application and mail to:
and mail to:
The EBI Funds, Inc.
The EBI Funds, Inc. 2 West Elm Street
2 West Elm Street P.O. Box 847
P.O. Box 847 Conshohocken, PA 19428
Conshohocken, PA
19428 or in a payment envelope
to:
Please be sure your The EBI Funds, Inc.
financial consultant has P.O. Box 412797
properly and accurately Kansas City, MO
completed the section 64141-2797
for their name and firm
information to assure
we may properly assist
the consultant in
servicing your account.
By wire: Have your financial Wire as noted under
consultant call "Initial Investment".
(800) 554-1156 to
properly obtain an
account number, then
wire Federal funds
prior to 4:00 p.m.,
Eastern Time, for same-
day processing as
follows:
United Missouri Bank
ABA Routing #1010-0069-5
Credit to Account
9870475308
FBO INVESCO Funds for
further credit to
Equity UMB #740108006
Income UMB #740109004
Flex UMB #740110002
MultiFlex UMB #740106000
Relative Return Bond UMB #740107008
Real Estate UMB #740105002
International Value UMB #740103007
Cash Management UMB #740111000
For account of (client name and account number
obtained by your financial consultant from the
phone call).
The Fund reserves the right to reject any purchase order.
Minimum Purchases:
Initial Additional
Non IRA IRA Non IRA IRA
Portfolio Symbol Cusip Account Account Account Account
Equity EBEQX 268232105 $25,000 $25,000 $1,000 $250
Income EBINX 268234101 $25,000 $25,000 $1,000 $250
Flex EBFLX 268237203 $25,000 $25,000 $1,000 $250
MultiFlex EBMFX 268233103 $25,000 $25,000 $1,000 $250
Relative
Return Bond 268233202 $25,000 $25,000 $1,000 $250
Real Estate 268233301 $25,000 $25,000 $1,000 $250
International
Value 268233400 $25,000 $25,000 $1,000 $250
Cash
Management 268230109 $ 1,000 $ 1,000 $1,000 $250
The toll free telephone number of the Fund is (800)
554-1156. Investors may call the Distributor for assistance in
completing the required application or other authorization forms.
The Distributor's office is located at 1355 Peachtree Street,
N.E., Atlanta, Georgia 30309 and the telephone number is (800)
972-9030.
Contingent Deferred Sales Charges
Shares of each Portfolio, except the Cash Management
Portfolio, that are purchased by new investors on or after May 1,
1995 and redeemed within one year from the date of purchase are
subject to a CDSC of 1.0% of the lesser of the net asset value of
the shares at redemption or the initial purchase price of the
shares being redeemed. There is no CDSC applicable to additional
purchases of shares in any of the Portfolios by shareholders of
record on April 30, 1995 that are redeemed within the first year
after purchase. Redemptions of shares of the Cash Management
Portfolio are generally not subject to a CDSC; however, a CDSC
may be applicable to redemptions of shares of the Cash Management
Portfolio following an exchange of shares from another Portfolio.
See "How to Exchange Shares." Proceeds from the CDSC are paid
to, and are used in whole or in part by, the Distributor to
defray its expenses related to providing distribution-related
services to the Fund, such as the payment of a 1% commission to
the selling dealer or agent at the time of share purchase. The
combination of the CDSC and the distribution fee facilitates the
ability of the Fund to sell shares without a sales charge at the
time of purchase.
Prior to May 1, 1995, shares originally purchased prior to
January 1, 1992 were subject to a maximum CDSC of 5% of the
lesser of the original purchase price or market value at
redemption of those shares. Imposition of this CDSC on "old"
shares has been discontinued.
General Information
The Fund reserves the right to reduce or to waive the
minimum purchase requirements in certain cases, such as, but not
limited to, investments involving entities which are affiliated
with one another (such as separate employee benefit plans
sponsored by the same employer or separate companies under common
control) or where additional investments are expected to be made
in amounts sufficient to meet the minimum requirement.
Orders placed with broker-dealers must be placed prior to
the close of regular trading of the New York Stock Exchange and
transmitted to the Fund by telephone prior to the closing of the
New York Stock Exchange or through the National Securities
Clearing Corporation -- Fund/SERV clearing system ("Fund/SERV")
on that day. A purchase order submitted directly to the Transfer
Agent is effective when an application containing all of the
information, signatures and payments required by ISI or the
Transfer Agent to carry out the order is received by the Transfer
Agent.
<PAGE>
HOW TO REDEEM SHARES
Shares may be redeemed on any day on which the New York
Stock Exchange is open for regular trading. Within three
business days after receipt of a proper redemption request by the
Transfer Agent, the redeeming Portfolio will make payment in cash
of the net asset value of the shares next determined after such
redemption request was received, less any applicable CDSC, except
as described below under "How to Redeem Shares -- General
Information." In determining the amount of the CDSC that may be
applicable to a redemption, the calculation is determined in the
manner that results in the lowest possible rate being charged.
Therefore, any shares in the redeeming shareholder's account that
may be redeemed without charge will be assumed to be redeemed
prior to those subject to a charge. In addition, if the CDSC is
determined to be applicable to redeemed shares, it will be
assumed that shares held for the longest duration are redeemed
first. No CDSC is imposed on amounts representing increases in
the net asset value per share, or shares acquired through
reinvestment of income dividends or capital gains distributions.
To Sell through Your Broker-Dealer
Requests for redemption submitted through a broker-dealer
must be received by the broker-dealer prior to the close of
regular trading of the New York Stock Exchange and be forwarded
either electronically to the Transfer Agent prior to the close of
order processing through the Fund/SERV system for that day's
trading, or by telephone prior to the close of regular trading on
the New York Stock Exchange. It is the responsibility of dealers
to promptly transmit redemption notices to the Fund.
To Sell Directly with the Fund
Requests for redemption may be submitted directly to the
Fund by letter or, under certain circumstances, by telephone.
Redemption by Letter
A signature guarantee from a national bank or a NASD- or
U.S. stock exchange-registered broker-dealer is required on
letters of redemption WHEN:
a shareholder's address has changed in the last 30
days;
a shareholder's redemption is for an amount of $100,000
or greater;
the redemption is less than $100,000 and the
shareholder requests that the check for the proceeds be
made payable to a party other than in whose name(s) the
account is registered; provided, however, that payment
shall be made to a national bank or a NASD- or U.S. stock
exchange-registered broker-dealer for specific credit
to an account with the same registration as the account
from which the redemption is made. Standing
instructions may be presented at the time the account
is opened, or may be presented in written form with
signature guarantee after the account is opened;
the redemption is less than $100,000 and the
shareholder requests that proceeds be sent to an
address different from that on the account. Such
standing instructions to do so may be presented at the
time the account is opened, or may be presented in
written form with signature guarantee after the account
is opened.
Redemption by Telephone
Telephone redemption privileges are established
automatically at the time an account is opened, unless an
investor specifically requests that such privileges not be made
available for the account. The proceeds of shares redeemed by
telephone must be in an amount not less than $1,000 nor more than
$100,000. The proceeds of a redemption by telephone will
promptly be forwarded according to the shareholder's
instructions, provided that the redemption is made payable to one
of the following: (i) the shareholder of record; (ii) a person
designated to receive redemption proceeds pursuant to properly
signature-guaranteed instructions given previously by the
shareholder; or (iii) a bank account designated to receive
redemption proceeds pursuant to properly signature-guaranteed
instructions given previously by the shareholder. If a
shareholder instructs that redemption proceeds be wired to a
bank, the shareholder should be aware that fees are normally
charged by such banks and will be borne by the investor.
In electing a telephone redemption, the investor authorizes
the Transfer Agent to act on telephone instructions from any
person representing himself to be the investor or the investor's
authorized representative, and believed by the Transfer Agent to
be genuine. The Transfer Agent's records of such instructions
are binding. Investors should be aware that a telephone
redemption may be difficult to implement during periods of
drastic economic or market changes. Should redeeming
shareholders be unable to implement a telephone redemption during
such periods, or for any other reason, they may give appropriate
notice of redemption to their financial consultant or to the
Transfer Agent by mail. The Fund reserves the right to modify or
terminate the telephone redemption privilege at any time without
notice.
By utilizing telephone redemption privileges, the
shareholder has agreed that neither the Transfer Agent nor the
Fund will be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. The Fund
provides written confirmation of transactions initiated by
telephone as a procedure designed to confirm that telephone
instructions are genuine. As a result of this policy, the
investor may bear the risk of any loss in the event of such a
transaction. However, if the Transfer Agent or the Fund fails to
employ this and other established procedures, the Transfer Agent
or the Fund may be liable.
Redemption by telephone is not available for Semper Trust
Company IRA accounts. Such redemption requests must be made in
writing by the IRA shareholder and must specify the reason for
the withdrawal (early withdrawal, mandatory, etc.), and the
current age of the IRA shareholder. In the event that
instructions for withholding taxes are not specified in the
written request, appropriate taxes will automatically be
withheld.
Redemption by Check
Shareholders of the Cash Management Portfolio may redeem
shares by check in an amount not less than $500. At the
shareholder's request, the Transfer Agent will provide the
shareholder with checks drawn on the account maintained for that
purpose on behalf of the Cash Management Portfolio by the
custodian. These checks can be made payable to the order of any
person and the payee of the check may cash or deposit the check
in the same manner as any check drawn on a bank. When such a
check is presented for payment, the Cash Management Portfolio
will redeem a sufficient number of full and fractional shares in
the shareholder's account to cover the amount of the check.
Shareholders earn dividends on the amounts being redeemed by
check until such time as such check clears the bank. If the
amount of the check is greater than the value of the shares held
in the shareholder's account, the check will be returned, and the
shareholder may be subject to extra charges (presently estimated
to be approximately $20.00 per returned check). The Cash
Management Portfolio does not allow an account to be closed
through a check redemption. The Fund reserves the right at any
time to suspend the procedure permitting redemption by check.
Systematic Withdrawal Plan
A Systematic Withdrawal Plan is available to shareholders
who own or purchase shares of the Portfolios which the Transfer
Agent has approved for inclusion in such a plan, having a total
value of $10,000 or more. Under the Systematic Withdrawal Plan,
the Transfer Agent will make specified monthly or quarterly
payments to a designated party of any amount selected (minimum
payment of $100). This will occur on the 25th of each month, or
the first business day following the 25th if the 25th is not a
regular trading day on the New York Stock Exchange. Notice of
all changes concerning the Systematic Withdrawal Plan must be
received by the Transfer Agent at least two weeks prior to the
next scheduled payment. Further information regarding the
Systematic Withdrawal Plan and its requirements and tax
consequences can be obtained by contacting the Transfer Agent at
(800) 554-1156.
General Information
Redemptions of shares are taxable events on which a
shareholder may realize a gain or a loss. Shareholders who are
subject to federal income taxation should note that if a loss has
been realized on the sale of shares of a Portfolio, the loss may
be disallowed for tax purposes if shares of the same Portfolio
are purchased within 30 days before or after the sale.
The CDSC may be waived on redemptions of shares in
connection with: (1) redemptions made within one year following
the death or disability of a shareholder; (2) continuing,
periodic withdrawals under the Systematic Withdrawal Plan, up to
an annual total of 10% of the value of a shareholder's account;
(3) a lump-sum or other distribution in the case of an IRA, a
self-employed individual retirement plan (so-called "Keogh Plan")
or a custodial account under Section 403(b) of the Internal
Revenue Code following attainment of age 59 ; (4) redemptions by
directors, trustees, officers, employees (and immediate family
members) of the Fund and of ISI and its affiliates; and (5) under
other circumstances in the discretion of the Fund. The CDSC may
be waived on certain sales or redemptions to promote goodwill and
because the sales effort, if any, involved in making such sales
is negligible.
The date of payment for redeemed shares may be postponed, or
a Portfolio's obligation to redeem its shares may be suspended,
beyond the three-day period mentioned above (1) for any period
during which trading on the New York Stock Exchange is restricted
(as determined by the SEC), (2) for any period during which an
emergency exists (as determined by the SEC) which makes it
impracticable for the Portfolio to dispose of its securities or
to determine the value of a Portfolio's net assets, or (3) for
such other periods as the SEC may, by order, permit for the
protection of shareholders.
It is possible that in the future conditions may exist which
would, in the opinion of the Directors, make it undesirable for a
Portfolio to pay for redeemed shares in cash. In such cases, the
Directors may authorize payment to be made in portfolio
securities or other property of the applicable Portfolio.
However, each Portfolio is obligated under the 1940 Act to redeem
for cash all shares presented to such Portfolio for redemption by
any one shareholder up to $250,000 (or 1% of the applicable
Portfolio's net assets if that is less) in any 90-day period.
Securities delivered in payment of redemptions are valued at the
same value assigned to them in computing the applicable
Portfolio's net asset value per share. Shareholders receiving
such securities are likely to incur brokerage costs on their
subsequent sales of such securities.
If the Directors determine that it is in the best interest
of a Portfolio, such Portfolio has the right to redeem upon prior
written notice, at the then current net asset value per share,
all shareholder accounts which have dropped below a minimum level
($1,000 for the Cash Management Portfolio; $10,000 for the other
Portfolios) as a result of redemption of such Portfolio's shares
(but not as a result of any reduction in market value of such
shares). An investor will have 60 days to increase the shares in
his account to the minimum level in order to avoid any such
involuntary redemption.
<PAGE>
HOW TO EXCHANGE SHARES
Shares may be exchanged by telephone, by writing to the
Transfer Agent, or through a financial consultant. Telephone
exchange privileges are established automatically at the time an
account is opened, unless an investor specifically requests that
such privileges not be made available for his account.
Investors in any of the Portfolios may exchange shares of
their respective Portfolio held for at least 15 days for shares
of the other Portfolios without the payment of a CDSC; the sales
charge will be assessed, if applicable, when the shareholder
redeems his or her shares or has them repurchased without a
corresponding purchase of shares in another Portfolio. Where a
shareholder previously exchanged his shares into the Cash
Management Portfolio from another Portfolio, the applicable CDSC
will be assessed when the shares are redeemed from the Cash
Management Portfolio even though this Portfolio does not
otherwise assess a CDSC on redemptions.
The exchange privilege is limited to residents of states in
which the shares of the Portfolio being acquired are registered
for sale. Before making an exchange, the investor should review
a current prospectus of the Fund for information relating to the
Portfolio in which he is acquiring shares. Investors should
consider the differences in the investment objectives and
portfolio compositions of such Portfolios.
By utilizing telephone exchange privileges, the shareholder
has agreed that neither the Fund nor the Transfer Agent will be
liable for following instructions communicated by telephone that
it reasonably believes to be genuine. The Transfer Agent
provides written confirmation of transactions initiated by
telephone as a procedure designed to confirm that telephone
instructions are genuine. As a result of this policy, the
investor may bear the risk of any loss in the event of such a
transaction. However, if the Fund or the Transfer Agent fails to
employ this and other established procedures, the Fund or the
Transfer Agent may be liable.
It is the policy of the Fund to discourage frequent trading
by shareholders among the Portfolios in response to market
fluctuations. Accordingly, in order to maintain a stable asset
base in each Portfolio and to reduce administrative expenses
borne by each Portfolio, the Fund reserves the right to modify or
withdraw the exchange privilege at any time without notice.
Automatic Monthly Exchange
Shareholders of the Portfolios may arrange for a fixed
dollar amount of their shares to be automatically exchanged for
shares of any of the other Portfolios on a monthly basis. This
will occur on the 25th of each month, or the first business day
following the 25th if the 25th is not a regular trading day on
the New York Stock Exchange. The minimum monthly exchange in
this program is $100. This automatic exchange program can be
changed by the shareholder at any time by writing to the Transfer
Agent at least two weeks prior to the date the change is to be
made. Further information regarding this service can be obtained
by contacting the Transfer Agent.
BankDraft
For shareholders who want to maintain a schedule of monthly
investments, BankDraft uses various methods to draw a
preauthorized amount from the shareholder's bank account to
purchase Fund shares. The minimum account size for participation
in this program is $10,000, and the minimum monthly draft amount
is $100. This automatic investment program can be changed by the
shareholder at any time by writing to the Transfer Agent at least
two weeks prior to the date the change is to be made. Further
information regarding this service can be obtained by contacting
the Transfer Agent.
COMPUTATION OF NET ASSET VALUE
The net asset value per share of each Portfolio is
determined on each day that the New York Stock Exchange is open
for trading and at such other times and/or on such other days as
there is sufficient trading in the portfolio securities of a
particular Portfolio that might materially affect its net asset
value per share. The net asset value per share of each Portfolio
is determined at the close of the New York Stock Exchange,
currently 4:00 p.m. (Eastern Time). Each Portfolio's net asset
value is calculated in the following manner:
Equity Securities. Securities which are listed or admitted
to trading on a national securities exchange or traded on the
NASDAQ National Market System will be valued at the last sales
price on the exchange on which the security is principally
traded. Securities for which there is no sale on that day and
securities traded only in the over-the-counter market will be
valued at their highest 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 values as
determined in good faith by the Board of Directors.
Income Securities. Valuations of fixed and variable income
securities are supplied by independent pricing services used by
ISI as the Fund's manager, which have been approved by the
Directors of the Fund. ISI pays the cost of use of the
independent pricing services on behalf of the Fund pursuant to
the Operating Services Agreement. Valuations are based upon a
consideration of yields or prices of obligations of comparable
quality, coupon, maturity and type, indications as to value from
recognized dealers, and general market conditions. The pricing
service may use electronic data processing techniques and/or a
computerized matrix system to determine valuations. Securities
for which market quotations are readily available are valued
based upon those quotations. The procedures used by the pricing
service are reviewed by the officers of the Fund and ISI or the
sub-advisers under the general supervision of the Directors. The
Directors may deviate from the valuation provided by the pricing
service whenever, in their judgment, such valuation is not
indicative of the fair value of the obligation. In such
instances the obligations will be valued at fair value as
determined in good faith by or under the direction of the
Directors.
Foreign Securities. Foreign securities traded on foreign
exchanges ordinarily will be valued at the last quoted sales
price available before the time when the Portfolio's assets are
valued. If a security's price is available from more than one
U.S. or foreign exchange, the exchange that is the primary market
for the security will be used. Foreign securities not traded on
foreign exchanges and foreign income securities are valued on the
basis of independent pricing services approved by the Directors,
and such pricing services generally follow the same procedures in
valuing such foreign securities as are described above. Values
of the portfolio securities primarily traded on a foreign
exchange are received already translated into U.S. dollars from a
quotation service approved by the Board of Directors.
Other Securities. Other securities and assets of a
Portfolio, including restricted securities, will be valued at
fair value as determined in good faith by or under the direction
of the Directors.
After portfolio securities are valued as described above,
cash, receivables and other assets of the Portfolio are added and
liabilities of the Portfolio deducted. Each Portfolio's net
asset value per share is determined by dividing the value of the
net assets of the Portfolio (I.E., assets less liabilities) by
the total number of shares of the Portfolio outstanding.
Expenses and fees of each Portfolio, including the fees of ISI,
are accrued daily and taken into account for the purpose of
determining net asset value.
Cash Management Portfolio. The Cash Management Portfolio
seeks to maintain a constant net asset value of $1.00 per share.
There can be no assurance that the Portfolio will be able to
maintain a net asset value of $1.00 per share. In order to
accomplish this goal, the Portfolio intends to utilize the
amortized cost method of valuing portfolio securities. By using
this method, the Portfolio seeks to maintain a constant net asset
value of $1.00 per share despite minor shifts in the market value
of its portfolio securities. Under the amortized cost method of
valuation, securities are valued at cost on the date of purchase.
Thereafter, the value of the security is increased or decreased
incrementally each day so that at maturity any purchase discount
or premium is fully amortized and the value of the security is
equal to its principal. The amortized cost method may result in
periods during which the amortized cost value of the securities
may be higher or lower than their market value, and the yield on
a shareholder's investment may be higher or lower than that which
would be recognized if the net asset value of the portfolio was
not constant and was permitted to fluctuate with the market value
of the portfolio securities. It is believed that any such
differences will normally be minimal. The Board of Directors has
undertaken to establish procedures reasonably designed, taking
into account current market conditions and the Portfolio's
investment objectives, to stabilize, to the extent possible, the
Portfolio's price per share, as computed for the purposes of
sales and redemptions. Such procedures include review of the
value of portfolio holdings by the Board of Directors, at such
intervals as it deems appropriate, to determine whether the
Portfolio's net asset value calculated by using available market
quotations or market equivalents deviates from $1.00 per share
based on amortized cost. If any deviation between the
Portfolio's net asset value based upon available market
quotations or market equivalents and that based upon amortized
cost exceeds 0.5%, the Board of Directors will promptly consider
what action, if any, is appropriate. The action may include, as
appropriate, the sale of portfolio instruments prior to maturity
to realize capital gains or losses or to shorten average
portfolio maturity; withholding dividends; reducing the number of
shares outstanding; or utilizing a net asset value per share
determined by using available market quotations.
CAPITALIZATION
There are no conversion or preemptive rights in connection
with any shares of the Fund, nor are there cumulative voting
rights with respect to the shares of the Fund. Each of the
Portfolios' shares has equal voting rights. Each issued and
outstanding share of the Fund is entitled to participate equally
in dividends and distributions declared by the Fund and in net
assets of the Fund upon liquidation or dissolution remaining
after satisfaction of outstanding liabilities.
All issued and outstanding shares of the Fund will be fully
paid and nonassessable and will be redeemable at the net asset
value per share (subject to the contingent deferred sales charge
discussed above). Unless specifically requested in writing by a
shareholder, the interests of shareholders in the Fund will not
be evidenced by a certificate or certificates representing shares
of the Fund.
The authorized capital stock of the Fund consists of
10,070,000,000 shares of common stock having a par value of $.001
per share. The authorized capital stock of the Fund has been
classified as 10,000,000 shares of each of the Equity, Income,
Flex, MultiFlex, Relative Return Bond, Real Estate and
International Value Portfolios, and 10,000,000,000 shares of the
Cash Management Portfolio. The Fund's Articles of Incorporation
provide that the obligations and liabilities of each Portfolio
are restricted to the assets of the particular Portfolio and
generally do not extend to the assets of the other Portfolios of
the Fund.
<PAGE>
DISTRIBUTIONS AND TAX INFORMATION
Distributions
It is the intention of the Equity, Income, Flex, MultiFlex,
Relative Return Bond, Real Estate and International Value
Portfolios to distribute to shareholders of each of these
Portfolios net investment income and net realized capital gains,
if any. The Equity, Flex, MultiFlex and Real Estate Portfolios
will make periodic distributions of net investment income
(including any net short-term capital gains) during the months of
March, June, September and December, and will make an annual
distribution of net realized long-term capital gain during the
month of December. It is contemplated that the International
Value Portfolio will make semiannual distributions of net
investment income and an annual distribution of net realized
long-term capital gain during the month of December. Each of the
Income and Relative Return Bond Portfolios will make monthly
distributions of net investment income (including any net
short-term capital gains), and an annual distribution of net
realized long-term capital gain during the month of December.
The net income of the Cash Management Portfolio is declared daily
and its dividends will be distributed monthly. Net realized
capital gains, if any, will be distributed during the month of
December. All such distributions will be reinvested
automatically in additional shares (or fractions thereof) of each
applicable Portfolio pursuant to such Portfolio's Automatic
Dividend Reinvestment Plan unless a shareholder has elected not
to participate in this plan or has elected to terminate his
participation in the plan and to receive his distributions in
excess of ten dollars in cash. Shareholders of the Cash
Management Portfolio will not be entitled to dividends for the
day on which the investment is made, and will receive dividends
through and including the day of redemption. Shareholders of the
Cash Management Portfolio who redeem all of their shares at any
time during the month will be paid all dividends accrued through
the date of redemption. Shareholders of the Cash Management
Portfolio who redeem less than all of their shares will be paid
the proceeds of the redemption in cash, and dividends with
respect to the redeemed shares will be reinvested in additional
shares (unless the shareholder has elected not to participate in
the Portfolio's Automatic Dividend Reinvestment Plan or has
elected to terminate his participation in such plan). See
"Automatic Dividend Reinvestment Plan".
Federal Taxes
Each Portfolio of the Fund intends to qualify for the
special tax treatment afforded regulated investment companies
under Subchapter M of the Internal Revenue Code, as amended (the
"Code"). If a Portfolio qualifies as a regulated investment
company, it generally will not be subject to federal income taxes
to the extent that it distributes its net investment income and
net realized capital gain. In order to avoid a 4% federal excise
tax, the Portfolios intend to distribute each year substantially
all of their income and gains.
With respect to tax-exempt shareholders, distributions from
the Portfolios will not be subject to federal income taxation to
the extent permitted under the applicable tax-exemption. With
respect to a shareholder that is not exempt from federal income
taxation, all dividends from a Portfolio, whether received in
cash or in additional shares of a Portfolio, will be taxable and
must be reported by the shareholder on its federal income tax
return. Shareholders must treat dividends, other than capital
gain dividends, as ordinary income. Dividends designated as
capital gain dividends are taxable to shareholders as long-term
capital gain. The Cash Management Portfolio expects that all or
substantially all of the dividends received from the Portfolio
will be taxable to shareholders as ordinary income. Certain
dividends declared in October, November, or December of a
calendar year are taxable to shareholders as though received on
December 31 of that year if paid to shareholders during January
of the following calendar year.
Information concerning the status of a Portfolio's
distributions for federal income tax purposes will be mailed to
shareholders annually. Such distributions may also be subject to
state and local taxes.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and Treasury Regulations
presently in effect, and is qualified in its entirety by
reference thereto. The Code and these regulations are subject to
change by legislative or administrative action. For further
discussion of the taxation of the Portfolios and of the tax
consequences of becoming a shareholder in any of the Portfolios,
see the Statement of Additional Information under "Tax
Information." Shareholders should consult with their tax advisors
concerning the tax consequences of an investment in the Fund.
Automatic Dividend Reinvestment Plan
For convenience of the shareholders and to permit
shareholders to increase their shareholdings in the Portfolios in
which they have invested, the Transfer Agent is automatically
appointed by the investors to receive all dividends and capital
gains distributions of the respective Portfolios and to reinvest
them in shares (or fractions thereof) of the Portfolio at the net
asset value per share next determined on the reinvestment date.
Shareholders may, however, elect not to enter into or to
terminate at any time without penalty their participation in the
Automatic Dividend Reinvestment Plan and to receive payment of
all dividends and distributions in excess of ten dollars by check
by notifying the Transfer Agent, in writing, at the time of
investment for new investments or at least 15 days prior to the
proposed date of such termination for existing participants.
Shareholders may rejoin the plan by notifying the Transfer Agent,
in writing, at least 15 days prior to the record date on which
such shareholder wishes to rejoin the plan. Each Portfolio has
the right to appoint a new transfer agent.
The Transfer Agent will maintain each shareholder's
Portfolio account and furnish the shareholder with written
information concerning all transactions in the account, including
information needed for tax records. Upon termination of a
shareholder's participation in the Automatic Dividend
Reinvestment Plan, a check for the market value of any fractional
interest will, at the request of the shareholder, be sent to the
shareholder. All costs of the Automatic Dividend Reinvestment
Plan, including those of registration under applicable securities
laws, if any, will be borne by ISI on behalf of the Fund,
pursuant to the Operating Services Agreement.
SHAREHOLDER REPORTS
Each Portfolio will issue to each of its shareholders
semiannual and annual reports containing each Portfolio's
financial statements, including selected financial highlights and
a schedule of each Portfolio's portfolio securities. The federal
income tax status of shareholder distributions will also be
reported to shareholders after the end of each year.
Shareholders having any questions concerning any of the
Portfolios may call the Distributor. The toll-free telephone
number is (800) 972-9030.
PERFORMANCE INFORMATION
From time to time the Fund may provide total return of the
Portfolios in advertisements or in reports and other
communications to shareholders. The Equity (EBEQX), Income
(EBINX), Flex (EBFLX) and MultiFlex (EBMFX) Portfolios are listed
in the daily newspaper mutual fund section under the name "EBI
Funds." Total return is calculated based on the applicable
Portfolio's change in net asset value per share between the
beginning and end of the period and assumes reinvestment of the
Portfolio's dividends and capital gains distributions during the
period. Further information about the performance of the Fund is
contained in the Fund's Annual Report to Shareholders and may be
obtained without charge.
In addition, from time to time the Cash Management Portfolio
advertises its "yield" and "effective yield." Both yield figures
are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Cash Management Portfolio
refers to the net income generated by an investment in the Cash
Management Portfolio over a seven-day period (which period will
be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Cash
Management Portfolio is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. "Yield" is
based on historical earnings and is not intended to indicate
future performance. For additional performance information, see
"Performance Information" in the Statement of Additional
Information.
Performance information for a Portfolio may be compared in
advertisements, sales literature, and reports to shareholders to:
(i) unmanaged indices, such as the S&P 500 Stock Index, the
Salomon Brothers Broad Investment Grade Bond Index, the Morgan
Stanley Capital International indices, the Dow Jones Industrial
Average, Donoghue Money Market Institutional Averages, the
Merrill Lynch 1 to 3 Year Treasury Index, the Salomon Brothers
World Government Benchmark Bond Index, the Lehman Brothers
Municipal Bond Index, the Lehman Brothers Aggregate Bond Index,
the Lehman Brothers Government Corporate Index and the NAREIT
Equity Index; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm
which ranks mutual funds by overall performance, investment
objectives and assets, or tracked by other services, companies,
publications or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation) and other measures of the performance of
the economy to assess the real rate of return from an investment
in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for
administrative and managements costs and expenses.
MISCELLANEOUS
United Missouri Bank is the custodian for each of the
Portfolios. The bank does not perform any investment management
functions for the Fund. The principal address of United Missouri
Bank is 928 Grand Avenue, Kansas City, Missouri 64141. The
custodian may use the services of sub-custodians with respect to
the Portfolios.
Fund/Plan Services, Inc. is the transfer agent for the
Fund's shares of common stock. The Transfer Agent will maintain
each shareholder's account as to each Portfolio and furnish the
shareholder with written information concerning all transactions
in the account, including information needed for tax records.
The Portfolios each have the right to appoint a successor
transfer agent. Pursuant to an Operating Services Agreement, the
Manager pays for the services of the Transfer Agent to the
Portfolios. See "Management of the Fund". The principal
business address of Fund/Plan Services, Inc. is 2 West Elm
Street, Conshohocken, PA 19428.
As stated above, the Portfolios are series of the Fund. The
Fund, as a Maryland corporation, is not required to hold annual
shareholder meetings. However, special meetings may be called
for purposes such as electing or removing directors, changing
fundamental policies or approving an advisory contract, or as may
be required by applicable law or the Fund's Articles of
Incorporation or By-Laws. Meetings of shareholders will be
called upon written request of shareholders holding in the
aggregate at least 10% of the Fund's outstanding shares. The
directors will provide appropriate assistance to shareholders, in
compliance with provisions of the 1940 Act, if such a request for
a meeting is received. Each shareholder receives one vote for
each share owned.
This Prospectus omits certain information contained in the
registration statement which the Fund has filed with the SEC
under the Securities Act of 1933 and the 1940 Act, and reference
is made to the registration statement and the exhibits thereto
for further information with respect to the Fund and the shares
offered hereby. Copies of such registration statement, including
exhibits, may be obtained from the SEC's principal office at
Washington, D.C., upon payment of the fee prescribed by the SEC.
LEGAL OPINIONS
The legality of the securities offered by this Prospectus
will be passed upon for the Fund by Kirkpatrick & Lockhart, 1800
M Street, N.W., Suite 900, Washington, D.C. 20036.
<PAGE>
Investment Adviser --
INVESCO Services, Inc.
Sub-Advisers
INVESCO Capital Management,
Inc. PROSPECTUS
INVESCO Management & Research,
Inc. THE EBI FUNDS, INC.
INVESCO Realty Advisors, Inc.
EQUITY PORTFOLIO
Distributor INCOME PORTFOLIO
INVESCO Services, Inc. FLEX PORTFOLIO
MULTIFLEX PORTFOLIO
RELATIVE RETURN BOND PORTFOLIO
Transfer Agent REAL ESTATE PORTFOLIO
Fund/Plan Services, Inc. INTERNATIONAL VALUE PORTFOLIO
CASH MANAGEMENT PORTFOLIO
Custodian
United Missouri Bank
May 1, 1995
Independent Accountants
Price Waterhouse LLP
------------------------------ ------------------------------
THE EBI FUNDS, INC.
EQUITY PORTFOLIO
INCOME PORTFOLIO
FLEX PORTFOLIO
MULTIFLEX PORTFOLIO
RELATIVE RETURN BOND PORTFOLIO
REAL ESTATE PORTFOLIO
INTERNATIONAL VALUE PORTFOLIO
CASH MANAGEMENT PORTFOLIO
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telephone: 800/554-1156
-----------------------------------------------------------------
The EBI Funds, Inc. (the "Fund") is comprised of eight separate
series (the "Portfolios"), each of which represents a separate
portfolio of investments. Each of the Portfolios has separate
investment objectives and investment policies. The Portfolios
are as follows: Equity Portfolio, Income Portfolio, Flex
Portfolio, MultiFlex Portfolio, Relative Return Bond Portfolio,
Real Estate Portfolio, International Value Portfolio and Cash
Management Portfolio.
The Flex Portfolio, formerly a series of EBI Series Trust, a
Massachusetts business trust, was reorganized into a portfolio of
the Fund effective July 1, 1993.
-----------------------------------------------------------------
INVESCO Services, Inc.
Investment Adviser
Manager
Distributor
INVESCO Capital Management, Inc.
Sub-Adviser: Equity Portfolio
Income Portfolio
Flex Portfolio
International Value Portfolio
Cash Management Portfolio
INVESCO Management & Research, Inc.
Sub-Adviser: MultiFlex Portfolio
Relative Return Bond Portfolio
INVESCO Realty Advisors, Inc.
Sub-Adviser: Real Estate Portfolio
-----------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information is not a Prospectus but
should be read in conjunction with the Fund's current Prospectus
dated May 1, 1995. Please retain this Statement of Additional
Information for future reference. The Prospectus is available
from INVESCO Services, Inc., 1355 Peachtree Street, N.E.,
Atlanta, Georgia 30309.
-----------------------------------------------------------------
May 1, 1995
<PAGE>
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES
Convertible Securities
Mortgage-Related Securities
INVESTMENT RESTRICTIONS
PORTFOLIO SECURITIES LOANS
MANAGEMENT OF THE FUND
Directors and Officers
Director Compensation
Fund Committees
THE ADVISORY AND SUB-ADVISORY AGREEMENTS
OPERATING SERVICES AGREEMENT
THE DISTRIBUTOR
DISTRIBUTION OF SHARES
DISTRIBUTIONS AND TAX INFORMATION
Distributions
Federal Taxes
Options, Futures and Foreign Currency Forward Contracts
Swap Agreements
Currency Fluctuations -- "Section 988" Gains or Losses
Investment in Passive Foreign Investment Companies
Debt Securities Acquired at a Discount
Distributions
Disposition of Shares
Backup Withholding
Other Taxation
SERVICES PROVIDED BY THE FUND
Systematic Withdrawal Plan
Exchange Privilege
Automatic Dividend Reinvestment Plan
Automatic Monthly Exchange
BankDraft
BROKERAGE AND PORTFOLIO TRANSACTIONS
PERFORMANCE INFORMATION
CALCULATION OF YIELD
MISCELLANEOUS
Principal Shareholders
Net Asset Value
The Custodian
Independent Accountants
APPENDIX A
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The following discussion elaborates on the disclosure of the
Portfolios' investment policies contained in the Prospectus.
Convertible Securities
Although the equity investments of the International Value
Portfolio consist primarily of common and preferred stocks, the
Portfolio may buy securities convertible into common stock if,
for example, the sub-adviser believes that a company's
convertible securities are undervalued in the market.
Convertible securities eligible for purchase by the Portfolio
include convertible bonds, convertible preferred stocks, and
warrants. A warrant is an instrument issued by a corporation
which gives the holder the right to subscribe to a specific
amount of the corporation's capital stock at a set price for a
specified period of time. Warrants do not represent ownership of
the securities, but only the right to buy the securities. The
prices of warrants do not necessarily move parallel to the prices
of underlying securities. Warrants may be considered speculative
in that they have no voting rights, pay no dividends, and have no
rights with respect to the assets of a corporation issuing them.
Warrant positions will not be used to increase the leverage of
the Portfolio; consequently, warrant positions are generally
accompanied by cash positions equivalent to the required exercise
amount.
Mortgage-Related Securities
Mortgage-related securities are interests in pools of
mortgage loans made to residential home buyers, including
mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans
are assembled as securities for sale to investors by various
governmental, government-related and private organizations (see
"Mortgage Pass-Through Securities" below). The Portfolios may
also invest in debt securities which are secured with collateral
consisting of mortgage-related securities (see "Collateralized
Mortgage Obligations"), and in other types of mortgage-related
securities.
Mortgage Pass-Through Securities. Interests in pools of
mortgage-related securities differ from other forms of debt
securities, which normally provide for periodic payment of
interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a
monthly payment which consists of both interest and principal
payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their
residential or commercial mortgage loans, net of any fees paid to
the issuer or guarantor of such securities. Additional payments
are caused by repayments of principal resulting from the sale of
the underlying property, refinancing or foreclosure, net of fees
or costs which may be incurred. Some mortgage-related securities
(such as securities issued by the Government National Mortgage
Association ("GNMA")) are described as "modified pass-through."
These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain
fees, at the scheduled payment dates regardless of whether or not
the mortgagor actually makes the payment.
GNMA is the principal governmental guarantor of mortgage-
related securities. GNMA is a wholly owned U.S. Government
corporation within the Department of Housing and Urban
Development. GNMA is authorized to guarantee, with the full
faith and credit of the U.S. Government, the timely payment of
principal and interest on securities issued by institutions
approved by GNMA (such as savings and loan institutions,
commercial banks and mortgage bankers) and backed by pools of
FHA-insured or VA-guaranteed mortgages.
Government-related guarantors (i.e., not backed by the full
faith and credit of the U.S. Government) include the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC"). FNMA is a government-sponsored
corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and
Urban Development. FNMA purchases conventional (i.e., not
insured or guaranteed by any government agency) residential
mortgages from a list of approved seller/servicers which include
state and federally chartered savings and loan associations,
mutual savings banks, commercial banks and credit unions and
mortgage bankers. Pass-through securities issued by FNMA are
guaranteed as to timely payment of principal and interest by FNMA
but are not backed by the full faith and credit of the U.S.
Government.
FHLMC was created by Congress in 1970 for the purpose of
increasing the availability of mortgage credit for residential
housing. It is a government-sponsored corporation formerly owned
by the 12 Federal Home Loan Banks and now owned entirely by
private stockholders. FHLMC issues Participation Certificates
("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment
of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private
mortgage insurance companies, mortgage bankers and other
secondary market issuers also create pass-through pools of
conventional residential mortgage loans. Such issuers may, in
addition, be the originators and/or servicers of the underlying
mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such non-governmental issuers
generally offer a higher rate of interest than government and
government-related pools because there are no direct or indirect
government or agency guarantees of payments in the former pools.
However, timely payment of interest and principal of these pools
may be supported by various forms of insurance or guarantees,
including individual loan, title, pool and hazard insurance and
letters of credit. The insurance and guarantees are issued by
governmental entities, private insurers and the mortgage poolers.
Such insurance and guarantees and the creditworthiness of the
issuers thereof will be considered in determining whether a
mortgage-related security meets a Portfolio's investment quality
standards. There can be no assurance that the private insurers
or guarantors can meet their obligations under the insurance
policies or guarantee arrangements. Although the market for such
securities is becoming increasingly liquid, securities issued by
certain private organizations may not be readily marketable. A
Portfolio will not purchase mortgage-related securities or other
assets which in the sub-adviser's opinion are illiquid if, as a
result, more than 15% of the value of the Portfolio's total
assets will be illiquid.
Mortgage-backed securities that are issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, are not
subject to a Portfolio's industry concentration restrictions, by
virtue of the exclusion from that test available to all U.S.
Government securities. In the case of privately issued mortgage-
related securities, the Portfolios take the position that
mortgage-related securities do not represent interests in any
particular "industry" or group of industries. The assets
underlying such securities may be represented by a portfolio of
first lien residential mortgages (including both whole mortgage
loans and mortgage participation interests) or portfolios of
mortgage pass-through securities issued or guaranteed by GNMA,
FNMA or FHLMC. Mortgage loans underlying a mortgage-related
security may in turn be insured or guaranteed by the Federal
Housing Administration or the Department of Veterans Affairs. In
the case of private issue mortgage-related securities whose
underlying assets are neither U.S. Government securities nor U.S.
Government-insured mortgages, to the extent that real properties
securing such assets may be located in the same geographical
region, the security may be subject to a greater risk of default
than other comparable securities in the event of adverse
economic, political or business developments that may affect such
region and, ultimately, the ability of residential homeowners to
make payments of principal and interest on the underlying
mortgages.
Collateralized Mortgage Obligations ("CMOs"). A CMO is a
hybrid between a mortgage-backed bond and a mortgage pass-through
security. Similar to a bond, interest and prepaid principal is
paid, in most cases, semiannually. CMOs may be collateralized by
whole mortgage loans, but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.
CMOs are structured into multiple classes, each bearing a
different stated maturity. Actual maturity and average life will
depend upon the prepayment experience of the collateral. CMOs
provide for a modified form of call protection through a de facto
breakdown of the underlying pool of mortgages according to how
quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepay-
ments, is first returned to investors holding the shortest
maturity class. Investors holding the longer maturity classes
receive principal only after the first class has been retired.
An investor is partially guarded against a sooner than desired
return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer")
issues multiple series (e.g., A, B, C, Z) of CMO bonds ("Bonds").
Proceeds of the Bond offering are used to purchase mortgages or
mortgage pass-through certificates ("Collateral"). The
Collateral is pledged to a third party trustee as security for
the Bonds. Principal and interest payments from the Collateral
are used to pay principal on the Bonds in the order A, B, C, Z.
The Series A, B, and C Bonds all bear current interest. Interest
on the Series Z Bond is accrued and added to principal and a like
amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are
paid in full, interest and principal on the Series Z Bond begins
to be paid currently. With some CMOs, the issuer serves as a
conduit to allow loan originators (primarily builders or savings
and loan associations) to borrow against their loan portfolios.
FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued
in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans
purchased by FHLMC. Unlike FHLMC PCs, payments of principal and
interest on the CMOs are made semiannually, as opposed to
monthly. The amount of principal payable on each semiannual
payment date is determined in accordance with FHLMC's mandatory
sinking fund schedule, which, in turn, is equal to approximately
100% of FHA prepayment experience applied to the mortgage
collateral pool. All sinking fund payments in the CMOs are
allocated to the retirement of the individual classes of bonds in
the order of their stated maturities. Payment of principal on
the mortgage loans in the collateral pool in excess of the amount
of FHLMC's minimum sinking fund obligation for any payment date
are paid to the holders of the CMOs as additional sinking fund
payments. Because of the "pass-through" nature of all principal
payments received on the collateral pool in excess of FHLMC's
minimum sinking fund requirement, the rate at which principal of
the CMOs is actually repaid is likely to be such that each class
of bonds will be retired in advance of its scheduled maturity
date.
If collection of principal (including prepayments) on the
mortgage loans during any semiannual payment period is not
sufficient to meet FHLMC's minimum sinking fund obligation on the
next sinking fund payment date, FHLMC agrees to make up the
deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the
FHLMC CMOs are identical to those of FHLMC PCs. FHLMC has the
right to substitute collateral in the event of delinquencies
and/or defaults.
INVESTMENT RESTRICTIONS
The Directors of the Fund, on behalf of the Portfolios, have
adopted the following investment restrictions, all of which are
fundamental policies and may not be changed as to any Portfolio
without the approval of the holders of a majority of such
Portfolio's outstanding voting securities (which in this
Prospectus means, as to each Portfolio, the vote of the lesser of
(i) 67% or more of the voting securities present at a meeting, if
the holders of more than 50% of the outstanding voting securities
are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities). The Portfolios may not:
(1) Invest in the securities of issuers conducting
their principal business activity in the same industry, if
immediately after such investment the value of a Portfolio's
investments in such industry would exceed 25% of the value of
such Portfolio's total assets; provided, however, that this
limitation does not apply to a Portfolio's investments in
obligations issued or guaranteed by the U.S. Government, its
agencies, authorities or instrumentalities, and, as to the Cash
Management Portfolio, certificates of deposit of domestic
branches of U.S. banks or bankers' acceptances of domestic
branches of U.S. banks.
(2) For the MultiFlex, Relative Return Bond, Real
Estate and International Value Portfolios, with respect to 75% of
the Portfolio's assets, invest in the securities of any one
issuer, other than obligations of, or guaranteed by, the U.S.
Government, its agencies, authorities or instrumentalities, if
immediately after such investment more than 5% of the value of
the Portfolio's total assets, taken at market value, would be
invested in such issuer or more than 10% of such issuer's
outstanding voting securities would be owned by such Portfolio.
For the Equity, Income, Flex and Cash Management Portfolios, with
respect to 100% of the Portfolio's assets, invest in the
securities of any one issuer, other than obligations of, or
guaranteed by, the U.S. Government, its agencies, authorities or
instrumentalities, if immediately after such investment more than
5% of the value of the Portfolio's total assets, taken at market
value, would be invested in such issuer or more than 10% of such
issuer'soutstandingvoting securitieswouldbeowned bysuchPortfolio.
(3) Underwrite securities of other issuers, except
insofar as it may technically be deemed an "underwriter" under
the Securities Act of 1933, as amended, in connection with the
disposition of a Portfolio's portfolio securities.
(4) Invest in companies for the purpose of exercising
control or management.
(5) Issue any class of senior securities or borrow
money, except borrowings from banks for temporary or emergency
purposes not in excess of 5% of the value of a Portfolio's total
assets at the time the borrowing is made.
(6) Mortgage, pledge, hypothecate or in any manner
transfer as security for indebtedness any securities owned or
held except to an extent not greater than 5% of the value of a
Portfolio's total assets.
(7) Make short sales of securities or maintain a short
position. All Portfolios, except the Equity and Cash Management
Portfolios, may, however, write covered call options and cash
secured put options.
(8) Purchase securities on margin, except that a
Portfolio may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities.
(9) Purchase or sell real estate or interests in real
estate. A Portfolio may invest in securities secured by real
estate or interests therein or issued by companies, including
real estate investment trusts, which invest in real estate or
interests therein.
(10) Purchase or sell commodities or commodity
contracts, except as set forth in the Prospectus and in this
Statement of Additional Information for transactions in commodity
futures contracts, foreign currency futures contracts, and stock
index futures contracts. The Income, Flex and Multiflex
Portfolios may enter into interest rate futures contracts if
immediately after such a commitment the sum of the then aggregate
futures market prices of financial instruments required to be
delivered under open futures contract sales and the aggregate
purchase prices under future contract purchases would not exceed
30% of the applicable Portfolio's total assets.
(11) Make loans to other persons, provided that a
Portfolio may purchase debt obligations consistent with its
investment objectives and policies and, except for the Cash
Management Portfolio, may lend limited amounts (not to exceed 40%
of total assets of the Relative Return Bond Portfolio and 10% of
total assets for the remaining Portfolios) of its portfolio
securities to broker-dealers or other institutional investors.
(12) Purchase securities of other investment companies
except (a) in connection with a merger, consolidation,
acquisition or reorganization; or (b) by purchase in the open
market of securities of other investment companies involving only
customary brokers' commissions and only if immediately thereafter
(i) no more than 3% of the voting securities of any one
investment company are owned by the Portfolio, (ii) no more than
5% of the value of the total assets of a Portfolio would be
invested in any one investment company, and (iii) no more than
10% of the value of the total assets of a Portfolio would be
invested in the securities of such investment companies. A
portion of a Portfolio's cash may be invested from time to time
in investment companies to which the Adviser or sub-adviser
serves as investment adviser; provided that no management or
distribution fee will be charged by the Adviser or sub-adviser
with respect to any such assets so invested and provided further
that at no time will more than 3% of the Portfolio's assets be so
invested. Should a Portfolio purchase securities of other
investment companies, shareholders may incur additional
management, advisory and distribution fees.
(13) Invest in securities for which there are legal or
contractual restrictions on resale, if more than 2% of the value
of a Portfolio's total assets would be invested in such
securities, or invest in securities for which there is no readily
available market, if more than 5% of the value of a Portfolio's
total assets would be invested in such securities. In
determining securities subject to this 5% restriction, the
Portfolios will include repurchase agreements maturing in more
than seven days.
The Income Portfolio has adopted the following additional
investment restriction, which is a fundamental policy and may not
be changed without the approval of the holders of a majority of
the Income Portfolio's outstanding voting securities, as defined
above. The Income Portfolio may not invest in non-income
producing securities if immediately after such investment more
than 35% of the value of its total assets would be invested in
such securities. (See "Investment Objectives and Policies" in
the Prospectus). However, as an operating policy, the Income
Portfolio does not intend to invest in non-income producing
securities.
Additional investment restrictions adopted by the Directors
on behalf of the Portfolios, which may be changed by the
Directors at their discretion, provide that the Portfolios may
not:
(1) For the Equity, Income, Flex, Cash Management, Relative
Return Bond and Real Estate Portfolios, invest more than 10% of
the value of the applicable Portfolio's total assets in
securities of foreign issuers; provided, however, that the Equity
and Flex Portfolios may invest up to 25% of the value of the
applicable Portfolio's total assets in sponsored ADRs (American
Depositary Receipts). The MultiFlex Portfolio may invest up to
40% of total assets in securities of foreign issuers and the
International Value Portfolio may invest up to 100% of its total
assets in securities of foreign issuers. Investing in securities
issued by companies whose principal business activities are
outside the United States may involve significant risks not
present in domestic investments.
(2) Write, purchase or sell puts, calls, straddles, spreads
or combinations thereof, except as set forth in the Prospectus
and this Statement of Additional Information for transactions in
options, futures, and options on futures and transactions arising
under swap agreements. Options on interest rate futures
contracts and investments in initial margins will not exceed 5%
of the applicable Portfolio's total assets. Covered call options
and cash secured puts will not exceed 25% of the applicable
Portfolio's total assets. For a detailed discussion on these
types of instruments, see the Prospectus.
(3) Purchase or sell interests in oil, gas or other mineral
leases or exploration or development programs. A Portfolio,
however, may purchase or sell securities issued by entities which
invest in such interests.
(4) Invest more than 5% of a Portfolio's total assets in
securities of companies having a record, together with
predecessors, of less than three years of continuous operation.
(5) Purchase or retain the securities of any issuer if any
individual officer or Director of a Portfolio, the Adviser or
sub-adviser, or any subsidiary thereof owns individually more
than 0.5% of the securities of that issuer and all such officers
and Directors together own more than 5% of the securities of that
issuer.
(6) Engage in arbitrage transactions.
Another policy which may be changed by the Directors at
their discretion is that, to the extent a Portfolio invests in
warrants, a Portfolio's investment in warrants, valued at the
lower of cost or market, may not exceed 5% of the value of such
Portfolio's net assets. Included within that amount, but not to
exceed 2% of the value of such Portfolio's net assets, may be
warrants which are not listed on the New York or American Stock
Exchanges. Warrants acquired by a Portfolio as part of a unit or
attached to securities may be deemed to be without value.
PORTFOLIO SECURITIES LOANS
Each of the Portfolios, except the Cash Management
Portfolio, may lend limited amounts of portfolio securities (not
to exceed 40% of total assets for the Relative Return Bond
Portfolio, and 10% of total assets for the other Portfolios) to
broker-dealers or other institutional investors. The sub-
advisers will monitor the creditworthiness of such broker-dealers
in accordance with procedures adopted by the Directors. Fund
Management understands that it is the current view of the staff
of the Securities and Exchange Commission (the "Commission") that
the Portfolios are permitted to engage in loan transactions only
if the following conditions are met: (1) the applicable Portfolio
must receive 100% collateral in the form of cash or cash
equivalents, e.g., U.S. Treasury bills or notes, from the
borrower; (2) the borrower must increase the collateral whenever
the market value of the borrowed securities (determined on a
daily basis) rises above the level of the collateral; (3) the
applicable Portfolio must be able to terminate the loan after
notice; (4) the applicable Portfolio must receive reasonable
interest on the loan or a flat fee from the borrower, as well as
amounts equivalent to any dividends, interest or other
distributions on the securities loaned and any increase in market
value; (5) the applicable Portfolio may pay only reasonable
custodian fees in connection with the loan; and (6) voting rights
on the securities loaned may pass to the borrower; however, if a
material event affecting the investment occurs, the Portfolio
must be able to terminate the loan and vote proxies or enter into
an alternative arrangement with the borrower to enable the
Portfolio to vote proxies. Excluding items (1) and (2), these
practices may be amended from time to time as regulatory
provisions permit.
While there may be delays in recovery of loaned securities
or even a loss of rights in collateral supplied should the
borrower fail financially, loans will be made only to firms
deemed by the sub-advisers to be of good standing and will not be
made unless, in the judgment of the respective sub-adviser, the
consideration to be earned from such loans would justify the
risk.
It is expected that each of the Portfolios will use the cash
portions of loan collateral to invest in short-term income
producing securities for such Portfolio's account and that such
Portfolio may share some of the income from these investments
with the borrower.
MANAGEMENT OF THE FUND
Directors and Officers
Listed below are the Directors and executive officers of the
Fund, their business addresses and their principal occupations
during the past five years.
CHARLES W. BRADY,*+ Chairman of the Board of Directors
Mr. Brady is Chief Executive Officer and a director of
INVESCO PLC, London, England, and of various subsidiaries
thereof. He is also Chairman of the Board of INVESCO Treasurer's
Series Trust and of The Global Health Sciences Fund. Address:
1315 Peachtree Street, N.E., Atlanta, Georgia 30309. Born: May
11, 1935.
FRED A. DEERING,+# Vice Chairman of the Board of Directors
Mr. Deering is Chairman of the Executive Committee of the
Board of Security Life of Denver Insurance Company, Denver,
Colorado and Chairman of the Executive Committee of the Board of
ING American Life Insurance Company. He is also Director of NN
Financial, Toronto, Ontario, Canada and Vice Chairman of INVESCO
Treasurer's Series Trust. Address: Security Life Center, 1290
Broadway, Denver, Colorado 80203. Born: January 12, 1928.
HUBERT L. HARRIS, JR.,*+ President and Director
Mr. Harris has been President of the Fund since April 1991.
Mr. Harris is also President of ISI, a position he has held since
January 1990. He is a Director and Chief Financial Officer of
INVESCO PLC, London, England. From November 1988 to January
1990, he was an employee of ICM. From 1983 to 1988, Mr.
Harris was President and Executive Director of the International
Association for Financial Planning. Mr. Harris is a member of
the Executive Committee of the Alumni Board of Trustees of Georgia
Institute of Technology. Address: 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309. Born: July 15, 1943.
VICTOR L. ANDREWS,** Director
Dr. Andrews has been Mills Bee Lane Professor of Banking and
Finance and Chairman of the Department of Finance at Georgia
State University, Atlanta, Georgia since 1968. Since
October 1984, Dr. Andrews has been Director of the Center for the
Study of Regulated Industry at Georgia State University. He is a
former member of the faculties of the Harvard Business School and
the Sloan School of Management of MIT. He is also a Director of
The Southeastern Thrift and Bank Fund, Inc. and The Sheffield
Funds, Inc., and a Trustee of INVESCO Treasurer's Series Trust.
Address: Department of Finance, Georgia State University,
University Plaza, Atlanta, Georgia 30303-3083. Born: June 23,
1930.
BOB R. BAKER,+** Director
Mr. Baker has been President and Chief Executive Officer of
AMC Cancer Research Center, Denver, Colorado, since January 1989.
Until mid-December 1988, Mr. Baker served as Vice Chairman of the
Board of First Columbia Financial Corporation (a financial
institution), Englewood, Colorado. Prior to that time, Mr. Baker
served as Chairman of the Board and Chief Executive Officer of
First Columbia Financial Corporation. Mr. Baker is a Trustee of
INVESCO Treasurer's Series Trust. Address: 1775 Sherman Street,
#1000, Denver, Colorado 80203. Born: August 7, 1936.
LAWRENCE H. BUDNER,# Director
Mr. Budner is a Trust Consultant. Prior to June 1987, he
was Senior Vice President and Senior Trust Officer of InterFirst
Bank of Dallas, Texas. He is a Trustee of INVESCO Treasurer's
Series Trust. Address: 7608 Glen Albens, Dallas, Texas 75225.
Born: July 25, 1930.
DANIEL D. CHABRIS,+# Director
Mr. Chabris is a Financial Consultant. From 1966 to 1988,
he was Assistant Treasurer of Colt Industries, Inc., New York,
New York. He is a Trustee of INVESCO Treasurer's Series Trust.
Address: 15 Sterling Road, Armonk, New York 10504. Born:
August 1, 1923.
KENNETH T. KING,** Director
Mr. King is retired. Mr. King was formerly Chairman of the
Board of The Capital Life Insurance Company and of Providence
Washington Insurance Company and Director of numerous
subsidiaries thereof in the United States. Prior to that,
Mr. King was the Chairman of the Board of The Providence Capital
Companies in the United Kingdom and Guernsey. Mr. King also
served as Chairman of the Board of Symbion Corporation (a high
technology company) until 1987. He is a Trustee of INVESCO
Treasurer's Series Trust. Address: 4080 North Circulo
Manzanillo, Tucson, Arizona 85715. Born: November 16, 1925.
FRANK M. BISHOP,* Director
Mr. Bishop is President and Chief Operating Officer of
INVESCO Inc., a position he has held since February 1993. Mr.
Bishop is also Director of INVESCO Funds Group, Inc. (since March
1993), and Director (since February 1993), Vice President (since
December 1991), and portfolio manager (since February 1987) of
ICM and predecessor firms. Address: 1315 Peachtree Street,
N.E., Atlanta, Georgia 30309. Born: December 7, 1943.
A.D. FRAZIER, JR.,** Director
Mr. Frazier is Chief Operating Officer of the Atlanta
Committee for the Olympic Games. Until 1991, Mr. Frazier was
Executive Vice President of the North American Banking Group of
First Chicago Bank. Mr. Frazier is also Director of the Atlanta
Chamber of Commerce and Atlanta Symphony Orchestra and a
Trustee of INVESCO Treasurer's Series Trust. Address:
250 Williams Street, Suite 6000, Atlanta, Georgia 30301. Born:
June 23, 1944.
JOHN W. MCINTYRE,# Director
Mr. McIntyre is retired. He was formerly Chairman of the
Board and Chief Executive Officer of Citizens and Southern
National Bank in Atlanta, Georgia, positions he held from May
1986 to December 1991. Prior to that, Mr. McIntyre was Vice
Chairman of the Board of The Citizens and Southern Corporation
and Chairman of the Board and Chief Executive Officer of The
Citizens and Southern Georgia Corp. He is also a Trustee of
INVESCO Treasurer's Series Trust. Address: Seven Piedmont
Center, Suite 100, Atlanta, Georgia 30305. Born: September 14,
1930.
PENELOPE P. ALEXANDER, Treasurer and Secretary
Ms. Alexander has been Treasurer and Secretary of the Fund
since its inception. Ms. Alexander has also served as Treasurer
of the Fund's predecessors since April 1985 and Secretary of the
Fund's predecessors since November 30, 1984. Ms. Alexander also
served as the Treasurer and Secretary of INVESCO Institutional
Series Trust, now Invesco Value Trust, from July 1987 to
January 1991, and has served as Treasurer and Secretary of
INVESCO Treasurer's Series Trust since January 27, 1988. Since
June 1983, Ms. Alexander has been associated with ISI and since
May 1984, with ICM. Address: 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309. Born: December 26, 1938.
______________________________________
* Messrs. Brady, Bishop and Harris are "interested persons"
(as that term is defined in the 1940 Act) of the Fund
because of their affiliation with ISI and/or its affiliated
companies.
# Member of the audit committee of the Fund.
+ Member of the executive committee of the Fund. The executive
committee acts upon the current and ordinary business of the
Fund between meetings of the Board of Directors. Except for
certain powers which, under applicable law, may only be
exercised by the full Board of Directors, the executive
committee may exercise all powers and authority of the Board
of Directors in the management of the business of the Fund.
All decisions are subsequently submitted for ratification by
the Board of Directors.
** Member of the management liaison committee of the Fund.
ICM and ISI serve as investment adviser and principal
underwriter, respectively, of INVESCO Treasurer's Series Trust.
Mr. Brady is also Chairman of the Board, Mr. Deering is Vice
Chairman, and all of the Directors of the Fund are directors or
trustees of the following investment companies: INVESCO Growth
Fund, Inc., INVESCO Industrial Income Fund, Inc., INVESCO
Dynamics Fund, Inc., INVESCO Income Funds, Inc., INVESCO Tax-Free
Income Funds, Inc., INVESCO Strategic Portfolios, Inc., INVESCO
Value Trust, INVESCO Emerging Growth Fund, Inc., INVESCO
Money Market Funds, Inc., INVESCO International Funds, Inc.,
INVESCO Diversified Funds, Inc., INVESCO Multiple Asset Funds,
Inc., and INVESCO Variable Investment Funds, Inc. All of the
Directors of the Fund, except Mr. Harris, are also trustees of
INVESCO Treasurer's Series Trust.
Director Compensation
The following table sets forth, for the fiscal period ended
December 31, 1994: the compensation paid by the Fund to its
eight independent directors for services rendered in their
capacities as directors of the Fund; the retirement benefits
accrued as Fund expenses with respect to the Defined Benefit
Deferred Compensation Plan discussed below; and the total
compensation paid by all of the mutual funds distributed by ISI
and INVESCO Funds Group, Inc., including the Fund, INVESCO
Treasurer's Series Trust and The Global Health Sciences Fund
(collectively, the "INVESCO Complex") (45 portfolios in total) to
these directors for services rendered in their capacities as
directors or trustees.
Aggregate Retirement
Compensation Benefits
Name of Person, Position From Fund1 Accrued As
Part of
Fund
Expenses2
Fred A. Deering, Vice Chairman $ 7,020 $ 1,122
of the Board
Victor L. Andrews 6,547 1,060
Bob R. Baker 6,883 947
Lawrence H. Budner 6,547 1,060
Daniel D. Chabris 6,789 1,210
A.D. Frazier, Jr. 22,000 0
Kenneth T. King 6,687 1,165
John W. McIntyre 22,000 0
Total 84,473 6,564
Estimated Total
Annual Compensation
Benefits From INVESCO
Name of Person, Position Upon Complex Paid
Retirement To
2 Directors1
Fred A. Deering, Vice Chairman N/A $ 89,350
of the Board
Victor L. Andrews N/A 68,000
Bob R. Baker N/A 75,350
Lawrence H. Budner N/A 68,000
Daniel D. Chabris N/A 73,350
A.D. Frazier, Jr. N/A 32,500
Kenneth T. King N/A 71,000
John W. McIntyre N/A 33,000
Total N/A $489,050
1/The vice chairman of the board, the chairman of the audit,
management liaison, and compensation committees, and the members
of the executive committee each receive compensation for serving
in such capacities in addition to the compensation paid to all
independent directors.
2/Funds in the INVESCO Complex are not charged independent
directors' fees until the earlier of one year from their initial
offering date or such time as the total assets of the fund equal
$10 million. Since the Relative Return Bond Portfolio did not
have assets in excess of $10 million during the fiscal period
ended December 31, 1994, the Fund was not charged any independent
directors fees or accruals for retirement benefits during the
fiscal period ended December 31, 1994 with respect to this
Portfolio. Accordingly, as of the date of this Statement of
Additional Information, the Fund is unable to estimate the annual
benefits to be received by these directors upon retirement as a
result of their services to the Fund.
Effective January 1, 1994, the Fund pays six of its
Independent Directors a regular annual fee of $1,000 per year per
Portfolio, plus the Portfolio's pro-rata share of a $3,000
quarterly meeting fee for attending regular quarterly Directors'
meetings, plus the Portfolio's pro-rata share of the balance of
the retainer which is currently $22,000. Two independent
directors, Messrs. Frazier and McIntyre, receive annual
directors' fees of $20,000. Messrs. Bishop, Brady, and Harris,
as "interested persons" of the Fund and of the other funds in the
INVESCO Complex, receive compensation as officers or employees of
ISI or its affiliated companies, and do not receive any
directors' fees or other compensation from the Fund or the other
funds in the INVESCO Complex for their service as directors. The
Fund does not have stock option or pension or retirement plans
for management or personnel, and pays no compensation to any of
its officers.
The Board of Directors has adopted a mandatory retirement
policy for Directors who have attained 72 years of age. The
mandatory retirement date for each Director is the last day of
the calendar quarter in which he or she turns 72; provided,
however, that a majority of the Directors may annually extend a
Director's retirement date for a maximum period of three years,
or through the calendar quarter in which the Director turns 75.
The boards of directors/trustees of the mutual funds in the
INVESCO Complex adopted a Defined Benefit Deferred Compensation
Plan for the independent directors and trustees of the funds.
Under this plan, each director or trustee who is not an
interested person of the funds and who has served for at least
five years (a "qualified director") is entitled to receive, upon
retiring from the board at the retirement age of 72 (or the
retirement age of 73 or 74, if retirement is extended by the
boards for one or two years, but less than three years)
continuation of payment for one year (the "first year retirement
benefit") of the annual basic retainer payable by the funds to
the qualified director at the time of his retirement (the "basic
retainer"). Commencing with any such director's second year of
retirement, and commencing with the first year of retirement of a
director whose retirement has been extended by the board for
three years, a qualified director shall receive quarterly
payments at an annual rate equal to 25% of the basic retainer.
These payments will continue for the remainder of the qualified
director's life or ten years, whichever is longer (the "reduced
retainer payments"). If a qualified director dies or becomes
disabled after age 72 and before age 74 while still a director of
the funds, the first year retirement benefit and the reduced
retainer payments will be made to him or to his beneficiary or
estate. If a qualified director becomes disabled or dies either
prior to age 72 or during his/her 74th year while still a
director of the funds, the director will not be entitled to
receive the first year retirement benefit; however, the reduced
retainer payments will be made to his beneficiary or estate. The
plan is administered by a committee of three directors who are
also participants in the plan and one director who is not a plan
participant. The cost of the plan will be allocated among the
INVESCO, EBI and Treasurer's Series funds in a manner determined
to be fair and equitable by the committee. Although the Fund is
not making any payments to directors under the plan as of the
date of this Statement of Additional Information, it has begun to
accrue, as a current expense, a proportionate amount of the
estimated future cost of these benefits.
Fund Committees
The Fund has an audit committee which is comprised of three
of the Directors who are not interested persons of the Fund. The
committee meets periodically with the Fund's independent
accountants and officers to review accounting principles used by
the Fund, the adequacy of internal controls, the responsibilities
and fees of the independent accountants, and other matters.
The Fund also has a management liaison committee which meets
quarterly with various management personnel in order (a) to
facilitate better understanding of management and operations of
the Fund, and (b) to review legal and operational matters which
have been assigned to the committee by the Board of Directors, in
furtherance of the Board of Directors' overall duty of
supervision.
THE ADVISORY AND SUB-ADVISORY AGREEMENTS
The investment adviser to the Fund is INVESCO Services,
Inc., a Georgia corporation (the "Adviser" or "ISI"), which has
its principal office at 1315 Peachtree Street, N.E., Atlanta,
Georgia 30309. The Adviser is a wholly owned subsidiary of
INVESCO Capital Management, Inc., which serves as sub-adviser to
five of the Portfolios, as described below.
The sub-adviser to the Equity, Income, Flex, International
Value and Cash Management Portfolios is INVESCO Capital
Management, Inc., a Delaware corporation ("ICM"), which has its
principal office at 1315 Peachtree Street, N.E., Atlanta, Georgia
30309. ICM also has an advisory office in Coral Gables, Florida
and a marketing and client service office in San Francisco,
California.
The sub-adviser to the MultiFlex and Relative Return Bond
Portfolios is INVESCO Management and Research, Inc., formerly
Gardner and Preston Moss, Inc., of Boston, Massachusetts ("IMR"),
a Massachusetts corporation which has its principal office at 101
Federal Street, Boston, MA 02110. IMR manages funds of
approximately $1.7 billion, predominantly in pension and
endowment accounts.
The sub-adviser to the Real Estate Portfolio is INVESCO
Realty Advisors, Inc., a Texas corporation based in Dallas
("IRA"), which has its principal office at One Lincoln Centre,
Suite 1200, 5400 LBJ Freeway/LB 2, Dallas, Texas 75240. IRA is
responsible for providing advisory services in the U.S. real
estate markets for INVESCO PLC's clients worldwide. Established
in 1983 as a registered investment adviser and qualified
professional asset manager, funds under management total $2.3
billion. As of December 31, 1994, its direct portfolio contained
74 properties totalling over 18.2 million square feet of
commercial real estate and 3,686 apartment units. Clients
include corporate plans and public pension funds as well as
endowment and foundation accounts.
ICM, IMR and IRA are wholly owned subsidiaries of INVESCO
North American Holdings, Inc., formerly Britannia Holdings, Inc.
("INAH"), a Delaware corporation, which is a wholly owned
subsidiary of INVESCO PLC. INVESCO PLC is a financial holding
company which was organized in 1935. Its ordinary shares are
held by approximately 16,349 shareholders and are traded on the
International Stock Exchange of the United Kingdom and the
Republic of Ireland, Ltd. ("London Stock Exchange"), with a
market valuation of over $66.8 million as of December 31, 1994.
The principal business of INVESCO PLC, which is carried on
through subsidiaries, is investment management on a global basis.
Through subsidiaries in London, Denver, Atlanta, Boston,
Louisville, Dallas, Tokyo, Hong Kong, Paris, Luxembourg, and the
Channel Islands, INVESCO PLC manages over $65 billion on behalf
of mutual funds, pension and insurance funds and private
individuals. INVESCO Fund Managers Limited, one of the largest
unit trust management companies in the United Kingdom, manages
the assets of over 23 authorized unit trusts having approximately
283,656 unitholders and assets exceeding $2 billion. INVESCO
International Limited (incorporated in Jersey, Channel Islands)
offers a broad range of offshore trusts (designed for
international investors other than residents of the United
States). Funds under management in Jersey amount to some $1.3
billion on behalf of some 26,647 unitholders.
INVESCO Funds Group, Inc., formerly Financial Programs,
Inc., an affiliated company which is also a wholly owned
subsidiary of INAH, was established in 1932, and engages in the
investment advisory business in Denver, Colorado, managing 14 no-
load mutual funds consisting of 36 portfolios with combined
assets of approximately $9.4 billion at December 31, 1994.
In May 1986, INVESCO PLC acquired INVESCO Asset Management
Limited (formerly, "MIM Limited") ("INVESCO Management"), an
investment management company located in the United Kingdom. The
principal business of INVESCO Management is the management of
pension funds, investment trusts, unit trusts, and various
investment portfolios on behalf of private clients, charities,
corporations, and foreign financial institutions.
In December 1988, INVESCO PLC, through one of its wholly
owned subsidiaries, purchased ICM's general partnership interest
in INVESCO Capital Management, L.P. INVESCO Capital Management
L.P.'s limited partnership interest had been acquired by INVESCO
PLC in December 1986.
In December 1990, INVESCO PLC purchased the business and
assets of PRIMCO Capital Management, Inc. ("PRIMCO"). PRIMCO,
which was established in 1985 and is based in Louisville,
Kentucky, specializes in managing stable return investments
principally on behalf of Section 401(k) retirement plans. As of
December 31, 1994, PRIMCO managed assets of over $12.1 billion on
behalf of approximately 60 clients.
The corporate headquarters of INVESCO PLC are located at 11
Devonshire Square, London, EC2M 4YR, England. The dollar figures
set forth in the above paragraphs were obtained by converting
British pounds sterling into U.S. dollars as of December 31, 1994
at $1.5645. All of the information contained in the above six
paragraphs was furnished by INVESCO PLC and its affiliates.
Under their Investment Advisory and Sub-Advisory Agreements
(the "Agreements") with the respective Portfolios, the Adviser
and sub-advisers will, subject to the supervision of the
Directors of the Fund and in conformance with the stated policies
of the Portfolios, manage the investment operations of the
Portfolios. In this regard, it will be the responsibility of the
Adviser and sub-advisers not only to make investment decisions
for the Portfolios, but also to place the purchase and sale
orders for the portfolio transactions of the Portfolios. (See
"Brokerage and Portfolio Transactions.") The Investment Advisory
Agreement provides that, in fulfilling its responsibilities, the
Adviser may engage the services of other investment managers with
respect to one or more of the Portfolios.
The Adviser is also responsible for furnishing to the
Portfolios, at the Adviser's expense, the services of persons
believed to be competent to perform all supervisory and
administrative services required by the Portfolios, in the
judgment of the Directors, to conduct their respective businesses
effectively, as well as the offices, equipment and other
facilities necessary for their operations. Such functions include
the maintenance of each Portfolio's accounts and records, and the
preparation of all requisite corporate documents such as tax
returns and reports to the Securities and Exchange Commission
("SEC") and shareholders. Operational services which are
necessary for the day-to-day operations of the Portfolios are
provided under a separate Operating Services Agreement between
the Fund and ISI (See "Operating Services Agreement").
Except as discussed below (see "Operating Services
Agreement"), each of the Portfolios is responsible for the
payment of its own expenses. However, if, in any given year, the
sum of a particular Portfolio's expenses exceeds applicable state
expense limitations, the Adviser will be required to reimburse
such Portfolio for such excess expenses promptly. Interest,
taxes, distribution expenses, directors' fees and expenses and
extraordinary items such as litigation costs are not deemed
expenses for purposes of the foregoing limitations and will be
borne by the Fund or particular Portfolio, as applicable.
Expenditures, including costs incurred in connection with the
purchase or sale of portfolio securities, which are capitalized
in accordance with generally accepted accounting principles
applicable to investment companies, are accounted for as capital
items and not as expenses. There were no reimbursements for the
Portfolios during the period ended December 31, 1994. For the
fiscal year ended December 31, 1993, ISI reimbursed the Equity,
Income, Flex and Cash Management Portfolios in the following
amounts: $3,227, $17,632, $18,993 and $15,099 respectively. For
the fiscal year ended December 31, 1992, the Cash Management
Portfolio was reimbursed in the amount of $38,925 by ICM, the
Portfolio's former adviser. There were no reimbursements for the
Equity, Income, or Flex Portfolios during that period. For the
fiscal year ended December 31, 1991, there were no reimbursements
for the Equity, Income, Flex or Cash Management Portfolios by
ICM, the Portfolios' former adviser.
For the services to be rendered and the expenses to be
assumed by the Adviser under the Investment Advisory Agreements,
each Portfolio will pay to the Adviser an advisory fee which will
be computed daily and paid as of the last day of each month on
the basis of the Portfolio's daily net asset value, using for
each daily calculation the most recently determined net asset
value of the Portfolio. (See "Computation of Net Asset Value").
On an annual basis, the advisory fee is equal to 0.75% of the
average net asset value of net assets of the Portfolio for each
of the Equity, Income and Flex Portfolios, 0.90% of the average
net asset value of the Real Estate Portfolio, 1.0% of the average
net asset value of each of the MultiFlex and International Value
Portfolios, and 0.50% of the average net asset value of each of
each of the Relative Return Bond and Cash Management Portfolios.
Those fees which equal 0.75% of average annual net assets are
higher than those generally charged by investment advisers to
similar funds for advisory services. However, the Adviser also
provides certain supervisory and administrative services to the
Portfolios pursuant to the Investment Advisory Agreements. No
advisory fee will be paid to the Adviser with respect to any
assets of the Portfolios invested in the Cash Management
Portfolio.
For the services to be rendered and the expenses to be
assumed by ICM, IMR and IRA under their respective Sub-Advisory
Agreements, the Adviser will pay to each sub-adviser a fee which
will be computed daily and paid as of the last day of each month
on the basis of each Portfolio's daily net asset value, using for
each daily calculation the most recently determined net asset
value of the Portfolio. (See "Computation of Net Asset Value").
On an annual basis, the sub-advisory fee is equal to 0.20% of the
average net asset value of the Portfolio for each of the Equity
and Flex Portfolios; 0.10% of the average net asset value of the
Portfolio for each of the Income, Cash Management and Relative
Return Bond Portfolios; 0.35% of the average net asset value of
the Real Estate Portfolio on assets up to $100 million and 0.25%
on assets in excess of $100 million; 0.35% of the average net
asset value of the MultiFlex Portfolio on assets up to $500
million and 0.25% on assets in excess of $500 million; and the
following for the International Value Portfolio: 0.35% on net
assets up to $50 million, 0.30% on net assets over $50 million
and up to $100 million, and 0.25% on net assets over $100
million.
The current Investment Advisory and Sub-Advisory Agreements
were approved by the shareholders of the Equity, Income, Flex and
Cash Management Portfolios on June 8, 1993, by the sole
shareholder of the MultiFlex and Relative Return Bond Portfolios
on November 8, 1993, and by the sole shareholder of the Real
Estate and International Value Portfolios on April 10, 1995. The
Agreements will each continue in effect from year to year
provided such continuance is specifically approved at least
annually by (i) the vote of a majority of each applicable
Portfolio's outstanding voting securities (as defined under
"Investment Restrictions" in the Prospectus) or by the Directors,
and (ii) the vote of a majority of the Directors, who are not
"interested persons" (as such term is defined in the 1940 Act) of
the Portfolios or the Adviser or the respective sub-adviser. The
Agreements are terminable on 60 days' written notice by either
party thereto and will terminate automatically if assigned.
For the fiscal years ended December 31, 1994, 1993 and 1992,
the aggregate amounts of the advisory fees paid to the Adviser
(ISI for the period July 1, 1993 through December 31, 1994 and
ICM in prior periods) by the Portfolios, were as follows:
<PAGE>
December 31,
Portfolio 1994 1993 1992
Equity $ 594,977 $ 682,566 $623,667
Income $ 243,102 $ 360,382 $304,906
Flex $1,909,886 $1,742,393 $931,444
MultiFlex $ 815,359 $ 5,794 N/A
Relative Return
Bond $ 11,331 $ 690 N/A
Real Estate N/A N/A N/A
International Value N/A N/A N/A
Cash Management $ 93,680 $ 86,715 $100,633
The investment advisory services of the Adviser to the
Portfolios are not exclusive and the Adviser is free to render
investment advisory services to others, including other
investment companies.
OPERATING SERVICES AGREEMENT
ISI, as manager of the Portfolios, also provides operating
services pursuant to an Operating Services Agreement with the
Fund. Under the Operating Services Agreement, each Portfolio
pays to the Manager an annual fee of 0.50% of daily net assets of
the Portfolio for providing or arranging to provide accounting,
legal (except litigation), dividend disbursing, registrar,
custodial, shareholder reporting, sub-accounting and
recordkeeping services and functions. These agreements provide
that the Manager pays all fees and expenses associated with these
and other functions, including, but not limited to, registration
fees, shareholder meeting fees, and proxy statement and
shareholder report expenses.
The combined effect of the Advisory Agreements and Operating
Services Agreement, and the Distribution Plans of each of the
Portfolios (see "Distribution of Shares"), is to place a cap or
ceiling on the total expenses of each Portfolio, other than
brokerage commissions, interest, taxes, litigation, and other
extraordinary expenses. ISI has voluntarily agreed to adhere to
maximum expense ratios for the Portfolios. To the extent that a
Portfolio's expenses exceed the amounts listed below, ISI will
waive its fees or reimburse the Portfolio to assure that each
Portfolio's expenses do not exceed the designated maximum
amounts. The expense ceilings include reductions at larger asset
sizes to reflect anticipated economies of scale as the Portfolios
grow in size.
If, in any calendar quarter, the average net assets of the
Equity or Flex Portfolios are less than $500 million, expenses
shall not exceed 2.25%; on the next $500 million of net assets,
expenses shall not exceed 2.15%; on the next $1 billion of net
assets, expenses shall not exceed 2.10%; and on all assets over
$2 billion, expenses shall not exceed 2.05%. If, in any calendar
quarter, the average net assets of the Income Portfolio are less
than $250 million, expenses shall not exceed 2.25%; on the next
$250 million of net assets, expenses shall not exceed 2.15%; on
the next $250 million of net assets, expenses shall not exceed
2.10%; and on all assets over $750 million, expenses shall not
exceed 2.05%. If, in any calendar quarter, the average net
assets of the MultiFlex or International Value Portfolio are less
than $100 million, expenses shall not exceed 2.50%; on the next
$400 million of net assets, expenses shall not exceed 2.40%; on
the next $500 million of net assets, expenses shall not exceed
2.35%; on the next $1 billion of net assets, expenses shall not
exceed 2.30%; and on all assets over $2 billion, expenses shall
not exceed 2.25%. If, in any calendar quarter, the average net
assets of the Real Estate Portfolio are less than $100 million,
expenses shall not exceed 2.40%; on the next $400 million of net
assets, expenses shall not exceed 2.35%; on the next $500 million
of net assets, expenses shall not exceed 2.30%; and on all assets
over $1 billion, expenses shall not exceed 2.25%. In any
calendar year, the expenses of the Cash Management Portfolio may
not exceed 1% of average net assets, and expenses of the Relative
Return Bond Portfolio may not exceed 1.50% of average net assets.
THE DISTRIBUTOR
ISI, the Fund's distributor (the "Distributor"), is the
principal underwriter of the Fund under a separate Distribution
Agreement dated as of July 1, 1993, as amended November 1, 1993
and April 19, 1995 (the "Distribution Agreement"). All of the
Distributor's outstanding shares of voting stock are owned by
ICM. The Distributor's office is located at 1355 Peachtree
Street, N.E., Atlanta, Georgia 30309. The Distributor will
receive payments from each Portfolio, except the Cash Management
Portfolio, pursuant to the provisions of the Fund's plan of
distribution described under "Distribution of Shares."
Prior to May 1, 1995, the Distributor received directly the
full amount of all contingent deferred sales charges paid upon
redemption of shares of the Equity, Income, and Flex Portfolios
purchased prior to January 1, 1992. Imposition of a contingent
deferred sales charge on redemptions of shares purchased prior to
1992 has been discontinued.
The aggregate amounts of contingent deferred sales charges
received by the Distributor for the fiscal year ended December
31, 1994, were as follows:
Equity Income Flex MultiFlex Cash Management
Portfolio Portfolio Portfolio Portfolio Portfolio
Year ended $46,177 $50,559 $26,541 $ 908 $ 9,822
12/31/94
The aggregate amount of payments (not including contingent
deferred sales charges) received by the Distributor for the
fiscal year ended December 31, 1994, from each of the Portfolios,
except the Cash Management Portfolio, was as follows:
Equity Income Flex
Portfolio Portfolio Portfolio
Year ended 12/31/94 $793,302 $324,137 $2,546,516
MultiFlex Relative Return
Portfolio Bond Portfolio
Year ended 12/31/94 $815,359 $11,331
The amounts paid by each of the Portfolios, except the Cash
Management Portfolio, under its plan for the fiscal year ended
December 31, 1994, were used by the Distributor as follows:
Printing and
Mailing Compensation to
Portfolio Advertising Prospectus (to Dealers and other
other than Expenses
Shareholders)
Equity $ 60,000 $30,000 $ 703,302
Income $ 41,350 $20,650 $ 262,137
Flex $145,340 $72,660 $2,328,516
MultiFlex $132,000 $66,000 $ 617,359
Relative $ 2,000 $ 1,000 $ 8,331
Return Bond
Any remaining amounts paid to the Distributor were retained by it
to offset the initial commission paid by the Distributor to
dealers selling shares of the Equity, Income and Flex Portfolios.
The Real Estate and International Value Portfolios were not
operational prior to 1995.
DISTRIBUTION OF SHARES
Rule 12b-1 under the 1940 Act ("Rule 12b-1") permits a fund
to use its assets to bear expenses of distributing its shares if
it complies with various conditions, including adoption of a plan
of distribution containing certain provisions set forth in the
Rule. The plan described below was approved by the Directors of
the Fund with respect to the Equity, Income, Flex, MultiFlex,
Relative Return Bond, Real Estate and International Value
Portfolios, including a majority of the Directors who are not
"interested persons" of the Portfolios as defined in the 1940 Act
("Independent Directors") and the Directors who have no direct or
indirect financial interest in the plan or any agreement related
thereto (the "Rule 12b-1 Directors"), who currently are the same
persons as the Independent Directors. The Directors have
determined that, in their judgment, there is a reasonable
likelihood that the plan will benefit each Portfolio and its
shareholders by, among other things, providing broker-dealers
with an incentive to sell additional shares of the Fund, thereby
helping to satisfy the Fund's liquidity needs and thus, helping
to increase the Fund's investment flexibility. In their
quarterly review of the plan, the Directors will consider its
continued appropriateness and the levels of compensation provided
in the plan. On June 8, 1993, the plan was approved by
shareholders of the Equity, Income, and Flex Portfolios. On
November 8, 1993, the plan was approved by the sole shareholder
of each of the MultiFlex and Relative Return Bond Portfolios. On
April 10, 1995, the plan was approved by the sole shareholder of
each of the Real Estate and International Value Portfolios.
The plan provides that each applicable Portfolio may incur
certain distribution and maintenance fees which may not exceed a
maximum amount equal to 0.50% of average annual net assets for
the Relative Return Bond Portfolio, and 1.0% of average annual
net assets for the other applicable Portfolios. This expense
includes the payment of 0.25% of average annual net assets to
broker-dealers as a "service fee" for providing account
maintenance or personal service to existing shareholders.
Under the plan of distribution, broker-dealers selling Fund
shares may be paid fees for selling shares and maintaining Fund
assets. Generally, an asset-based fee for selling shares and
providing services to shareholders will be paid out of Rule 12b-1
plan payments by the Distributor as follows: payments not
exceeding 1.0% per annum (0.50% per annum for the Relative Return
Bond Portfolio), which amount includes the 0.25% "service fee",
of the average net asset value of Fund shares sold by
broker-dealers, which are outstanding on the books of such
Portfolios for each month, will be made at least quarterly to the
selling broker-dealer. Additionally, the plan authorizes each
applicable Portfolio, subject to the annual limitations described
above, to pay the Distributor (or other broker-dealers): (1) the
costs and expenses incurred in preparation, printing and
distribution of the Fund's prospectuses, statements of additional
information and sales literature; (2) amounts from time to time
to support marketing shares of the Fund through programs with
broker-dealers selling Fund shares; and (3) overhead expenses
which involve the costs of ISI's personnel whose primary
responsibilities involve marketing the Fund. In addition, the
plan provides that the Portfolios may pay, subject to the annual
limitations, such other distribution costs and expenses as the
Directors may from time to time specify. The Distributor may pay
additional amounts up to 0.25% on assets serviced by a dealer
from its own resources to dealers or others who meet designated
eligibility criteria relating to sales of Fund shares, or who
provide administrative or informational assistance to
shareholders.
The plan may be terminated at any time by vote of a majority
of the Rule 12b-1 Directors or by vote of a majority of the
outstanding voting securities of the applicable Portfolio. Any
change in the plan that would materially increase the
distribution expenses of the Portfolio provided for in the plan
requires shareholder approval; otherwise, the plan may be amended
by a majority of the Directors, including the Rule 12b-1
Directors.
For so long as the plan is in effect, the Portfolios will be
required to commit the selection and nomination of candidates for
Independent Directors to the discretion of the Rule 12b-1
Directors.
The total amounts paid by each Portfolio under the foregoing
arrangements for any year may not exceed the maximum plan limit
specified above, and the amounts and purposes of expenditures
under the plan must be reported to the Rule 12b-1 Directors
quarterly. The Rule 12b-1 Directors may require or approve
changes in the implementation or operation of the plan and may
also require that total expenditures by each applicable Portfolio
under the plan be kept within limits lower than the maximum
amount permitted by the plan as stated above.
Until January 1, 1992, under the plan of distribution then
in effect for the Equity, Income and Flex Portfolios, and subject
to the plan's then-existing limit on quarterly expenditures
(i.e., 0.3125% of average daily net assets), a commission equal
to 4% of the total price paid to each Portfolio for each sale of
Portfolio shares effected through the Distributor (other than the
Cash Management Portfolio) was paid by the Distributor to other
broker-dealers making such sales. Thus, the Distributor from
time to time, particularly in the early years of the Portfolios'
operations, incurred marketing expenses for which it may be
reimbursed from 12b-1 plan payments, but for which the
Distributor has not been reimbursed to date ("unreimbursed
distribution expenses"). Such unreimbursed distribution expenses
have been paid to the Distributor by means of contingent deferred
sales charges paid upon redemption of shares purchased prior to
January 1, 1992, and from the amounts generated from each
Portfolio's plan of distribution which were not applied to the
payment of current distribution fees or other current
distribution expenses. Payments from the prior contingent
deferred sales charge have been discontinued. Redemptions of
shares purchased on or after May 1, 1995 are subject to a 1%
contingent deferred sales charge on redemptions made within one
year of purchase, which is paid to the Distributor to defray its
expenses related to providing distribution-related services to
the Fund.
<PAGE>
DISTRIBUTIONS AND TAX INFORMATION
Distributions
It is the intention of the Equity, Income, Flex, MultiFlex,
Relative Return Bond, Real Estate and International Value
Portfolios to distribute to its respective shareholders all of
the applicable Portfolio's net investment income and net realized
capital gains, if any. The Equity, Flex, MultiFlex, and Real
Estate Portfolios will make periodic distributions of its net
investment income (including any net short-term capital gain)
during the months of March, June, September and December and will
make an annual distribution of realized net capital gain during
the month of December. The International Value Portfolio will
make semiannual distributions of net investment income (including
any net short-term capital gain) during the months of June and
December and will make an annual distribution of realized net
capital gain during the month of December. Each of the Income
and Relative Return Bond Portfolios will make monthly
distributions of its net investment income (including any net
short-term capital gain), and will make an annual distribution of
its realized net capital gain during the month of December. The
net income of the Cash Management Portfolio is declared daily and
its dividends will be distributed monthly. Net realized capital
gains, if any, will be distributed during the month of December.
All such distributions will be reinvested automatically in
additional shares (or fractions thereof) of each applicable
Portfolio pursuant to each Portfolio's Automatic Dividend
Reinvestment Plan unless a shareholder has elected not to
participate in this plan or has elected to terminate his
participation in the plan and to receive his distributions in
excess of ten dollars in cash. Shareholders of the Cash
Management Portfolio who redeem all of their shares at any time
during the month will be paid all dividends accrued through the
date of redemption. Shareholders of the Cash Management
Portfolio who redeem less than all of their shares will be paid
the proceeds of the redemption in cash, and dividends with
respect to the redeemed shares will be reinvested in additional
shares (unless the shareholder has elected not to participate in
the Portfolio's Automatic Dividend Reinvestment Plan or has
elected to terminate his participation in such plan). (See
"Automatic Dividend Reinvestment Plan" in the Prospectus.)
Federal Taxes
Each Portfolio of the Fund intends to be taxed as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, a
Portfolio generally must, among other things, (a) derive in each
taxable year at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or
foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies;
(b) derive in each taxable year less than 30% of its gross income
from the sale or other disposition of certain assets held less
than three months, namely: (i) stock or securities; (ii)
options, futures, or forward contracts (other than those on
foreign currencies); or (iii) foreign currencies (or options,
futures, or forward contracts on foreign currencies) that are not
directly related to the Portfolio's principal business of
investing in stock or securities (or options and futures with
respect to stock or securities) (the "30% Limitation"); and (c)
diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the Portfolio's
assets is represented by cash, U.S. Government securities, the
securities of other regulated investment companies and other
securities, with such other securities limited, in respect of any
one issuer, to an amount not greater than 5% of the value of the
Portfolio's total assets and 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any
one issuer (other than U.S. Government securities and the
securities of other regulated investment companies).
As a regulated investment company, a Portfolio generally
will not be subject to U.S. federal income tax on income and
gains that it distributes to shareholders, if at least 90% of
each Portfolio's investment company taxable income (which
includes, among other items, dividends, interest and the excess
of any short-term capital gains over long-term capital losses)
for the taxable year is distributed. The Portfolios intend to
distribute substantially all of such income.
Amounts not distributed on a timely basis in accordance with
a calendar year distribution requirement are subject to a
nondeductible 4% excise tax at the Portfolio level. To avoid the
tax, each Portfolio must distribute during each calendar year,
(1) at least 98% of its ordinary income (not taking into account
any capital gains or losses) for the calendar year, (2) at least
98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses) for a one-year period
generally ending on October 31 of the calendar year, and (3) all
ordinary income and capital gains for previous years that were
not distributed during such years. To avoid application of the
excise tax, each Portfolio intends to make distributions in
accordance with the calendar year distribution requirements. A
distribution will be treated as paid on December 31 of the
current calendar year if it is declared by the Portfolio in
October, November or December of the year with a record date in
such a month and paid by the Portfolio during January of the
following year. Such distributions will be taxable to
shareholders in the calendar year the distributions are declared,
rather than the calendar year in which the distributions are
received.
Options, Futures and Foreign Currency Forward Contracts
Some of the options, futures and foreign currency forward
contracts in which a Portfolio may invest may be "section 1256
contracts." Gains (or losses) on these contracts generally are
considered to be 60% long-term and 40% short-term capital gains
or losses; however foreign currency gains or losses arising from
certain section 1256 contracts are ordinary in character. Also,
section 1256 contracts held by a Portfolio at the end of each
taxable year (and on certain other dates prescribed in the Code)
are "marked to market" with the result that unrealized gains or
losses are treated as though they were realized.
The transactions in options, futures and forward contracts
undertaken by a Portfolio may result in "straddles" for federal
income tax purposes. The straddle rules may affect the character
of gains or losses realized by a Portfolio. In addition, losses
realized by a Portfolio on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken
into account in calculating the taxable income for the taxable
year in which such losses are realized. Because only a few
regulations implementing the straddle rules have been
promulgated, the consequences of such transactions to a Portfolio
are not entirely clear. The straddle rules may increase the
amount of short-term capital gain realized by a Portfolio, which
is taxed as ordinary income when distributed to shareholders.
A Portfolio may make one or more of the elections available
under the Code which are applicable to straddles. If a Portfolio
makes any of the elections, the amount, character and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to shareholders
as ordinary income or long-term capital gain may be increased or
decreased substantially as compared to a fund that did not engage
in such transactions.
The 30% Limitation and the diversification requirements
applicable to each Portfolio's assets may limit the extent to
which a Portfolio will be able to engage in transactions in
options, futures and forward contracts.
Swap Agreements
The MultiFlex and International Value Portfolios may enter
into swap agreements. The rules governing the tax aspects of
swap agreements are in a developing stage and are not entirely
clear in certain respects. Accordingly, while a Portfolio
intends to account for such transactions in a manner deemed to be
appropriate, the Internal Revenue Service might not accept such
treatment. If it did not, the status of the Fund as a regulated
investment company might be affected. The Fund intends to
monitor developments in this area. Certain requirements that
must be met under the Code in order for the Fund to qualify as a
regulated investment company may limit the extent to which the
Portfolio will be able to engage in swap agreements.
Currency Fluctuations -- "Section 988" Gains or Losses
Gains or losses attributable to fluctuations in exchange
rates which occur between the time a Portfolio accrues income or
other receivables or accrues expenses or other liabilities
denominated in a foreign currency and the time the Portfolio
actually collects such receivables or pays such liabilities
generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt
securities denominated in a foreign currency and certain forward
contracts, gains or losses attributable to fluctuations in the
value of the foreign currency between the date of acquisition of
the security and the date of disposition also are treated as
ordinary gain or loss. These gains and losses, referred to under
the Code as "section 988" gains or losses, increase or decrease
the amount of a Portfolio's investment company taxable income
available to be distributed to its shareholders as ordinary
income. If section 988 losses exceed other investment company
taxable income during a taxable year, the Portfolio would not be
able to make any ordinary dividend distributions, or
distributions made before the losses were realized would be
recharacterized as a return of capital to shareholders, rather
than as an ordinary dividend, reducing each shareholder's basis
in his or her Portfolio shares.
Investment in Passive Foreign Investment Companies
A Portfolio may invest in shares of foreign corporations
which may be classified under the Code as passive foreign
investment companies ("PFICs"). In general, a foreign
corporation is classified as a PFIC if at least one-half of its
assets constitute investment-type assets, or 75% or more of its
gross income is investment-type income. If a Portfolio receives
a so-called "excess distribution" with respect to PFIC stock, the
Portfolio itself may be subject to a tax on a portion of the
excess distribution, whether or not the corresponding income is
distributed by the Portfolio to shareholders. In general, under
the PFIC rules, an excess distribution is treated as having been
realized ratably over the period during which the Portfolio held
the PFIC shares. The Portfolio itself will be subject to tax on
the portion, if any, of an excess distribution that is so
allocated to prior Portfolio taxable years and an interest factor
will be added to the tax, as if the tax had been payable in such
prior taxable years. Certain distributions from a PFIC as well
as gain from the sale of PFIC shares are treated as excess
distributions. Excess distributions are characterized as
ordinary income even though, absent application of the PFIC
rules, certain excess distributions might have been classified as
capital gain.
A Portfolio may be eligible to elect alternative tax
treatment with respect to PFIC shares. Under an election that
currently is available in some circumstances, the Portfolio
generally would be required to include in its gross income its
share of the earnings of a PFIC on a current basis, regardless of
whether distributions are received from the PFIC in a given year.
If this election were made, the special rules, discussed above,
relating to the taxation of excess distributions, would not
apply. In addition, another election may be available that would
involve marking to market the Portfolio's PFIC shares at the end
of each taxable year (and on certain other dates prescribed in
the Code), with the result that unrealized gains are treated as
though they were realized. If this election were made, tax at
the Portfolio level under the PFIC rules would generally be
eliminated, but the Portfolio could, in limited circumstances,
incur nondeductible interest charges. A Portfolio's intention to
qualify annually as a regulated investment company may limit its
elections with respect to PFIC shares.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss
and the timing of the recognition of income with respect to PFIC
shares, as well as subject a Portfolio itself to tax on certain
income from PFIC shares, the amount that must be distributed to
shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC
shares.
Debt Securities Acquired at a Discount
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Portfolio may be treated as debt securities that
are issued originally at a discount. Generally, the amount of
the original issue discount ("OID") is treated as interest income
and is included in income over the term of the debt security,
even though payment of that amount is not received until a later
time, usually when the debt security matures.
Some of the debt securities (with a fixed maturity date of
more than one year from the date of issuance) that may be
acquired by a Portfolio in the secondary market may be treated as
having market discount. Generally, gain recognized on the
disposition of, and any partial payment of principal on, a debt
security having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In addition,
the deduction of any interest expenses attributable to debt
securities having market discount may be deferred. Market
discount generally accrues in equal daily installments. A
Portfolio may make one or more of the elections applicable to
debt securities having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date of one year
or less from the date of issuance) that may be acquired by a
Portfolio may be treated as having acquisition discount, or OID
in the case of certain types of debt securities. Generally, a
Portfolio will be required to include the acquisition discount,
or OID, in income over the term of the debt security, even though
payment of that amount is not received until a later time,
usually when the debt security matures. A Portfolio may make one
or more of the elections applicable to debt securities having
acquisition discount, or OID, which could affect the character
and timing of recognition of income.
A Portfolio generally will be required to distribute
dividends to shareholders representing discount on debt
securities that is currently includable in income, even though
cash representing such income may not have been received by the
Portfolio. Cash to pay such dividends may be obtained from sales
proceeds of securities held by the Portfolio or by borrowing.
Distributions
With respect to tax-exempt shareholders, distributions from
the Portfolios will not be subject to federal income taxation to
the extent permitted under the applicable tax-exemption. With
respect to shareholders that are not exempt from federal
taxation, distributions of investment company taxable income are
taxable to a U.S. shareholder as ordinary income, whether paid in
cash or shares. Dividends paid by a Portfolio to a corporate
shareholder, to the extent such dividends are attributable to
dividends received from U.S. corporations, may qualify for the
dividends received deduction. However, the revised alternative
minimum tax applicable to corporations may reduce the value of
the dividends received deduction. Distributions of net capital
gains (the excess of net long-term capital gains over net short-
term capital losses), if any, designated by a Portfolio as
capital gain dividends, are taxable as long-term capital gains,
whether paid in cash or in shares, regardless of how long the
shareholder has held the Portfolio's shares and are not eligible
for the dividends received deduction. Shareholders will be
notified annually as to the U.S. federal tax status of
distributions.
If the net asset value of shares is reduced below a
shareholder's cost as a result of a distribution by a Portfolio,
such distribution generally will be taxable even though it
represents a return of invested capital. Investors should be
careful to consider the tax implications of buying shares of a
Portfolio just prior to a distribution. The price of shares
purchased at this time may reflect the amount of the forthcoming
distribution. Those purchasing just prior to a distribution will
receive a distribution which generally will be taxable to them.
Disposition of Shares
With respect to tax-exempt shareholders, a redemption, sale
or exchange of shares of a Portfolio will not be subject to
federal income taxation to the extent permitted under the
applicable tax-exemption. Upon a redemption, sale or exchange of
his or her shares of a Portfolio, a shareholder that is not
exempt from federal income taxation will realize a taxable gain
or loss depending upon his or her basis in the shares. However,
it is not expected that dispositions of Cash Management Portfolio
shares will give rise to a gain or loss, if that Portfolio
maintains a net asset value per share of one dollar. A gain or
loss will be treated as capital gain or loss if the shares are
capital assets in the shareholder's hands and generally will be
long-term or short-term, depending upon the shareholder's holding
period for the shares. Any loss realized on a redemption, sale
or exchange will be disallowed to the extent the shares disposed
of are replaced (including through reinvestment of dividends)
within a period of 61 days beginning 30 days before and ending 30
days after the shares are disposed of. In such a case, the basis
of the shares acquired will be adjusted to reflect the disallowed
loss. Any loss realized by a shareholder on the sale of a
Portfolio's shares held by the shareholder for six months or less
will be treated for tax purposes as a long-term capital loss to
the extent of any distributions of capital gain dividends
received or treated as having been received by the shareholder
with respect to such shares.
Backup Withholding
Each Portfolio will be required to report to the Internal
Revenue Service (the "IRS") all distributions and, with the
exception of the Cash Management Portfolio, will also be required
to report gross proceeds from the redemption of the Portfolio's
shares, except in the case of certain exempt shareholders. All
distributions and proceeds from the redemption of Portfolio
shares (with the exception of Cash Management Portfolio shares)
will be subject to withholding of federal income tax at a rate of
31% ("backup withholding") in the case of non-exempt shareholders
if (1) the shareholder fails to furnish the Portfolio with and to
certify the shareholder's correct taxpayer identification number
or social security number, (2) the IRS notifies the shareholder
or the Portfolio that the shareholder has failed to report
properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so,
the shareholder fails to certify that he or she is not subject to
backup withholding. If the withholding provisions are
applicable, any such distributions or proceeds, whether
reinvested in additional shares or taken in cash, will be reduced
by the amounts required to be withheld.
Other Taxation
Distributions may also be subject to additional state, local
and foreign taxes depending on each shareholder's particular
situation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the tax
consequences applicable to the Portfolios or shareholders.
Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an
investment in a Portfolio.
SERVICES PROVIDED BY THE FUND
Systematic Withdrawal Plan
As described in the Prospectus, the Fund offers a Systematic
Withdrawal Plan. All dividends and distributions on shares owned
by shareholders participating in this Plan are reinvested in
additional shares. Since withdrawal payments represent the
proceeds from sales of shares, the amount of shareholders'
investments in a Portfolio will be reduced to the extent that
withdrawal payments exceed dividends and other distributions paid
and reinvested. Any gain or loss on such redemptions must be
reported for tax purposes. In each case, shares will be redeemed
at the close of business on or about the 25th day of each month
preceding payment and payments will be mailed within five
business days thereafter.
The Systematic Withdrawal Plan involves the use of principal
and is not a guaranteed annuity. Payments under such Plan do not
represent income or a return on investment.
A Systematic Withdrawal Plan may be terminated at any time
by directing a written request to the Transfer Agent. Upon
termination, all future dividends and capital gain distributions
will be reinvested in additional shares unless a shareholder
requests otherwise.
Exchange Privilege
As discussed in the Prospectus, the Fund offers shareholders
the privilege of exchanging shares of their respective Portfolio
for shares of the other Portfolios. Any gain or loss realized on
an exchange is recognized for federal income tax purposes. This
privilege is not an option or right to purchase securities, but
is a revocable privilege permitted under the present policies of
each of the Portfolios and is not available in any state or other
jurisdiction where the shares into which transfer is to be made
are not qualified for sale, or when the net asset value of the
shares presented for exchange is less than the minimum dollar
purchase required by the Prospectus.
The exchange of shares of one of these Portfolios for shares
of another Portfolio is treated for federal income tax purposes
as a sale of the shares given in exchange and an investor (other
than a tax-exempt investor) may, therefore, realize a taxable
gain or loss. The Portfolios reserve the right, upon 60 days'
notice to shareholders, to impose reasonable fees and
restrictions with respect to the exchange privilege and to modify
or terminate the exchange privilege. Except for those limited
instances where redemptions of the exchanged security are
suspended under Section 22(e) of the 1940 Act, or where sales of
the Portfolio into which the shareholder is exchanging are
temporarily suspended, notice of all such modifications or
termination of the exchange privilege will be given at least 60
days prior to the date of termination or the effective date of
the modification.
Automatic Dividend Reinvestment Plan
For convenience of the shareholders and to permit
shareholders to increase their shareholdings in the Portfolios in
which they have invested, each Portfolio maintains an Automatic
Dividend Reinvestment Plan. For a discussion of this plan, see
"Automatic Dividend Reinvestment Plan" in the Prospectus.
Automatic Monthly Exchange
For convenience of the shareholders, each Portfolio
maintains an automatic monthly exchange program. For a discussion
of this plan, see "Automatic Monthly Exchange" in the Prospectus.
BankDraft
As discussed in the Prospectus, the Portfolios offer
shareholders who wish to maintain a schedule of monthly
investments the option of drawing a preauthorized amount from the
shareholder's bank account to purchase shares. See "BankDraft" in
the Prospectus for additional information on this program.
BROKERAGE AND PORTFOLIO TRANSACTIONS
The Adviser or sub-advisers will arrange for the placement
of orders and the execution of portfolio transactions for each of
the Portfolios. Various brokerage firms may be used to carry out
portfolio transactions. The Adviser and sub-advisers have
agreed, in selecting brokers and dealers to be used in portfolio
transactions, to give primary consideration to the broker's or
dealer's ability to provide the best execution of the transaction
at prices most favorable to the Portfolios. When such
transactions involve listed securities, the Adviser and
sub-advisers take into consideration the advisability of
effecting the transaction with a broker or dealer which is not a
member of the securities exchange on which the security is
listed, i.e., a third market transaction, or effecting the
transaction in the institutional or fourth market. In
over-the-counter market transactions, the Adviser and
sub-advisers attempt to deal with the primary market maker and
thereby avoid payment of a brokerage commission. However, in
situations where in the Adviser's or sub-advisers' judgment
execution through some other broker is likely to result in a
savings or other advantage to the Portfolio, such broker will be
used.
With respect to fixed and variable income securities, such
portfolio securities generally will be purchased or sold to
parties acting as either principal or agent. Newly issued
securities normally will be purchased directly from the issuer or
from an underwriter acting as principal. Other purchases will be
placed with those dealers whom the Adviser or sub-advisers
believe will provide the best execution of the transaction at
prices most favorable to the applicable Portfolio. Usually, no
brokerage commissions (as such) are paid by the Portfolio for
such transactions, although the price paid usually includes an
undisclosed compensation to the dealer. The prices paid to the
underwriters of newly-issued securities normally include a
concession paid by the issuer to the underwriter. Purchases of
after-market securities from dealers normally are executed at a
price between bid and asked prices.
Subject to the primary consideration of best execution at
prices most favorable to the applicable Portfolio, the Adviser or
sub-advisers may, in the allocation of such investment
transaction business, consider the general research and
investment information and other services provided by the brokers
and dealers, although they have adopted no formula for such
allocation. These research and investment information services
make available to the Adviser and sub-advisers the views and
information of individuals and research staffs of many securities
firms for the Adviser's or sub-advisers' analysis and
consideration. Although such information may be a useful
supplement to the Adviser's and sub-advisers' own investment
information, the value of such research and services is not
expected to reduce materially the expenses of the Adviser or
sub-advisers in the performance of its services under the
Agreements and will not reduce the advisory fee payable to the
Adviser by the Portfolios. In recognition of the value of the
above-described brokerage and research services provided by
certain brokers, the Portfolios' Adviser or sub-advisers,
consistent with the standard of seeking to obtain the best
execution on portfolio transactions, may place orders with such
brokers for the execution of transactions for the Portfolios on
which the commissions or discounts are in excess of those which
other brokers might have charged for effecting the same
transactions.
The Adviser and sub-advisers may also follow a policy of
considering sales of shares of the Portfolios as a factor in the
selection of broker-dealers to execute portfolio transactions,
subject to the primary consideration of best execution discussed
above.
On occasions when the Adviser or sub-advisers deem the
purchase or sale of a security to be in the best interest of a
Portfolio as well as other customers, the Adviser or
sub-advisers, to the extent permitted by applicable laws and
regulations, may aggregate the securities to be so purchased or
sold for such parties in order to obtain best execution and lower
brokerage commissions. In such event, allocation of the shares
so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Adviser or sub-advisers in the
manner it considers to be most equitable and consistent with its
fiduciary obligations to all such customers, including the
applicable Portfolio. In some cases the aggregation of
securities to be sold or purchased could have a detrimental
effect on the price of the security insofar as a Portfolio is
concerned. However, in other cases, the ability of a Portfolio
to participate in volume transactions will be beneficial to the
Portfolio.
For the fiscal years ended December 31, 1994, 1993 and 1992,
the Equity Portfolio paid total brokerage commissions of $64,780,
$129,353 and $122,701, respectively. For the fiscal year ended
December 31, 1994, the Equity Portfolio paid $6,618 to brokers
providing research services for this Portfolio. For the fiscal
years ended December 31, 1994, 1993 and 1992, the Flex Portfolio
paid total brokerage commissions of $96,813, $155,513, and
$71,850, respectively. For the fiscal year ended December 31,
1994, the Flex Portfolio paid $7,300 to brokers providing
research services for this Portfolio. For the fiscal years ended
December 31, 1994 and 1993, the MultiFlex Portfolio paid total
brokerage commissions of $269,827 and $10,450. For the fiscal
year ended December 31, 1994, the MultiFlex Portfolio paid
$89,852 to brokers providing research services for this
Portfolio. The MultiFlex Portfolio was not operational prior to
1993. There were no brokerage commissions paid to affiliated
broker-dealers during the fiscal years ended December 31, 1994,
1993 or 1992, by any of the Portfolios.
During the fiscal years ended December 31, 1994, 1993, and
1992, the Equity Portfolio's portfolio turnover rates were 21%,
47% and 41%, respectively, the Income Portfolio's portfolio
turnover rates were 59%, 92% and 16%, respectively, and the Flex
Portfolio's portfolio turnover rates were 36%, 27% and 15%,
respectively. During the fiscal years ended December 31, 1994,
and 1993, the MultiFlex Portfolio's portfolio turnover rates were
81% and 0.5%, respectively, and the Relative Return Bond
Portfolio's portfolio turnover rates were 47% and 5%,
respectively. The MultiFlex and Relative Return Bond Portfolio
were not operational prior to 1993. The Real Estate and
International Value Portfolios were not operational prior to
1995.
At December 31, 1994, certain of the Portfolios held
securities of the Fund's regular brokers or dealers, or their
parents, as follows:
Value of
Portfolio Securities
at December
Broker or Dealer 31, 1994
Equity Portfolio Morgan Stanley Group $1,091,500
Flex Portfolio Morgan Stanley Group $2,950,000
MultiFlex Portfolio Bear Stearns Co.,
Inc.
Merrill Lynch & Co., $ 124,307
Inc. $ 132,275
Paine Webber, Inc. $ 251,092
PERFORMANCE INFORMATION
The following table provides the actual total rates of
return for each of the Portfolios (other than the Cash Management
Portfolio) for the fiscal years ended December 31, 1994, 1993,
and 1992. These rates of return are net of all expenses and
assume all dividends and distributions by the Portfolios have
been reinvested on the reinvestment dates during each period.
The Real Estate and International Value Portfolios were not
operational prior to 1995.
Equity Income Flex
Portfolio Portfolio Portfolio
1994 . . . . . 2.69% -1.80% 0.64%
1993 . . . . . 9.16% 7.39% 10.48%
1992 . . . . . 4.84% 4.74% 7.72%
MultiFlex Relative Return
Portfolio Bond Portfolio
1994 . . . . . -1.02% -1.99%
1993 . . . . . 0.46%* 0.01%**
1992 . . . . . N/A N/A
* Since November 17, 1993 (commencement of operations).
** Since November 15, 1993 (commencement of operations).
The average annual compound rates of return as of
December 31, 1994 for the Portfolios for the periods listed below
are as follows:
Portfolio
Since
1 Year 5 Years 10 Years Inception
Equity 2.69% 8.61% 12.12% 12.12%
Income -1.80% 6.02% 7.39% 7.39%
Flex 0.64% 8.00% N/A 9.10%*
MultiFlex -1.02% N/A N/A -0.50%**
Relative Return -1.99% N/A N/A -1.75%***
Bond
_______________________
* From 02-24-88 (commencement of operations) (6.85 years).
** From 11-17-93 (commencement of operations) (1.13 years).
*** From 11-15-93 (commencement of operations) (1.13 years).
<PAGE>
Examples:
One Five Ten
Equity Portfolio Year Years Years
Based on the average annual
compound rates of return listed
above over these periods, you
could have expected the
following redeemable values on a
$1,000 investment assuming
redemption at the end of each
time period (December 31, 1994) $1,027 $1,511 $3,139
You could have expected the
following values assuming no
redemption at the end of each
time period (December 31, 1994) $1,027 $1,511 $3,139
One Five Ten
Income Portfolio Year Years Years
Based on the average annual
compound rates of return listed
above over these periods, you
could have expected the following
redeemable values on a $1,000
investment assuming redemption at
the end of each time period
(December 31, 1994) . . . . . . . $982 $1,339 $2,040
You could have expected the
following values assuming no
redemption at the end of each
time period (December 31, 1994) . $982 $1,339 $2,040
One Five
Flex Portfolio Year Years
Based on the average annual
compound rates of return listed
above over these periods, you
could have expected the
following redeemable values on a
$1,000 investment assuming
redemption at the end of each
time period (December 31, 1994) $1,006 $1,469
You could have expected the
following value assuming no
redemption at the end of each
time period (December 31, 1994) $1,006 $1,469
The redeemable values listed above are computed by
multiplying hypothetical investments of $1,000 on the first day
of the measurement period by a number equal to: (1 plus the
compound annual return for the period) to the power of the number
of years (or fraction thereof) included in the period, less any
applicable redemption charges.
No assumption should be made that future performance by the
Portfolios will equal past performance.
CALCULATION OF YIELD
From time to time the Cash Management Portfolio may
advertise its "yield" and "effective yield." Both yield figures
are based on historical earnings and are not intended to indicate
future performance. The "yield" of the Cash Management Portfolio
refers to the income generated by an investment in the Cash
Management Portfolio over a seven-day period (which period will
be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week
over a 52-week period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but,
when annualized, the income earned by an investment in the Cash
Management Portfolio is assumed to be reinvested. The "effective
yield" will be slightly higher than the "yield" because of the
compounding effect of this assumed reinvestment. Annualized net
yield for the seven days ended December 31, 1994 was 4.74%.
Average portfolio maturity was 19 days.
The Cash Management Portfolio normally computes its yield by
determining for a seven-day base period the net change, exclusive
of capital changes, for a hypothetical pre-existing account
having a balance of one share at the beginning of the base
period, subtracting a hypothetical charge reflecting deductions
from shareholder accounts and dividing the difference by the
value of the account at the beginning of the base period to
obtain the base period return, multiplying the result by (365/7)
with the resulting yield figure carried to at least the nearest
hundredth of one percent. The Cash Management Portfolio may also
compute a standardized effective yield. This is computed by
compounding the base period return, which is done by adding one
to the base period return, raising the sum to a power equal to
365 divided by seven and subtracting one from the result.
MISCELLANEOUS
Principal Shareholders
As of March 31, 1995, the following entities owned of record
or beneficially 5% or more of the shares of a Portfolio:
Name and Address of
Beneficial Owner Portfolio Number of Percent of
Shares Class
Merrill Lynch Pierce Equity 252,953 17.66%
Fenner & Smith Income 65,999 12.28%
Trade Account Flex 628,556 12.45%
4800 Deer Lake Drive MultiFlex 288,471 8.88%
Jacksonville, FL 32216
Southtrust Estate & Cash 6,468,807 39.65%
Trust Company of Management
Georgia, Trustee for
INVESCO
Capital Management,
Inc.
Profit Sharing Money
Purchase Pension
Plan
34 Peachtree Street NW
Atlanta, GA 30303
Home Missioners of Relative 3,909 5.63%
America Return
General Fund Bond
P.O. Box 465618
Cincinnati, OH 46246
Henry Fischer and Elaine Relative 24,208 34.92%
Fischer, Return
Trustee for Henry Bond
Fischer Builder, Inc.
2670 Chancellor Drive
Crestview Hills, KY
41017-3443
National Financial Relative 5,030 7.25%
Service Corp. Return
F/B/O Customers Bond
1 World Financial Center
200 Liberty
New York, NY 10281
Southtrust Estate & Trust Company, as trustee for INVESCO
Capital Management, Inc. Profit Sharing Money Purchase Pension
Plan, may be deemed to control the Cash Management Portfolio by
virtue of its ownership of 39.65% of the outstanding securities
of that Portfolio, and Henry Fischer and Elaine Fischer, trustee
for Henry Fischer Builder, Inc., may be deemed to control the
Relative Return Bond Portfolio by virtue of its ownership of
34.92% of the outstanding securities of that Portfolio.
As of March 31, 1995, the officers and Directors of the
Fund, as a group, owned less than 1% of the outstanding shares of
the Portfolios.
Net Asset Value
The net asset value per share of the Portfolios will not be
calculated on days that the New York Stock Exchange is closed.
These days presently include New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
<PAGE>
The Custodian
United Missouri Bank, 928 Grand Avenue, Kansas City,
Missouri, is custodian of the portfolio securities and cash of
the Portfolios and maintains certain records on behalf of the
Portfolios. Subject to the prior approval of the Board of
Directors, the custodian may, in the future, use the services of
subcustodians as to one or more of the Portfolios.
Independent Accountants
Price Waterhouse LLP, 950 Seventeenth Street, Denver,
Colorado serves as the independent accountants for each of the
Portfolios, providing services including audit of the annual
financial statements, and preparation of tax returns filed on
behalf of the Portfolios.
The financial statements, including the schedules of
investments and financial highlights for the periods ended
December 31, 1994, 1993, 1992, 1991 and 1990 have been audited by
Price Waterhouse LLP, Denver, Colorado, as stated in their report
appearing elsewhere herein, and are included in reliance upon the
report of said firm given upon its authority as experts in
accounting and auditing.
<PAGE> APPENDIX A
Some of the terms used in the Fund's Prospectus and this
Statement of Additional Information are described below.
The term "money market" refers to the marketplace composed
of the financial institutions which handle the purchase and sale
of liquid, short-term, high-grade debt instruments. The money
market is not a single entity, but consists of numerous separate
markets, each of which deals in a different type of short-term
debt instrument. These include U.S. Government obligations,
commercial paper, certificates of deposit and bankers'
acceptances, which are generally referred to as money market
instruments.
U.S. Government obligations are debt securities (including
bills, notes and bonds) issued by the U.S. Treasury or issued by
an agency or instrumentality of the U.S. Government which is
established under the authority of an Act of Congress. Such
agencies or instrumentalities include, but are not limited to,
the Federal National Mortgage Association, Government National
Mortgage Association, the Federal Farm Credit Bank, and the
Federal Home Loan Bank. Although all obligations of agencies,
authorities and instrumentalities are not direct obligations of
the U.S. Treasury, payment of the interest and principal on these
obligations is generally backed directly or indirectly by the
U.S. Government. This support can range from the backing of the
full faith and credit of the United States to U.S. Treasury
guarantees, or to the backing solely of the issuing
instrumentality itself. In the case of securities not backed by
the full faith and credit of the United States, the investor must
look principally to the agency issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert
a claim against the United States itself in the event the agency
or instrumentality does not meet its commitments.
BANK OBLIGATIONS include certificates of deposit which are
negotiable certificates evidencing the indebtedness of a
commercial bank to repay funds deposited with it for a definite
period of time (usually from 14 days to one year) at a stated
interest rate.
BANKERS' ACCEPTANCES are credit instruments evidencing the
obligation of a bank to pay a draft which has been drawn on it by
a customer. These instruments reflect the obligation both of the
bank and of the drawer to pay the face amount of the instrument
upon maturity.
TIME DEPOSITS are non-negotiable deposits maintained in a
banking institution for a specified period of time at a stated
interest rate.
COMMERCIAL PAPER consists of short-term (usually one to 180
days) unsecured promissory notes issued by corporations in order
to finance their current operations.
CORPORATE DEBT OBLIGATIONS are bonds and notes issued by
corporations and other business organizations, including business
trusts, in order to finance their long-term credit needs.
CERTIFICATES OF DEPOSIT are negotiable certificates issued
against funds deposited in a commercial bank for a definite
period of time and earning a specified return.
MORTGAGE-BACKED securities are interests in a pool of
mortgage loans. Most mortgage securities are pass-through
securities, which means that they provide investors with payments
consisting of both principal and interest as mortgages in the
underlying mortgage pool are paid off by the borrowers. The
dominant issuers or guarantors of mortgage securities are the
Government National Mortgage Association ("GNMA"), the Federal
National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC").
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOs") are hybrid
instruments with characteristics of both mortgage-backed and
mortgage pass-through securities. Similar to a bond, interest
and pre-paid principal on a CMO are paid, in most cases, semi-
annually. CMOs may be collateralized by whole mortgage loans but
are more typically collateralized by portfolios of mortgage pass-
through securities guaranteed by GNMA, FHLMC, or FNMA. CMOs are
structured into multiple classes, with each class bearing a
different stated maturity. Monthly payments of principal,
including prepayments, are first returned to investors holding
the shortest maturity class; investors holding the longer
maturity classes receive principal only after the first class has
been retired.
MUNICIPAL BONDS are debt obligations which generally have a
maturity at the time of issue in excess of one year and are
issued to obtain funds for various public purposes. The two
principal classifications of municipal bonds are "general
obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and
taxing power for the payment of principal and interest. Revenue
bonds are payable only from the revenues derived from a
particular facility or class of facilities, or, in some cases,
from the proceeds of a special excise or specific revenue source.
Industrial development bonds or private activity bonds are issued
by or on behalf of public authorities to obtain funds for
privately operated facilities and are, in most cases, revenue
bonds which do not generally carry the pledge of the full faith
and credit of the issuer of such bonds, but depend for payment on
the ability of the industrial user to meet its obligations (or
any property pledged as security).
ZERO COUPON BONDS are debt obligations issued without any
requirement for the periodic payment of interest. Zero coupon
bonds are issued at a significant discount from face value. The
discount approximates the total amount of interest the bonds
would accrue and compound over the period until maturity at a
rate of interest reflecting the market rate at the time of
issuance. A Portfolio, if it holds zero coupon bonds in its
portfolio, however, would recognize income currently for Federal
tax purposes in the amount of the unpaid, accrued interest
(determined under tax rules) and generally would be required to
distribute dividends representing such income to shareholders
currently, even though funds representing such income would not
have been received by the Portfolio. Cash to pay dividends
representing unpaid, accrued interest may be obtained from sales
proceeds of portfolio securities and Portfolio shares and from
loan proceeds. Because interest on zero coupon obligations is
not paid to the Portfolio on a current basis but is in effect
compounded, the value of the securities of this type is subject
to greater fluctuations in response to changing interest rates
than the value of debt obligations which distribute income
regularly.
RATINGS OF CORPORATE DEBT OBLIGATIONS -- Except as to the
Cash Management Portfolio, Portfolio purchases of taxable
obligations are not limited to those obligations rated within the
four highest categories by Moody's and S&P. However, the Flex
Portfolio's and Income Portfolio's standards for investment grade
obligations are generally similar to those standards included in
the four highest categories by Moody's and S&P. The Cash
Management Portfolio will limit its investments to those
obligations within the two highest categories. The Relative
Return Bond Portfolio may invest up to 10% of Portfolio assets in
corporate bonds rated below Baa by Moody's or below BBB by S&P
but rated at least Ba by Moody's or BB by S&P. The MultiFlex
Portfolio may invest up to 5% of Portfolio assets in corporate
bonds rated below Baa by Moody's or below BBB by S&P, but rated
at least Ba by Moody's or BB by S&P.
The characteristics of corporate debt obligations rated by
Moody's are generally as follows:
Aaa -- Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade bonds. They are
rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A -- Bonds which are rated A possess many favorable
investment attributes and are to be considered as upper medium
grade obligations. Factors giving security to principal and
interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium
grade obligations, i.e., they are neither highly protected nor
poorly secured. Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have
speculative elements. The future of such bonds cannot be
considered as well assured.
B -- Bonds which are rated B generally lack characteristics
of a desirable investment.
Caa -- Bonds rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with
respect to principal or interest.
Ca -- Bonds rated Ca are speculative to a high degree.
C -- Bonds rated C are the lowest rated class of bonds and
are regarded as having extremely poor prospects.
The characteristics of corporate debt obligations rated by
S&P are generally as follows:
AAA -- This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay
principal and interest.
AA -- Bonds rated AA also qualify as high quality debt
obligations. Capacity to pay principal and interest is very
strong, and in the majority of instances they differ from AAA
issues only in small degree.
A -- Debt rated A has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated BBB is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB -- Debt rated BB is predominantly speculative with
respect to capacity to pay interest and repay principal in
accordance with terms of the obligation. BB indicates the lowest
degree of speculation; CC indicates the highest degree of
speculation.
BB,B,CCC,CC -- Debt in these ratings is predominantly
speculative with respect to capacity to pay interest and repay
principal in accordance with terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest.
A bond rating is not a recommendation to purchase, sell or
hold a security, inasmuch as it does not comment as to market
price or suitability for a particular investor.
The ratings are based on current information furnished by
the issuer or obtained by the rating services from other sources
which they consider reliable. The ratings may be changed,
suspended or withdrawn as a result of changes in or
unavailability of, such information, or for other reasons.
Ratings of Commercial Paper. Cash Management Portfolio
purchases are limited to those instruments rated A-1 by S&P and
Prime 1 by Moody's.
Commercial paper rated A-1 by Standard & Poor's has the
following characteristics: liquidity ratios are adequate to meet
cash requirements; the issuer's long-term debt is rated "A" or
better; the issuer has access to at least two additional channels
of borrowing; and basic earnings and cash flow have an upward
trend with allowances made for unusual circumstances. Typically,
the issuer's industry is well established and the issuer has a
strong position within the industry.
Commercial paper rated Prime 1 by Moody's is the highest
commercial paper assigned by Moody's. Among the factors
considered by Moody's in assigning ratings are the following:
(1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in
certain areas; (3) evaluation of the issuer's products in
relation to competition and consumer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and
(8) recognition by the management of obligations which may be
present or may arise as a result of public interest questions and
preparations to meet such obligations. Relative strength or
weakness of the above factors determine how the issuer's
commercial paper is rated within various categories.
Determination of Credit Quality of Unrated Securities. In
determining whether an unrated debt security is of comparable
quality to a rated security, the sub-adviser may consider the
following factors, among others:
(1) other securities of the issuer that are rated;
(2) the issuer's liquidity, debt structure, repayment
schedules, and external credit support facilities;
(3) the reliability and quality of the issuer's management;
(4) the length to maturity of the security and the
percentage of the portfolio represented by securities
of that issuer;
(5) the issuer's earnings and cash flow trends;
(6) the issuer's industry, the issuer's position in its
industry, and an appraisal of speculative risks which
may be inherent in the industry;
(7) the financial strength of the issuer's parent and its
relationship with the issuer;
(8) the extent and reliability of credit support, including
a letter of credit or third party guarantee applicable
to payment of principal and interest;
(9) the issuer's ability to repay its debt from cash
sources or asset liquidation in the event that the
issuer's backup credit facilities are unavailable;
(10) other factors deemed relevant by the subadviser.
FINANCIAL STATEMENTS
February 24, 1995
Dear EBI Shareholder:
We are pleased to offer this Annual Report of The EBI Funds, Inc.
and hope that you will take a few minutes to review the report
which will give you additional perspective on the capital markets
and how INVESCO manages your money. In retrospect it was a
difficult period for both stocks and bonds; however, we are
glad to report good results.
In the stock market in 1994, good news regarding corporate
profits was outweighed by bad news on interest rates. Indeed,
rising interest rates was the dominant factor in a year which was
disappointing for most equity investors. In this environment
INVESCO's risk-averse style produced strong results with the EBI
Equity Portfolio's return outpacing the Lipper Growth and Income
Index and doubling that of the S&P 500. In fact, all four of the
EBI Funds which are ranked by the Wall Street Journal received an
""A'' rating (top 20% of peer group) for 1994. INVESCO's bias toward
larger, high quality companies benefitted our investors last year.
This performance is very much in line with INVESCO's risk-averse
disciplines which have been utilized for 23 years.
The bond market was a minefield in 1994 as rising interest rates
played havoc with fixed income investors. For most of the year
our disciplines dictated that we maintain high quality portfolios
with a short average maturity. Thus investors in the EBI Income
and EBI Relative Return Bond Fund did much better than the bond
indices and fixed income investors in general. In late 1994, after interest
rates had risen over 2 percentage points from the previous year,
we extended maturities. This approach (shortening maturities
when inflation-adjusted rates are low and lengthening maturities
when real rates are high) tends to give our investors better
downside protection over the long run.
We continue to favor stocks over bonds in asset allocation
accounts. At December 31, 1994 the EBI Flex Portfolio was
invested 58% in high quality stocks with the balance in
government bonds and money market instruments. During the year
the allocation ranged from 70% to 49% in stocks as Flex
successfully added value relative to a static mix of 60%
stocks/40% bonds. The EBI MultiFlex Portfolio, an equity-
oriented fund consisting of six asset classes, was extremely
well-diversified throughout 1994. At year-end the MultiFlex
allocation was well-balanced: 18.5% large capitalization
stocks, 18.4% small capitalization stocks, 16.5% international
equities, 20.5% real estate securities, 19.5% U.S. fixed income,
and 6.6% cash.
<PAGE>
EBI Shareholders
February 24, 1995
Page Two
As INVESCO grows as a worldwide institution, we continue to
enhance our capabilities in terms of additional disciplines
available to EBI investors. We will shortly have two new EBI
portfolios: The EBI International Value Portfolio and The EBI
Real Estate Portfolio. These new funds will be managed utilizing
the same disciplines currently employed in those respective
components of MultiFlex. The International Value Portfolio will
draw on the expertise of INVESCO's global presence and our analysts
in our offices from London and Paris to Tokyo and Hong Kong to invest
in high quality non U.S. stocks. THE EBI Real Estate Portfolio will
invest in equity real estate securities under the management of
INVESCO Realty Advisors, giving investors many of the benefits
traditionally associated with real estate plus the additional
advantage of liquidity. These new options will be available in
May, 1995.
Once again, let me say how much we appreciate the confidence you
have placed in INVESCO by allowing us to manage your investments
in the EBI Funds. If you have any questions at all, please call
our Shareholder Services toll-free line at (800) 554-1156 or feel
free to contact me directly.
Sincerely,
HLH:jm
Enclosure
<PAGE>
The EBI Equity Portfolio
Market Perspective
The stock market's performance in 1994 was much like jogging in
place; one ends up exhausted having made little, if any,
progress. 1994's performance was unsatisfactory by most
standards. The S&P 500's 1.3% return placed it as the fourth
lowest in the past twenty years. The bond market did even worse,
recording losses it hasn't seen in decades.
Despite Wall Street's problems, Main Street had a good year. The
domestic economy grew at an above average rate, the employment
picture improved, incomes rose, consumer confidence remained
high, and corporate profits increased an estimated 36%.
Inflation was also benign, rising only 2.6% as measured by
consumer prices, one of the lowest rates of increase in 30 years.
So what's the problem with the financial markets? Ironically,
the problem is that the usual consequences of a strong economy,
higher interest rates and inflationary fears. For better or
worse, the financial markets are a discounting mechanism.
Investors are anticipating that future inflation will worsen,
and interest rates will rise further. It is not uncommon for inflation
to rise once the economy is operating near capacity and full
employment. The Fed's interest rate hikes in 1994 were part of
a "preemptive strike" to prevent the economy from overheating.
Since February 1994, the Fed has raised the Federal Funds rate (the
rate at which banks borrow from one another) six times and the discount
rate (the rate at which banks borrow from the Federal Reserve)
three times. Only time will tell if their efforts to slow
the economy will be successful.
Portfolio Comments
The EBI Equity Portfolio was able to add value relative to the
S&P 500 for the year in a very difficult market environment. For
1994, the EBI Equity Portfolio had a total return of 2.7%
compared to a 1.3% return for the S&P 500 and an "A" ranking by
the Wall Street Journal (top 20% of peer group).
The EBI Equity Fund is a well diversified portfolio of common and
preferred stocks, concentrating on high quality, large and medium
sized companies. Our goal is to provide consistency and
predictability of investment returns while minimizing risk.
One of the ways we accomplish risk control is by avoiding popular
themes and searching for undervalued stocks in the neglected
areas of the market. As an example, we maintained a full
weighting in healthcare this year, which contributed to our
performance, even though it was an unpopular sector earlier in
the year. Other sectors which performed well included the
economically sensitive sectors: capital goods, and manufacturing
and processing stocks. Of particular benefit to performance were
the technology stocks, Compaq Computer (+60%), Hewlett Packard
(+26%), and Computer Associates (+21%).
As we enter 1995, the probability is the domestic economy will
slow while foreign economies will be strengthening. Earnings
growth should slow relative to 1994 and rising interest rates
should not be as great a problem in 1995 as they were in 1994.
Given this scenario, the portfolio should benefit from our exposure
to large multinational companies, financial stocks and utilities.
Our emphasis on risk control and total return should also help us
stay ahead of the market in what will certainly be another
challenging year.
For long-term investors, we continue to recommend a near fully
invested position with only modest cash reserves. The stock
market is currently priced to provide investors with returns in
line with its long term historical average of 10%. Valuations
are more attractive now than they were a year ago, given the
strong improvement in corporate earnings and the flat-to-
declining stock prices. If the economy begins showing signs of
slowing in the first and second quarters of 1995, the Fed may
relax its stance on raising interest rates. Such a development
would ease the pressure on equities, increasing the chances that
1995 could turn out to be a happy and prosperous New Year for
investors.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $25,000
The chart below compares the growth in the value of an investment
in the EBI Equity Portfolio and in the S&P 500, if you had
invested $25,000 on December 31, 1984, and had reinvested all
your capital gains distributions and income dividends through
December 31, 1994. No adjustment has been made for any income
taxes payable by shareholders on income dividends and
capital gains distributions. Past performance is no guarantee of
future results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
If investors redeem shares, purchased prior to January 1, 1992,
they may be subject to a contingent deferred sales charge, which
would reduce the total returns shown below for EBI Equity
Fund.
[GRAPH COMPARING EBI EQUITY AND S&P 500]
EBI Equity Portfolio's average annual total returns for the
periods ended December 31, 1994 are: 1 year: 2.69%; 3 years:
5.53%; 5 years: 8.61%; and, 10 years: 12.12.%.
The EBI Flex Portfolio
Market Perspective
1994 was a difficult year for investors. Stock and bond market
performance was unsatisfactory by most standards. The S&P 500
gained only 1.3%, and the bond market fared even worse and
recorded losses it hadn't seen in decades. For the year, the
widely followed Lehman Government/Corporate index lost more than 3.5%.
Portfolio Comments
EBI Flex provided strong performance in 1994, a difficult year.
In keeping with INVESCO's past performance in difficult markets,
Flex exceeded its benchmark and was given an "A" ranking by the
Wall Street Journal (top 20% of funds in peer group). This
performance is very much in line with INVESCO's risk-averse
disciplines which have been utilized for 23 years.
For the year, the EBI Flex return of +0.6% compares quite
favorably with the 60/40 stock bond mix of -0.6% (+1.3% S&P; -
3.5% Govt/Corp bonds). While this growth rate for calendar 1994
was below its long-term potential, Flex did hold up extremely
well in a very difficult market environment.
The investment disciplines used in the management of The EBI Flex
Portfolio's assets are identical to those described in the
discussions of The EBI Equity and EBI Income Portfolios. The same
issues which impacted the returns of these two funds also
affected EBI Flex. Because the Flex fund is a balanced portfolio
of stocks and bonds, however, it does have an additional tool at
its disposal to impact performance. EBI Flex uses INVESCO's Flex
Asset Allocation Model to adjust the stock/bond ratio, within
specified parameters. Adjustments to the asset mix occur on an
ongoing basis.
INVESCO's Flex Model analyzes the level of stock and bond prices
and emphasizes that asset class which is more undervalued.
Historically stocks have been priced to yield about three
percentage points more than bonds. Given this logical and
historically demonstrated relationship between the two asset
classes, the investor is presented with the opportunity to
substantially improve investment performance by adjusting the
asset mix as the relative implied returns shift over and under
the long term equilibrium level. Normally, whenever equities
offer more than the typical three percentage point premium over
bonds, they are emphasized in the EBI Flex Portfolio. If the spread
relationship changes and bonds offer a premium over stocks, then
fixed income investments will be emphasized.
Expected Returns: Equities vs. LT Bonds
As the spread increases, INVESCO weights more heavily toward
stocks. As the spread decreases bonds are emphasized. During
1994, EBI Flex Fund emphasized stocks. The allocation to stocks
decreased during the year's second half, as higher interest rates
made bonds become more competitive with stocks. At year's end,
EBI Flex had over 59% of its assets in the stock market. The
balance was invested in the bond market.
[GRAPH COMPARING RETURNS OF EQUITIES VERSUS LONG-TERM BONDS]
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $25,000
The chart below compares the growth in the value of an investment
in the EBI Flex Portfolio and in the Benchmark*, if you had
invested $25,000 on April 1, 1988 (commencement of operations),
and had reinvested all your capital gains distributions and
income dividends through December 31, 1994. No adjustment has
been made for any income taxes payable by shareholders on income
dividends and capital gains distributions. Past performance is
no guarantee of future results. Share price and return will vary
with market conditions; investors may realize a gain or loss upon
redemption. If investors redeem shares, purchased prior to
January 1, 1992, they may be subject to a contingent deferred
sales charge, which would reduce the total returns shown below
for EBI Flex Portfolio.
[GRAPH COMPARING EBI FLEX TO BENCHMARK]
EBI Flex Portfolio's average annual total returns for the periods
ended December 31, 1994 are: 1 year: 0.64%; 3 years: 6.20%;
5 years: 8.00%; and, since inception: 9.10%.
___________________________
*60% S&P 500 and 40% Lehman Brothers Government/Corporate Bond
Index.
The EBI MultiFlex Portfolio
Market Perspective
Last year was a good argument for diversification. Real estate
securities and international stocks did significantly better than
other asset classes. The MultiFlex discipline calls for an
extremely well-diversified approach with six different asset
classes. Four of the six component parts outperformed their
respective index in 1994. By combining asset classes with low
correlations (i.e. they don't move up and down together), one can
participate in higher returning asset classes (real estate,
international stocks, and small cap stocks) while still
controlling portfolio risk.
Portfolio Comments
EBI MultiFlex performance was -1.0% for 1994. Although the full
year return lagged the S&P 500, MultiFlex was ranked ""A'' by the
Wall Street Journal (top 20% of peer group) for 1994.
The real estate portion of EBI MultiFlex outpaced its
corresponding benchmark (NAREIT Equity Index). The economic
recovery combines to bolster the returns of industrial
properties, while the residential sector also performed well.
There were 41 real estate securities in the portfolio at December
31, 1994 representing 1,640 properties.
The international component of MultiFlex contributed a positive
return of 3.5% for the year. The portfolio benefitted in
particular from its well diversified investments in the major
European markets. INVESCO is a ""bottom-up'' manager which
places more emphasis on stock selection than country allocation.
Based on this process, the international component (with 68 security
positions) was overweighted in Europe for most of the year and
underweighted in the more volatile Far East markets.
While we were generally underweighted in large cap stocks, this
asset class did lag its long term historical returns. The stock
market is currently priced to provide investors with returns in
line with its long term historical average of 10%. Valuations
are more attractive now than they were a year ago, given the strong
improvement in corporate earnings and the flat-to-declining stock
prices, thus increasing the chances that 1995 will turn out to be
a better year for large cap stocks.
Small cap stocks were one of the worst performing asset classes
in 1994 turning in negative results for the year. However, the
small cap component of EBI MultiFlex was down about half as much
as the index for the year (-0.9% vs -1.8%), thus there was
significant value-added. This component is especially well-diversified
with 224 positions.
Although bonds were the worst performing asset class in 1994,
INVESCO again added value by limiting losses to about a third of
the market's loss (-0.8% vs -2.9% for the Lehman Aggregate
Index). Real interest rates have risen substantially since early
1994, and the bond market is therefore more attractive on a
valuation basis. Consequently, we extended the average maturity
of the fixed income component of MultiFlex to equal the market
average.
We continue to maintain an extremely well-diversified portfolio
consisting of 443 positions:
MultiFlex Allocation
12/31/94
[PIE CHART ILLUSTRATING ALLOCATIONS]
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $25,000
The chart below compares the growth in the value of an investment
in the EBI MultiFlex Portfolio and in the S&P 500, if you had
invested $25,000 on November 15, 1993 (commencement of
operations), and had reinvested all your capital gains
distributions and income dividends through December 31, 1994. No
adjustment has been made for any income taxes payable by shareholders on
income dividends and capital gains distributions. Past performance is no
guarantee of future results. Share price and return will vary
with market conditions; investors may realize a gain or loss upon
redemption.
[GRAPH COMPARING MULTIFLEX TO S&P 500]
EBI MultiFlex Portfolio's average annual total returns for the
periods ended December 31, 1994 are: 1 year: -1.02%; and, since
inception:-0.50%.
The EBI Income Portfolio
Market Perspective
Interest rates rose substantially in 1994, causing a significant
decline in bond prices and producing a negative total return for
fixed income markets. Pushing rates up was a big increase in the
demand for credit, which was associated with the strong economic
growth posted during the year. In many respects the economy
expanded at a pace not seen since the early 1980's. There were
also pressures on the supply of credit. Fears that inflation
would be the end result of too-rapid growth caused many bond investors
to retreat from the long end of the market and the Federal
Reserve tightened credit conditions in the short end of the
market in an attempt to keep the economy from over-heating.
Long term treasury bond yields began the year at 6.5%, climbed to
around 8.25% during November and then fell back to about 7.75% at
year end. Short treasuries rose steadily in yield throughout the
year, starting at 4.5% and going all the way up to 7.5%. This
pattern, called a yield curve flattening, has been observed to
occur near interest rate peaks in past cycles.
1994 produced a lot of pain for speculative bond market investors
who were betting against a rise in rates. The list included
global hedge fund managers, corporate treasurers using
derivatives, municipal treasurers using leverage, and bond mutual
fund managers who bought Mexican debt. INVESCO's risk-averse
disciplines helped us avoid these pitfalls.
Portfolio Comments
The EBI Income Portfolio's total return for the year was -1.8%
compared with -3.5% for the benchmark Lehman Brothers
Government/Corp. Bond Index. The Fund was ranked "A" by the Wall
Street Journal (top 20% of peer group).
Through the first three quarters of the year the portfolio was
structured with a maturity that was shorter than the maturity of
the market benchmark. This kept the Portfolio from being hurt by
rising interest rates as much as the benchmark and helped its
performance on a relative basis versus the benchmark.
During the fourth quarter the Fund's maturity was extended so
that it is now longer than the benchmark and near the maximum
end of its range. This change was made because INVESCO's
analysis of inflation-adjusted yields indicated levels had
reached historically high ranges and pointed to good value in
long bonds. Inflation-adjusted yields rose quickly during 1994
as the trend of inflation remained fairly stable while interest
rates went up significantly.
Corporate bonds were underweighted during the year and continue
to be so because relative values for this sector are not good,
based on below-average yield premiums of corporates over
treasuries. This also aided relative performance of the Fund in
1994. The SEC
yield for the Income portfolio was 5.6% for the thirty one day
period December 1-December 31, 1994.
[GRAPH OF INFLATION-ADJUSTED YIELD]
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $25,000
The chart below compares the growth in the value of an investment
in the EBI Income Portfolio and in the Lehman Brothers
Government/Corporate Bond Index, if you had invested $25,000 on
December 31, 1984, and had reinvested all your capital gains
distributions and income dividends through December 31, 1994. No
adjustment has been made for any income taxes payable
by shareholders on income dividends and capital gains
distributions. Past performance is no guarantee of future
results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
If investors redeem shares, purchased prior to January 1, 1992,
they may be subject to a contingent deferred sales charge, which
would reduce the total returns shown below for EBI Income Fund.
[GRAPH COMPARING EBI INCOME TO LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX]
EBI Income Portfolio's average annual total returns for the
periods ended December 31, 1994 are: 1 year: -1.80%; 3 years:
3.37%; 5 years: 6.02%; and, 10 years: 7.39%.
The EBI Relative Return Bond Portfolio
Market Perspective
Rising interest rates in 1994 produced one of the worst bond
markets in decades. The Lehman Aggregate Bond Index
(intermediate bonds) was down 2.9%; however, longer term bonds
lost as much as 20% of their market value in 1994. During the
fourth quarter long term rates did slow their ascent while short
term rates continued up. This is called a "flattening" of the
yield curve. In the past, a flat yield curve has coincided with
interest rate peaks and the late stages of bear markets for
bonds.
Portfolio Comments
The EBI Relative Return Bond Portfolio returned -1.99% for the
year, well ahead of the Lehman Aggregate Bond Index at -2.9% for
the year.
A shorter average maturity (until very recently) and a
"barbelled" yield curve structure emphasis on short and long term
bonds and an underweighting in intermediate maturities
contributed positively to performance. Our strategy is to add
value through our choice of average maturity, positioning along
the yield curve, sector and individual security selection. This
multiple decision process, based primarily on valuation measures,
has led to consistent performance over time and has reduced the risk
inherent in single decision strategies.
With the sharp increase in rates this year, real (after
inflation) Treasury yields are attractively valued on an
historical basis. In November, we extended the average maturity
to 10 years, about equal to the market. We anticipate continuing
to extend maturity in the coming months. We have maintained our
barbelled structure, since intermediate maturities remain vulnerable
until the Fed is finished raising rates.
Corporate bonds remain at expensive levels historically. We are
near the point in the economic cycle when yield spreads typically
widen and corporate bonds underperform. Consequently, we will
reduce our exposure (presently at 30% of assets) and maintain
shorter maturities with the balance of our holdings. Mortgages
are at average valuations versus U.S. Treasuries. In addition,
call protection against high prepayments has improved
significantly as prices dropped below par. We will continue to
increase our commitment to mortgages (now 10% of assets) in the coming
months.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $25,000
The chart below compares the growth in the value of an investment
in the EBI Relative Return Portfolio and in the Lehman Brothers
Aggregate Bond Index, if you had invested $25,000 on November 15,
1993 (commencement of operations), and had reinvested all your
capital gains distributions and income dividends through December
31, 1994. No adjustment has been made for any income taxes
payable by shareholders on income dividends and capital gains
distributions. Past performance is no guarantee of future
results. Share price and return will vary with market
conditions; investors may realize a gain or loss upon redemption.
[GRAPH COMPARING EBI RELATIVE RETURN BOND AND
LEHMAN BROTHERS AGGREGATE BOND INDEX]
EBI Relative Return Bond Portfolio's average annual total returns
for the periods ended December 31, 1994 are: 1 year: -1.99%;
and, since inception: -1.89%.
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
December 31, 1994
EBI Equity
Fund EBI Flex Fund
ASSETS
Investment securities:
At cost $70,316,614 $223,137,096
At value $76,812,831 $239,340,412
Cash 185 10,435
Receivables:
Fund shares sold 1,111,726 2,182,394
Dividends and interest 170,917 2,980,371
Other 2,490 0
TOTAL ASSETS 78,098,149 244,513,612
LIABILITIES
Payables:
Distributions to shareholders 0 0
Investment securities purchased 0 0
Fund shares repurchased 21,439 197,250
Other 148,023 468,369
TOTAL LIABILITIES 169,462 665,619
NET ASSETS $77,928,687 $243,847,993
NET ASSETS
Paid-in capital $71,397,100 $227,788,007
Accumulated undistributed
(overdistributed) net
investment income 5,752 36,710
Accumulated net realized gain
(loss) on investments 29,618 (180,040)
Unrealized net appreciation
(depreciation) of investments 6,496,217 16,203,316
Net assets $77,928,687 $243,847,993
Shares outstanding 1,395,716 4,828,758
Net asset value per share $ 55.83 $ 50.50
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
December 31, 1994
EBI MultiFlex Fund
ASSETS
Investment securities:
At cost $120,241,992
At value $119,681,655
Cash 145,116
Receivables:
Fund shares sold 309,837
Dividends and interest 834,521
Other 0
TOTAL ASSETS 120,971,129
LIABILITIES
Payables:
Distributions to shareholders 0
Investment securities purchased 279,718
Fund shares repurchased 223,185
Other 247,938
TOTAL LIABILITIES 750,841
NET ASSETS $120,220,288
NET ASSETS
Paid-in capital $122,565,549
Accumulated undistributed
(overdistributed) net
investment income 804
Accumulated net realized gain
(loss) on investments (1,785,728)
Unrealized net appreciation
(depreciation) of investments (560,337)
Net assets $120,220,288
Shares outstanding 3,072,064
Net asset value per share $ 39.13
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
December 31, 1994
EBI EBI Relative
Income Return Bond
Fund Fund
ASSETS
Investment securities:
At cost $ 26,054,621 $ 3,228,651
At value $ 24,992,045 $ 3,125,973
Cash 381 0
Receivables:
Fund shares sold 19,609 5,330
Dividends and interest 602,169 40,599
Other 0 0
TOTAL ASSETS 25,614,204 3,171,902
LIABILITIES
Payables:
Distributions to shareholders 0 0
Investment securities purchased 0 0
Fund shares repurchased 96,673 0
Other 50,517 4,026
TOTAL LIABILITIES 147,190 4,026
NET ASSETS $ 25,467,014 $ 3,167,876
NET ASSETS
Paid-in capital $ 28,544,537 $ 3,325,452
Accumulated undistributed
(overdistributed) net investment
income (7,929) 116
Accumulated net realized gain
(loss) on investments (2,007,018) (55,014)
Unrealized net appreciation
(depreciation) of investments (1,062,576) (102,678)
Net assets $ 25,467,014 $ 3,167,876
Shares outstanding 561,818 85,154
Net asset value per share $ 45.33 $ 37.20
See notes to financial statements
<PAGE>
The EBI Funds, Inc.
Statement of Assets and Liabilities
December 31, 1994
EBI Cash
Management
Fund
ASSETS
Investment securities:
At cost $ 15,332,152
At value $ 15,332,152
Cash 674
Receivables:
Fund shares sold 45,628
Dividends and interest 1,576
Other 0
TOTAL ASSETS 15,380,030
LIABILITIES
Payables:
Distributions to shareholders 23,411
Investment securities purchased 0
Fund shares repurchased 130,589
Other 14,517
TOTAL LIABILITIES 168,517
NET ASSETS $ 15,211,513
NET ASSETS
Paid-in capital $ 15,211,722
Accumulated undistributed
(overdistributed) net investment
income 0
Accumulated net realized gain
(loss) on investments (209)
Unrealized net appreciation
(depreciation) of investments 0
Net assets $ 15,211,513
Shares outstanding 15,211,722
Net asset value per share $ 1.00
See notes to financial statements
<PAGE>
The EBI Funds, Inc.
Statement of Operations
Year Ended December 31, 1994
EBI EBI EBI
Equity Flex MultiFlex
Fund Fund Fund
INVESTMENT INCOME
INCOME
Dividends $ 2,170,176 $ 5,711,118 $ 2,225,317
Interest 94,700 5,908,418 $ 1,447,432
TOTAL INCOME 2,264,876 11,619,536 3,672,749
EXPENSES
Investment advisory
fees (Note 2) 594,977 1,909,886 815,359
Distribution fees
(Note 2) 793,302 2,546,516 815,359
Operating services
fees (Note 2) 396,651 1,273,258 402,496
TOTAL EXPENSES 1,784,930 5,729,660 2,033,214
NET INVESTMENT INCOME 479,946 5,889,876 1,639,535
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENT SECURITIES
Net realized gain (loss)
on investments 6,360,957 12,398,071 (1,785,609)
Change in unrealized
net depreciation
of investments (4,712,275)(16,818,380) (625,088)
NET GAIN (LOSS) ON
INVESTMENTS 1,648,682 (4,420,309) (2,410,697)
Net increase (decrease)
in net assets resulting
from operations $ 2,128,628 $ 1,469,567 $ (771,162)
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Operations
Year Ended December 31, 1994
EBI EBI Relative EBI Cash
Income Return Bond Management
Fund Fund Fund
INVESTMENT INCOME
INCOME
Dividends $ 0 $ 0 $ 0
Interest 2,367,440 144,882 792,451
TOTAL INCOME 2,367,440 144,882 792,451
EXPENSES
Investment advisory
fees (Note 2) 243,102 11,331 93,680
Distribution fees
(Note 2) 324,137 11,331 0
Operating services
fees (Note 2) 162,068 11,331 93,680
TOTAL EXPENSES 729,307 33,993 187,360
NET INVESTMENT INCOME 1,638,133 110,889 605,091
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENT SECURITIES
Net realized gain (loss)
on investments (1,092,593) (54,981) (192)
Change in unrealized
net depreciation
of investments (1,271,405) (96,893) 0
NET GAIN (LOSS) ON
INVESTMENTS (2,363,998) (151,874) (192)
Net increase (decrease)
in net assets resulting
from operations (725,865) (40,985) 604,899
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
Year Ended December 31, 1994
EBI Equity Fund
1994 1993
OPERATIONS
Net investment income $ 479,946 $ 561,948
Net realized gain (loss)
on investments 6,360,957 11,713,298
Change in unrealized net appreciation
(depreciation) of investments (4,712,275) (4,322,644)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 2,128,628 7,952,602
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (476,139) (561,587)
Net realized gain on investments (6,484,023) (11,590,866)
TOTAL DISTRIBUTIONS (6,960,162) (12,152,453)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 15,904,991 25,319,942
Reinvestment of distributions 5,464,054 9,869,341
21,369,045 35,189,283
Amount paid for repurchase of shares (25,267,819) (35,475,970)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (3,898,774) (286,687)
Total increase (decrease) in net assets (8,730,308) (4,486,537)
NET ASSETS
Beginning of period 86,658,995 91,145,532
End of period $77,928,687 $86,658,995
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 5,752 $ 1,945
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 265,696 391,802
Shares issued from reinvestment
of distributions 96,921 164,420
362,617 556,222
Shares repurchased (420,707) (542,993)
Net increase (decrease) in
capital shares (58,090) 13,229
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
Year Ended December 31, 1994
EBI Flex Fund
1994 1993
OPERATIONS
Net investment income $ 5,889,876 $ 4,861,152
Net realized gain (loss)
on investments 12,398,071 5,502,690
Change in unrealized net appreciation
(depreciation) of investments (16,818,380) 12,645,761
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 1,469,567 23,009,603
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (5,854,696) (4,891,173)
Net realized gain on investments (12,579,717) (5,502,101)
TOTAL DISTRIBUTIONS (18,434,413) (10,393,274)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 51,594,730 131,045,091
Reinvestment of distributions 15,701,393 8,848,701
67,296,123 139,893,792
Amount paid for repurchase of shares (80,831,906) (43,888,377)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (13,535,783) 96,005,415
Total increase (decrease) in net assets (30,500,629) 108,621,744
NET ASSETS
Beginning of period 274,348,622 165,726,878
End of period $243,847,993 $274,348,622
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 36,710 $ 1,530
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 964,467 2,469,519
Shares issued from reinvestment
of distributions 306,095 163,965
1,270,562 2,633,484
Shares repurchased (1,507,311) (815,024)
Net increase (decrease) in
capital shares (236,749) 1,818,459
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
Year Ended December 31, 1994
EBI MultiFlex Fund
1994 1993*
OPERATIONS
Net investment income $ 1,639,535 $ 6,323
Net realized gain (loss)
on investments (1,785,609) (119)
Change in unrealized net appreciation
(depreciation) of investments (625,088) 64,751
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (771,162) 70,955
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (1,638,474) (6,580)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (1,638,474) (6,580)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 123,515,314 12,174,171
Reinvestment of distributions 1,424,166 5,643
124,939,480 12,179,814
Amount paid for repurchase of shares (14,550,357) (3,388)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 110,389,123 12,176,426
Total increase (decrease) in net assets 107,979,487 12,240,801
NET ASSETS
Beginning of period 12,240,801 0
End of period $120,220,288 $ 12,240,801
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 804 $ (257)
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 3,102,568 304,771
Shares issued from reinvestment
of distributions 36,277 141
3,138,845 304,912
Shares repurchased (371,608) (85)
Net increase (decrease) in
capital shares 2,767,237 304,827
*For the period from November 17, 1993 (commencement of
operations) through December 31, 1993.
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
Year Ended December 31, 1994
EBI
Income Fund
1994 1993
OPERATIONS
Net investment income $ 1,638,133 $ 2,189,291
Net realized gain (loss)
on investments (1,092,593) 2,336,618
Change in unrealized net appreciation
(depreciation) of investments (1,271,405) (1,003,379)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (725,865) 3,522,530
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (1,627,655) (2,191,773)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (1,627,655) (2,191,773)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 6,797,165 19,710,496
Reinvestment of distributions 1,262,826 1,626,060
8,059,991 21,336,556
Amount paid for repurchase of shares (23,111,481) (26,891,784)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS (15,051,490) (5,555,228)
Total increase (decrease) in net assets (17,405,010) (4,224,471)
NET ASSETS
Beginning of period 42,872,024 47,096,495
End of period $25,467,014 $42,872,024
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ (7,929)$ (18,407)
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 145,083 402,326
Shares issued from reinvestment
of distributions 27,130 33,204
172,213 435,530
Shares repurchased (492,542) (546,768)
Net increase (decrease) in
capital shares (320,329) (111,238)
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
Year Ended December 31, 1994
EBI Relative Return
Bond Fund
1994 1993*
OPERATIONS
Net investment income $ 110,889 $ 6,365
Net realized gain (loss)
on investments (54,981) (33)
Change in unrealized net appreciation
(depreciation) of investments (96,893) (5,785)
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS (40,985) 547
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (110,981) (6,157)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (110,981) (6,157)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 2,634,968 1,256,850
Reinvestment of distributions 105,960 6,157
2,740,928 1,263,007
Amount paid for repurchase of shares (678,483) 0
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 2,062,445 1,263,007
Total increase (decrease) in net assets 1,910,479 1,257,397
NET ASSETS
Beginning of period 1,257,397 0
End of period $ 3,167,876 $ 1,257,397
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 116 $ 208
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 68,611 31,441
Shares issued from reinvestment
of distributions 2,795 154
71,406 31,595
Shares repurchased (17,847) 0
Net increase (decrease) in
capital shares 53,559 31,595
*For the period from November 15, 1993 (commencement of
operations) through December 31, 1993.
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Statement of Changes in Net Assets
Year Ended December 31, 1994
EBI Cash
Management Fund
1994 1993
OPERATIONS
Net investment income $ 605,091 $ 377,183
Net realized gain (loss)
on investments (192) (17)
Change in unrealized net appreciation
(depreciation) of investments 0 0
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS 604,899 377,166
DISTRIBUTIONS TO SHAREHOLDERS
Net investment income (605,091) (377,183)
Net realized gain on investments 0 0
TOTAL DISTRIBUTIONS (605,091) (377,183)
CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares 36,063,570 25,288,698
Reinvestment of distributions 393,345 238,972
36,456,915 25,527,670
Amount paid for repurchase of shares (35,072,549) (32,131,629)
NET INCREASE (DECREASE) IN NET
ASSETS FROM CAPITAL SHARE
TRANSACTIONS 1,384,366 (6,603,959)
Total increase (decrease) in net assets 1,384,174 (6,603,976)
NET ASSETS
Beginning of period 13,827,339 20,431,315
End of period $15,211,513 $13,827,339
Accumulated undistributed
(overdistributed) net investment
income included in net assets at
end of period $ 0 $ 0
________________________________________________________________
CAPITAL SHARE TRANSACTIONS
Shares sold 36,063,570 25,288,698
Shares issued from reinvestment
of distributions 393,345 238,972
36,456,915 25,527,670
Shares repurchased (35,072,549) (32,131,629)
Net increase (decrease) in
capital shares 1,384,366 (6,603,959)
See notes to financial statements.
<PAGE>
The EBI Funds, Inc.
Notes to Financial Statements
NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES. The
EBI Funds, Inc. (the "Fund") is registered under the Investment Company
Act of 1940 (the "Act") as a diversified, open-end management investment
company. The Fund consists of six separate investment portfolios,
EBI Equity Fund ("EBI Equity"), EBI Flex Fund
("EBI Flex"), EBI MultiFlex Fund ("EBI MultiFlex"), EBI Income Fund
("EBI Income"), EBI Relative Return Bond Fund ("EBI Relative Return")
and EBI Cash Management Fund ("EBI Cash"). EBI MultiFlex and EBI
Relative Return commenced operations on November 17, 1993 and
November 15, 1993, respectively.
A 25 for 1 split of EBI Equity, EBI Flex and EBI Income
capital shares was effected on January 2, 1992, which
resulted in a corresponding reduction in the net asset value per
share. All per share information presented in the
accompanying financial statements and financial highlights for EBI
Equity, EBI Flex and EBI Income has been restated
to reflect the stock split.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements.
A. SECURITY VALUATION--Securities held by EBI Cash are valued using
the amortized cost method of valuation, which approximates market value.
If such valuation does not reflect a security's fair value, it is
valued at fair value as determined in good faith by the Fund's
board of directors.
For EBI Equity, EBI Flex, EBI MultiFlex, EBI Income and EBI
Relative Return, securities traded on national securities exchanges
are valued at the last sale price on the exchange where such securities are
primarily traded. Securities traded in the over-the-counter
market and listed securities for which no sale was reported on the
valuation date are valued at bid price (or yield equivalent
thereof) obtained from one or more dealers making a market for such
securities or by a pricing service approved by the Fund's board of directors.
If market quotations or pricing service valuations are not
readily available, securities are valued at fair value
as determined in good faith by the Fund's board of directors.
Securities which are considered short-term
investments when purchased are stated at amortized cost (which
approximates market value) if maturity of the investment is 60 days or
less, or at market value if maturity is greater than 60 days.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME--Security
transactions are accounted for on trade date and dividend income is recorded
on ex-dividend date. Interest income is recorded on the accrual basis.
Discounts on debt securities purchased are accredit over the life of the
respective security as adjustments to interest income. Costs used in
determining realized gains and losses on the sale of investment
securities are those of specific securities sold.
C. FEDERAL INCOME TAXES--Each investment portfolio intends to
comply with the provisions of the Internal Revenue Code applicable
to regulated investment companies and, accordingly, distributes net
investment income and net realized capital gains, if any, to relieve it
from federal income taxes. At December 31, 1994,
EBI MultiFlex had net capital loss carryforwards aggregating
$1,746,736. These carryforwards expire as follows: $120 in 2001 and
$1,746,616 in 2002. At December 31, 1994, EBI Income had net capital loss
carryforwards aggregating $2,007,018. These carryforwards
expire as follows: $112,657 in 1997, $615,300 in 1998, $186,468 in 1999
and $1,092,593 in 2002. Net capital loss carryforwards utilized in 1993
amounted to $2,336,618 for this investment portfolio. At December 31,
1994, EBI Relative Return had net capital loss carryforwards
aggregating $55,014. These carryforwards expire as follows: $115 in
2001 and $54,899 in 2002.
To the extent future capital gains are offset by capital loss
carryforwards, such gains will generally not be distributed to shareholders.
Dividends paid from net investment income and distributions of
net realized short-term capital gains are, for federal income tax
purposes, taxable as ordinary income to shareholders.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--For EBI Equity, EBI
Flex, EBI MultiFlex, EBI Income and EBI Relative Return, dividends and
distributions are recorded by these investment portfolios
on the ex-dividend date. All of EBI Cash's net investment
income is distributed to shareholders by dividends
declared daily and paid monthly. Reinvestment of EBI Cash's
dividends are effected at month-end net asset values.
NOTE 2 -- INVESTMENT ADVISORY AND OTHER AGREEMENTS. INVESCO
Capital Management, Inc. ("ICM"), served as the investment adviser to EBI
Equity, EBI Flex, EBI Income and EBI Cash through June 30, 1993.
As compensation for its services to these investment portfolios,
ICM received an investment advisory fee which was
accrued daily and paid monthly. The fee was based on the annual
rate of 0.75% of the respective average daily net
assets of EBI Equity, EBI Flex Fund and EBI Income and 0.50% of the
average daily net assets of EBI Cash. Effective
July 1, 1993 (or at the commencement of operations for EBI
MultiFlex and EBI Relative Return), shareholders of each
investment portfolio approved an advisory agreement, under terms
similar to the agreement with ICM, whereby
INVESCO Services, Inc. ("ISI"), wholly owned by ICM, serves as each
investment portfolio's investment adviser. As
compensation for its services to each investment portfolio, ISI
receives an investment advisory fee which is accrued
daily and paid monthly. These fees are based on the annual rate of
0.75% of the respective average daily net assets of
EBI Equity, EBI Flex and EBI Income, 0.50% of the respective
average daily net assets of EBI Relative Return and
EBI Cash and 1.00% of the average daily net assets of EBI
MultiFlex. ISI has entered into a sub-advisory agreement
with ICM, with respect to EBI Equity, EBI Flex, EBI Income and EBI
Cash, whereby investment decisions for these
investment portfolios are made by ICM. Fees for these sub-advisory
services are paid by ISI to ICM at an annual rate
of 0.20% of the average daily net assets of EBI Equity and EBI Flex
and 0.10% of the average daily net assets of EBI
Income and EBI Cash. ISI has also entered into a sub-advisory
agreement with INVESCO Management & Research,
Inc. ("IMR"), with respect to EBI MultiFlex and EBI Relative
Return, whereby investment decisions for these
investment portfolios are made by IMR. Fees for these sub-advisory
services are paid by ISI to IMR at annual rates
based on daily average net assets: for EBI MultiFlex Fund, 0.30% on
the first $100 million of assets, 0.25% on the next
$400 million of assets and 0.20% of assets in excess of $500
million; for EBI Relative Return, 0.10% of total assets.
INVESCO Funds Group, Inc. ("IFG"), an affiliate of ICM and ISI,
provided administrative, accounting and clerical services to EBI Equity,
EBI Flex, EBI Income and EBI Cash under administrative agreements
effective through July 5, 1993. For these services, each investment
portfolio paid IFG an annual fee of $10,000 plus an additional amount
computed at the annual rate of 0.015% of daily average net assets.
These fees were accrued daily and paid monthly.
In addition, IFG received a transfer agent fee for each investment
portfolio in the amount of $50.00 per shareholder
account with a minimum annual fee of $5,000 per investment
portfolio. These fees were paid monthly based in part
on the actual number of accounts in existence at the end of each
month. These agreements were terminated in July 1993.
ISI is the principal underwriter for the Fund. For the period
January 1, 1993 through June 30, 1993, pursuant
to plans of distribution (the "Plans") in accordance with Rule
12b-1 of the Act, EBI Equity, EBI Flex and EBI Income
each paid ISI a fee equal to 1.25% per annum of each investment
portfolio's average daily net assets. Effective July
1, 1993 (or at the commencement of operations for EBI MultiFlex and
EBI Relative Return) these annual fees were
in effect according to the Plans: for EBI Equity, EBI Flex, EBI
MuliFlex and EBI Income, 1.00% of average daily net
assets; for EBI Relative Return, 0.50% of average daily net assets.
ISI advised the Fund that for the year ended
December 31, 1994, it received approximately $46,177, $26,541,
$50,559 and $9,822 and $908 in contingent deferred
sales charges ("CDSC") from certain shareholder redemptions of EBI
Equity, EBI Flex, EBI Income, EBI Cash
Management and Multiflex Funds, respectively. Certain officers or
directors of the Fund are officers or directors of
ISI.
On July 1, 1993 (or at the commencement of operations for EBI
MultiFlex and EBI Relative Return), each
investment portfolio entered into an operating services agreement
with ISI. Under the respective operating services
agreements, each investment portfolio pays ISI an annual fee of
0.50% of daily average net assets for providing or
arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agent, registrar, custodial,
shareholder reporting, sub-accounting and recordkeeping services
and functions. These agreements provide that ISI
will pay all fees and expenses associated with these and other
functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder
report expenses. The combined effect of the advisory
agreements, distribution plans and operating services agreements of
each investment portfolio is to place a cap or ceiling
on the total expenses of each investment portfolio, other than
brokerage commissions, interest, taxes, litigation, directors
fees and expenses, and other extraordinary expenses.
<PAGE>
If in any calendar year, the average daily net assets of EBI
Equity or EBI Flex are less than $500 million,
expenses shall not exceed 2.25%; on the next $500 million of
average daily net assets, expenses shall not exceed 2.15%;
on the next $1 billion of daily average net assets, expenses shall
not exceed 2.10%; and on all average daily net assets
over $2 billion, expenses shall not exceed 2.05%. If in any
calendar year, the average daily net assets of EBI MultiFlex
are less than $100 million, expenses shall not exceed 2.50%; on the
next $400 million of average daily net assets,
expenses shall not exceed 2.40%; on the next $500 million of
average daily net assets, expenses shall not exceed 2.35%;
on the next $1 billion of average daily net assets, expenses shall
not exceed 2.30%; and on all daily average net assets
over $2 billion, expenses shall not exceed 2.25%. If in any
calendar year, the average daily net assets of EBI Income
are less than $250 million, expenses shall not exceed 2.25%; on the
next $250 million of average daily net assets,
expenses shall not exceed 2.15%; on the next $250 million of
average daily net assets, expenses shall not exceed 2.10%;
and on all daily average net assets over $750 million, expenses
shall not exceed 2.05%. In any calendar year, the
expenses of EBI Relative Return may not exceed 1.50% of average
daily net assets, and the expenses of EBI Cash may
not exceed 1.00% of average daily net assets.
At December 31, 1994, 34.23% of the outstanding capital shares
of EBI Cash were owned by affiliated parties.
NOTE 3 -- PURCHASES AND SALES OF INVESTMENT SECURITIES. For the
year ended, December
31, 1994, the aggregate cost of purchases and proceeds from sales
of U.S. Government Securities were:
Purchases Sales
EBI Flex. . . . . . . . . . . . 78,845,292 52,495,208
EBI MultiFlex . . . . . . . . . 36,519,916 25,207,696
EBI Income. . . . . . . . . . . 17,146,610 25,167,945
EBI Relative Return . . . . . . 1,879,341 452,201
The aggregate cost of purchases and proceeds from sales of all
other securities (excluding all short-term securities)
were:
Purchases Sales
EBI Equity. . . . . . . . . . . $ 15,975,023$ 30,239,543
EBI Flex. . . . . . . . . . . . 10,753,254 55,662,533
EBI MultiFlex . . . . . . . . . 135,901,243 36,729,597
EBI Income. . . . . . . . . . . 1,580,580 2,577,281
EBI Relative Return . . . . . . 907,689 432,776
NOTE 4 -- UNREALIZED APPRECIATION AND DEPRECIATION. At December
31, 1994, the gross unrealized appreciation and depreciation of securities
for federal income tax purposes was as follows:
Net
Gross Gross Unrealized
Unrealized Unrealized Appreciation
Appreciation Depreciation (Depreciation)
EBI Equity. . . $10,549,709 ($4,053,492) $6,496,217
EBI Income. . . 49,417 (1,111,993) (1,062,576)
EBI Flex. . . . 25,645,645 (9,442,329) 16,203,316
EBI Multiflex . 4,114,567 (4,674,904) (560,337)
EBI Relative Return . . 9,895 (112,573) (102,678)
NOTE 5 -- CAPITAL SHARES. The authorized capital stock of the Fund
consists of 10,050,000,000 shares of common stock having a par value of
$0.001 per share. Of such shares, 10 million has been allocated to each
of the EBI Equity, EBI Flex, EBI MultiFlex, EBI Income and EBI Relative
Return investment portfolios and 10 billion has been allocated to EBI Cash.
<PAGE>
EBI Equity Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1994 1993
Net asset value, beginning of
period $ 59.61 $ 63.27
INVESTMENT OPERATIONS
Net investment income 0.36 0.41
Net gain (loss) on securities
(both realized and unrealized) 1.26 5.40
Total from investment operations 1.62 5.81
DISTRIBUTIONS
Dividends (from net investment
income) (0.36) (0.41)
Distributions (from capital gains) (5.04) (9.06)
Total distributions (5.40) (9.47)
Net asset value, end of period $55.83 $59.61
TOTAL RETURN(1) 2.69% 9.16%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $77,929 $86,659
Ratio of expenses to average net
assets* 2.25% 2.25%
Ratio of net investment income to
average net assets* 0.61% 0.62%
Portfolio turnover rate 21% 47%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
* INVESCO Capital Management, Inc. voluntarily absorbed certain
expenses of the Fund aggregating $3,227 and $23,818 for 1993
and 1990, respectively. If such expenses had not been
absorbed, the ratio of expenses to average net assets for 1993
and 1990 would have been 2.25% and 2.28%, respectively and the
ratio of net investment income to average net assets for 1993
and 1990 would have been 0.62% and 1.68%, respectively.
See notes to financial statements.
<PAGE>
EBI Equity Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1992 1991
Net asset value, beginning of period $63.38 $54.70
INVESTMENT OPERATIONS
Net investment income 0.60 0.66
Net gain (loss) on securities
(both realized and unrealized) 2.44 17.63
Total from investment operations 3.04 18.29
DISTRIBUTIONS
Dividends (from net investment
income) (0.57) (0.69)
Distributions (from capital gains) (2.58) (8.92)
Total distributions (3.15) (9.61)
Net asset value, end of period $63.27 $63.38
TOTAL RETURN(1) 4.84% 33.59%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $91,146 $81,732
Ratio of expenses to average net
assets 2.18% 2.22%
Ratio of net investment income to
average net assets 0.90% 1.04%
Portfolio turnover rate 41% 47%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
See notes to financial statements.
<PAGE>
EBI Equity Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1990
Net asset value, beginning of
period $62.01
INVESTMENT OPERATIONS
Net investment income 1.04
Net gain (loss) on securities
(both realized and unrealized) (3.40)
Total from investment operations (2.36)
DISTRIBUTIONS
Dividends (from net investment
income) (1.21)
Distributions (from capital gains) (3.74)
Total distributions (4.95)
Net asset value, end of period $54.70
TOTAL RETURN(1) (3.75%)
Ratios/Supplemental Data
Net assets, end of period (in 000's) $69,279
Ratio of expenses to average net
assets* 2.25%
Ratio of net investment income to
average net assets* 1.71%
Portfolio turnover rate 12%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Fund aggregating $3,227 and
$23,818 for 1993 and 1990, respectively. If such expenses
had not been absorbed, the ratio of expenses to average
net assets for 1993 and 1990 would have been 2.25% and
2.28%, respectively and the ratio of net investment income
to average net assets for 1993 and 1990 would have been
0.62% and 1.68%, respectively.
See notes to financial statements.
<PAGE>
EBI Flex Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1994 1993
Net asset value, beginning of period $54.16 $51.04
INVESTMENT OPERATIONS
Net investment income 1.26 1.10
Net gain (loss) on securities (0.91) 4.22
(both realized and unrealized)
Total from investment operations 0.35 5.32
DISTRIBUTIONS
Dividends (from net investment income) (1.25) (1.09)
Distributions (from capital gains) (2.76) (1.11)
Total distributions (4.01) (2.20)
Net asset value, end of period $50.50 $54.16
TOTAL RETURN(1) 0.64% 10.48%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $243,848 $274,349
Ratio of expenses to average net assets* 2.25% 2.25%
Ratio of net investment income to
average net assets* 2.32% 2.10%
Portfolio turnover rate 36% 27%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Fund aggregating $18,993 for 1993.
If such expenses had not been absorbed, the ratio of
expenses to average net assets would have been 2.26%, and
the ratio of net investment income to average net assets
would have been 2.09%.
See notes to financial statements.
<PAGE> EBI Flex Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1992 1991 1990
Net asset value, beginning of
period $49.35 $42.26 $45.32
INVESTMENT OPERATIONS
Net investment income 1.39 1.47 1.64
Net gain (loss) on securities
(both realized and unrealized) 2.37 8.90 (2.42)
Total from investment operations 3.76 10.37 (0.78)
DISTRIBUTIONS
Dividends (from net investment
income) (1.35) (1.49) (1.75)
Distributions (from capital
gains) (0.72) (1.79) (0.53)
Total distributions (2.07) (3.28) (2.28)
Net asset value, end of period $51.04 $49.35 $42.26
TOTAL RETURN(1) 7.72% 24.80% (1.68%)
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $165,727 $104,204 $96,772
Ratio of expenses to average
net assets 2.17% 2.21% 2.25%
Ratio of net investment income to
average net assets 2.81% 3.12% 3.77%
Portfolio turnover rate 15% 24% 31%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
See notes to financial statements.
<PAGE>
EBI MultiFlex Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout the period presented.
Year Ended For the Period
December 31, Nov. 17, 1993* to
1994 Dec. 31, 1993
------------- ------------------
Net asset value,
beginning of period $40.16 $40.00
------- -------
INVESTMENT OPERATIONS
Net investment income 0.62 0.02
Net gain (loss) on
securities (both realized
and unrealized) (1.03) 0.16
------- ------
Total from investment
operations (0.41) 0.18
------- ------
DISTRIBUTIONS
Dividends (from net
investment income) (0.62) (0.02)
------- -------
Total distributions (0.62) (0.02)
------- -------
Net asset value, end
of period $39.13 $40.16
======= =======
TOTAL RETURN (1.02%) 0.46%
--------- ---------
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $120,220 $12,241
Ratio of expenses to
average net assets 2.49% 2.50%+
Ratio of net investment
income to average
net assets 2.01% 1.09%+
Portfolio turnover rate 81% 0.53%
* Commencement of operations
+ Annualized
See notes to financial statements
<PAGE>
EBI Income Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1994 1993
Net asset value, beginning of period $48.60 $47.41
INVESTMENT OPERATIONS
Net investment income 2.40 2.28
Net gain (loss) on securities (3.27) 1.20
(both realized and unrealized)
Total from investment operations (0.87) 3.48
DISTRIBUTIONS
Dividends (from net investment income) (2.40) (2.29)
Total distributions (2.40) (2.29)
Net asset value, end of period $45.33 $48.60
TOTAL RETURN(1) (1.80%) 7.39%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $25,467 $42,872
Ratio of expenses to average net assets* 2.25% 2.25%
Ratio of net investment income to
average net assets* 5.09% 4.56%
Portfolio turnover rate 59% 92%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Fund aggregating $17,632 and $11,540
for 1993 and 1990, respectively. If such expenses had not
been absorbed, the ratio of expenses to average net assets
would have been 2.29% and 2.32%, respectively and the ratio
of net investment income to average net assets would have
been 4.52% and 5.41%, respectively.
See notes to financial statements.
<PAGE>
EBI Income Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1992 1991 1990
Net asset value, beginning of
period $47.77 $45.42 $45.48
INVESTMENT OPERATIONS
Net investment income 2.57 3.03 3.43
Net gain (loss) on securities
(both realized and unrealized) (0.37) 2.43 (0.03)
Total from investment operations 2.20 5.46 3.40
DISTRIBUTIONS
Dividends (from net investment
income) (2.56) (3.11) (3.46)
Total distributions (2.56) (3.11) (3.46)
Net asset value, end of period $47.41 $47.77 $45.42
TOTAL RETURN(1) 4.74% 12.46% 7.81%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $47,096 $39,104 $41,004
Ratio of expenses to average
net assets* 2.25% 2.29% 2.30%
Ratio of net investment income to
average net assets* 5.48% 6.48% 7.08%
Portfolio turnover rate 16% 37% 25%
(1) A contingent deferred sales charge may be imposed on
redemptions of shares purchased prior to January 1, 1992
which would reduce the total returns shown above.
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Fund aggregating $17,632 and $11,540
for 1993 and 1990, respectively. If such expenses had not
been absorbed, the ratio of expenses to average net assets
would have been 2.29% and 2.32%, respectively and the ratio
of net investment income to average net assets would have
been 4.52% and 5.41%, respectively.
See notes to financial statements.
<PAGE>
EBI Relative Return Bond Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout the period presented.
Year Ended For the Period
December 31, Nov. 15, 1993* to
1994 Dec. 31, 1993
------------- -----------------
Net asset value,
beginning of period $39.80 $40.00
--------- ---------
INVESTMENT OPERATIONS
Net investment income 1.81 0.21
Net loss on securities
(both realized and
unrealized) (2.60) (0.21)
------- -------
Total from investment
operations (0.79) 0.00
------- -------
DISTRIBUTIONS
Dividends (from net
investment income) (1.81) (0.20)
------- -------
Total distributions (1.81) (0.20)
------- -------
Net asset value, end
of period $37.20 $39.80
======= =======
TOTAL RETURN (1.99%) 0.01%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $3,168 $1,257
Ratio of expenses to
average net assets 1.50% 1.50%+
Ratio of net investment
income to average
net assets 4.89% 4.61%+
Portfolio turnover rate 47% 5%
* Commencement of operations
+ Annualized
See notes to financial statements
<PAGE>
EBI Cash Management Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1994 1993
Net asset value, beginning of period $ 1.00 $ 1.00
INVESTMENT OPERATIONS
Net investment income 0.03 0.02
DISTRIBUTIONS
Dividends (from net investment income) (0.03) (0.02)
Net asset value, end of period $ 1.00 $ 1.00
TOTAL RETURN 3.30% 2.20%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $15,212 $13,827
Ratio of expenses to average net assets* 1.00% 0.95%
Ratio of net investment income to
average net assets* 3.23% 2.17%
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Fund aggregating $15,099, $38,925,
and $5,536 for 1993, 1992, and 1990, respectively. If such
expenses had not been absorbed the ratio of expenses to
average net assets would have been 1.03%, 0.92%, and 1.12%,
for the above periods, respectively and the ratio of net
investment to average net assets would have 2.09%, 2.75%,
4.92%, respectively.
See notes to financial statements.
<PAGE>
EBI Cash Management Fund
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for a capital share
outstanding throughout each period presented.
Year ended December 31,
1992 1991 1990
Net asset value, beginning of
period $1.00 $1.00 $1.00
INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.07
DISTRIBUTIONS
Dividends (from net investment
income) (0.03) (0.05) (0.07)
Net asset value, end of period $1.00 $1.00 $1.00
TOTAL RETURN 3.00% 5.08% 7.35%
Ratios/Supplemental Data
Net assets, end of period
(in 000's) $20,431 $17,730 $20,701
Ratio of expenses to average
net assets* 0.73% 1.00% 1.09%
Ratio of net investment income to
average net assets* 2.94% 5.04% 7.11%
* INVESCO Capital Management, Inc. voluntarily absorbed
certain expenses of the Fund aggregating $15,099, $38,925,
and $5,536 for 1993, 1992, and 1990, respectively. If such
expenses had not been absorbed the ratio of expenses to
average net assets would have been 1.03%, 0.92%, and 1.12%,
for the above periods, respectively and the ratio of net
investment to average net assets would have 2.09%, 2.75%,
4.92%, respectively.
See notes to financial statements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
The EBI Funds, Inc.
In our opinion, the accompanying statements of assets and
liabilities, including the statements of investment securities,
and the related statements of operations and of changes in net
assets and the financial highlights present fairly, in all
material respects, the financial position of EBI Equity Fund, EBI
Flex Fund, EBI MultiFlex Fund, EBI Income Fund, EBI Relative
Return Bond Fund and EBI Cash Management Fund (constituting The
EBI Funds, Inc., hereafter referred to as the "Fund") at December
31, 1994, the results of each of their operations, the changes in
each of their net assets and the financial highlights for each of
the respective periods presented, in conformity with generally
accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of
securities at December 31, 1994 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion
expressed above.
Price Waterhouse LLP
Denver, Colorado
February 10, 1995
Part C
Other Information
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
1. Financial statements and schedules included in
Prospectus (Part A):
Financial information since commencement of
operations (February 15, 1984 for Equity, Income
and Cash Management Portfolios; February 24, 1988
for Flex Portfolio; November 17, 1993 for
MultiFlex Portfolio; November 15, 1993 for
Relative Return Bond Portfolio) through the period
ended December 31, 1994.
2. Financial statements and schedules included in
Statement of Additional Information (Part B):
(i) Report of Independent Accountants relating to
the financial statements and financial
information for the fiscal year ended
December 31, 1994.
(ii) Statement of Investment Securities as of
December 31, 1994.
(iii) Statement of Assets and Liabilities as
of December 31, 1994.
(iv) Statement of Operations for the fiscal year
ended December 31, 1994.
(v) Statement of Changes in Net Assets for each
of the two years ended December 31, 1994 and
December 31, 1993.
(vi) Financial highlights for the periods set
forth above.
3. Financial statements and schedules included in
Part C:
Not applicable.
(b) Exhibits:
1. Amended and Restated Articles of Incorporation of
Registrant.
2. By-Laws of Registrant, as amended.
3. None.
4. Not applicable.
5. (a) Investment Advisory Agreement between
Registrant and INVESCO Services, Inc.
("ISI"), dated as of July 1, 1993, as amended
April 19, 1995.
(b) Sub-Advisory Agreement between ISI and
INVESCO Capital Management, Inc., dated as of
July 1, 1993, as amended April 19, 1995.
(c) Sub-Advisory Agreement between ISI and
INVESCO Realty Advisors dated as of April 19,
1995.
(d) Sub-Advisory Agreement between ISI and
INVESCO Management & Research, Inc., dated as
of November 1, 1993.
6. Distribution Agreement between Registrant and ISI,
dated as of July 1, 1993, as amended April 19,
1995.
7. None.
8. Form of Custodian Agreement between Registrant and
United Missouri Bank.
9. Operating Services Agreement between Registrant
and ISI, dated as of July 1, 1993, as amended
April 19, 1995.
10. Opinion as to legality of the shares, incorporated
herein by reference.
11. Consent of Independent Accountants.
12. None.
13. None.
14. None.
15. Plan and Agreement of Distribution pursuant to
Rule 12b-1 between the Registrant and ISI, dated
as of July 1, 1993, as amended April 19, 1995.
16. Schedule for computation of total return and
yield.
27. Financial Data Schedule.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
No person is controlled by, or under common control
with, the Registrant.
Item 26. NUMBER OF HOLDERS OF SECURITIES
As of March 15, 1995, the number of record holders of
each class of securities of the Registrant was as
follows:
TITLE OF NUMBER OF
NAME OF PORTFOLIO CLASS RECORDHOLDERS
Equity Portfolio Common 830
Income Portfolio Common 390
Flex Portfolio Common 2,789
MultiFlex Portfolio Common 2,028
Relative Return Bond Portfolio Common 70
Real Estate Portfolio Common 0
International Value Portfolio Common 0
Cash Management Portfolio Common 221
Item 27. INDEMNIFICATION
Section 2-418 of the General Corporation Law of the
State of Maryland, Article VI of the Registrant's
Charter filed as Exhibit 1, Article VII of the
Registrant's By-Laws filed as Exhibit 2, and the
Investment Advisory Agreement filed as Exhibit 5(a),
provide, or will provide, for indemnification.
The Registrant's Articles of Incorporation (Article VI)
provide that the Registrant shall indemnify (a) its
directors to the fullest extent permitted by law now or
hereafter in force, including the advance of expenses
under the procedures provided under such laws; (b) its
officers to the same extent it shall indemnify its
directors; and (c) its officers who are not directors
to such further extent as shall be authorized by the
Board of Directors and be consistent with law,
provided, however, that such indemnification shall not
be construed to protect any director or officer against
any liability to which such director or officer 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.
The Registrant's By-laws (Article VII) provide that the
Registrant shall indemnify any director and/or officer
who was or is threatened to be made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was
a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director
or officer of another corporation, partnership, joint
venture, trust or other enterprise, against all
expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding to the maximum extent permitted by law.
With respect to indemnification of officers and
directors, Section 2-418 of the Maryland General
Corporation Law provides that a corporation may
indemnify any director who is made a party to any
threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right
of the Registrant) by reason of service in that
capacity, or is or was serving at the request of the
corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture,
trust or other enterprise against expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement and expenses actually and reasonably
incurred by him in connection with such action, suit or
proceeding unless (1) it is established that the act or
omission of the director was material to the matter
giving rise to the proceeding, and (a) was committed in
bad faith or (b) was the result of active and
deliberate dishonesty; or (2) the director actually
received an improper personal benefit of money,
property, or services; or (3) in the case of any
criminal action or proceeding, had reasonable cause to
believe that the act or omission was unlawful. A court
of appropriate jurisdiction may, however, except in
proceedings by or in the right of the Registrant or in
which liability has been adjudged by reason of the
person receiving an improper personal benefit, order
such indemnification as the court shall deem proper if
it determines that the director is fairly and
reasonably entitled to indemnification in view of all
the relevant circumstances, whether or not the director
has met the requisite standards of conduct. Under
Section 2-418, the Registrant shall also indemnify
officers, employees, and agents of the Registrant to
the same extent that it shall indemnify directors, and
officers, employees and agents who are not directors to
such further extent, consistent with law, as may be
provided by general or specific action of the Board of
Directors or contract. Pursuant to Section 2-418 of
the Maryland General Corporation Law, the termination
of any action, suit or proceeding by judgment, order or
settlement does not create a presumption that the
person did not meet the requisite standard of conduct
required by Section 2-418. The termination of any
action, suit or proceeding by conviction, or a plea of
nolo contendere or its equivalent, or an entry of an
order of probation prior to judgment, creates a
rebuttable presumption that the person did not meet the
requisite standard of conduct.
Insofar as indemnification for liability arising under
the Securities Act of 1933 (the "Act") may be permitted
to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant
of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in
connection with the securities being registered, the
Registrant 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 Act and will be
governed by the final adjudication of such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
AND SUB-ADVISER
See "Management of the Fund" in the Prospectus and "The
Advisory and Sub-Advisory Agreements" in the Statement
of Additional Information for information regarding the
business of the investment adviser and sub-advisers.
For information as to the business, profession,
vocation or employment of a substantial nature of each
of the officers and directors of INVESCO Services,
Inc., INVESCO Capital Management, Inc., INVESCO
Management & Research, Inc., and INVESCO Realty
Advisors, Inc., reference is made to Form ADV filed
under the Investment Advisers Act of 1940 by INVESCO
Services, Inc., INVESCO Capital Management, Inc., and
INVESCO Realty Advisors, Inc., herein incorporated by
reference.
<PAGE>
Item 29. PRINCIPAL UNDERWRITERS
(a) None.
(b)
NAME AND POSITIONS AND POSITIONS AND
PRINCIPAL BUSINESS OFFICES WITH OFFICES WITH
ADDRESS UNDERWRITER REGISTRANT
Hubert L. Harris, Jr. President and President and
1315 Peachtree Street, N.E. Director Director
Atlanta, Georgia 30309
Tony D. Green Secretary, Vice N/A
1355 Peachtree Street, N.E. President-Operations
Atlanta, Georgia 30309 and Director
David Hartley Treasurer N/A
1315 Peachtree Street, N.E.
Atlanta, Georgia 30309
John P. Stewart Senior Vice President N/A
1355 Peachtree Street, N.E. and General Manager
Atlanta, Georgia 30309
Michael J. Hanley Senior Vice President N/A
1355 Peachtree Street, N.E. and National Sales
Atlanta, Georgia 30309 Manager
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Registrant maintains the records required to be
maintained by it under Rules 31a-1(a), 31a-1(b) and
31a-2(a) under the 1940 Act at its offices at 1315
Peachtree Street, N.E., Atlanta, Georgia 30309.
Certain records, including records relating to
Registrant's shareholders and the physical possession
of its securities, may be maintained pursuant to Rule
31a-3 at the offices of Registrant's Transfer Agent,
Fund/Plan Services, Inc., 2 West Elm Street,
Conshohocken, Pennsylvania 19428, and at the offices of
the custodian, United Missouri Bank, 928 Grand Avenue,
Kansas City, Missouri 64141.
Item 31. MANAGEMENT SERVICES
Not applicable.
Item 32. UNDERTAKINGS
(a) Not applicable.
(b) Registrant undertakes to file a post-effective
amendment, using financial statements for the Real
Estate and International Value Portfolios which
need not be certified, within four to six months
from the effective date of this Post-Effective
Amendment No. 24 to Registrant's registration
statement under the Securities Act of 1933. The
financial statements included in such amendment
will be as of and for the time period ended on a
date reasonably close or as soon as practicable to
the date of the filing of the amendment.
(c) Registrant undertakes to furnish to each person to
whom a prospectus is delivered with a copy of
Registrant's latest annual report to shareholders
upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this post-effective amendment to its Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Atlanta, County of
Fulton, in the State of Georgia, on the 27th day of April, 1995.
THE EBI FUNDS, INC.
(Registrant)
By: /s/ Penelope P. Alexander By: /s/ Hubert L. Harris, Jr.
Secretary President
Pursuant to the requirements of the Securities Act of 1933,
this post-effective amendment to Registrant's Registration
Statement has been signed by the following persons in the
capacities indicated on this 27th day of April, 1995.
/s/ Hubert L. Harris, Jr. /s/Frank M. Bishop
President Director*
(Chief Executive Officer and
Chief Financial and Accounting
Officer) and Director
/s/Penelope P. Alexander /s/Lawrence H. Budner
Treasurer Director*
/s/Victor L. Andrews /s/Daniel D. Chabris
Director* Director*
/s/Bob R. Baker /s/Fred A. Deering
Director* Director*
/s/A.D. Frazier, Jr. /s/John W. McIntyre
Director* Director*
/s/Charles W. Brady /s/Kenneth T. King
Director* Director*
By: */s/ Jeffrey L. Steele
as attorney-in-fact
* Pursuant to power of attorney filed with Post-Effective
Amendment No. 23 on February 14, 1995.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS FILED WITH
POST-EFFECTIVE AMENDMENT NO. 24
TO THE
REGISTRATION STATEMENT
EBI FUNDS, INC.
EXHIBIT 1 -- Amended and Restated Articles of
Incorporation of Registrant
EXHIBIT 2 -- By-Laws of Registrant, as amended
EXHIBIT 5(a) -- Investment Advisory Agreement
EXHIBIT 5(b) -- Sub-Advisory Agreement (INVESCO Capital
Management, Inc.)
EXHIBIT 5(c) -- Sub-Advisory Agreement (INVESCO Realty
Advisors, Inc.)
EXHIBIT 5(d) -- Sub-Advisory Agreement (INVESCO Management &
Research, Inc.)
EXHIBIT 6 -- Distribution Agreement
EXHIBIT 8 -- Form of Custodian Agreement
EXHIBIT 9 -- Operating Services Agreement
EXHIBIT 11 -- Consent of Independent Accountants
EXHIBIT 15 -- Plan and Agreement of Distribution
EXHIBIT 16 -- Schedule for Computation of Total Return and
Yield
EXHIBIT 27 -- Financial Data Schedule
EXHIBIT 1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
THE ARTICLES OF INCORPORATION
OF
THE EBI FUNDS, INC.
THE UNDERSIGNED, Hubert L. Harris, Jr., being the President
of THE EBI FUNDS, INC. (hereinafter the "Corporation"), hereby
certifies that:
(1) The Articles of Incorporation of the Corporation were
filed on September 19, 1989, and Articles Supplementary were
filed on June 30, 1993, November 17, 1993 and March 7, 1995 with
the State Department of Assessments and Taxation;
(2) The Corporation desires to amend and restate its
Articles of Incorporation;
(3) This Amendment and Restatement of the Corporation's
Articles of Incorporation has been approved by a majority of the
Board of Directors of the Corporation;
(4) The amendments are limited to changes expressly
permitted by Section 2-605(4) of the Maryland General Corporation
Law to be made without action by the stockholders;
(5) The Corporation is registered as an open-end investment
company under the Investment Company Act of 1940;
(6) The current address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation
Trust, Incorporated, 32 South Street, Baltimore, Maryland 21202;
(7) The Corporation's current resident agent in the State
of Maryland is The Corporation Trust, Incorporated, 32 South
Street, Baltimore, Maryland 21202;
(8) There are eleven (11) current directors of the
Corporation, whose names are as follows:
Charles W. Brady
Fred A. Deering
Hubert L. Harris, Jr.
Victor L. Andrews
Bob R. Baker
Lawrence H. Budner
Daniel D. Chabris
Kenneth T. King
Frank M. Bishop
A. D. Frazier, Jr.
John W. McIntyre
(9) The text of the Articles of Incorporation is hereby
amended and restated in its entirety to read as follows:
ARTICLE I
NAME
The name of the corporation is The EBI Funds, Inc. (the
"Corporation").
ARTICLE II
CORPORATE PURPOSES
The purpose for which the Corporation is formed is to engage
in the business of an open-end management investment company.
The Corporation may engage in any other business and shall
have all powers conferred upon or permitted to corporations by
the Maryland General Corporation Law.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
The present address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation
Trust, Incorporated, 32 South Street, Baltimore, Maryland 21202.
The name of the resident agent of the Corporation in Maryland is
The Corporation Trust, Incorporated, and the address of the
resident agent is 32 South Street, Baltimore, Maryland 21202.
The resident agent is a Maryland corporation.
ARTICLE IV
CAPITAL STOCK AND STOCKHOLDERS
Section 1. AUTHORIZED SHARES. The Corporation is
authorized to issue Ten Billion Seventy Million (10,070,000,000)
shares of Common Stock par value $.001 per share. The aggregate
par value of all shares which the Corporation is authorized to
issue is Ten Million Seventy Thousand Dollars ($10,070,000).
Subject to the following paragraph, the authorized shares
are classified as 10,000,000 shares of the Equity Portfolio,
10,000,000 shares of the Income Portfolio, 10,000,000 shares of
the Flex Portfolio, 10,000,000 shares of the MultiFlex Portfolio,
10,000,000 shares of the Relative Return Bond Portfolio,
10,000,000 shares of the Real Estate Portfolio, 10,000,000 shares
of the International Value Portfolio, and 10,000,000,000 shares
of the Cash Management Portfolio.
The Board of Directors is authorized to classify or to
reclassify, from time to time, any unissued shares of stock of
the Corporation, whether now or hereafter authorized, by setting,
changing or eliminating the preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights to require
redemption of the stock.
The provisions of these Articles of Incorporation, including
those in this Section, shall apply to each class of stock unless
otherwise provided by the Board of Directors prior to issuance of
any shares of that class:
(a) As more fully set forth hereafter, the assets and
liabilities and the income and expenses of each class of the
Corporation's stock shall be determined separately and,
accordingly, the net asset value, the dividends payable to
holders, and the amounts distributable in the event of
dissolution of the Corporation to holders of shares of the
Corporation's stock may vary from class to class. Except for
these differences and certain other differences hereafter set
forth, each class of the Corporation's stock shall have the same
preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and
terms and conditions of and rights to require redemption.
(b) All consideration received by the Corporation for
the issue or sale of shares of a class of the Corporation's
stock, together with all funds derived from any investment and
reinvestment thereof, shall irrevocably belong to that class for
all purposes, subject only to the rights of creditors, and shall
be so recorded upon the books of account of the Corporation.
Such consideration and any funds derived from any investment and
reinvestment are herein referred to as "assets belonging to" that
class.
(c) The assets belonging to a class of the
Corporation's stock shall be charged with the liabilities of the
Corporation with respect to that class and with that class' share
of the liabilities of the Corporation not attributable to any
particular class, in the latter case in the proportion that the
net asset value of that class (determined without regard to such
liabilities) bears to the net asset value of all classes of the
Corporation's stock (determined without regard to such
liabilities). The determination of the Board of Directors shall
be conclusive as to the allocation of liabilities, including
accrued expenses and reserves, to the assets to a particular
class or classes.
(d) Shares of each class of stock shall be entitled to
such dividends or distributions, in stock or in cash or both, as
may be declared from time to time by the Board of Directors with
respect to such class. Dividends or distributions shall be paid
on shares of a class of stock only out of the assets belonging to
that class.
(e) All holders of shares of stock shall vote as a
single class except with respect to any matter which affects only
one or more classes of stock, in which case only the holders of
shares of the classes affected shall be entitled to vote.
(f) In the event of the liquidation or dissolution of
the Corporation, the stockholders of a class of the Corporation's
stock shall be entitled to receive, as a class, out of the assets
of the Corporation available for distribution to stockholders,
the assets belonging to that class less the liabilities allocated
to that class. The assets so distributable to the stockholders
of a class shall be distributed among such stockholders in
proportion to the number of shares of that class held by them and
recorded on the books of the Corporation. In the event that
there are any assets available for distribution that are not
attributable to any particular class of stock, such assets shall
be allocated to all classes in proportion to the net asset value
of the respective classes.
Section 2. FRACTIONAL SHARES. The Corporation may issue
fractional shares. Any fractional share shall carry
proportionately all the rights of a whole share, excepting any
right to receive a certificate evidencing such fractional share,
but including, without limitation, the right to vote and the
right to receive dividends.
Section 3. QUORUM REQUIREMENTS. The presence in person or
by proxy of the holders of one-third of the shares of stock of
the Corporation entitled to vote without regard to class shall
constitute a quorum at any meeting of the stockholders, except
with respect to any matter which by law requires the approval of
one or more classes of stock, in which case the presence in
person or by proxy of the holders of one-third of the shares of
stock of each class entitled to vote on the matter shall
constitute a quorum.
Section 4. VOTING. Notwithstanding any provision of the
laws of the State of Maryland requiring any action to be taken or
authorized by the affirmative vote of the holders of more than a
majority of the outstanding stock of the Corporation, that action
shall, except to the extent otherwise required by the Investment
Company Act of 1940, be effective and valid if taken or
authorized by the affirmative vote of the holders of the majority
of the total number of votes entitled to be cast thereon.
Section 5. NO PREEMPTIVE RIGHTS. No holder of shares of
stock of the Corporation shall be entitled to any preemptive
right other than as the Board of Directors may establish.
Section 6. REDEMPTION OF STOCK. Each stockholder may
require the Corporation to redeem all or any part of the stock
owned by that holder, upon request to the Corporation or its
designated agent, at the net asset value of the shares of that
class next determined following receipt of the request in a form
approved by the Corporation and accompanied by surrender of the
certificate or certificates for the share, if any. The Board of
Directors may establish procedures for redemption of stock.
Payment of the redemption price by the Corporation or its
designated agent shall be made within seven days after
redemption. The right of redemption may be suspended and payment
of the redemption price may be postponed when permitted or
required by applicable law. The right of a holder of stock
redeemed by the Corporation to receive dividends thereon and all
other rights with respect to the shares shall terminate at the
time as of which the redemption price has been determined, except
the right to receive the redemption price and any dividend or
distribution to which that holder had become entitled as the
record holder of the shares on the record date for that dividend.
Section 7. DETERMINATIONS BY BOARD OF DIRECTORS. Any
determination made in good faith by or pursuant to the direction
of the Board of Directors as to the amount of the assets, debts,
obligations or liabilities of the Corporation, as to the amount
of any reserves or charges set up and the proprietary use
thereof, as to the time of or purpose for creating such reserves
or charges, as to the use, alteration or cancellation of any
reserves or charges (whether or not any debt, obligation or
liability for which such reserves or charges shall have been
created shall have been paid or discharged or shall be then or
thereafter required to be paid or discharged), as to the value of
or the method of valuing any investment or other asset owned or
held by the Corporation, as to the number of shares of any class
of stock outstanding, as to the income of the Corporation or as
to any other matter relating to the determination of net asset
value, the declaration of dividends or the issue, sale,
redemption or other acquisition of shares of the Corporation,
shall be final and conclusive and shall be binding upon the
Corporation and all holders of its shares, past, present and
future, and shares of the Corporation are issued and sold on the
condition and understanding that any and all such determinations
shall be binding as aforesaid.
ARTICLE V
BOARD OF DIRECTORS
Section 1. NUMBER OF DIRECTORS. The number of Directors
in office may be changed from time to time in the manner
specified in the By-Laws of the Corporation, but this number
shall never be less than the minimum number required under the
Maryland General Corporation Law.
Section 2. CERTAIN POWERS OF BOARD OF DIRECTORS. In
addition to its other powers explicitly or implicitly granted
under these Articles of Incorporation, by law or otherwise, the
Board of Directors of the Corporation (a) is expressly authorized
to make, alter, amend or repeal the By-Laws of the Corporation,
(b) may from time to time determine whether, to what extent, at
what times and places, and under what conditions and regulations
the accounts and books of the Corporation, or any of them, shall
be open to the inspection of the stockholders, and no stockholder
shall have any right to inspect any account, book or document of
the Corporation except as conferred by statute or as authorized
by the Board of Directors of the Corporation, (c) is empowered to
authorize, without stockholder approval, the issuance and sale
from time to time of shares of stock of the Corporation whether
now or hereafter authorized, and (d) is authorized to adopt
procedures for determination of and to maintain constant the net
asset value of shares of the Corporation's stock.
ARTICLE VI
LIABILITY AND INDEMNIFICATION
(a) To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its
stockholders for damages. This limitation on liability applies
to events occurring at the time a person serves as a director or
officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which
liability is asserted.
(b) The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by
the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-law,
resolution or agreement make further provision for
indemnification of directors, officers, employees and agents to
the fullest extent permitted by the Maryland General Corporation
Law.
(c) No provision of this Article shall be effective to
protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(d) References to the Maryland General Corporation Law
in this Article are to that law as from time to time amended. No
amendment to the charter of the Corporation shall affect any
right of any person under this Article based on any event,
omission or proceeding prior to the amendment.
ARTICLE VII
Amendments
The Corporation reserves the right from time to time to make
any amendment of these Articles of Incorporation now or hereafter
authorized by law, including any amendment which alters the
contract rights, as expressly set forth in these Articles of
Incorporation, of any outstanding capital stock.
I have signed these Articles of Amendment and Restatement of
the Articles of Incorporation of the Corporation on March 7, 1995
and acknowledge the same to be my act.
[CORPORATE SEAL] THE EBI FUNDS, INC.
/s/Hubert L. Harris, Jr.
President
ATTEST:
By: /s/Penelope P. Alexander
Secretary
EXHIBIT 2
THE EBI FUNDS, INC.
BY-LAWS
ARTICLE I
STOCKHOLDERS
Section 1. PLACE OF MEETING. All meetings of the
stockholders shall be held at such place within or without the
State of Maryland as may from time to time be designated by the
Board of Directors and stated in the notice of meeting.
Section 2. ANNUAL MEETINGS. The annual meeting of the
stockholders of the Corporation shall be held within the fourth
month following the end of the Corporation s fiscal year, at a
time within that period set by the Board of Directors, for the
purpose of electing directors for the ensuing year and for the
transaction of such other business as may properly be brought
before the meeting. An annual meeting of the stockholders shall
be required to be held in any year in which an annual meeting of
stockholders is not required under Maryland law.
Section 3. SPECIAL OR EXTRAORDINARY MEETINGS. Special or
extraordinary meetings of the stockholders for any purpose or
purposes may be called by the Chairman of the Board of Directors,
if any, or by the President or the Board of Directors or by the
Secretary of the Corporation upon the written request of
stockholders entitled to cast at least 25% of all votes entitled
to be cast at the meeting. A request for a special meeting shall
state the purpose of the meeting and the matters proposed to be
acted upon at it. The Secretary shall inform the stockholders
who make the request of the reasonably estimated costs of
preparing and mailing a notice of the meeting and shall, upon
payment of these costs to the Corporation, notify each
stockholder entitled to notice of the meeting. Unless requested
by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be
called to consider any matter which is substantially the same as
a matter voted on at any special meeting of the stockholders held
during the preceding twelve months.
Section 4. NOTICE OF MEETINGS OF STOCKHOLDERS. Not less
than ten days and not more than ninety days written or printed
notice of every meeting of stockholders, stating the time and
place thereof (and the general nature of the business proposed to
be transacted at any special or extraordinary meeting), shall be
given to each stockholder entitled to vote thereat or entitled to
receive notice thereof by leaving the same with him or at his
residence or usual place of business or by mailing it, postage
prepaid, and addressed to him at his address as it appears upon
the books of the Corporation.
No notice of the time, place or purpose of any meeting of
stockholders need be given to any stockholder who attends in
person or by proxy or to any stockholder who, in writing executed
and filed with the records of the meeting, either before or after
the holding thereof, waives such notice.
Section 5. RECORD DATES. The Board of Directors may fix,
in advance, a date, not exceeding 90 days and not less than ten
days preceding the date of any meeting of stockholders, and not
exceeding 90 days preceding any dividend payment date or any date
for the allotment of rights, as a record date for the
determination of the stockholders entitled to notice of and to
vote at such meeting, or entitled to receive such dividends or
rights, as the case may be; and only stockholders of record on
such date shall be entitled to notice of and to vote at such
meeting or to receive such dividends or rights, as the case may
be.
Section 6. QUORUM, ADJOURNMENT OF MEETINGS. The presence
in person or by proxy of the holders of record of one-third of
the shares of the capital stock of the Corporation issued and
outstanding and entitled to vote thereat shall constitute a
quorum at all meetings of the stockholders, except with respect
to any matter which by law requires the approval of one or more
classes of stock, in which case, the presence in person or by
proxy of the holders of one-third of the shares of stock of each
class entitled to vote on the matter shall constitute a quorum.
If at any meeting of the stockholders there shall be less than a
quorum present with respect to any matter, the stockholders
present at such meeting and entitled to vote on the matter may,
without further notice, adjourn the same from time to time until
quorum shall attend, but no business shall be transacted at any
such adjourned meeting except such as might have been lawfully
transacted had the meeting not been adjourned.
Section 7. VOTING AND INSPECTORS. At all meetings of
stockholders every stockholder of record entitled to vote thereat
shall be entitled to one vote for each share of stock standing in
his name on the books of the Corporation (and such stockholders
of record holding fractional shares, if any, shall have
proportionate voting rights as provided in the Articles of
Incorporation) on the date for the determination of stockholders
entitled to vote at such meeting either in person or by proxy
appointed by instrument in writing subscribed by such
stockholders or his duly authorized attorney. No proxy which is
dated more than eleven months before the meeting at which it is
offered shall be accepted, unless such proxy shall, on its face,
name a longer period for which it is to remain in force.
All elections shall be had and all questions decided by a
majority of the votes cast at a duly constituted meeting, except
as otherwise provided in the Articles of Incorporation or in
these By-Laws or by law.
At any election of Directors, the Board of Directors prior
thereto may, or, if they have not so acted, the Chairman of the
meeting may, and upon request of the holders of ten percent (10%)
of the stock entitled to vote at such election shall, appoint two
inspectors of election who shall first, subscribe an oath or
affirmation to execute faithfully the duties of inspectors at
such election with strict impartiality and according to the best
of their ability, and shall after the election make a certificate
of the results of the vote taken. No candidate for the office of
Director shall be appointed such Inspector.
The Chairman of the meeting may cause a vote by ballot to be
taken upon any election or matter, and such vote shall be taken
upon the request of the holders of ten percent (10%) of the stock
entitled to vote on such election or matter.
Section 8. CONDUCT OF STOCKHOLDERS' MEETINGS. The meetings
of the stockholders shall be presided over by the Chairman of the
Board of Directors, if any, or if he shall not be present, by the
President, or if he shall not be present, by a Vice-President, or
if neither the Chairman of the Board of Directors, the President
nor any Vice-President is present, by a Chairman of the meeting
to be elected at the meeting. The Secretary of the Corporation,
if present, shall act as Secretary of such meetings, or if he is
not present, an Assistant Secretary shall so act; if neither the
Secretary nor an Assistant Secretary is present, then the
Chairman of the meeting shall appoint its secretary.
Section 9. CONCERNING VALIDITY OF PROXIES, BALLOTS, ETC.
At every meeting of the stockholders, all proxies shall be
received and canvassed by the Secretary of the meeting, who shall
decide all questions touching the qualification of voters, the
validity of the proxies, and the acceptance or rejection of
votes, unless inspectors of election shall have been appointed as
provided in Section 7, in which event, such inspectors of
election shall decide all such questions.
<PAGE>
ARTICLE II
BOARD OF DIRECTORS
Section 1. GENERAL POWERS. Except as otherwise provided in
the Articles of Incorporation, the business and affairs of the
Corporation shall be managed under the direction of the Board of
Directors. All powers of the Corporation may be exercised by or
under authority of the Board of Directors except as conferred on
or reserved to the stockholders by law or by the Articles of
Incorporation of these By-Laws.
Section 2. NUMBER AND TENURE OF OFFICE. The business of
the Corporation shall be managed by or under the direction of its
Board of Directors. The Corporation shall initially have one
Director. The number of Directors may be increased or decreased
as provided in Section 3 of this Article. Each Director shall
hold office until the annual meeting of stockholders of the
Corporation next succeeding his election or until his successor
is duly elected and qualifies. Directors need not be
stockholders.
Section 3. INCREASE OR DECREASE IN NUMBER OF DIRECTORS.
The Board of Directors, by the vote of a majority of the entire
Board, may increase the number of Directors to a number not
exceeding twelve, and may elect Directors to fill the vacancies
created by an such increase in the number of Directors to serve
until the next annual meeting or until their successors are duly
elected and qualify; the Board of Directors, by the vote of a
majority of the entire Board, may likewise decrease the number of
Directors to a number not less than three or the same number as
the number of stockholders, whichever is less. Vacancies
occurring other than by reason of any such increase shall be
filled as provided by the Maryland General Corporation Law.
Section 4. PLACE OF MEETING. The Directors may hold their
meetings, have one or more offices, and keep the books of the
Corporation outside the State of Maryland, at any office of
offices of the Corporation or at any other place as they may from
time to time by resolution determine, or, in the case of
meetings, as they may from time to time by resolution determine
or as shall be specified or fixed in the respective notices or
waivers of notice thereof.
Section 5. REGULAR MEETINGS. Regular meetings of the Board
of Directors shall be held at such time and place on such notice,
if any, as the Directors may from time to time determine.
Section 6. SPECIAL MEETINGS. Special meetings of the Board
of Directors may be held from time to time upon call of the
Chairman of the Board of Directors, if any, the President or two
or more of the Directors, by oral or telegraphic or written
notice duly served on or sent or mailed to each Director not less
than one day before such meeting.
Section 7. WAIVER OF NOTICE OF MEETINGS. No notice need be
given to any Director who attends in person or to any Director
who, in writing executed and filed with the records of the
meeting either before or after the holding thereof, waives such
notice. Such notice or waiver of notice need not state the
purposes or purposes of such meeting.
Section 8. QUORUM. One-third of the Directors then in
office shall constitute a quorum for the transaction of business,
provided that a quorum shall in no case be less than two
Directors. If at any meeting of the Board there shall be less
than a quorum present, a majority of those present may adjourn
the meeting from time to time until a quorum shall have been
obtained. The act of the majority of the Directors present at
any meeting at which there is a quorum shall be the act of the
Directors, except as may be otherwise specifically provided by
statute, by the Articles of Incorporation or by these By-Laws.
Section 9. EXECUTIVE COMMITTEE. The Board of Directors may
elect from the Directors an Executive Committee to consist of
such number of Directors as the Board may from time to time
determine. The Board of Directors by such affirmative vote shall
have power at any time to change the numbers of such Committee
and may fill vacancies in the Committee by election from the
Directors. When the Board of Directors is not in session, the
Executive Committee shall have and may exercise any or all of the
powers of the Board of Directors in the management of the
business and affairs of the Corporation (including the power to
authorize the seal of the Corporation to be affixed to all papers
which may require it) except as provided by law and except the
power to increase or decrease the size of, or fill vacancies on,
the Board. The Executive Committee may fix its own rules of
procedure, and may meet, when and as provided by such rules or by
resolution of the Board of Directors, but in every case the
presence of a majority shall be necessary to constitute a quorum.
In the absence of any member of the Executive Committee, the
members thereof present at any meeting, whether or not they
constitute a quorum, may appoint a member of the Board of
Directors to act in the place of such absent member.
Section 10. OTHER COMMITTEES. The Board of Directors may
appoint other committees which shall in each case consists of
such number of members (not less than two) and shall have and may
exercise such powers as the Board may determine in the resolution
appointing them. A majority of all members of any such committee
may determine its action, and fix the time and place of its
meetings, unless the Board of Directors shall have the power at
any time to change the members and powers of such committee, to
fill vacancies, and to discharge any such committee.
Section 11. INFORMAL ACTION BY DIRECTORS AND COMMITTEES.
Any action required or permitted to be taken at any meeting of
the Board of Directors or any committee thereof may be taken
without a meeting, if a written consent to such action is signed
by all members of the Board, or of such committee, as the case
may be.
Section 12. TELEPHONE MEETINGS. Members of the Board of
Directors or any committee thereof may participate in a meeting
by means of a conference telephone or similar communication
equipment if all persons participating in the meeting can hear
each other at the same time. Participants in a meeting by these
means shall constitute presence in person at the meeting. No
member who participates by this means shall be deemed present at
the meeting with respect to any matter which under the 1940 Act
requires the presence in person of a majority of the Board of
Directors.
Section 13. COMPENSATION OF DIRECTORS. Directors shall be
entitled to receive such compensation from the Corporation for
their services as may from time to time be voted by the Board of
Directors.
ARTICLE III
OFFICERS
Section 1. EXECUTIVE OFFICERS. The executive officers of
the Corporation shall be chosen by the Board of Directors. These
may include a Chairman oaf the Board of Directors, and shall
include a President, one or more Vice Presidents (the number
thereof to be determined by the Board of Directors), a Secretary
and a Treasurer. The Chairman of the Board of Directors, if any,
shall be selected from among the Directors. The Board of
Directors may also in its discretion appoint Assistant
Secretaries, Assistant Treasurers, and other officers, agents and
employees, who shall have such authority and perform such duties
as the Board may determine. The Board of Directors may fill any
vacancy which may occur in any office. Any two offices, except
those of President and Vice President, may be held by the same
person, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity, if such instrument is
required by law or these By-Laws to be executed, acknowledged or
verified by two or more officers.
Section 2. TERM OF OFFICE. All officers shall serve until
their respective successors are chosen and qualify. Any officer
may be removed from office at any time with or without cause by
the vote of a majority of the entire Board of Directors.
Section 3. POWERS AND DUTIES. The officers of the
Corporation shall have such powers and duties as generally
pertain to their respective offices, as well as such powers and
duties as may from time to time be conferred by the Board of
Directors.
Section 4. COMPENSATION. The compensation of the officers
of the Corporation shall be fixed by the Board of Directors, but
this power may be delegated to any officer in respect of other
officers under his control.
Section 5. BONDS OR OTHER SECURITY. If required by the
Board of Directors, any officer, agent or employee of the
Corporation shall give a bond or other security for the faithful
performance of his duties, in such amount and with such surety or
sureties as the Board may require.
ARTICLE IV
CAPITAL STOCK
Section 1. CERTIFICATE OF SHARES. Each stockholder of the
Corporation shall be entitled, upon written request, to a
certificate or certificates representing the number of full
shares of stock of the Corporation owned by him in such form as
the Board of Directors may from time to time prescribe, provided,
however, that stockholders shall not be entitled to certificates
for fractional shares owned.
Section 2. TRANSFER OF SHARES. Shares of the Corporation
shall be transferable on the books of the Corporation by the
holder thereof in person or by his duly authorized attorney or
legal representative, upon surrender and cancellation of
certificates, if any, for the same number of shares, duly
endorsed or accompanied by proper instruments of assignment and
transfer, with such proof of the authenticity of the signature as
the Corporation or its agents may reasonably require; in the case
of shares not represented by certificates, the same or similar
requirements may be imposed by the Board of Directors.
Section 3. STOCK LEDGERS. The stock ledgers of the
Corporation, containing the names and addresses of the
stockholders and the number of shares held by them respectively,
shall be kept at the principal offices of the Corporation or, if
the Corporation employs a transfer agent, at the offices of the
transfer agent of the Corporation.
Section 4. LOST, STOLEN OR DESTROYED CERTIFICATES. The
Board of Directors may determine the conditions upon which a new
certificate of stock of the Corporation of any class may be
issued in place of a certificate which is alleged to have been
lost, stolen or destroyed; and may, in their discretion, require
the owner of such certificate or his legal representative to give
bond, with sufficient surety to the Corporation and the transfer
agent, if any, to indemnify it and such transfer agent against
any and all loss or claims which may arise by reason of the issue
of a new certificate in the place of one so lost, stolen or
destroyed.
ARTICLE V
CORPORATE SEAL
The Board of Directors may provide a suitable corporate
seal, in such form and bearing such inscriptions as it may
determine. It is sufficient to meet the requirements of any law,
rule or regulation relating to a corporate seal to place the word
(Seal) adjacent to the person authorized to sign the document
on behalf of the Corporation.
<PAGE>
ARTICLE VI
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by the
Board of Directors.
ARTICLE VII
INDEMNIFICATION
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify its directors to the fullest extent
that indemnification of directors is permitted by the Maryland
General Corporation Law. The Corporation shall indemnify its
officers to the same extent as its directors and to such further
extent as is consistent with law. The Corporation shall
indemnify its directors and officers who while serving as
directors or officers also serve at the request of the
Corporation as a director, officer, partner, trustee, employee,
agent or fiduciary of another corporation, partnership, joint
venture, trust, other enterprise or employee benefit plan to the
fullest extent consistent with law. The indemnification and
other rights provided by this Article shall continue as to a
person who has ceased to be a director or officer and shall inure
to the benefit of the heirs, executors and administrators of such
a person. This Article shall not protect any such person against
any liability to the Corporation or any stockholder thereof to
which such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duties involved in the conduct of his office ( disabling
conduct ).
Section 2. ADVANCES. Any current or former director or
officer of the Corporation seeking indemnification within the
scope of this Article shall be entitled to advances from the
Corporation for payment of the reasonable expenses incurred by
him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation Law. The
person seeking indemnification shall provide the Corporation a
written affirmation of his good faith belief that the standard of
conduct necessary for indemnification by the Corporation has been
met and a written undertaking to repay any such advance if it
should ultimately be determined that the standard of conduct has
not been met. In addition, at least one of the following
additional conditions shall be met: (a) the person seeking
indemnification shall provide a security in form and amount
acceptable to the Corporation for his undertaking; (b) the
Corporation is insured against losses arising by reason of the
advance; or (c) a majority of a quorum of directors of the
Corporation who are neither interested persons as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the proceeding ( disinterested non-party
directors ), or independent legal counsel, in a written opinion,
shall have determined, based on a review of facts readily
available to the Corporation at the time the advance is proposed
to be made, that there is reason to believe that the person
seeking indemnification will ultimately be found to be entitled
to indemnification.
Section 3. PROCEDURE. At the request of any person
claiming indemnification under this Article, the Board of
Directors shall determine, or cause to be determined, in a manner
consistent with the Maryland General Corporation Law, whether the
standards required by this Article have been met.
Indemnification shall be made only following: (a) a final
decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not
liable by reason of disabling conduct or (b) in the absence of
such a decision, a reasonable determination, based upon a review
of the facts, that the person to be indemnified was not liable by
reason of disabling conduct by (i) the vote of a majority of a
quorum of disinterested non-party directors or (ii) an
independent legal counsel in a written opinion.
<PAGE>
Section 4. INDEMNIFICATION OF EMPLOYEES AND AGENTS.
Employees and agents who are not officers or directors of the
Corporation may be indemnified, and reasonable expenses may be
advanced to such employees or agents, as may be provided by
action of the Board of Directors or by contract, subject to any
limitations imposed by the Investment Company Act of 1940.
Section 5. OTHER RIGHTS. The Board of Directors may make
further provision consistent with law for indemnification and
advance of expenses to the directors, officers, employees and
agents by resolution, agreement or otherwise. The
indemnification provided by this Article shall not be deemed
exclusive of any other right, with respect to indemnification or
otherwise, to which those seeking indemnification may be entitled
under any insurance or other agreement or resolution of
stockholders or disinterested directors or otherwise.
Section 6. AMENDMENTS. References in this Article are to
the Maryland General Corporation Law and to the Investment
Company Act of 1940 as from time to time amended. No amendment
of these By-Laws shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the
amendment.
ARTICLE VIII
AMENDMENT
The By-Laws of the Corporation may be altered, amended,
added to or repealed by majority vote of the entire Board of
Directors.
EXHIBIT 5(a)
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, as made the 1st day of July 1993 and amended
the 1st day of November 1993, in Atlanta, Georgia, by and between
INVESCO Services, Inc. (the "Adviser"), a Georgia corporation,
and The EBI Funds, Inc., a Maryland corporation (the "Fund"), is
hereby amended this 19th day of April 1995, for the sole purpose
of adding the Real Estate Portfolio and the International Value
Portfolio to the Agreement.
W I T N E S S E T H :
WHEREAS, the Fund is a corporation organized under the laws
of the State of Maryland; and
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), as a
diversified, open-end management investment company and currently
has one class of shares which is divided into eight series (the
"Shares"), and which may be divided into additional series, each
representing an interest in a separate portfolio of investments
(such series as are presently structured being designated as the
Equity Portfolio, Income Portfolio, Flex Portfolio, MultiFlex
Portfolio, Relative Return Bond Portfolio, Real Estate Portfolio,
International Value Portfolio and Cash Management Portfolio,
hereinafter referred to as the "Series"); and
WHEREAS, the Fund desires that the Adviser manage its
investment operations and provide it with certain other services,
and the Adviser desires to manage said operations and to provide
such other services;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as
follows:
1. INVESTMENT MANAGEMENT SERVICES. The Adviser hereby
agrees to manage the investment operations of the
Fund's Series, subject to the terms of this Agreement
and to the supervision of the Fund's directors (the
"Directors"). The Adviser agrees to perform, or
arrange for the performance of, the following specific
services for the Fund:
(a) to manage the investment and reinvestment of
all the assets, now or hereafter acquired,
of the Fund's Series, and to execute all
purchases and sales of portfolio securities;
(b) to maintain a continuous investment program
for the Fund's Series, consistent with (i)
the Series' investment policies as set forth
in the Fund's Articles of Incorporation,
Bylaws, and Registration Statement, as from
time to time amended, under the Investment
Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"),
and in any Prospectus and/or Statement of
Additional Information of the Fund, as from
time to time amended and in use under the
Securities Act of 1933, as amended, and (ii)
the Fund's status as a regulated investment
company under the Internal Revenue Code of
1986, as amended;
(c) to determine what securities are to be
purchased or sold for the Fund's Series,
unless otherwise directed by the Directors of
the Fund, and to execute transactions
accordingly;
(d) to provide to the Fund's Series the benefit
of all of the investment analyses and
research, the reviews of current economic
conditions and of trends, and the
consideration of long-range investment
policy now or hereafter generally available
to investment advisory customers of the
Adviser;
(e) to determine what portion of the Fund's
Series should be invested in the various
types of securities authorized for purchase
by the Fund; and
(f) to make recommendations as to the manner in
which voting rights, rights to consent to
Fund action and any other rights pertaining
to the Series' securities shall be exercised.
With respect to execution of transactions for the
Fund's Series, the Adviser is authorized to employ
such brokers or dealers as may, in the Adviser's
best judgment, implement the policy of the Fund to
obtain prompt and reliable execution at the most
favorable price obtainable. In assigning an
execution or negotiating the commission to be paid
therefor, the Adviser is authorized to consider
the full range and quality of a broker's services
which benefit the Fund, including but not limited
to research and analytical capabilities,
reliability of performance, sale of Fund shares,
and financial soundness and responsibility.
Research services prepared and furnished by
brokers through which the Adviser effects
securities transactions on behalf of the Fund may
be used by the Adviser in servicing all of its
accounts, and not all such services may be used by
the Adviser in connection with the Fund. In the
selection of a broker or dealer for execution of
any negotiated transaction, the Adviser shall have
no duty or obligation to seek advance competitive
bidding for the most favorable negotiated
commission rate for such transaction; or to select
any broker solely on the basis of its purported
or "posted" commission rate for such transaction,
provided, however, that the Adviser shall consider
such "posted" commission rates, if any, together
with any other information available at the time
as to the level of commissions known to be charged
on comparable transactions by other qualified
brokerage firms, as well as all other relevant
factors and circumstances, including the size of
any contemporaneous market in such securities, the
importance to the Fund of speed, efficiency, and
confidentiality of execution, the execution
capabilities required by the circumstances of the
particular transactions, and the apparent
knowledge or familiarity with sources from or to
whom such securities may be purchased or sold.
Where the commission rate reflects services,
reliability and other relevant factors in addition
to the cost of execution, the Adviser shall have
the burden of demonstrating that such expenditures
were bona fide and for the benefit of the Fund.
Fund transactions may be effected through
qualified broker-dealers who recommend the Fund to
their clients, or who act as agent in the purchase
of the Fund's shares for their clients. When a
number of brokers and dealers can provide
comparable best price and execution on a
particular transaction, the Adviser may consider
the sale of Fund shares by a broker or dealer in
selecting among qualified broker-dealers.
2. OTHER SERVICES AND FACILITIES. The Adviser shall, in
addition, supply at its own expense all supervisory and
administrative services and facilities necessary in
connection with the day-to-day operations of the Fund's
Series (except those associated with the preparation
and maintenance of certain required books and records
and certain sub-accounting services, which services and
facilities are provided under separate Accounting
Services, Transfer Agency and Administrative Services
Agreements between the Adviser and Fund/Plan Services,
Inc., and those operational services which are
necessary for the day-to-day operations of the Fund's
Series, which services are provided under a separate
Operating Services Agreement dated July 1, 1993 as
amended November 1, 1993 and April 19, 1995, between
the Fund and the Adviser (the "Operating Services
Agreement")). These services shall include, but not be
limited to: supplying the Fund with officers, clerical
staff and other employees, if any, who are necessary in
connection with the Fund's operations; furnishing
office space, facilities, equipment, and supplies;
conducting periodic compliance reviews of the Fund's
operations; preparation and review of certain required
documents, reports and filings (including required
reports to the Securities and Exchange Commission (the
"SEC"), and other corporate documents of the Fund),
except insofar as the assistance of independent
accountants or attorneys is necessary or desirable;
supplying basic telephone service and other utilities;
and preparing and maintaining the books and records
required to be prepared and maintained by the Fund
pursuant to Rule 31a-1(b)(4), (5), (9), and (10) under
the Investment Company Act. All books and records
prepared and maintained by the Adviser for the Fund
under this Agreement shall be the property of the Fund
and, upon request therefor, the Adviser shall surrender
to the Fund such of the books and records so
requested.
3. PAYMENT OF COSTS AND EXPENSES. The Adviser shall bear
the costs and expenses of all personnel, facilities,
equipment and supplies reasonably necessary to provide
the services required to be provided by the Adviser
under this Agreement. The Adviser shall pay all of the
costs and expenses associated with the Fund's
operations and activities, except those expressly
assumed by the Fund under this Agreement, which shall
consist of:
(a) all brokers' commissions, issue and transfer
taxes, and other costs chargeable to the Fund in
connection with securities transactions to which
the Fund is a party or in connection with
securities owned by the Fund's Series;
(b) the interest on indebtedness, if any, incurred by
the Fund;
(c) extraordinary expenses, including unexpected
franchise or income taxes, or business license and
other corporate fees (not including SEC and state
securities registration fees) that are not
anticipated which the Fund will be required to pay
to federal, state, county, city, or other
governmental agents, and fees and disbursements of
Fund counsel in connection with litigation by or
against the Fund;
(d) the expenses of distributing shares of the Fund
but only if and to the extent permissible under a
plan of distribution adopted by the Fund pursuant
to Rule 12b-1 under the Investment Company Act;
and
(e) all fees paid by the Fund for operational services
which are necessary for the day-to-day operations
of the Fund's Series under the Operating Services
Agreement.
4. Use of Affiliated Companies. In connection with the
rendering of the services required to be provided by
the Adviser under this Agreement, the Adviser may, to
the extent it deems appropriate and subject to
compliance with the requirements of applicable laws and
regulations, and upon receipt of written approval of
the Fund, make use of its affiliated companies and
their employees; provided that the Adviser shall
supervise and remain fully responsible for all such
services in accordance with and to the extent provided
by this Agreement, and further provided that all costs
and expenses associated with the providing of services
by any such companies or employees and required by this
Agreement to be borne by the Adviser shall be borne by
the Adviser or its affiliated companies.
5. COMPENSATION OF THE ADVISER. For the services to be
rendered and the charges and expenses to be assumed by
the Adviser hereunder, the Fund shall pay to the
Adviser an advisory fee which will be computed daily
and paid as of the last day of each month, using for
each daily calculation the most recently determined net
asset value of each of the Fund's Series, as determined
by valuations made in accordance with the Fund's
procedures for calculating its net asset value as
described in the Fund's Prospectus and/or Statement of
Additional Information. The advisory fee to the
Adviser shall be computed at the following annual
rates: 0.75% of the daily net assets of the Equity
Portfolio, Income Portfolio and Flex Portfolio; 0.90%
of the daily net assets of the Real Estate Portfolio;
1.0% of the daily net assets of the MultiFlex Portfolio
and the International Value Portfolio; and 0.50% of the
daily net assets of the Relative Return Bond Portfolio
and the Cash Management Portfolio. During any period
when the determination of the Fund's net asset value is
suspended by the Directors of the Fund, the net asset
value of a share of the Fund as of the last business
day prior to such suspension shall, for the purpose of
this Paragraph 5, be deemed to be the net asset value
at the close of each succeeding business day until it
is again determined.
No advisory fee shall be paid to the Adviser with
respect to any assets of the Fund's Series which may be
invested in any other investment company for which the
Adviser serves as investment adviser. The fee provided
for hereunder shall be prorated in any month in which
this Agreement is not in effect for the entire month.
If, in any given year, the sum of a Series' expenses
exceeds the state-imposed annual expense limitation to
which the Fund is subject, the Adviser will be required
to reimburse that Series for such excess expenses
promptly. Interest, taxes and extraordinary items such
as litigation costs are not deemed expenses for
purposes of this paragraph and shall be borne by that
Series in any event. Expenditures, including costs
incurred in connection with the purchase or sale of
portfolio securities, which are capitalized in
accordance with generally accepted accounting
principles applicable to investment companies, are
accounted for as capital items and shall not be deemed
to be expenses for purposes of this paragraph.
6. AVOIDANCE OF INCONSISTENT POSITIONS AND COMPLIANCE WITH
LAWS. In connection with purchases or sales of
securities for the investment portfolios of the Fund's
Series, neither the Adviser nor its officers or
employees will either act as a principal or agent for
any party other than the Fund's Series or receive any
commissions. The Adviser will comply with all
applicable laws in acting hereunder including, without
limitation, the Investment Company Act; the Investment
Advisers Act of 1940, as amended; and all rules and
regulations duly promulgated under the foregoing.
7. DURATION AND TERMINATION. This Agreement has been
approved by a majority of the outstanding voting
securities of the Fund's Series, and shall become
effective as of the date so written above, and unless
sooner terminated as hereinafter provided, shall remain
in force for an initial term ending two years from the
date of execution, and from year to year thereafter,
but only as long as such continuance is specifically
approved at least annually (i) by a vote of a majority
of the outstanding voting securities of the Fund's
Series or by the Directors of the Fund, and (ii) by a
majority of the Directors of the Fund who are not
interested persons of the Adviser or the Fund by votes
cast in person at a meeting called for the purpose of
voting on such approval.
This Agreement may, on 60 days' prior written notice,
be terminated without the payment of any penalty, by
the Directors of the Fund, or by the vote of a majority
of the outstanding voting securities of the Fund's
Series, as the case may be, or by the Adviser. This
Agreement shall immediately terminate in the event of
its assignment, unless an order is issued by the SEC
conditionally or unconditionally exempting such
assignment from the provisions of Section 15(a) of the
Investment Company Act, in which event this Agreement
shall remain in full force and effect subject to the
terms and provisions of said order. In interpreting
the provisions of this paragraph 7, the definitions
contained in Section 2(a) of the Investment Company Act
and the applicable rules under the Investment Company
Act (particularly the definitions of "interested
person," "assignment" and "vote of a majority of the
outstanding voting securities") shall be applied.
The Adviser agrees to furnish to the Directors of the
Fund such information on an annual basis as may
reasonably be necessary to evaluate the terms of this
Agreement.
Termination of this Agreement shall not affect the
right of the Adviser to receive payments on any unpaid
balance of the compensation described in paragraph 5
earned prior to such termination.
8. NON-EXCLUSIVE SERVICES. The Adviser shall, during the
term of this Agreement, be entitled to render
investment advisory services to others, including,
without limitation, other investment companies with
similar objectives to those of the Fund's Series. The
Adviser may, when it deems such to be advisable,
aggregate orders for its other customers together with
any securities of the same type to be sold or purchased
for the Fund's Series in order to obtain best execution
and lower brokerage commissions. In such event, the
Adviser shall allocate the shares so purchased or sold,
as well as the expenses incurred in the transaction,
in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Fund's
Series and the Adviser's other customers. It is
understood that directors, officers, employees and
shareholders of the Fund are or may become interested
in the Adviser and its affiliates, as directors,
officers, employees and shareholders or otherwise and
that directors, officers, employees and shareholders of
the Adviser, INVESCO Capital Management, Inc., and
their affiliates are or may become interested in the
Fund as directors, officers and employees.
9. MISCELLANEOUS PROVISIONS.
NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage
prepaid, to the other party at such address as such
other party may designate for the receipt of such
notice.
AMENDMENTS HEREOF. No provision of this Agreement may
be orally changed or discharged, but may only be
modified by an instrument in writing signed by the
Fund and the Adviser. In addition, no amendment to
this Agreement shall be effective unless approved by
(1) the vote of a majority of the Directors of the
Fund, including a majority of the Directors who are not
parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the
purpose of voting on such amendment, and (2) the vote
of a majority of the outstanding voting securities of
any of the Fund's Series as to which such amendment is
applicable (other than an amendment which can be
effective without shareholder approval under applicable
law).
SEVERABILITY. Each provision of this Agreement is
intended to be severable. If any provision of this
Agreement shall be held illegal or made invalid by a
court decision, statute, rule or otherwise,
such illegality or invalidity shall not affect the
validity or enforceability of the remainder of this
Agreement.
HEADINGS. The headings in this Agreement are
inserted for convenience and identification only and
are in no way intended to describe, interpret, define
or limit the size, extent or intent of this Agreement
or any provision hereof.
APPLICABLE LAW. This Agreement shall be construed in
accordance with the laws of the State of Georgia. To
the extent that the applicable laws of the State of
Georgia, or any of the provisions herein, conflict
with applicable provisions of the Investment Company
Act, the latter shall control.
IN WITNESS WHEREOF, the Adviser and the Fund each has caused
this Agreement to be duly executed on its behalf by an officer
thereunto duly authorized, on the date first above written.
THE EBI FUNDS, INC.
ATTEST: By: /s/Hubert L. Harris, Jr.
President
/s/Penelope P. Alexander
Secretary
INVESCO SERVICES, INC.
ATTEST: By: /s/John P. Stewart
Vice President
/s/Tony D. Green
Secretary
EXHIBIT 5(b)
SUB-ADVISORY AGREEMENT
AGREEMENT made this 1st day of July, 1993 and amended the
1st day of November 1993, by and between INVESCO Services, Inc.
("ISI"), a Georgia corporation, and INVESCO CAPITAL MANAGEMENT,
Inc., a Delaware corporation (the "Sub-Adviser"), is hereby
amended this 19th day of April, 1995, for the sole purpose of
clarifying the applicability of this Agreement to five of the
eight series of The EBI Funds, Inc. (the "Fund"), in recognition
of the addition of two new series to the Fund.
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as a diversified,
open-end management investment company registered under the
Investment Company Act of 1940, as amended (hereinafter referred
to as the "Investment Company Act") and currently has one class
of shares which is divided into various series (the "Shares"),
and which may be divided into additional series, each
representing an interest in a separate portfolio of investments;
and
WHEREAS, ISI and the Sub-Adviser are engaged principally in
rendering investment advisory services and are registered as
investment advisers under the Investment Advisers Act of 1940;
and
WHEREAS, ISI has entered into an Investment Advisory
Agreement with the Fund (the "ISI Investment Advisory
Agreement"), pursuant to which ISI is required to provide
investment and advisory services to the Fund's series, and, upon
receipt of written approval of the Fund, is authorized to retain
companies which are affiliated with ISI to provide such services;
and
WHEREAS, the Sub-Adviser is willing to provide investment
advisory services to five of the Fund's eight series (the Equity
Portfolio, the Income Portfolio, the Flex Portfolio, the
International Value Portfolio and the Cash Management Portfolio
series, hereinafter referred to as the "Series"), on the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, ISI and the Sub-Adviser hereby agree as
follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
ISI hereby employs the Sub-Adviser to act as investment
adviser to the Fund and to furnish the investment advisory
services described below, subject to the broad supervision of ISI
and the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such
period, at its own expense, to render such services and to assume
the obligations herein set forth for the compensation provided
for herein. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority
to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
The Sub-Adviser hereby agrees to manage the investment
operations of the Fund's Series, subject to the supervision of
the Fund's directors (the "Directors") and ISI. Specifically,
the Sub-Adviser agrees to perform the following services:
(a) to manage the investment and reinvestment of all the
assets, now or hereafter acquired, of the Fund's
Series, and to execute all purchases and sales of
portfolios securities;
(b) to maintain a continuous investment program for the
Fund's Series, consistent with (i) the Series'
investment policies as set forth in the Fund's Articles
of Incorporation, Bylaws, and Registration Statement,
as from time to time amended, under the Investment
Company Act of 1940, and in any Prospectus and/or
Statement of Additional Information of the Fund, as
from time to time amended and in use under the
Securities Act of 1933, as amended, and (ii) the Fund's
status as a regulated investment company under the
Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or
sold for the Fund's Series, unless otherwise directed
by the Directors of the Fund or ISI, and to execute
transactions accordingly;
(d) to provide to the Fund's Series the benefit of all of
the investment analysis and research, the reviews of
current economic conditions and of trends, and the
consideration of long-range investment policy now or
hereafter generally available to investment advisory
customers of the Sub-Adviser;
(e) to determine what portion of the Fund's Series should
be invested in the various types of securities
authorized for purchase by the Series; and
(f) to make recommendations as to the manner in which
voting rights, rights to consent to Fund action and any
other rights pertaining to the Series' securities shall
be exercised.
With respect to execution of transactions for the Fund's
Series, the Sub-Adviser is authorized to employ such brokers or
dealers as may, in the Sub-Adviser's best judgment, implement the
policy of the Fund to obtain prompt and reliable execution at the
most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser
is authorized to consider the full range and quality of a
broker's services which benefit the Fund, including but not
limited to research and analytical capabilities, reliability of
performance, sale of Fund shares, and financial soundness and
responsibility. Research services prepared and furnished by
brokers through which the Sub-Adviser effects securities
transactions on behalf of the Fund may be used by the Sub-Adviser
in servicing all of its accounts, and not all such services may
be used by the Sub-Adviser in connection with the Fund. In the
selection of a broker or dealer for execution of any negotiated
transaction, the Sub-Adviser shall have no duty or obligation to
seek advance competitive bidding for the most favorable
negotiated commission rate for such transaction, or to select any
broker solely on the basis of its purported or "posted"
commission rate for such transaction, provided, however, that the
Sub-Adviser shall consider such "posted" commission rates, if
any, together with any other information available at the time as
to the level of commissions known to be charged on comparable
transactions by other qualified brokerage firms, as well as all
other relevant factors and circumstances, including the size of
any contemporaneous market in such securities, the importance to
the Fund of speed, efficiency, and confidentiality of execution,
the execution capabilities required by the circumstances of the
particular transactions, and the apparent knowledge or
familiarity with sources from or to whom such securities may be
purchased or sold. Where the commission rate reflects services,
reliability and other relevant factors in addition to the cost of
execution, the Sub-Adviser shall have the burden of demonstrating
that such expenditures were bona fide and for the benefit of the
Fund. Fund transactions may be effected through qualified
broker-dealers who recommend the Fund to their clients, or who
act as agent in the purchase of the Fund's shares for their
clients. When a number of brokers and dealers can provide
comparable best price and execution on a particular transaction,
the Sub-Adviser may consider the sale of Fund shares by a broker
or dealer in selecting among qualified broker-dealers.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under
this Agreement, and shall, at its own expense, provide the office
space, equipment and facilities necessary to perform its
obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent
required by law to be paid by the Sub-Adviser, ISI and/or the
Fund shall pay all costs and expenses in connection with the
operations of the Fund's Series.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, the facilities furnished and
expenses assumed by the Sub-Adviser, ISI shall pay to the
Sub-Adviser a fee, computed daily and paid as of the last day of
each month, using for each daily calculation the most recently
determined net asset value of the Fund's Series, as determined by
a valuation made in accordance with the Fund's procedures for
calculating its net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. The
advisory fee to the Sub-Adviser shall be computed at the
following annual rates: 0.20% of the Equity Portfolio and the
Flex Portfolio Series' daily net assets; 0.10% of the Income
Portfolio and Cash Management Portfolio Series' daily net assets;
and the following for the International Value Portfolio Series:
0.35% on the first $50 million of assets, 0.30% on the next $50
million of assets and 0.25% on daily net assets in excess of $100
million. During any period when the determination of the Series'
net asset value is suspended by the Directors of the Fund, the
net asset value of a share of the Fund's Series as of the last
business day prior to such suspension shall, for the purpose of
this Article III, be deemed to be the net asset value at the
close of each succeeding business day until it is again
determined. However, no such fee shall be paid to the
Sub-Adviser with respect to any assets of the Fund's Series which
may be invested in any other investment company for which the
Sub-Adviser serves as investment adviser or sub adviser. The fee
provided for hereunder shall be prorated in any month in which
this Agreement is not in effect for the entire month. The
Sub-Adviser shall be entitled to receive fees hereunder only for
such periods as the ISI Investment Advisory Agreement remains in
effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Fund are not to be
deemed to be exclusive, the Sub-Adviser and any person controlled
by or under common control with the Sub-Adviser (for purposes of
this Article IV referred to as "affiliates") being free to render
services to others. It is understood that directors, officers,
employees and shareholders of the Fund are or may become
interested in the Sub-Adviser and its affiliates, as directors,
officers, employees and shareholders or otherwise and that
directors, officers, employees and shareholders of the
Sub-Adviser, ISI and their affiliates are or may become
interested in the Fund as directors, officers and employees.
<PAGE>
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS
AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the
investment portfolio of the Fund's Series, neither the
Sub-Adviser nor any of its directors, officers or employees will
either act as a principal or agent for any party other than the
Fund's Series or receive any commissions. The Sub-Adviser will
comply with all applicable laws in acting hereunder including,
without limitation, the Investment Company Act; the Investment
Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement having been approved by a majority of the
outstanding voting securities of the Fund's Series, shall become
effective as of the date so written above, and shall remain in
force for an initial term of two years from the date of
execution, and from year to year thereafter until its
termination in accordance with this Article VI, but only so long
as such continuance is specifically approved at least annually by
(i) the Directors of the Fund, or by the vote of a majority of
the outstanding voting securities of the Fund's Series, and (ii)
a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by ISI, by the Fund by vote of the
Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Fund's Series, or by the Sub-Adviser. A
termination by ISI or the Sub-Adviser shall require sixty days'
written notice to the other party and to the Fund, and a
termination by the Fund shall require such notice to each of the
parties. This Agreement shall automatically terminate in the
event of its assignment to the extent required by the Investment
Company Act and the rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the
Fund such information on an annual basis as may reasonably be
necessary to evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of
the Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Article III hereof earned prior to such
termination.
<PAGE>
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or
discharged, but may only be modified by an instrument in writing
signed by the Sub-Adviser and ISI. In addition, no amendment to
this Agreement shall be effective unless approved by (1) the vote
of a majority of the Directors of the Fund, including a majority
of the Directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the
vote of a majority of the outstanding voting securities of any of
the Fund's Series as to which such amendment is applicable (other
than an amendment which can be effective without shareholder
approval under applicable law).
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms
"vote of a majority of the outstanding voting securities,"
"assignments," "affiliated person" and "interested person," when
used in this Agreement, shall have the respective meanings
specified in the Investment Company Act and the rules and
regulations thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the
laws of the State of Georgia and the applicable provisions of the
Investment Company Act. To the extent that the applicable laws
of the State of Georgia, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
ARTICLE X
MISCELLANEOUS
NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage prepaid, to
the other party at such address as such other party may designate
for the receipt of such notice.
SEVERABILITY. Each provision of this Agreement is intended
to be severable. If any provision of this Agreement shall be
held illegal or made invalid by a court decision, statute, rule
or otherwise, such illegality or invalidity shall not affect the
validity or enforceability of the remainder of this Agreement.
HEADINGS. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the size, extent or intent
of this Agreement or any provision hereof.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
INVESCO SERVICES, INC.
ATTEST: By: /s/John P. Stewart
Vice President
/s/Tony D. Green
Secretary
INVESCO CAPITAL MANAGEMENT, INC.
ATTEST: By: /s/Edward C. Mitchell, Jr.
/s/Penelope P. Alexander
Secretary
EXHIBIT 5(c)
SUB-ADVISORY AGREEMENT
AGREEMENT made this 19th day of April, 1995, by and between
INVESCO Services, Inc. ("ISI"), a Georgia corporation, and
INVESCO Realty Advisors, Inc., a Texas corporation (the
"Sub-Adviser").
W I T N E S S E T H:
WHEREAS, THE EBI FUNDS, INC. (the "Fund") is engaged in
business as a diversified, open-end management investment
company registered under the Investment Company Act of 1940, as
amended (hereinafter referred to as the "Investment Company Act")
and currently has one class of shares which is divided into
various series (the "Shares"), and which may be divided into
additional series, each representing an interest in a separate
portfolio of investments; and
WHEREAS, ISI and the Sub-Adviser are engaged principally in
rendering investment advisory services and are registered as
investment advisers under the Investment Advisers Act of 1940;
and
WHEREAS, ISI has entered into an Investment Advisory
Agreement with the Fund (the "ISI Investment Advisory
Agreement"), pursuant to which ISI is required to provide
investment and advisory services to the Fund's series, and, upon
receipt of written approval of the Fund, is authorized to retain
companies which are affiliated with ISI to provide such services;
and
WHEREAS, the Sub-Adviser is willing to provide investment
advisory services to those series of the Fund set forth in the
appendix hereto, hereinafter referred to as the "Series") on the
terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, ISI and the Sub-Adviser hereby agree as
follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
ISI hereby employs the Sub-Adviser to act as investment
adviser to the Series and to furnish the investment advisory
services described below, subject to the broad supervision of ISI
and the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such
period, at its own expense, to render such services and to assume
the obligations herein set forth for the compensation provided
for herein. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority
to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
The Sub-Adviser hereby agrees to manage the investment
operations of the Series, subject to the supervision of the
Fund's directors (the "Directors") and ISI. Specifically, the
Sub-Adviser agrees to perform the following services:
(a) to manage the investment and reinvestment of all the
assets, now or hereafter acquired, of the Series, and
to execute all purchases and sales of portfolios
securities;
(b) to maintain a continuous investment program for the
Series, consistent with (i) the Series' investment
policies as set forth in the Fund's Articles of
Incorporation, Bylaws, and Registration Statement, as
from time to time amended, under the Investment Company
Act of 1940, and in any Prospectus and/or Statement of
Additional Information of the Fund, as from time to
time amended and in use under the Securities Act of
1933, as amended, and (ii) the Fund's status as a
regulated investment company under the Internal Revenue
Code of 1986, as amended;
(c) to determine what securities are to be purchased or
sold for the Series, unless otherwise directed by the
Directors of the Fund or ISI, and to execute
transactions accordingly;
(d) to provide to the Series the benefit of all of the
investment analysis and research, the reviews of
current economic conditions and of trends, and the
consideration of long-range investment policy now or
hereafter generally available to investment advisory
customers of the Sub-Adviser;
(e) to determine what portion of the Series should be
invested in the various types of securities authorized
for purchase by the Series; and
(f) to make recommendations as to the manner in which
voting rights, rights to consent to Fund action and any
other rights pertaining to the Series' securities shall
be exercised.
With respect to execution of transactions for the Series,
the Sub-Adviser is authorized to employ such brokers or dealers
as may, in the Sub-Adviser's best judgment, implement the policy
of the Fund to obtain prompt and reliable execution at the most
favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser
is authorized to consider the full range and quality of a
broker's services which benefit the Fund, including but not
limited to research and analytical capabilities, reliability of
performance, sale of Fund shares, and financial soundness and
responsibility. Research services prepared and furnished by
brokers through which the Sub-Adviser effects securities
transactions on behalf of the Series may be used by the
Sub-Adviser in servicing all of its accounts, and not all such
services may be used by the Sub-Adviser in connection with the
Fund. In the selection of a broker or dealer for execution of
any negotiated transaction, the Sub-Adviser shall have no duty or
obligation to seek advance competitive bidding for the most
favorable negotiated commission rate for such transaction, or to
select any broker solely on the basis of its purported or
"posted" commission rate for such transaction, provided, however,
that the Sub-Adviser shall consider such "posted" commission
rates, if any, together with any other information available at
the time as to the level of commissions known to be charged on
comparable transactions by other qualified brokerage firms, as
well as all other relevant factors and circumstances, including
the size of any contemporaneous market in such securities, the
importance to the Fund of speed, efficiency, and confidentiality
of execution, the execution capabilities required by the
circumstances of the particular transactions, and the apparent
knowledge or familiarity with sources from or to whom such
securities may be purchased or sold. Where the commission rate
reflects services, reliability and other relevant factors in
addition to the cost of execution, the Sub-Adviser shall have the
burden of demonstrating that such expenditures were bona fide and
for the benefit of the Fund. Transactions may be effected
through qualified broker-dealers who recommend the Fund to their
clients, or who act as agent in the purchase of the Fund's shares
for their clients. When a number of brokers and dealers can
provide comparable best price and execution on a particular
transaction, the Sub-Adviser may consider the sale of Fund shares
by a broker or dealer in selecting among qualified broker-
dealers.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under
this Agreement, and shall, at its own expense, provide the office
space, equipment and facilities necessary to perform its
obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent
required by law to be paid by the Sub-Adviser, ISI and/or the
Fund shall pay all costs and expenses in connection with the
operations of the Series.
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, the facilities furnished and
expenses assumed by the Sub-Adviser, ISI shall pay to the
Sub-Adviser a fee, computed daily and paid as of the last day of
each month, using for each daily calculation the most recently
determined net asset value of the Series, as determined by a
valuation made in accordance with the Fund's procedures for
calculating its net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. The
advisory fee to the Sub-Adviser shall be computed at the annual
rates set forth in the appendix hereto. During any period when
the determination of the Series' net asset value is suspended by
the Directors of the Fund, the net asset value of a share of the
Series as of the last business day prior to such suspension
shall, for the purpose of this Article III, be deemed to be the
net asset value at the close of each succeeding business day
until it is again determined. However, no such fee shall be paid
to the Sub-Adviser with respect to any assets of the Series which
may be invested in any other investment company for which the
Sub-Adviser serves as investment adviser or sub-adviser. The fee
provided for hereunder shall be prorated in any month in which
this Agreement is not in effect for the entire month. The
Sub-Adviser shall be entitled to receive fees hereunder only for
such periods as the ISI Investment Advisory Agreement remains in
effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Fund are not to be
deemed to be exclusive, the Sub-Adviser and any person controlled
by or under common control with the Sub-Adviser (for purposes of
this Article IV referred to as "affiliates") being free to render
services to others. It is understood that directors, officers,
employees and shareholders of the Fund are or may become
interested in the Sub-Adviser and its affiliates, as directors,
officers, employees and shareholders or otherwise and that
directors, officers, employees and shareholders of the
Sub-Adviser, ISI and their affiliates are or may become
interested in the Fund as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS
AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the
investment portfolio of the Series, neither the Sub-Adviser nor
any of its directors, officers or employees will either act as a
principal or agent for any party other than the Series or receive
any commissions. The Sub-Adviser will comply with all applicable
laws in acting hereunder including, without limitation, the
Investment Company Act; the Investment Advisers Act of 1940, as
amended; and all rules and regulations duly promulgated under the
foregoing.
<PAGE>
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement having been approved by a majority of the
outstanding voting securities of the Series, shall become
effective as of the date so written above, and shall remain in
force for an initial term of two years from the date of
execution, and from year to year thereafter until its
termination in accordance with this Article VI, but only so long
as such continuance is specifically approved at least annually by
(i) the Directors of the Fund, or by the vote of a majority of
the outstanding voting securities of the Series, and (ii) a
majority of those Directors who are not parties to this Agreement
or interested persons of any such party cast in person at a
meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by ISI, by the Fund by vote of the
Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Series, or by the Sub-Adviser. A
termination by ISI or the Sub-Adviser shall require sixty days'
written notice to the other party and to the Fund, and a
termination by the Fund shall require such notice to each of the
parties. This Agreement shall automatically terminate in the
event of its assignment to the extent required by the Investment
Company Act and the rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the
Fund such information on an annual basis as may reasonably be
necessary to evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of
the Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Article III hereof earned prior to such
termination.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or
discharged, but may only be modified by an instrument in writing
signed by the Sub-Adviser and ISI. In addition, no amendment to
this Agreement shall be effective unless approved by (1) the vote
of a majority of the Directors of the Fund, including a majority
of the Directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such amendment, and (2) the
vote of a majority of the outstanding voting securities of the
Series (other than an amendment which can be effective without
shareholder approval under applicable law).
<PAGE>
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms
"vote of a majority of the outstanding voting securities,"
"assignments," "affiliated person" and "interested person," when
used in this Agreement, shall have the respective meanings
specified in the Investment Company Act and the rules and
regulations thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the
laws of the State of Georgia and the applicable provisions of the
Investment Company Act. To the extent that the applicable laws
of the State of Georgia, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
ARTICLE X
MISCELLANEOUS
NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage prepaid, to
the other party at such address as such other party may designate
for the receipt of such notice.
SEVERABILITY. Each provision of this Agreement is intended
to be severable. If any provision of this Agreement shall be
held illegal or made invalid by a court decision, statute, rule
or otherwise, such illegality or invalidity shall not affect the
validity or enforceability of the remainder of this Agreement.
HEADINGS. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the size, extent or intent
of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
INVESCO SERVICES, INC.
ATTEST: By: /s/John P. Stewart
Vice President
/s/Tony D. Green
Secretary
INVESCO REALTY ADVISORS, INC.
ATTEST: By: /s/David N. Farmer
Vice President
/s/Shellie M. Sims
Secretary
<PAGE>
APPENDIX TO SUB-ADVISORY AGREEMENT
Sub-Adviser: INVESCO Realty Advisors, Inc.
FUND SERIES FEE*
---- ------ ----
The EBI Funds, Inc. Real Estate Portfolio 0.35% (on
assets up to
$100 million);
0.25% (on
assets in
excess of $100
million)
* Expressed as a percentage of the average daily value of net
assets of the Series.
EXHIBIT 5(d)
SUB-ADVISORY AGREEMENT
AGREEMENT made this 1st day of November, 1993, by and
between INVESCO Services, Inc. ("ISI"), a Georgia corporation,
and INVESCO MANAGEMENT & RESEARCH, Inc., a Massachusetts
corporation (the "Sub-Adviser").
W I T N E S S E T H:
WHEREAS, THE EBI FUNDS, INC. (the "Fund") is engaged in
business as a diversified, open-end management investment company
registered under the Investment Company Act of 1940, as amended
(hereinafter referred to as the "Investment Company Act") and
currently has one class of shares which is divided into various
series (the "Shares"), and which may be divided into additional
series, each representing an interest in a separate portfolio of
investments; and
WHEREAS, ISI and the Sub-Adviser are engaged principally in
rendering investment advisory services and are registered as
investment advisers under the Investment Advisers Act of 1940;
and
WHEREAS, ISI has entered into an Investment Advisory
Agreement with the Fund (the "ISI Investment Advisory
Agreement"), pursuant to which ISI is required to provide
investment and advisory services to the Fund's series, and, upon
receipt of written approval of the Fund, is authorized to retain
companies which are affiliated with ISI to provide such services;
and
WHEREAS, the Sub-Adviser is willing to provide investment
advisory services to two of the Fund's series (the EBI MultiFlex
Fund and the EBI Relative Return Bond Fund, hereinafter referred
to as the "Series") on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, ISI and the Sub-Adviser hereby
agree as follows:
ARTICLE I
DUTIES OF THE SUB-ADVISER
ISI hereby employs the Sub-Adviser to act as investment
adviser to the Fund and to furnish the investment advisory
services described below, subject to the broad supervision of ISI
and the Board of Directors of the Fund, for the period and on the
terms and conditions set forth in this Agreement. The
Sub-Adviser hereby accepts such assignment and agrees during such
period, at its own expense, to render such services and to assume
the obligations herein set forth for the compensation provided
for herein. The Sub-Adviser shall for all purposes herein be
deemed to be an independent contractor and, unless otherwise
expressly provided or authorized herein, shall have no authority
to act for or represent the Fund in any way or otherwise be
deemed an agent of the Fund.
The Sub-Adviser hereby agrees to manage the investment
operations of the Fund's Series, subject to the supervision of
the Fund's directors (the "Directors") and ISI. Specifically,
the Sub-Adviser agrees to perform the following services:
(a) to manage the investment and reinvestment of all the
assets, now or hereafter acquired, of the Fund's
Series, and to execute all purchases and sales of
portfolios securities;
(b) to maintain a continuous investment program for the
Fund's Series, consistent with (i) the Series'
investment policies as set forth in the Fund's Articles
of Incorporation, Bylaws, and Registration Statement,
as from time to time amended, under the Investment
Company Act of 1940, and in any prospectus and/or
statement of additional information of the Fund, as
from time to time amended and in use under the
Securities Act of 1933, as amended, and (ii) the Fund's
status as a regulated investment company under the
Internal Revenue Code of 1986, as amended;
(c) to determine what securities are to be purchased or
sold for the Fund's Series, unless otherwise directed
by the Directors of the Fund or ISI, and to execute
transactions accordingly;
(d) to provide to the Fund's Series the benefit of all of
the investment analysis and research, the reviews of
current economic conditions and of trends, and the
consideration of long-range investment policy now or
hereafter generally available to investment advisory
customers of the Sub-Adviser;
(e) to determine what portion of the Fund's Series should
be invested in the various types of securities
authorized for purchase by the Series; and
(f) to make recommendations as to the manner in which
voting rights, rights to consent to Fund action and any
other rights pertaining to the Series' securities shall
be exercised.
With respect to execution of transactions for the Fund's
Series, the Sub-Adviser is authorized to employ such brokers or
dealers as may, in the Sub-Adviser's best judgment, implement the
policy of the Fund to obtain prompt and reliable execution at the
most favorable price obtainable. In assigning an execution or
negotiating the commission to be paid therefor, the Sub-Adviser
is authorized to consider the full range and quality of a
broker's services which benefit the Fund, including but not
limited to research and analytical capabilities, reliability of
performance, sale of Fund shares, and financial soundness and
responsibility. Research services prepared and furnished by
brokers through which the Sub-Adviser effects securities
transactions on behalf of the Fund may be used by the Sub-Adviser
in servicing all of its accounts, and not all such services may
be used by the Sub-Adviser in connection with the Fund. In the
selection of a broker or dealer for execution of any negotiated
transaction, the Sub-Adviser shall have no duty or obligation to
seek advance competitive bidding for the most favorable
negotiated commission rate for such transaction, or to select any
broker solely on the basis of its purported or "posted"
commission rate for such transaction, provided, however, that the
Sub-Adviser shall consider such "posted" commission rates, if
any, together with any other information available at the time as
to the level of commissions known to be charged on comparable
transactions by other qualified brokerage firms, as well as all
other relevant factors and circumstances, including the size of
any contemporaneous market in such securities, the importance to
the Fund of speed, efficiency, and confidentiality of execution,
the execution capabilities required by the circumstances of the
particular transactions, and the apparent knowledge or
familiarity with sources from or to whom such securities may be
purchased or sold. Where the commission rate reflects services,
reliability and other relevant factors in addition to the cost of
execution, the Sub-Adviser shall have the burden of demonstrating
that such expenditures were bona fide and for the benefit of the
Fund. Fund transactions may be effected through qualified
broker-dealers who recommend the Fund to their clients, or who
act as agent in the purchase of the Fund's shares for their
clients. When a number of brokers and dealers can provide
comparable best price and execution on a particular transaction,
the Fund's adviser may consider the sale of Fund shares by a
broker or dealer in selecting among qualified broker-dealers.
ARTICLE II
ALLOCATION OF CHARGES AND EXPENSES
The Sub-Adviser assumes and shall pay for maintaining the
staff and personnel necessary to perform its obligations under
this Agreement, and shall, at its own expense, provide the office
space, equipment and facilities necessary to perform its
obligations under this Agreement. Except to the extent expressly
assumed by the Sub-Adviser herein and except to the extent
required by law to be paid by the Sub-Adviser, ISI and/or the
Fund shall pay all costs and expenses in connection with the
operations of the Fund's Series.
<PAGE>
ARTICLE III
COMPENSATION OF THE SUB-ADVISER
For the services rendered, the facilities furnished and
expenses assumed by the Sub-Adviser, ISI shall pay to the
Sub-Adviser a fee, computed daily and paid as of the last day of
each month, using for each daily calculation the most recently
determined net asset value of the Fund's Series, as determined by
a valuation made in accordance with the Fund's procedures for
calculating its net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. The
advisory fee to the Sub-Adviser shall be computed at the
following annual rates: for the MultiFlex Fund Series, 0.30% of
the Series' daily net assets on the first $100 million of net
assets, 0.25% of daily net assets on the next $400 million of net
assets, and 0.20% of daily net assets on assets in excess of $500
million; for the Relative Return Bond Fund Series, 0.10% of the
Series' daily net assets. During any period when the
determination of the Series' net asset value is suspended by the
Directors of the Fund, the net asset value of a share of the
Fund's Series as of the last business day prior to such
suspension shall, for the purpose of this Article III, be deemed
to be the net asset value at the close of each succeeding
business day until it is again determined. However, no such fee
shall be paid to the Sub-Adviser with respect to any assets of
the Fund's Series which may be invested in any other investment
company for which the Sub-Adviser serves as investment adviser or
sub adviser. The fee provided for hereunder shall be prorated in
any month in which this Agreement is not in effect for the entire
month. The Sub-Adviser shall be entitled to receive fees
hereunder only for such periods as the ISI Investment Advisory
Agreement remains in effect.
ARTICLE IV
ACTIVITIES OF THE SUB-ADVISER
The services of the Sub-Adviser to the Fund are not to be
deemed to be exclusive, the Sub-Adviser and any person controlled
by or under common control with the Sub-Adviser (for purposes of
this Article IV referred to as "affiliates") being free to render
services to others. It is understood that directors, officers,
employees and shareholders of the Fund are or may become
interested in the Sub-Adviser and its affiliates, as directors,
officers, employees and shareholders or otherwise and that
directors, officers, employees and shareholders of the
Sub-Adviser, ISI and their affiliates are or may become
interested in the Fund as directors, officers and employees.
ARTICLE V
AVOIDANCE OF INCONSISTENT POSITIONS
AND COMPLIANCE WITH APPLICABLE LAWS
In connection with purchases or sales of securities for the
investment portfolio of the Fund's Series, neither the
Sub-Adviser nor any of its directors, officers or employees will
either act as a principal or agent for any party other than the
Fund's Series or receive any commissions. The Sub-Adviser will
comply with all applicable laws in acting hereunder including,
without limitation, the Investment Company Act; the Investment
Advisers Act of 1940, as amended; and all rules and regulations
duly promulgated under the foregoing.
ARTICLE VI
DURATION AND TERMINATION OF THIS AGREEMENT
This Agreement having been approved by a majority of the
outstanding voting securities of the Fund's Series, shall become
effective as of the date so written above, and shall remain in
force for an initial term of two years from the date of
execution, and from year to year thereafter until its
termination in accordance with this Article VI, but only so long
as such continuance is specifically approved at least annually by
(i) the Directors of the Fund, or by the vote of a majority of
the outstanding voting securities of the Fund's Series, and (ii)
a majority of those Directors who are not parties to this
Agreement or interested persons of any such party cast in person
at a meeting called for the purpose of voting on such approval.
This Agreement may be terminated at any time, without the
payment of any penalty, by ISI, the Fund by vote of the Directors
of the Fund, or by vote of a majority of the outstanding voting
securities of the Fund's Series, or by the Sub-Adviser. A
termination by ISI or the Sub-Adviser shall require sixty days'
written notice to the other party and to the Fund, and a
termination by the Fund shall require such notice to each of the
parties. This Agreement shall automatically terminate in the
event of its assignment to the extent required by the Investment
Company Act and the Rules thereunder.
The Sub-Adviser agrees to furnish to the Directors of the
Fund such information on an annual basis as may reasonably be
necessary to evaluate the terms of this Agreement.
Termination of this Agreement shall not affect the right of
the Sub-Adviser to receive payments on any unpaid balance of the
compensation described in Article III hereof earned prior to such
termination.
ARTICLE VII
AMENDMENTS OF THIS AGREEMENT
No provision of this Agreement may be orally changed or
discharged, but may only be modified by an instrument in writing
signed by the Sub-Adviser and ISI. In addition, no amendment to
this Agreement shall be effective unless approved by (1) the vote
of a majority of the Directors of the Fund, including a majority
of the Directors who are not parties to this Agreement or
interested persons of any such party cast in person at a meeting
called for the purpose of voting on such amendment and (2) the
vote of a majority of the outstanding voting securities of any of
the Fund's Series as to which such amendment is applicable (other
than an amendment which can be effective without shareholder
approval under applicable law).
ARTICLE VIII
DEFINITIONS OF CERTAIN TERMS
In interpreting the provisions of this Agreement, the terms
"vote of a majority of the outstanding voting securities,"
"assignments," "affiliated person" and "interested person," when
used in this Agreement, shall have the respective meanings
specified in the Investment Company Act and the Rules and
Regulations thereunder, subject, however, to such exemptions as
may be granted by the Securities and Exchange Commission under
said Act.
ARTICLE IX
GOVERNING LAW
This Agreement shall be construed in accordance with the
laws of the State of Georgia and the applicable provisions of the
Investment Company Act. To the extent that the applicable laws
of the State of Georgia, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company
Act, the latter shall control.
ARTICLE X
MISCELLANEOUS
NOTICE. Any notice under this Agreement shall be in
writing, addressed and delivered or mailed, postage prepaid, to
the other party at such address as such other party may designate
for the receipt of such notice.
SEVERABILITY. Each provision of this Agreement is intended
to be severable. If any provision of this Agreement shall be
held illegal or made invalid by a court decision, statute, rule
or otherwise, such illegality or invalidity shall not affect the
validity or enforceability of the remainder of this Agreement.
HEADINGS. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to
describe, interpret, define or limit the size, extent or intent
of this Agreement or any provision hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
INVESCO SERVICES, INC.
ATTEST: By: /s/Hubert L. Harris, Jr.
President
/s/Penelope P. Alexander
Secretary
INVESCO MANAGEMENT & RESEARCH, INC.
ATTEST: By: /s/ Illegible
President
/s/John D. Craven
Secretary
EXHIBIT 6
DISTRIBUTION AGREEMENT
THIS AGREEMENT, as made the 1st day of July, 1993 and
amended the 1st day of November, 1993, between THE EBI FUNDS,
INC., a Maryland corporation (the "Fund"), and INVESCO SERVICES,
INC., a Georgia corporation (the "Underwriter"), is hereby
amended this 19th day of April, 1995, for the sole purpose of
adding the Real Estate and International Value Portfolios to the
Agreement.
W I T N E S S E T H:
WHEREAS, the Fund is registered under the Investment Company
Act of 1940, as amended (the "Investment Company Act"), as a
diversified, open-end management investment company and currently
has one class of outstanding shares which is divided into series
(Equity Portfolio, Income Portfolio, Flex Portfolio, MultiFlex
Portfolio, Relative Return Bond Portfolio, Real Estate Portfolio,
International Value Portfolio, and Cash Management Portfolio; the
"Shares"), and which may be divided into additional series, each
representing an interest in a separate portfolio of investments,
and it is in the interest of the Fund to offer the Shares for
sale continuously; and
WHEREAS, the Underwriter is engaged in the business of
selling shares of investment companies either directly to
investors or through other securities dealers; and
WHEREAS, the Fund and the Underwriter wish to enter into an
agreement with each other with respect to the continuous offering
of the Shares in order to promote growth of the Fund and
facilitate the distribution of the Shares;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the
parties hereto as follows:
1. The Fund hereby appoints the Underwriter its agent for
the distribution of Shares in jurisdictions wherein
such Shares may legally be offered for sale; provided,
however, that the Fund in its absolute discretion may
(a) issue or sell Shares directly to purchasers, or (b)
issue or sell Shares to the shareholders of any other
investment company, for which the Underwriter or any
affiliate thereof shall act as exclusive distributor,
who wish to exchange all or a portion of their
investment in Shares or in shares of such other
investment company for the Shares. Notwithstanding any
other provision hereof, the Fund may terminate, suspend
or withdraw the offering of Shares whenever, in its
sole discretion, it deems such action to be desirable.
The Fund reserves the right to reject any subscription
in whole or in part for any reason.
2. The Underwriter hereby agrees to serve as agent for the
distribution of the Shares and agrees that it will use
its best efforts with reasonable promptness to sell
such part of the authorized Shares remaining unissued
as from time to time shall be effectively registered
under the Securities Act of 1933, as amended (the "1933
Act"), at such prices and on such terms as hereinafter
set forth, all subject to applicable federal and state
securities laws and regulations. Nothing herein shall
be construed to prohibit the Underwriter from engaging
in other related or unrelated businesses.
3. In addition to serving as the Fund's agent in the
distribution of the Shares, the Underwriter shall also
provide to the holders of the Shares certain
maintenance, support or similar services ("Shareholder
Services"). Such services shall include, without
limitation, answering routine shareholder inquiries
regarding the Fund, assisting shareholders in
considering whether to change dividend options and
helping to effectuate such changes, arranging for bank
wires, and providing such other services as the Fund
may reasonably request from time to time. It is
expressly understood that the Underwriter or the Fund
may enter into one or more agreements with third
parties pursuant to which such third parties may
provide the Shareholder Services provided for in this
paragraph. Nothing herein shall be construed to impose
upon the Underwriter any duty or expense in connection
with the services of any registrar, transfer agent or
custodian appointed by the Fund, the computation of the
net asset value or offering price of Shares, the
preparation and distribution of notices of meetings,
proxy soliciting material, annual and periodic reports,
dividends and dividend notices, or any other
responsibility of the Fund.
4. Except as otherwise specifically provided for in this
Agreement, the Underwriter shall sell the Shares
directly to purchasers, or through qualified
broker-dealers or others, in such manner, not
inconsistent with the provisions hereof and the then-
effective Registration Statement of the Fund under the
1933 Act (the "Registration Statement") and related
Prospectus (the "Prospectus") and Statement of
Additional Information ("SAI") of the Fund as the
Underwriter may determine from time to time; provided
that no broker-dealer or other person shall be
appointed or authorized to act as agent of the Fund
without the prior consent of the directors (the
"Directors") of the Fund. The Underwriter will require
each broker-dealer to conform to the provisions hereof
and of the Registration Statement (and related
Prospectus and SAI) at the time in effect under the
1933 Act with respect to the public offering price of
the Shares. The Fund will have no obligation to pay
any commissions or other remuneration to such
broker-dealers.
5. The Shares offered for sale or sold by the Underwriter
shall be offered or sold at the net asset value per
share determined in accordance with the then-current
Prospectus and/or SAI relating to the sale of the
Shares except as departure from such prices shall be
permitted by the then-current Prospectus and/or SAI of
the Fund, in accordance with applicable rules and
regulations of the Securities and Exchange Commission.
The price the Fund shall receive for the Shares
purchased from the Fund shall be the net asset value
per share of such Shares, determined in accordance with
the Prospectus and/or SAI applicable to the sale of the
Shares.
6. Except as may otherwise be agreed to by the Fund, the
Underwriter shall be responsible for issuing and
delivering such confirmations of sales made by it
pursuant to this Agreement as may be required;
provided, however, that the Underwriter or the Fund may
utilize the services of other persons or entities
believed by it to be competent to perform such
functions. Shares shall be registered on the transfer
books of the Fund in such names and denominations as
the Underwriter may specify.
7. The Fund will execute any and all documents and furnish
any and all information which may be reasonably
necessary in connection with the qualification of the
Shares for sale (including the qualification of the
Fund as a broker-dealer where necessary or advisable)
in such states as the Underwriter may reasonably
request (it being understood that the Fund shall not be
required without its consent to comply with any
requirement which in the opinion of the Directors of
the Fund is unduly burdensome). The Underwriter, at
its own expense, will effect all qualifications of
itself as broker or dealer, or otherwise, under all
applicable state or Federal laws required in order that
the Shares may be sold in such states or jurisdictions
as the Fund may reasonably request.
8. The Fund shall prepare and furnish to the Underwriter
from time to time the most recent form of the
Prospectus and SAI of the Fund. The Fund authorizes
the Underwriter to use the Prospectus and SAI, in the
forms furnished to the Underwriter from time to time,
in connection with the sale of the Shares of the Fund.
The Fund will furnish to the Underwriter from time to
time such information with respect to the Fund and the
Shares as the Underwriter may reasonably request for
use in connection with the sale of the Shares. The
Underwriter agrees that it will not use or distribute
or authorize the use, distribution or dissemination by
broker-dealers or others in connection with the sale of
the Shares any statements, other than those contained
in a current Prospectus and SAI of the Fund, except
such supplemental literature or advertising as shall be
lawful under federal and state securities laws and
regulations, and that it will promptly furnish the Fund
with copies of all such material.
9. The Underwriter will not make, or authorize any
broker-dealers or others to make, any short sales of
the Shares of the Fund or otherwise make any sales of
the Shares unless such sales are made in accordance
with a then-current Prospectus and SAI relating to the
sale of the applicable Shares.
10. The Underwriter, as agent of and for the account of the
Fund, may cause the redemption or repurchase of the
Shares at such prices and upon such terms and
conditions as shall be specified in a then-current
Prospectus and SAI. In selling, redeeming or
repurchasing the Shares for the account of the Fund,
the Underwriter will in all respects conform to the
requirements of all state and federal laws and the
Rules of Fair Practice of the National Association of
Securities Dealers, Inc., relating to such sale,
redemption or repurchase, as the case may be. The
Underwriter will observe and be bound by all the
provisions of the Articles of Incorporation or Bylaws
of the Fund and of any provisions in the Registration
Statement, Prospectus and SAI, as such may be amended
or supplemented from time to time, notice of which
shall have been given to the Underwriter, which at the
time in any way require, limit, restrict, prohibit or
otherwise regulate any action on the part of the
Underwriter.
11. (a) The Fund shall indemnify, defend and hold
harmless the Underwriter, its officers and
directors and any person who controls the
Underwriter within the meaning of the 1933 Act,
from and against any and all claims, demands,
liabilities and expenses (including the cost of
investigating or defending such claims, demands or
liabilities and any attorney fees incurred in
connection therewith) which the Underwriter, its
officers and directors or any such controlling
person, may incur under the federal securities
laws, the common law or otherwise, arising out of
or based upon any alleged untrue statement of a
material fact contained in the Registration
Statement or any related Prospectus and/or SAI or
arising out of or based upon any alleged omission
to state a material fact required to be stated
therein or necessary to make the statements
therein not misleading.
Notwithstanding the foregoing, this indemnity
agreement, to the extent that it might require
indemnity of the Underwriter or any person who is
an officer, director or controlling person of the
Underwriter, shall not inure to the benefit of the
Underwriter or officer, director or controlling
person thereof unless a court of competent
jurisdiction shall determine, or it shall have
been determined by controlling precedent, that
such result would not be against public policy as
expressed in the federal securities laws and in no
event shall anything contained herein be so
construed as to protect the Underwriter against
any liability to the Fund, the Directors or the
Fund's shareholders to which the Underwriter would
otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of its
reckless disregard of its obligations and duties
under this Agreement.
This indemnity agreement is expressly conditioned
upon the Fund's being notified of any action
brought against the Underwriter, its officers or
directors or any such controlling person, which
notification shall be given by letter or by
telegram addressed to the Fund at its principal
address in Atlanta, Georgia and sent to the Fund
by the person against whom such action is brought
within ten (10) days after the summons or other
first legal process shall have been served upon
the Underwriter, its officers or directors or any
such controlling person. The failure to notify
the Fund of any such action shall not relieve the
Fund from any liability which it may have to the
person against whom such action is brought by
reason of any such alleged untrue statement or
omission otherwise than on account of the
indemnity agreement contained in this paragraph.
The Fund shall be entitled to assume the defense
of any suit brought to enforce such claim, demand,
or liability, but in such case the defense shall
be conducted by counsel chosen by the Fund and
approved by the Underwriter, which approval shall
not be unreasonably withheld. If the Fund elects
to assume the defense of any such suit and retain
counsel approved by the Underwriter, the defendant
or defendants in such suit shall bear the fees and
expenses of an additional counsel obtained by any
of them. Should the Fund elect not to assume the
defense of any such suit, or should the
Underwriter not approve of counsel chosen by the
Fund, the Fund will reimburse the Underwriter, its
officers and directors or the controlling person
or persons named as defendant or defendants in
such suit, for the fees and expenses of any
counsel retained by the Underwriter or them. In
addition, the Underwriter shall have the right to
employ counsel to represent it, its officers and
directors and any such controlling person who may
be subject to liability arising out of any claim
in respect of which indemnity may be sought by the
Underwriter against the Fund hereunder if in the
reasonable judgment of the Underwriter it is
advisable for the Underwriter, its officers and
directors or such controlling person to be
represented by separate counsel, in which event
the fees and expenses of such separate counsel
shall be borne by the Fund. This indemnity
agreement and the Fund's representations and
warranties in this Agreement shall remain
operative and in full force and effect and shall
survive the delivery of any of the Shares as
provided in this Agreement. This indemnity
agreement shall inure exclusively to the benefit
of the Underwriter and its successors, the
Underwriter's officers and directors and their
respective estates and any such controlling person
and their successors and estates. The Fund shall
promptly notify the Underwriter of the
commencement of any litigation or proceeding
against it in connection with the issue and sale
of the Shares.
(b) The Underwriter agrees to indemnify, defend and
hold harmless the Fund, its Directors and any
person who controls the Fund within the meaning of
the 1933 Act, from and against any and all claims,
demands, liabilities and expenses (including the
cost of investigating or defending such claims,
demands or liabilities and any attorney fees
incurred in connection therewith) which the Fund,
its Directors or any such controlling person may
incur under the federal securities laws, the
common law or otherwise, but only to the extent
that such liability or expense incurred by the
Fund, its Directors or such controlling person
resulting from such claims or demands shall arise
out of or be based upon (a) any alleged untrue
statement of a material fact contained in
information furnished in writing by the
Underwriter to the Fund specifically for use in
the Registration Statement or any related
Prospectus and/or SAI or shall arise out of or be
based upon any alleged omission to state a
material fact in connection with such information
required to be stated in the Registration
Statement or the related Prospectus and/or SAI or
necessary to make such information not misleading
and (b) any alleged act or omission on the
Underwriter's part as the Fund's agent that has
not been expressly authorized by the Fund in
writing.
Notwithstanding the foregoing, this indemnity
agreement, to the extent that it might require
indemnity of the Fund or any Director or
controlling person of the Fund, shall not inure to
the benefit of the Fund or Director or controlling
person thereof unless a court of competent
jurisdiction shall determine, or it shall have
been determined by controlling precedent, that
such result would not be against public policy as
expressed in the federal securities laws and in no
event shall anything contained herein be so
construed as to protect any Director of the Fund
against any liability to the Fund or the Fund's
shareholders to which the Director would otherwise
be subject by reason of willful misfeasance, bad
faith or gross negligence or reckless disregard of
the duties involved in the conduct of his office.
This indemnity agreement is expressly conditioned
upon the Underwriter's being notified of any
action brought against the Fund, its Directors or
any such controlling person, which notification
shall be given by letter or telegram addressed to
the Underwriter at its principal office in
Atlanta, Georgia, and sent to the Underwriter by
the person against whom such action is brought,
within ten (10) days after the summons or other
first legal process shall have been served upon
the Fund, its Directors or any such controlling
person. The failure to notify the Underwriter of
any such action shall not relieve the Underwriter
from any liability which it may have to the person
against whom such action is brought by reason of
any such alleged untrue statement or omission
otherwise than on account of the indemnity
agreement contained in this paragraph. The
Underwriter shall be entitled to assume the
defense of any suit brought to enforce such claim,
demand, or liability, but in such case the defense
shall be conducted by counsel chosen by the
Underwriter and approved by the Fund, which
approval shall not be unreasonably withheld. If
the Underwriter elects to assume the defense of
any such suit and retain counsel approved by the
Fund, the defendant or defendants in such suit
shall bear the fees and expenses of an additional
counsel obtained by any of them. Should the
Underwriter elect not to assume the defense of any
such suit, or should the Fund not approve of
counsel chosen by the Underwriter, the Underwriter
will reimburse the Fund, its Directors or the
controlling person or persons named as defendant
or defendants in such suit, for the fees and
expenses of any counsel retained by the Fund or
them. In addition, the Fund shall have the right
to employ counsel to represent it, its Directors
and any such controlling person who may be subject
to liability arising out of any claim in respect
of which indemnity may be sought by the Fund
against the Underwriter hereunder if in the
reasonable judgment of the Fund it is advisable
for the Fund, its Directors or such controlling
person to be represented by separate counsel, in
which event the fees and expenses of such separate
counsel shall be borne by the Underwriter. This
indemnity agreement and the Underwriter's
representations and warranties in this Agreement
shall remain operative and in full force and
effect and shall survive the delivery of any of
the Shares as provided in this Agreement. This
indemnity agreement shall inure exclusively to
the benefit of the Fund and its successors, the
Fund's Directors and their respective estates and
any such controlling person and their successors
and estates. The Underwriter shall promptly
notify the Fund of the commencement of any
litigation or proceeding against it in connection
with the issue and sale of the Shares.
12. Except as may be provided in one or more other
agreements between the Fund and the Underwriter or
third parties, the Fund will pay or cause to be paid
(a) expenses (including the fees and disbursements of
its own counsel) of any registration of the Shares
under the 1933 Act, (b) expenses incident to the
issuance of the Shares, and (c) expenses (including the
fees and disbursements of its own counsel) incurred in
connection with the preparation, printing and
distribution of the Fund's Prospectuses, SAIs, and
periodic and other reports sent to holders of the
Shares in their capacity as such. The Underwriter
shall prepare and provide necessary copies of all sales
literature subject to the Fund's approval thereof.
13. This Agreement having been approved by a majority vote
of the Directors of the Fund, as well as a majority
vote of the Directors who, except for their positions
as Directors of the Fund, are not "interested persons"
(as defined in the Investment Company Act) of the Fund
and who have no direct or indirect financial interest
in the operation of this Agreement ("Disinterested
Directors"), shall become effective as of the date so
written above and shall continue in effect for an
initial term of two years from the date of execution,
and from year to year thereafter, but only so long as
such continuance is specifically approved at least
annually (a)(i) by a vote of the Directors of the Fund
or (ii) by a vote of a majority of the outstanding
voting securities of the Fund, and (b) by a vote of a
majority of the Disinterested Directors, cast in person
at a meeting called for the purpose of voting on this
Agreement.
Either party hereto may terminate this Agreement on any
date, without the payment of a penalty, by giving the
other party at least 60 days' prior written notice of
such termination specifying the date fixed therefor.
In particular, this Agreement may be terminated at any
time, without payment of any penalty, by vote of a
majority of the Disinterested Directors, or by vote of
a majority of the outstanding voting securities of the
Fund on not more than 60 days' written notice to the
Underwriter.
Without prejudice to any other remedies of the Fund
provided for in this Agreement or otherwise, the Fund
may terminate this Agreement at any time immediately
upon the Underwriter's failure to fulfill any of the
obligations of the Underwriter hereunder.
14. This Agreement shall automatically terminate in the
event of its assignment. In interpreting the
provisions of this Section 14, the definition of
"assignment" contained in the Investment Company Act
shall be applied.
15. This Agreement may not be amended to increase the
amount to be spent by the Fund hereunder without
approval of shareholders of the Fund. All material
amendments to the Agreement must be approved by the
vote of the Board of Directors of the Fund, including a
majority of the Disinterested Directors, cast in person
at a meeting called for the purpose of voting on such
amendment.
16. Any notice under this Agreement shall be in writing,
addressed and delivered or mailed, postage prepaid, to
the other party at such address as such other party may
designate for the receipt of such notice.
17. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an
instrument in writing signed by the Fund and the
Underwriter and, if applicable, approved in the manner
required by the Investment Company Act.
18. Each provision of this Agreement is intended to be
severable. If any provision of this Agreement shall be
held illegal or made invalid by a court decision,
statute, rule or otherwise, such illegality or
invalidity shall not affect the validity or
enforceability of the remainder of this Agreement.
19. This Agreement and the application and interpretation
hereof shall be governed exclusively by the laws of the
State of Georgia.
<PAGE.
IN WITNESS WHEREOF, the Fund and the Underwriter have each
caused this Agreement to be executed on its behalf by an officer
thereunto duly authorized and the Underwriter has caused its
corporate seal to be affixed as of the day and year first above
written.
THE EBI FUNDS, INC.
ATTEST: By: /s/Hubert L. Harris, Jr.
President
/s/Penelope P. Alexander
Secretary
[CORPORATE SEAL] INVESCO SERVICES, INC.
ATTEST: By: /s/John P. Stewart
Vice President
/s/Tony D. Green
Secretary
EXHIBIT 8
FORM OF CUSTODIAN AGREEMENT
CUSTODY AGREEMENT
Dated -------------------, 1995
Between
UMB BANK, N.A.
and
THE EBI FUNDS, INC.
<PAGE>
TABLE OF CONTENTS
SECTION
1. APPOINTMENT OF CUSTODIAN
2. DEFINITIONS
3. DELIVERY OF CORPORATE DOCUMENTS
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC
SUBCUSTODIAN
(a) Safekeeping
(b) Manner of Holding Securities
(c) Free Delivery of Assets
(d) Exchange of Securities
(e) Purchases of Assets
(f) Sales of Assets
(g) Options
(h) Futures Contracts
(i) Segregated Accounts
(j) Depositary Receipts
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
(l) Interest Bearing Deposits
(m) Foreign Exchange Transactions
(n) Pledges or Loans of Securities
(o) Stock Dividends, Rights, Etc.
(p) Routine Dealings
(q) Collections
(r) Bank Accounts
(s) Dividends, Distributions and Redemptions
(t) Proceeds from Shares Sold
(u) Proxies and Notices; Compliance with the
Shareholders Communication Act of 1985
(v) Books and Records
(w) Opinion of Fund's Independent Certified Public
Accountants
(x) Reports by Independent Certified Public
Accountants
(y) Bills and Other Disbursements
5. SUBCUSTODIANS
(a) Domestic Subcustodians
(b) Foreign Subcustodians
(c) Interim Subcustodians
(d) Special Subcustodians
(e) Termination of a Subcustodian
(f) Certification Regarding Foreign Subcustodians
6. STANDARD OF CARE
(a) General Standard of Care
(b) Actions Prohibited by Applicable Law, Events
Beyond Custodian's Control, Sovereign Risk, Etc.
(c) Liability for Past Records
(d) Advice of Counsel
(e) Advice of the Fund and Others
(f) Instructions Appearing to be Genuine
(g) Exceptions from Liability
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS
(a) Domestic Subcustodians
(b) Liability for Acts and Omissions of Foreign
Subcustodians
(c) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and
Clearing Agencies
(d) Defaults or Insolvencies of Brokers, Banks, Etc.
(e) Reimbursement of Expenses
8. INDEMNIFICATION
(a) Indemnification by the Company
(b) Indemnification by Custodian
9. ADVANCES
10. LIENS
11. COMPENSATION
12. POWERS OF ATTORNEY
13. TERMINATION AND ASSIGNMENT
14. ADDITIONAL FUNDS
15. NOTICES
16. MISCELLANEOUS
<PAGE>
CUSTODY AGREEMENT
This agreement made as of this ----- day of -------, 1995,
between UMB Bank, N.A., a national banking association with its
principal place of business located at Kansas City, Missouri
(hereinafter "Custodian"), and The EBI Funds, Inc., a Maryland
corporation (the "Company"), on behalf of each of the portfolios
listed on the signature page hereof together with such additional
portfolios which shall be made subject to this Agreement by the
addition of a separate signature page hereto (individually, a
"Fund" and collectively, the "Funds").
WITNESSETH:
WHEREAS, the Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as
amended; and
WHEREAS, the Company desires to appoint Custodian as its
custodian for the custody of Assets (as hereinafter defined)
owned by each Fund which Assets are to be held in such accounts
as such Fund may establish from time to time; and
WHEREAS, Custodian is willing to accept such appointment on
the terms and conditions hereof.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, the parties hereto, intending to be legally
bound, mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN.
The Company hereby constitutes and appoints the Custodian as
custodian of Assets belonging to each such Fund which have been
or may be from time to time deposited with the Custodian.
Custodian accepts such appointment as a custodian and agrees to
perform the duties and responsibilities of Custodian as set forth
herein on the conditions set forth herein.
<PAGE>
2. DEFINITIONS.
For purposes of this Agreement, the following terms shall
have the meanings so indicated:
(a) "Security" or "Securities" shall mean stocks,
bonds, bills, rights, script, warrants, interim certificates and
all negotiable or nonnegotiable paper commonly known as
Securities and other instruments or obligations.
(b) "Assets" shall mean Securities, monies and other
property held by the Custodian for the benefit of a Fund.
(c)(1) "Instructions", as used herein, shall mean: (i)
a tested telex, a written (including, without limitation,
facsimile transmission) request, direction, instruction or
certification signed or initialed by or on behalf of a Fund by an
Authorized Person; (ii) a telephonic or other oral communication
from a person the Custodian reasonably believes to be an
Authorized Person; or (iii) a communication effected directly
between an electro-mechanical or electronic device or system
(including, without limitation, computers) on behalf of a Fund.
Instructions in the form of oral communications shall be
confirmed by the appropriate Fund by tested telex or in writing
in the manner set forth in clause (i) above, but the lack of such
confirmation shall in no way affect any action taken by the
Custodian in reliance upon such oral Instructions prior to the
Custodian's receipt of such confirmation. Each Fund authorizes
the Custodian to record any and all telephonic or other oral
Instructions communicated to the Custodian.
(2) "Special Instructions", as used herein, shall mean
Instructions countersigned or confirmed in writing by the
Treasurer or any Assistant Treasurer of the Company or any other
person designated by the Treasurer of the Company in writing,
which countersignature or confirmation shall be included on the
same instrument containing the Instructions or on a separate
instrument relating thereto.
(3) Instructions and Special Instructions shall be
delivered to the Custodian at the address and/or telephone,
facsimile transmission or telex number agreed upon from time to
time by the Custodian and the Company.
(4) Where appropriate, Instructions and Special
Instructions shall be continuing instructions.
3. DELIVERY OF CORPORATE DOCUMENTS.
Each of the parties to this Agreement represents that its
execution does not violate any of the provisions of its
respective charter, articles of incorporation, articles of
association or bylaws and all required corporate action to
authorize the execution and delivery of this Agreement has been
taken.
The Company has furnished the Custodian with copies,
properly certified or authenticated, with all amendments or
supplements thereto, of the following documents:
(a) Certificate of Incorporation (or equivalent
document) of the Company as in effect on the date
hereof;
(b) By-Laws of the Company as in effect on the date
hereof;
(c) Resolutions of the Board of Directors of the
Company appointing the Custodian and approving the
form of this Agreement; and
(d) The Company's current prospectus and statements of
additional information.
The Company shall promptly furnish the Custodian with copies of
any updates, amendments or supplements to the foregoing
documents.
In addition, the Company has delivered or will promptly
deliver to the Custodian, copies of the Resolution(s) of its
Board of Directors or Trustees and all amendments or supplements
thereto, properly certified or authenticated, designating certain
officers or employees of the Company who will have continuing
authority to certify to the Custodian: (a) the names, titles,
signatures and scope of authority of all persons authorized to
give Instructions or any other notice, request, direction,
instruction, certificate or instrument on behalf of each Fund,
and (b) the names, titles and signatures of those persons
authorized to countersign or confirm Special Instructions on
behalf of each Fund (in both cases collectively, the "Authorized
Persons" and individually, an "Authorized Person"). Such
Resolutions and certificates may be accepted and relied upon by
the Custodian as conclusive evidence of the facts set forth
therein and shall be considered to be in full force and effect
until delivery to the Custodian of a similar Resolution or
certificate to the contrary. Upon delivery of a certificate
which deletes or does not include the name(s) of a person
previously authorized to give Instructions or to countersign or
confirm Special Instructions, such persons shall no longer be
considered an Authorized Person authorized to give Instructions
or to countersign or confirm Special Instructions. Unless the
certificate specifically requires that the approval of anyone
else will first have been obtained, the Custodian will be under
no obligation to inquire into the right of the person giving such
Instructions or Special Instructions to do so. Notwithstanding
any of the foregoing, no Instructions or Special Instructions
received by the Custodian from a Fund will be deemed to authorize
or permit any director, trustee, officer, employee, or agent of
such Fund to withdraw any of the Assets of such Fund upon the
mere receipt of such authorization, Special Instructions or
Instructions from such director, trustee, officer, employee or
agent.
4. POWERS AND DUTIES OF CUSTODIAN AND DOMESTIC
SUBCUSTODIAN.
Except for Assets held by any Subcustodian appointed
pursuant to Sections 5(b), (c), or (d) of this Agreement, the
Custodian shall have and perform the powers and duties
hereinafter set forth in this Section 4. For purposes of this
Section 4 all references to powers and duties of the "Custodian"
shall also refer to any Domestic Subcustodian appointed pursuant
to Section 5(a).
(a) Safekeeping.
The Custodian will keep safely the Assets of each Fund
which are delivered to it from time to time. The Custodian shall
not be responsible for any property of a Fund held or received by
such Fund and not delivered to the Custodian.
(b) Manner of Holding Securities.
(1) The Custodian shall at all times hold
Securities of each Fund either: (i) by physical possession of the
share certificates or other instruments representing such
Securities in registered or bearer form; or (ii) in book-entry
form by a Securities System (as hereinafter defined) in
accordance with the provisions of sub-paragraph (3) below.
(2) The Custodian may hold registrable portfolio
Securities which have been delivered to it in physical form, by
registering the same in the name of the appropriate Fund or its
nominee, or in the name of the Custodian or its nominee, for
whose actions such Fund and Custodian, respectively, shall be
fully responsible. Upon the receipt of Instructions, the
Custodian shall hold such Securities in street certificate form,
so called, with or without any indication of fiduciary capacity.
However, unless it receives Instructions to the contrary, the
Custodian will register all such portfolio Securities in the name
of the Custodian's authorized nominee. All such Securities shall
be held in an account of the Custodian containing only assets of
the appropriate Fund or only assets held by the Custodian as a
fiduciary, provided that the records of the Custodian shall
indicate at all times the Fund or other customer for which such
Securities are held in such accounts and the respective interests
therein.
(3) The Custodian may deposit and/or maintain
domestic Securities owned by a Fund in, and each Fund hereby
approves use of: (a) The Depository Trust Company; (b) The
Participants Trust Company; and (c) any book-entry system as
provided in (i) Subpart O of Treasury Circular No. 300, 31 CFR
306.115, (ii) Subpart B of Treasury Circular Public Debt Series
No. 27-76, 31 CFR 350.2, or (iii) the book-entry regulations of
federal agencies substantially in the form of 31 CFR 306.115.
Upon the receipt of Special Instructions, the Custodian may
deposit and/or maintain domestic Securities owned by a Fund in
any other domestic clearing agency registered with the Securities
and Exchange Commission ("SEC") under Section 17A of the
Securities Exchange Act of 1934 (or as may otherwise be
authorized by the SEC to serve in the capacity of depository or
clearing agent for the Securities or other assets of investment
companies) which acts as a Securities depository. Each of the
foregoing shall be referred to in this Agreement as a "Securities
System", and all such Securities Systems shall be listed on the
attached Appendix A. Use of a Securities System shall be in
accordance with applicable Federal Reserve Board and SEC rules
and regulations, if any, and subject to the following provisions:
(i) The Custodian may deposit the Securities
directly or through one or more agents
or Subcustodians which are also
qualified to act as custodians for
investment companies.
(ii) The Custodian shall deposit and/or
maintain the Securities in a Securities
System, provided that such Securities
are represented in an account
("Account") of the Custodian in the
Securities System that includes only
assets held by the Custodian as a
fiduciary, custodian or otherwise for
customers.
(iii) The books and records of the
Custodian shall at all times
identify those Securities belonging
to any one or more Funds which are
maintained in a Securities System.
(iv) The Custodian shall pay for Securities
purchased for the account of a Fund only
upon (a) receipt of advice from the
Securities System that such Securities
have been transferred to the Account of
the Custodian in accordance with the
rules of the Securities System, and (b)
the making of an entry on the records of
the Custodian to reflect such payment
and transfer for the account of such
Fund. The Custodian shall transfer
Securities sold for the account of a
Fund only upon (a) receipt of advice
from the Securities System that payment
for such Securities has been transferred
to the Account of the Custodian in
accordance with the rules of the
Securities System, and (b) the making of
an entry on the records of the Custodian
to reflect such transfer and payment for
the account of such Fund. Copies of all
advices from the Securities System
relating to transfers of Securities for
the account of a Fund shall be
maintained for such Fund by the
Custodian. The Custodian shall deliver
to a Fund on the next succeeding
business day daily transaction reports
which shall include each day's
transactions in the Securities System
for the account of such Fund. Such
transaction reports shall be delivered
to such Fund or any agent designated by
such Fund pursuant to Instructions, by
computer or in such other manner as such
Fund and Custodian may agree.
(v) The Custodian shall, if requested by a
Fund pursuant to Instructions, provide
such Fund with reports obtained by the
Custodian or any Subcustodian with
respect to a Securities System's
accounting system, internal accounting
control and procedures for safeguarding
Securities deposited in the Securities
System.
(vi) Upon receipt of Special Instructions,
the Custodian shall terminate the use of
any Securities System on behalf of a
Fund as promptly as practicable and
shall take all actions reasonably
practicable to safeguard the Securities
of such Fund maintained with such
Securities System.
(c) Free Delivery of Assets.
Notwithstanding any other provision of this Agreement
and except as provided in Section 3 hereof, the Custodian, upon
receipt of Special Instructions, will undertake to make free
delivery of Assets, provided such Assets are on hand and
available, in connection with a Fund's transactions and to
transfer such Assets to such broker, dealer, Subcustodian, bank,
agent, Securities System or otherwise as specified in such
Special Instructions.
<PAGE>
(d) Exchange of Securities.
Upon receipt of Instructions, the Custodian will
exchange portfolio Securities held by it for a Fund for other
Securities or cash paid in connection with any reorganization,
recapitalization, merger, consolidation, or conversion of
convertible Securities, and will deposit any such Securities in
accordance with the terms of any reorganization or protective
plan.
Without Instructions, the Custodian is authorized to
exchange Securities held by it in temporary form for Securities
in definitive form, to surrender Securities for transfer into a
name or nominee name as permitted in Section 4(b)(2), to effect
an exchange of shares in a stock split or when the par value of
the stock is changed, to sell any fractional shares, and, upon
receiving payment therefor, to surrender bonds or other
Securities held by it at maturity or call.
(e) Purchases of Assets.
(1) Securities Purchases. In accordance with
Instructions, the Custodian shall, with respect to a purchase of
Securities, pay for such Securities out of monies held for a
Fund's account for which the purchase was made, but only insofar
as monies are available therein for such purpose, and receive the
portfolio Securities so purchased. Unless the Custodian has
received Special Instructions to the contrary, such payment will
be made only upon receipt of Securities by the Custodian, a
clearing corporation of a national Securities exchange of which
the Custodian is a member, or a Securities System in accordance
with the provisions of Section 4(b)(3) hereof. Notwithstanding
the foregoing, upon receipt of Instructions: (i) in connection
with a repurchase agreement, the Custodian may release funds to a
Securities System prior to the receipt of advice from the
Securities System that the Securities underlying such repurchase
agreement have been transferred by book-entry into the Account
maintained with such Securities System by the Custodian, provided
that the Custodian's instructions to the Securities System
require that the Securities System may make payment of such funds
to the other party to the repurchase agreement only upon transfer
by book-entry of the Securities underlying the repurchase
agreement into such Account; (ii) in the case of Interest Bearing
Deposits, currency deposits, and other deposits, foreign exchange
transactions, futures contracts or options, pursuant to Sections
4(g), 4(h), 4(l), and 4(m) hereof, the Custodian may make payment
therefor before receipt of an advice of transaction; and (iii) in
the case of Securities as to which payment for the Security and
receipt of the instrument evidencing the Security are under
generally accepted trade practice or the terms of the instrument
representing the Security expected to take place in different
locations or through separate parties, such as commercial paper
which is indexed to foreign currency exchange rates, derivatives
and similar Securities, the Custodian may make payment for such
Securities prior to delivery thereof in accordance with such
generally accepted trade practice or the terms of the instrument
representing such Security.
(2) Other Assets Purchased. Upon receipt of
Instructions and except as otherwise provided herein, the
Custodian shall pay for and receive other Assets for the account
of a Fund as provided in Instructions.
(f) Sales of Assets.
(1) Securities Sold. In accordance with
Instructions, the Custodian will, with respect to a sale, deliver
or cause to be delivered the Securities thus designated as sold
to the broker or other person specified in the Instructions
relating to such sale. Unless the Custodian has received Special
Instructions to the contrary, such delivery shall be made only
upon receipt of payment therefor in the form of: (a) cash,
certified check, bank cashier's check, bank credit, or bank wire
transfer; (b) credit to the account of the Custodian with a
clearing corporation of a national Securities exchange of which
the Custodian is a member; or (c) credit to the Account of the
Custodian with a Securities System, in accordance with the
provisions of Section 4(b)(3) hereof. Notwithstanding the
foregoing, Securities held in physical form may be delivered and
paid for in accordance with "street delivery custom" to a broker
or its clearing agent, against delivery to the Custodian of a
receipt for such Securities, provided that the Custodian shall
have taken reasonable steps to ensure prompt collection of the
payment for, or return of, such Securities by the broker or its
clearing agent, and provided further that the Custodian shall not
be responsible for the selection of or the failure or inability
to perform of such broker or its clearing agent or for any
related loss arising from delivery or custody of such Securities
prior to receiving payment therefor.
(2) Other Assets Sold. Upon receipt of
Instructions and except as otherwise provided herein, the
Custodian shall receive payment for and deliver other Assets for
the account of a Fund as provided in Instructions.
(g) Options.
(1) Upon receipt of Instructions relating to the
purchase of an option or sale of a covered call option, the
Custodian shall: (a) receive and retain confirmations or other
documents, if any, evidencing the purchase or writing of the
option by a Fund; (b) if the transaction involves the sale of a
covered call option, deposit and maintain in a segregated account
the Securities (either physically or by book-entry in a
Securities System) subject to the covered call option written on
behalf of such Fund; and (c) pay, release and/or transfer such
Securities, cash or other Assets in accordance with any notices
or other communications evidencing the expiration, termination or
exercise of such options which are furnished to the Custodian by
the Options Clearing Corporation (the "OCC"), the securities or
options exchanges on which such options were traded, or such
other organization as may be responsible for handling such option
transactions.
(2) Upon receipt of Instructions relating to the
sale of a naked option (including stock index and commodity
options), the Custodian, the appropriate Fund and the
broker-dealer shall enter into an agreement to comply with the
rules of the OCC or of any registered national securities
exchange or similar organizations(s). Pursuant to that agreement
and such Fund's Instructions, the Custodian shall: (a) receive
and retain confirmations or other documents, if any, evidencing
the writing of the option; (b) deposit and maintain in a
segregated account, Securities (either physically or by
book-entry in a Securities System), cash and/or other Assets; and
(c) pay, release and/or transfer such Securities, cash or other
Assets in accordance with any such agreement and with any notices
or other communications evidencing the expiration, termination or
exercise of such option which are furnished to the Custodian by
the OCC, the securities or options exchanges on which such
options were traded, or such other organization as may be
responsible for handling such option transactions. The
appropriate Fund and the broker-dealer shall be responsible for
determining the quality and quantity of assets held in any
segregated account established in compliance with applicable
margin maintenance requirements and the performance of other
terms of any option contract.
(h) Futures Contracts.
Upon receipt of Instructions, the Custodian shall enter
into a futures margin procedural agreement among the appropriate
Fund, the Custodian and the designated futures commission
merchant (a "Procedural Agreement"). Under the Procedural
Agreement the Custodian shall: (a) receive and retain
confirmations, if any, evidencing the purchase or sale of a
futures contract or an option on a futures contract by such Fund;
(b) deposit and maintain in a segregated account cash, Securities
and/or other Assets designated as initial, maintenance or
variation "margin" deposits intended to secure such Fund's
performance of its obligations under any futures contracts
purchased or sold, or any options on futures contracts written by
such Fund, in accordance with the provisions of any Procedural
Agreement designed to comply with the provisions of the Commodity
Futures Trading Commission and/or any commodity exchange or
contract market (such as the Chicago Board of Trade), or any
similar organization(s), regarding such margin deposits; and (c)
release Assets from and/or transfer Assets into such margin
accounts only in accordance with any such Procedural Agreements.
The appropriate Fund and such futures commission merchant shall
be responsible for determining the type and amount of Assets held
in the segregated account or paid to the broker-dealer in
compliance with applicable margin maintenance requirements and
the performance of any futures contract or option on a futures
contract in accordance with its terms.
(i) Segregated Accounts.
Upon receipt of Instructions, the Custodian shall
establish and maintain on its books a segregated account or
accounts for and on behalf of a Fund, into which account or
accounts may be transferred Assets of such Fund, including
Securities maintained by the Custodian in a Securities System
pursuant to Paragraph (b)(3) of this Section 4, said account or
accounts to be maintained (i) for the purposes set forth in
Sections 4(g), 4(h) and 4(n) and (ii) for the purpose of
compliance by such Fund with the procedures required by the SEC
Investment Company Act Release Number 10666 or any subsequent
release or releases relating to the maintenance of segregated
accounts by registered investment companies, or (iii) for such
other purposes as may be set forth, from time to time, in Special
Instructions. The Custodian shall not be responsible for the
determination of the type or amount of Assets to be held in any
segregated account referred to in this paragraph, or for
compliance by the Fund with required procedures noted in (ii)
above.
(j) Depositary Receipts.
Upon receipt of Instructions, the Custodian shall
surrender or cause to be surrendered Securities to the depositary
used for such Securities by an issuer of American Depositary
Receipts or International Depositary Receipts (hereinafter
referred to, collectively, as "ADRs"), against a written receipt
therefor adequately describing such Securities and written
evidence satisfactory to the organization surrendering the same
that the depositary has acknowledged receipt of instructions to
issue ADRs with respect to such Securities in the name of the
Custodian or a nominee of the Custodian, for delivery in
accordance with such instructions.
Upon receipt of Instructions, the Custodian shall
surrender or cause to be surrendered ADRs to the issuer thereof,
against a written receipt therefor adequately describing the ADRs
surrendered and written evidence satisfactory to the organization
surrendering the same that the issuer of the ADRs has
acknowledged receipt of instructions to cause its depository to
deliver the Securities underlying such ADRs in accordance with
such instructions.
(k) Corporate Actions, Put Bonds, Called Bonds, Etc.
Upon receipt of Instructions, the Custodian shall: (a)
deliver warrants, puts, calls, rights or similar Securities to
the issuer or trustee thereof (or to the agent of such issuer or
trustee) for the purpose of exercise or sale, provided that the
new Securities, cash or other Assets, if any, acquired as a
result of such actions are to be delivered to the Custodian; and
(b) deposit Securities upon invitations for tenders thereof,
provided that the consideration for such Securities is to be paid
or delivered to the Custodian, or the tendered Securities are to
be returned to the Custodian.
Notwithstanding any provision of this Agreement to the
contrary, the Custodian shall take all necessary action, unless
otherwise directed to the contrary in Instructions, to comply
with the terms of all mandatory or compulsory exchanges, calls,
tenders, redemptions, or similar rights of security ownership,
and shall notify the appropriate Fund of such action in writing
by facsimile transmission or in such other manner as such Fund
and Custodian may agree in writing.
The Fund agrees that if it gives an Instruction for the
performance of an act on the last permissible date of a period
established by any optional offer or on the last permissible date
for the performance of such act, the Fund shall hold the Bank
harmless from any adverse consequences in connection with acting
upon or failing to act upon such Instructions.
(l) Interest Bearing Deposits.
Upon receipt of Instructions directing the Custodian to
purchase interest bearing fixed term and call deposits
(hereinafter referred to, collectively, as "Interest Bearing
Deposits") for the account of a Fund, the Custodian shall
purchase such Interest Bearing Deposits in the name of such Fund
with such banks or trust companies, including the Custodian, any
Subcustodian or any subsidiary or affiliate of the Custodian
(hereinafter referred to as "Banking Institutions"), and in such
amounts as such Fund may direct pursuant to Instructions. Such
Interest Bearing Deposits may be denominated in U.S. dollars or
other currencies, as such Fund may determine and direct pursuant
to Instructions. The responsibilities of the Custodian to a Fund
for Interest Bearing Deposits issued by the Custodian shall be
that of a U.S. bank for a similar deposit. With respect to
Interest Bearing Deposits other than those issued by the
Custodian, (a) the Custodian shall be responsible for the
collection of income and the transmission of cash to and from
such accounts; and (b) the Custodian shall have no duty with
respect to the selection of the Banking Institution or for the
failure of such Banking Institution to pay upon demand.
(m) Foreign Exchange Transactions.
(1) Each Fund hereby appoints the Custodian as
its agent in the execution of all currency exchange transactions.
The Custodian agrees to provide exchange rate and U.S. Dollar
information, in writing, to the Funds. Such information shall be
supplied by the Custodian at least by the business day prior to
the value date of the foreign exchange transaction, provided that
the Custodian receives the request for such information at least
two business days prior to the value date of the transaction.
(2) Upon receipt of Instructions, the Custodian
shall settle foreign exchange contracts or options to purchase
and sell foreign currencies for spot and future delivery on
behalf of and for the account of a Fund with such currency
brokers or Banking Institutions as such Fund may determine and
direct pursuant to Instructions. If, in its Instructions, a Fund
does not direct the Custodian to utilize a particular currency
broker or Banking Institution, the Custodian is authorized to
select such currency broker or Banking Institution as it deems
appropriate to execute the Fund's foreign currency transaction.
(3) Each Fund accepts full responsibility for its
use of third party foreign exchange brokers and for execution of
said foreign exchange contracts and understands that the Fund
shall be responsible for any and all costs and interest charges
which may be incurred as a result of the failure or delay of its
third party broker to deliver foreign exchange. The Custodian
shall have no responsibility or liability with respect to the
selection of the currency brokers or Banking Institutions with
which a Fund deals or the performance of such brokers or Banking
Institutions.
(4) Notwithstanding anything to the contrary
contained herein, upon receipt of Instructions the Custodian may,
in connection with a foreign exchange contract, make free
outgoing payments of cash in the form of U.S. Dollars or foreign
currency prior to receipt of confirmation of such foreign
exchange contract or confirmation that the countervalue currency
completing such contract has been delivered or received.
(5) The Custodian shall not be obligated to enter
into foreign exchange transactions as principal. However, if the
Custodian has made available to a Fund its services as a
principal in foreign exchange transactions and subject to any
separate agreement between the parties relating to such
transactions, the Custodian shall enter into foreign exchange
contracts or options to purchase and sell foreign currencies for
spot and future delivery on behalf of and for the account of the
Fund, with the Custodian as principal.
(n) Pledges or Loans of Securities.
(1) Upon receipt of Instructions from a Fund, the
Custodian will release or cause to be released Securities held in
custody to the pledgees designated in such Instructions by way of
pledge or hypothecation to secure loans incurred by such Fund
with various lenders including but not limited to UMB Bank, n.a.;
provided, however, that the Securities shall be released only
upon payment to the Custodian of the monies borrowed, except that
in cases where additional collateral is required to secure
existing borrowings, further Securities may be released or
delivered, or caused to be released or delivered for that purpose
upon receipt of Instructions. Upon receipt of Instructions, the
Custodian will pay, but only from funds available for such
purpose, any such loan upon re-delivery to it of the Securities
pledged or hypothecated therefor and upon surrender of the note
or notes evidencing such loan. In lieu of delivering collateral
to a pledgee, the Custodian, on the receipt of Instructions,
shall transfer the pledged Securities to a segregated account for
the benefit of the pledgee.
(2) Upon receipt of Special Instructions, and
execution of a separate Securities Lending Agreement, the
Custodian will release Securities held in custody to the borrower
designated in such Instructions and may, except as otherwise
provided below, deliver such Securities prior to the receipt of
collateral, if any, for such borrowing, provided that, in case of
loans of Securities held by a Securities System that are secured
by cash collateral, the Custodian's instructions to the
Securities System shall require that the Securities System
deliver the Securities of the appropriate Fund to the borrower
thereof only upon receipt of the collateral for such borrowing.
The Custodian shall have no responsibility or liability for any
loss arising from the delivery of Securities prior to the receipt
of collateral. Upon receipt of Instructions and the loaned
Securities, the Custodian will release the collateral to the
borrower.
(o) Stock Dividends, Rights, Etc.
The Custodian shall receive and collect all stock
dividends, rights, and other items of like nature and, upon
receipt of Instructions, take action with respect to the same as
directed in such Instructions.
(p) Routine Dealings.
The Custodian will, in general, attend to all routine
and mechanical matters in accordance with industry standards in
connection with the sale, exchange, substitution, purchase,
transfer, or other dealings with Securities or other property of
each Fund except as may be otherwise provided in this Agreement
or directed from time to time by Instructions from any particular
Fund. The Custodian may also make payments to itself or others
from the Assets for disbursements and out-of-pocket expenses
incidental to handling Securities or other similar items relating
to its duties under this Agreement, provided that all such
payments shall be accounted for to the appropriate Fund.
(q) Collections.
The Custodian shall (a) collect amounts due and payable
to each Fund with respect to portfolio Securities and other
Assets; (b) promptly credit to the account of each Fund all
income and other payments relating to portfolio Securities and
other Assets held by the Custodian hereunder upon Custodian's
receipt of such income or payments or as otherwise agreed in
writing by the Custodian and any particular Fund; (c) promptly
endorse and deliver any instruments required to effect such
collection; and (d) promptly execute ownership and other
certificates and affidavits for all federal, state, local and
foreign tax purposes in connection with receipt of income or
other payments with respect to portfolio Securities and other
Assets, or in connection with the transfer of such Securities or
other Assets; provided, however, that with respect to portfolio
Securities registered in so-called street name, or physical
Securities with variable interest rates, the Custodian shall use
its best efforts to collect amounts due and payable to any such
Fund. The Custodian shall notify a Fund in writing by facsimile
transmission or in such other manner as such Fund and Custodian
may agree in writing if any amount payable with respect to
portfolio Securities or other Assets is not received by the
Custodian when due. The Custodian shall not be responsible for
the collection of amounts due and payable with respect to
portfolio Securities or other Assets that are in default.
(r) Bank Accounts.
Upon Instructions, the Custodian shall open and operate
a bank account or accounts on the books of the Custodian;
provided that such bank account(s) shall be in the name of the
Custodian or a nominee thereof, for the account of one or more
Funds, and shall be subject only to draft or order of the
Custodian. The responsibilities of the Custodian to any one or
more such Funds for deposits accepted on the Custodian's books
shall be that of a U.S. bank for a similar deposit.
(s) Dividends, Distributions and Redemptions.
To enable each Fund to pay dividends or other
distributions to shareholders of each such Fund and to make
payment to shareholders who have requested repurchase or
redemption of their shares of each such Fund (collectively, the
"Shares"), the Custodian shall release cash or Securities insofar
as available. In the case of cash, the Custodian shall, upon the
receipt of Instructions, transfer such funds by check or wire
transfer to any account at any bank or trust company designated
by each such Fund in such Instructions. In the case of
Securities, the Custodian shall, upon the receipt of Special
Instructions, make such transfer to any entity or account
designated by each such Fund in such Special Instructions.
(t) Proceeds from Shares Sold.
The Custodian shall receive funds representing cash
payments received for shares issued or sold from time to time by
each Fund, and shall credit such funds to the account of the
appropriate Fund. The Custodian shall notify the appropriate
Fund of Custodian's receipt of cash in payment for shares issued
by such Fund by facsimile transmission or in such other manner as
such Fund and the Custodian shall agree. Upon receipt of
Instructions, the Custodian shall: (a) deliver all federal funds
received by the Custodian in payment for shares as may be set
forth in such Instructions and at a time agreed upon between the
Custodian and such Fund; and (b) make federal funds available to
a Fund as of specified times agreed upon from time to time by
such Fund and the Custodian, in the amount of checks received in
payment for shares which are deposited to the accounts of such
Fund.
(u) Proxies and Notices; Compliance with the
Shareholders Communication Act of 1985.
The Custodian shall deliver or cause to be delivered to
the appropriate Fund all forms of proxies, all notices of
meetings, and any other notices or announcements affecting or
relating to Securities owned by such Fund that are received by
the Custodian, any Subcustodian, or any nominee of either of
them, and, upon receipt of Instructions, the Custodian shall
execute and deliver, or cause such Subcustodian or nominee to
execute and deliver, such proxies or other authorizations as may
be required. Except as directed pursuant to Instructions,
neither the Custodian nor any Subcustodian or nominee shall vote
upon any such Securities, or execute any proxy to vote thereon,
or give any consent or take any other action with respect
thereto.
The Custodian will not release the identity of any Fund
to an issuer which requests such information pursuant to the
Shareholder Communications Act of 1985 for the specific purpose
of direct communications between such issuer and any such Fund
unless a particular Fund directs the Custodian otherwise in
writing.
(v) Books and Records.
The Custodian shall maintain such records relating to
its activities under this Agreement as are required to be
maintained by Rule 31a-1 under the Investment Company Act of 1940
("the 1940 Act") and to preserve them for the periods prescribed
in Rule 31a-2 under the 1940 Act. These records shall be open
for inspection by duly authorized officers, employees or agents
(including independent public accountants) of the appropriate
Fund during normal business hours of the Custodian.
The Custodian shall provide accountings relating to its
activities under this Agreement as shall be agreed upon by each
Fund and the Custodian.
<PAGE>
(w) Opinion of Fund's Independent Certified Public
Accountants.
The Custodian shall take all reasonable action as each
Fund may request to obtain from year to year favorable opinions
from each such Fund's independent certified public accountants
with respect to the Custodian's activities hereunder and in
connection with the preparation of each such Fund's periodic
reports to the SEC and with respect to any other requirements of
the SEC.
(x) Reports by Independent Certified Public
Accountants.
At the request of a Fund, the Custodian shall deliver
to such Fund a written report prepared by the Custodian's
independent certified public accountants with respect to the
services provided by the Custodian under this Agreement,
including, without limitation, the Custodian's accounting system,
internal accounting control and procedures for safeguarding cash,
Securities and other Assets, including cash, Securities and other
Assets deposited and/or maintained in a Securities System or with
a Subcustodian. Such report shall be of sufficient scope and in
sufficient detail as may reasonably be required by such Fund and
as may reasonably be obtained by the Custodian.
(y) Bills and Other Disbursements.
Upon receipt of Instructions, the Custodian shall pay,
or cause to be paid, all bills, statements, or other obligations
of a Fund.
5. SUBCUSTODIANS.
From time to time, in accordance with the relevant
provisions of this Agreement, the Custodian may appoint one or
more Domestic Subcustodians, Foreign Subcustodians, Special
Subcustodians, or Interim Subcustodians (as each are hereinafter
defined) to act on behalf of any one or more Funds. A Domestic
Subcustodian, in accordance with the provisions of this
Agreement, may also appoint a Foreign Subcustodian, Special
Subcustodian, or Interim Subcustodian to act on behalf of any one
or more Funds. For purposes of this Agreement, all Domestic
Subcustodians, Foreign Subcustodians, Special Subcustodians and
Interim Subcustodians shall be referred to collectively as
"Subcustodians".
(a) Domestic Subcustodians.
The Custodian may, at any time and from time to time,
appoint any bank as defined in Section 2(a)(5) of the 1940 Act or
any trust company or other entity, any of which meet the
requirements of a custodian under Section 17(f) of the 1940 Act
and the rules and regulations thereunder, to act for the
Custodian on behalf of any one or more Funds as a subcustodian
for purposes of holding Assets of such Fund(s) and performing
other functions of the Custodian within the United States (a
"Domestic Subcustodian"). Each Fund shall approve in writing the
appointment of the proposed Domestic Subcustodian; and the
Custodian's appointment of any such Domestic Subcustodian shall
not be effective without such prior written approval of the
Fund(s). Each such duly approved Domestic Subcustodian shall be
listed on Appendix A attached hereto, as it may be amended, from
time to time.
(b) Foreign Subcustodians.
The Custodian may at any time appoint, or cause a Domestic
Subcustodian to appoint, any bank, trust company or other entity
meeting the requirements of an "eligible foreign custodian" under
Section 17(f) of the 1940 Act and the rules and regulations
thereunder to act for the Custodian on behalf of any one or more
Funds as a subcustodian or sub-subcustodian (if appointed by a
Domestic Subcustodian) for purposes of holding Assets of the
Fund(s) and performing other functions of the Custodian in
countries other than the United States of America (hereinafter
referred to as a "Foreign Subcustodian" in the context of either
a subcustodian or a sub-subcustodian); provided that the
Custodian shall have obtained written confirmation from each Fund
of the approval of the Board of Directors or other governing body
of each such Fund (which approval may be withheld in the sole
discretion of such Board of Directors or other governing body or
entity) with respect to (i) the identity of any proposed Foreign
Subcustodian (including branch designation), (ii) the country or
countries in which, and the securities depositories or clearing
agencies (hereinafter "Securities Depositories and Clearing
Agencies"), if any, through which, the Custodian or any proposed
Foreign Subcustodian is authorized to hold Securities and other
Assets of each such Fund, and (iii) the form and terms of the
subcustodian agreement to be entered into with such proposed
Foreign Subcustodian. Each such duly approved Foreign
Subcustodian and the countries where and the Securities
Depositories and Clearing Agencies through which they may hold
Securities and other Assets of the Fund(s) shall be listed on
Appendix A attached hereto, as it may be amended, from time to
time. Each Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be
held in a country in which no Foreign Subcustodian is authorized
to act, in order that there shall be sufficient time for the
Custodian, or any Domestic Subcustodian, to effect the
appropriate arrangements with a proposed Foreign Subcustodian,
including obtaining approval as provided in this Section 5(b).
In connection with the appointment of any Foreign Subcustodian,
the Custodian shall, or shall cause the Domestic Subcustodian to,
enter into a subcustodian agreement with the Foreign Subcustodian
in form and substance approved by each such Fund. The Custodian
shall not consent to the amendment of, and shall cause any
Domestic Subcustodian not to consent to the amendment of, any
agreement entered into with a Foreign Subcustodian, which
materially affects any Fund's rights under such agreement, except
upon prior written approval of such Fund pursuant to Special
Instructions.
(c) Interim Subcustodians.
Notwithstanding the foregoing, in the event that a Fund
shall invest in an Asset to be held in a country in which no
Foreign Subcustodian is
authorized to act, the Custodian shall notify such Fund in
writing by facsimile transmission or in such other manner as such
Fund and the Custodian shall agree in writing of the
unavailability of an approved Foreign Subcustodian in such
country; and upon the receipt of Special Instructions from such
Fund, the Custodian shall, or shall cause its Domestic
Subcustodian to, appoint or approve an entity (referred to herein
as an "Interim Subcustodian") designated in such Special
Instructions to hold such Security or other Asset.
(d) Special Subcustodians.
Upon receipt of Special Instructions, the Custodian
shall, on behalf of a Fund, appoint one or more banks, trust
companies or other entities designated in such Special
Instructions to act for the Custodian on behalf of such Fund as a
subcustodian for purposes of: (i) effecting third-party
repurchase transactions with banks, brokers, dealers or other
entities through the use of a common custodian or subcustodian;
(ii) providing depository and clearing agency services with
respect to certain variable rate demand note Securities, (iii)
providing depository and clearing agency services with respect to
dollar denominated Securities, and (iv) effecting any other
transactions designated by such Fund in such Special
Instructions. Each such designated subcustodian (hereinafter
referred to as a "Special Subcustodian") shall be listed on
Appendix A attached hereto, as it may be amended from time to
time. In connection with the appointment of any Special
Subcustodian, the Custodian shall enter into a subcustodian
agreement with the Special Subcustodian in form and substance
approved by the appropriate Fund in Special Instructions. The
Custodian shall not amend any subcustodian agreement entered into
with a Special Subcustodian, or waive any rights under such
agreement, except upon prior approval pursuant to Special
Instructions.
(e) Termination of a Subcustodian.
The Custodian may, at any time in its discretion upon
notification to the appropriate Fund(s), terminate any
Subcustodian of such Fund(s) in accordance with the termination
provisions under the applicable subcustodian agreement, and upon
the receipt of Special Instructions, the Custodian will terminate
any Subcustodian in accordance with the termination provisions
under the applicable subcustodian agreement.
(f) Certification Regarding Foreign Subcustodians.
Upon request of a Fund, the Custodian shall deliver to such
Fund a certificate stating: (i) the identity of each Foreign
Subcustodian then acting on behalf of the Custodian; (ii) the
countries in which and the Securities Depositories and Clearing
Agencies through which each such Foreign Subcustodian is then
holding cash, Securities and other Assets of such Fund; and (iii)
such other information as may be requested by such Fund, and as
the Custodian shall be reasonably able to obtain, to evidence
compliance with rules and regulations under the 1940 Act.
6. STANDARD OF CARE.
(a) General Standard of Care.
The Custodian shall be liable to the Company for all
losses, damages and reasonable costs and expenses suffered or
incurred by a Fund resulting from the gross negligence or willful
misfeasance of the Custodian; provided, however, in no event
shall the Custodian be liable for special, indirect or
consequential damages arising under or in connection with this
Agreement.
(b) Actions Prohibited by Applicable Law, Events
Beyond Custodian's Control, Sovereign Risk, Etc.
In no event shall the Custodian or any Domestic
Subcustodian incur liability hereunder (i) if the Custodian or
any Subcustodian or Securities System, or any subcustodian,
Securities System, Securities Depository or Clearing Agency
utilized by the Custodian or any such Subcustodian, or any
nominee of the Custodian or any Subcustodian (individually, a
"Person") is prevented, forbidden or delayed from performing, or
omits to perform, any act or thing which this Agreement provides
shall be performed or omitted to be performed, by reason of: (a)
any provision of any present or future law or regulation or order
of the United States of America, or any state thereof, or of any
foreign country, or political subdivision thereof or of any court
of competent jurisdiction (and neither the Custodian nor any
other Person shall be obligated to take any action contrary
thereto); or (b) any event beyond the control of the Custodian or
other Person such as armed conflict, riots, strikes, lockouts,
labor disputes, equipment or transmission failures, natural
disasters, or failure of the mails, transportation,
communications or power supply; or (ii) for any loss, damage,
cost or expense resulting from "Sovereign Risk." A "Sovereign
Risk" shall mean nationalization, expropriation, currency
devaluation, revaluation or fluctuation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, taxes, levies or other
charges affecting a Fund's Assets; or acts of armed conflict,
terrorism, insurrection or revolution; or any other act or event
beyond the Custodian's or such other Person's control.
(c) Liability for Past Records.
Neither the Custodian nor any Domestic Subcustodian
shall have any liability in respect of any loss, damage or
expense suffered by a Fund, insofar as such loss, damage or
expense arises from the performance of the Custodian or any
Domestic Subcustodian in reliance upon records that were
maintained for such Fund by entities other than the Custodian or
any Domestic Subcustodian prior to the Custodian's employment
hereunder.
(d) Advice of Counsel.
The Custodian and all Domestic Subcustodians shall be
entitled to receive and act upon advice of counsel of its own
choosing on all matters. The Custodian and all Domestic
Subcustodians shall be without liability for any actions taken or
omitted in good faith pursuant to the advice of counsel.
(e) Advice of the Fund and Others.
The Custodian and any Domestic Subcustodian may rely
upon the advice of any Fund and upon statements of such Fund's
accountants and other persons believed by it in good faith to be
expert in matters upon which they are consulted, and neither the
Custodian nor any Domestic Subcustodian shall be liable for any
actions taken or omitted, in good faith, pursuant to such advice
or statements.
(f) Instructions Appearing to be Genuine.
The Custodian and all Domestic Subcustodians shall be
fully protected and indemnified in acting as a custodian
hereunder upon any Resolutions of the Board of Directors or
Trustees, Instructions, Special Instructions, advice, notice,
request, consent, certificate, instrument or paper appearing to
it to be genuine and to have been properly executed and shall,
unless otherwise specifically provided herein, be entitled to
receive as conclusive proof of any fact or matter required to be
ascertained from any Fund hereunder a certificate signed by any
officer of such Fund authorized to countersign or confirm Special
Instructions.
(g) Exceptions from Liability.
Without limiting the generality of any other provisions
hereof, neither the Custodian nor any Domestic Subcustodian shall
be under any duty or obligation to inquire into, nor be liable
for:
(i) the validity of the issue of any Securities
purchased by or for any Fund, the legality of
the purchase thereof or evidence of ownership
required to be received by any such Fund, or
the propriety of the decision to purchase or
amount paid therefor;
(ii) the legality of the sale of any Securities by
or for any Fund, or the propriety of the
amount for which the same were sold; or
(iii) any other expenditures, encumbrances of
Securities, borrowings or similar
actions with respect to any Fund's
Assets;
and may, until notified to the contrary, presume that all
Instructions or Special Instructions received by it are not in
conflict with or in any way contrary to any provisions of any
such Fund's Declaration of Trust, Partnership Agreement, Articles
of Incorporation or By-Laws or votes or proceedings of the
shareholders, trustees, partners or directors of any such Fund,
or any such Fund's currently effective Registration Statement on
file with the SEC.
7. LIABILITY OF THE CUSTODIAN FOR ACTIONS OF OTHERS.
(a) Domestic Subcustodians.
The Custodian shall be liable for the acts or omissions
of any Domestic Subcustodian to the same extent as if such
actions or omissions were performed by the Custodian itself.
(b) Liability for Acts and Omissions of Foreign
Subcustodians.
The Custodian shall be liable to the Company for any
loss or damage to a Fund caused by or resulting from the acts or
omissions of any Foreign Subcustodian to the extent that, under
the terms set forth in the subcustodian agreement between the
Custodian or a Domestic Subcustodian and such Foreign
Subcustodian, the Foreign Subcustodian has failed to perform in
accordance with the standard of conduct imposed under such
subcustodian agreement and the Custodian or Domestic Subcustodian
recovers from the Foreign Subcustodian under the applicable
subcustodian agreement.
(c) Securities Systems, Interim Subcustodians, Special
Subcustodians, Securities Depositories and
Clearing Agencies.
The Custodian shall not be liable to the Company for
any loss, damage or expense suffered or incurred by a Fund
resulting from or occasioned by the actions or omissions of a
Securities System, Interim Subcustodian, Special Subcustodian, or
Securities Depository and Clearing Agency unless such loss,
damage or expense is caused by, or results from, the gross
negligence or willful misfeasance of the Custodian.
(d) Defaults or Insolvencies of Brokers, Banks, Etc.
The Custodian shall not be liable for any loss, damage
or expense suffered or incurred by the Company resulting from or
occasioned by the actions, omissions, neglects, defaults or
insolvency of any broker, bank, trust company or any other person
with whom the Custodian may deal (other than any of such entities
acting as a Subcustodian, Securities System or Securities
Depository and Clearing Agency, for whose actions the liability
of the Custodian is set out elsewhere in this Agreement) unless
such loss, damage or expense is caused by, or results from, the
gross negligence or willful misfeasance of the Custodian.
(e) Reimbursement of Expenses.
The Company agrees to reimburse the Custodian for all
out-of-pocket expenses incurred by the Custodian in connection
with this Agreement, but excluding salaries and usual overhead
expenses.
8. INDEMNIFICATION.
(a) Indemnification by the Company.
Subject to the limitations set forth in this Agreement,
the Company agrees to indemnify and hold harmless the Custodian
and its nominees from all losses, damages and expenses (including
attorneys' fees) suffered or incurred by the Custodian or its
nominee caused by or arising from actions taken by the Custodian,
its employees or agents in the performance of its duties and
obligations under this Agreement, including, but not limited to,
any indemnification obligations undertaken by the Custodian under
any relevant subcustodian agreement; provided, however, that such
indemnity shall not apply to the extent the Custodian is liable
under Sections 6 or 7 hereof.
If the Company requires the Custodian to take any
action with respect to Securities, which action involves the
payment of money or which may, in the opinion of the Custodian,
result in the Custodian or its nominee assigned to such Fund
being liable for the payment of money or incurring liability of
some other form, the Company, as a prerequisite to requiring the
Custodian to take such action, shall provide indemnity to the
Custodian in an amount and form satisfactory to it.
(b) Indemnification by Custodian.
Subject to the limitations set forth in this Agreement
and in addition to the obligations provided in Sections 6 and 7,
the Custodian agrees to indemnify and hold harmless the Company
from all losses, damages and expenses suffered or incurred by a
Fund caused by the gross negligence or willful misfeasance of the
Custodian.
9. ADVANCES.
In the event that, pursuant to Instructions, the
Custodian or any Subcustodian, Securities System, or Securities
Depository or Clearing Agency acting either directly or
indirectly under agreement with the Custodian (each of which for
purposes of this Section 9 shall be referred to as "Custodian"),
makes any payment or transfer of funds on behalf of any Fund as
to which there would be, at the close of business on the date of
such payment or transfer, insufficient funds held by the
Custodian on behalf of any such Fund, the Custodian may, in its
discretion without further Instructions, provide an advance
("Advance") to any such Fund in an amount sufficient to allow the
completion of the transaction by reason of which such payment or
transfer of funds is to be made. In addition, in the event the
Custodian is directed by Instructions to make any payment or
transfer of funds on behalf of any Fund as to which it is
subsequently determined that such Fund has overdrawn its cash
account with the Custodian as of the close of business on the
date of such payment or transfer, said overdraft shall constitute
an Advance. Any Advance shall be payable by the Fund on behalf
of which the Advance was made on demand by Custodian, unless
otherwise agreed by such Fund and the Custodian, and shall accrue
interest from the date of the Advance to the date of payment by
such Fund to the Custodian at a rate agreed upon in writing from
time to time by the Custodian and such Fund. It is understood
that any transaction in respect of which the Custodian shall have
made an Advance, including but not limited to a foreign exchange
contract or transaction in respect of which the Custodian is not
acting as a principal, is for the account of and at the risk of
the Fund on behalf of which the Advance was made, and not, by
reason of such Advance, deemed to be a transaction undertaken by
the Custodian for its own account and risk. The Custodian and
each of the Funds which are parties to this Agreement acknowledge
that the purpose of Advances is to finance temporarily the
purchase or sale of Securities for prompt delivery in accordance
with the settlement terms of such transactions or to meet
emergency expenses not reasonably foreseeable by a Fund. The
Custodian shall promptly notify the appropriate Fund of any
Advance. Such notification shall be sent by facsimile
transmission or in such other manner as such Fund and the
Custodian may agree.
10. LIENS.
The Bank shall have a lien on the Property in the
Custody Account to secure payment of fees and expenses for the
services rendered under this Agreement. If the Bank advances
cash or securities to the Fund for any purpose or in the event
that the Bank or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of its duties hereunder, except
such as may arise from its or its nominee's negligent action,
negligent failure to act or willful misconduct, any Property at
any time held for the Custody Account shall be security therefor
and the Fund hereby grants a security interest therein to the
Bank. The Fund shall promptly reimburse the Bank for any such
advance of cash or securities or any such taxes, charges,
expenses, assessments, claims or liabilities upon request for
payment, but should the Fund fail to so reimburse the Bank, the
Bank shall be entitled to dispose of such Property to the extent
necessary to obtain reimbursement. The Bank shall be entitled to
debit any account of the Fund with the Bank including, without
limitation, the Custody Account, in connection with any such
advance and any interest on such advance as the Bank deems
reasonable.
11. COMPENSATION.
Each Fund will pay to the Custodian such compensation
as is agreed to in writing by the Custodian and each such Fund
from time to time. Such compensation, together with all amounts
for which the Custodian is to be reimbursed in accordance with
Section 7(e), shall be billed to each such Fund and paid in cash
to the Custodian.
12. POWERS OF ATTORNEY.
Upon request, each Fund shall deliver to the Custodian
such proxies, powers of attorney or other instruments as may be
reasonable and necessary or desirable in connection with the
performance by the Custodian or any Subcustodian of their
respective obligations under this Agreement or any applicable
subcustodian agreement.
<PAGE>
13. TERMINATION AND ASSIGNMENT.
The Company, on behalf of any Fund, or the Custodian
may terminate this Agreement by notice in writing, delivered or
mailed, postage prepaid (certified mail, return receipt
requested) to the other not less than 90 days prior to the date
upon which such termination shall take effect. Upon termination
of this Agreement, the appropriate Fund shall pay to the
Custodian such fees as may be due the Custodian hereunder as well
as its reimbursable disbursements, costs and expenses paid or
incurred. Upon termination of this Agreement, the Custodian
shall deliver, at the terminating party's expense, all Assets
held by it hereunder to the appropriate Fund or as otherwise
designated by such Fund by Special Instructions. Upon such
delivery, the Custodian shall have no further obligations or
liabilities under this Agreement except as to the final
resolution of matters relating to activity occurring prior to the
effective date of termination.
This Agreement may not be assigned by the Custodian or
the Company without the respective consent of the other, duly
authorized by a resolution by its Board of Directors or Trustees.
14. ADDITIONAL FUNDS.
An additional Fund or Funds may become subject to this
Agreement after the date hereof by an instrument in writing to
such effect signed by the Company, on behalf of such Fund or
Funds, and the Custodian. If this Agreement is terminated as to
one or more of the Funds (but less than all of the Funds) or if
an additional Fund or Funds shall become a party to this
Agreement, there shall be delivered to each party an Appendix B
or an amended Appendix B, signed by the Company, on behalf of
each of the additional Funds (if any) and each of the remaining
Funds as well as the Custodian, deleting or adding such Fund or
Funds, as the case may be. The termination of this Agreement as
to less than all of the Funds shall not affect the obligations of
the Custodian and the remaining Funds hereunder as set forth on
the signature page hereto and in Appendix B as revised from time
to time.
15. NOTICES.
As to each Fund, notices, requests, instructions and
other writings delivered to Invesco MIM, Inc., 1315 Peachtree
Street, Suite 500, Attention: _______________, Atlanta, Georgia
30309, postage prepaid, or to such other address as any
particular Fund may have designated to the Custodian in writing,
shall be deemed to have been properly delivered or given to a
Fund.
Notices, requests, instructions and other writings
delivered to the Securities Administration Department of the
Custodian at its office at 928 Grand Avenue, Kansas City,
Missouri, or mailed postage prepaid, to the Custodian's
Securities Administration Department, Post Office Box 226, Kansas
City, Missouri 64141, or to such other addresses as the Custodian
may have designated to each Fund in writing, shall be deemed to
have been properly delivered or given to the Custodian hereunder;
provided, however, that procedures for the delivery of
Instructions and Special Instructions shall be governed by
Section 2(c) hereof.
16. MISCELLANEOUS.
(a) This Agreement is executed and delivered in the
State of Missouri and shall be governed by the laws of such
state.
(b) All of the terms and provisions of this Agreement
shall be binding upon, and inure to the benefit of, and be
enforceable by the respective successors and assigns of the
parties hereto.
(c) No provisions of this Agreement may be amended,
modified or waived, in any manner except in writing, properly
executed by both parties hereto; provided, however, Appendix A
may be amended from time to time as Domestic Subcustodians,
Foreign Subcustodians, Special Subcustodians, and Securities
Depositories and Clearing Agencies are approved or terminated
according to the terms of this Agreement.
(d) The captions in this Agreement are included for
convenience of reference only, and in no way define or delimit
any of the provisions hereof or otherwise affect their
construction or effect.
(e) This Agreement shall be effective as of the date
of execution hereof.
(f) This Agreement may be executed simultaneously in
two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the
same instrument.
(g) The following terms are defined terms within the
meaning of this Agreement, and the definitions thereof are found
in the following sections of the Agreement:
Term Section
Account 4(b)(3)(ii)
ADR'S 4(j)
Advance 9
Assets 2
Authorized Person 3
Banking Institution 4(1)
Domestic Subcustodian 5(a)
Foreign Subcustodian 5(b)
Instruction 2
Interim Subcustodian 5(c)
Interest Bearing Deposit 4(1)
Liability 10
OCC 4(g)(2)
Person 6(b)
Procedural Agreement 4(h)
SEC 4(b)(3)
Securities 2
Securities Depositories 5(b)
and Clearing Agencies
Securities System 4(b)(3)
Shares 4(s)
Sovereign Risk 6(b)
Special Instruction 2
Special Subcustodian 5(c)
Subcustodian 5
1940 Act 4(v)
(h) If any part, term or provision of this Agreement
is held to be illegal, in conflict with any law or otherwise
invalid by any court of competent jurisdiction, the remaining
portion or portions shall be considered severable and shall not
be affected, and the rights and obligations of the parties shall
be construed and enforced as if this Agreement did not contain
the particular part, term or provision held to be illegal or
invalid.
(i) This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to
the subject matter hereof, and accordingly supersedes, as of the
effective date of this Agreement, any custodian agreement
heretofore in effect between the Company and the Custodian.
IN WITNESS WHEREOF, the parties hereto have caused this
Custody Agreement to be executed by their respective duly
authorized officers.
THE EBI FUNDS, INC.
ATTEST: By: ------------------------------
Name: ----------------------------
Title: ----------------------------
------------------------- Date: -----------------------------
UMB BANK, N.A.
ATTEST: By: ------------------------------
Name: ----------------------------
Title: ----------------------------
------------------------- Date: -----------------------------
<PAGE>
APPENDIX A
CUSTODY AGREEMENT
DOMESTIC SUBCUSTODIANS:
United Missouri Trust Company of New York
Morgan Stanley Trust Company (Foreign Securities Only)
SECURITIES SYSTEMS:
Federal Book Entry
Depository Trust Company
Participant's Trust Company
SPECIAL SUBCUSTODIANS:
SECURITIES DEPOSITORIES
COUNTRIES FOREIGN SUBCUSTODIANS CLEARING AGENCIES
Euroclear
The EBI Funds, Inc. UMB Bank, N.A.
By: --------------------- By: --------------------------
Name: ------------------- Name: -----------------------
Title: ------------------- Title: ----------------------
Date: -------------------- Date: -----------------------
<PAGE>
APPENDIX B
CUSTODY AGREEMENT
The following portfolios of The EBI Funds, Inc. ("Funds")
are hereby made subject to the Custody Agreement dated ---------,
1995, between UMB Bank, N.A. ("Custodian") and The EBI Funds,
Inc.:
Cash Management Portfolio Equity Portfolio
Flex Portfolio Income Portfolio
MultiFlex Portfolio Relative Return Bond Portfolio
International Value Portfolio Real Estate Portfolio
UMB Bank, N.A. The EBI Funds, Inc.
By: --------------------- By: --------------------------
Name: ------------------- Name: -----------------------
Title: ------------------- Title: ----------------------
Date: -------------------- Date: -----------------------
EXHIBIT 9
OPERATING SERVICES AGREEMENT
AGREEMENT made as of the 1st day of July 1993 and amended
the 1st day of November, 1993, in Atlanta, Georgia, by and
between The EBI Funds, Inc., a Maryland corporation (the "Fund"),
and INVESCO Services, Inc., a Georgia corporation (hereinafter
referred to as "ISI"), is hereby amended this 19th day of April,
1995, for the sole purpose of adding the Real Estate Portfolio
and the International Value Portfolio to the Agreement.
WHEREAS, the Fund is engaged in business as an open-end
management investment company, is registered as such under the
Investment Company Act of 1940, as amended (the "Act"), and is
authorized to issues shares representing interests in the
following separate portfolios of investments: (1) the Equity
Portfolio, (2) the Income Portfolio, (3) the Flex Portfolio, (4)
the MultiFlex Portfolio, (5) the Relative Return Bond Portfolio,
(6) the Real Estate Portfolio, (7) the International Value
Portfolio and (8) the Cash Management Portfolio (the "Series");
and
WHEREAS, ISI is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business
of acting as investment adviser and providing certain other
administrative, sub-accounting, and recordkeeping services to
certain investment companies, including the Fund; and
WHEREAS, the Fund desires to retain ISI, or companies
retained by ISI at its expense, to render certain operational
services which are necessary for the day-to-day operations of the
Fund's Series (the "Services") in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, ISI desires to be retained to perform directly, or
to retain companies at its expense to perform, such services on
said terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter contained, and Fund and ISI agree as follows:
1. The Fund hereby retains ISI to provide, or, upon
receipt of written approval of the Fund arrange for
other companies, including affiliates of ISI, to
provide to the Series: (a) such accounting services and
functions, including costs and expenses of any
independent public accountants, as are reasonable
necessary for the operation of the Series; (b) such
legal services and functions, including costs and
expenses of any outside legal counsel that may be
retained to perform non-litigation-related legal
services for the Fund or the Directors of the Fund, as
are reasonable necessary for the operation of the
Series; (c) such dividend disbursing agent, dividend
reinvestment agent, transfer agent, and registrar
services and functions (including answering inquiries
related to shareholder Fund accounts) as are reasonably
necessary for the operation of the Series; (d) such
custodian and depository services and functions as are
reasonably necessary for the operation of the Series;
(e) such independent pricing services as are reasonably
necessary for the operation of the Series; (f) such
shareholder reports (including dividend notices,
statements of additional information and prospectuses
sent to existing shareholders) and reports to broker-
dealers, financial institutions and other organizations
which render services and assistance in connection with
the distribution of the shares of the Series describing
the operations of the Series as are reasonably
necessary for the operation of the Series; (g) such
sub-accounting and recordkeeping services and functions
(other than those books and records required to be
maintained by ISI under the Investment Advisory
Agreement between the Fund and ISI dated July 1, 1993,
as amended November 1, 1993 and April 19, 1995 (the
"Investment Advisory Agreement"), including maintenance
of shareholder records and shareholder information
concerning the status of their Fund accounts by
investment advisers, broker-dealers, financial
institutions, and other organizations on behalf of ISI,
as are reasonably necessary for the operation of the
Series; and (h) such administrative services and
functions (other than those administrative
responsibilities specifically assumed by ISI under the
Investment Advisory Agreement), including the fees and
expenses involved in maintaining the registration and
qualification of the Fund and of its Series' shares
under laws administered by the Securities and Exchange
Commission, the various states, or under other
applicable regulatory requirements, the fees and
expenses of the Fund's Directors, the costs of printing
and distributing notices of shareholders' meetings,
proxy statements, and other communications to the
Fund's shareholders, as well as all expenses of
shareholders' meetings and Directors' meetings, all
costs, fees or other expenses arising in connection
with the organization of new Series, including initial
registration and qualification of the new Series under
the Act and under the Securities Act of 1933, as
amended, the initial determination of the new Series'
tax status and any rulings obtained for this purpose,
the initial registration and qualification of the new
Series' securities under the laws of any state and the
approval of the new Series' operations by any other
federal or state authority, insurance premiums, the
costs of designing, printing, and issuing certificates
representing shares of the Fund's Series, premiums for
the fidelity bond maintained by the Fund pursuant to
Section 17(g) of the Act and rules promulgated
thereunder (except for such premiums as may be
allocated to third parties, as insureds thereunder),
and association and institute dues, as are reasonably
necessary for the operation of the Series. All books
and records prepared and maintained by ISI for the Fund
under this Agreement shall be the property of the Fund
and, upon request therefor, ISI shall surrender to the
Fund such of the books and records so requested.
2. ISI shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such
other persons as it shall from time to time determine
to be necessary or useful to the performance of its
obligations under this Agreement. Without limiting
the generality of the foregoing, such staff and
personnel shall be deemed to include officers of ISI
and persons employed or otherwise retained by ISI to
provide or assist in providing Services to the Series.
3. ISI shall, at its own expense, provide such office
space, facilities and equipment (including, but not
limited to, computer equipment, telephone and other
communication lines and supplies) and such clerical
help and personnel and other services as shall be
necessary to provide the Services to the Series.
4. The Fund will, from time to time, furnish or otherwise
make available to ISI such information relating to the
business and affairs of the Series as ISI may
reasonably require in order to discharge its duties and
obligations hereunder.
5. For the services rendered, facilities furnished, and
expenses assumed by ISI under this Agreement, the Fund
shall pay to ISI a fee computed on a daily basis and
paid on a monthly basis. For purposes of each daily
calculation of this fee, the most recently determined
net asset value of each Series, as determined by a
valuation made in accordance with the Fund's procedure
for calculating Series net asset value as described in
the Fund's Prospectus and/or Statement of Additional
Information, shall be used. The fee to ISI under this
Agreement shall be computed at the annual rate of 0.50%
of each Series' daily net assets as so determined.
During any period when the determination of a Series'
net asset value is suspended by the directors of the
Fund, the net asset value of a share of that Series as
of the last business day prior to such suspension
shall, for the purpose of this Paragraph 5, be deemed
to be the net asset value at the close of each
succeeding business day until it is again determined.
6. ISI will permit representatives of the Fund including
the Fund's independent auditors to have reasonable
access to the personnel and records of ISI in order to
enable such representatives to monitor the quality of
services being provided and the level of fees due ISI
pursuant to this Agreement. In addition, ISI shall
promptly deliver to the board of directors of the Fund
such information as may reasonably be requested from
time to time to permit the board of directors to make
an informed determination regarding continuation of
this Agreement and the payments contemplated to be
made hereunder.
7. This Agreement shall remain in effect until no later
than April 19, 1997, and from year to year thereafter
provided such continuance is approved at least annually
by the vote of a majority of the directors of the Fund
who are not parties to this Agreement or "interested
persons" (as defined in the Act) of any such party,
which vote must be cast in person at a meeting called
for the purpose of voting on such approval; and further
provided, however, that (a) the Fund may, at any time
and without the payment of any penalty, terminate this
Agreement upon thirty (30) days' written notice to ISI;
(b) the Agreement shall immediately terminate in the
event of its assignment (within the meaning of the Act
and the Rules thereunder) unless the board of directors
of the Fund approves such amendment; and (c) ISI may
terminate this Agreement without payment of penalty on
sixty (60) days' written notice to the Fund. Any
notice under this Agreement shall be given in writing,
addressed and delivered, or mailed post-paid, to the
other party at the principal office of such party.
8. This Agreement shall be construed in accordance with
the laws of the State of Georgia and the applicable
provisions of the Act. To the extent the applicable
law of the State of Georgia or any of the provisions
herein conflict with the applicable provisions of the
Act, the latter shall control.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement on the day and year first above written.
THE EBI FUNDS, INC.
ATTEST: By: /s/Hubert L. Harris, Jr.
President
/s/Penelope P. Alexander
Secretary
INVESCO SERVICES, INC.
ATTEST: By: /s/John P. Stewart
Vice President
/s/Tony D. Green
Secretary
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional
Information constituting part of this Post-Effective Amendment
No. 24 to the registration statement of Form N-1A (the
"Registration Statement") of our report dated February 10, 1995,
relating to the financial statements and financial highlights of
The EBI Funds, Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this
Registration Statement. We also consent to the reference to us
under the heading "Independent Accountants" in such Statement of
Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/Price Waterhouse LLP
Price Waterhouse LLP
Denver, Colorado
April 25, 1995
EXHIBIT 15
PLAN AND AGREEMENT OF DISTRIBUTION PURSUANT TO RULE 12b-1
PLAN AND AGREEMENT made as of the 1st day of July, 1993 and
amended the 1st day of November, 1993, by and between The EBI
Funds, Inc., a Maryland corporation (hereinafter called the
"Company") and INVESCO Services, Inc., a Georgia corporation
("ISI"), is hereby amended this 19th day of April, 1995, for the
sole purpose of adding the Real Estate Portfolio and the
International Value Portfolio to this Plan and Agreement.
WHEREAS, the Company engages in business as an open-end
management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Company desires to finance the distribution of
the shares of each of seven of its eight Series (the Equity
Portfolio, the Income Portfolio, the Flex Portfolio, the
MultiFlex Portfolio, the Relative Return Bond Portfolio, the Real
Estate Portfolio, and the International Value Portfolio;
collectively, the "Funds") in accordance with this Plan and
Agreement of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan and Agreement"); and
WHEREAS, ISI desires to be retained to perform services in
accordance with such Plan and Agreement and on said terms and
conditions; and
WHEREAS, this Plan and Agreement has been approved by a vote
of the board of directors of the Company, including a majority of
the directors who are not interested persons of the Company, as
defined in the Act, and who have no direct or indirect financial
interest in the operation of this Plan and Agreement (the
"Disinterested Directors") cast in person at a meeting called for
the purpose of voting on this Plan and Agreement;
NOW, THEREFORE, the Company hereby adopts the Plan set forth
herein and the Company and ISI hereby enter into this Agreement
pursuant to the Plan in accordance with the requirements of Rule
12b-1 under the Act, and provide and agree as follows:
1. The Plan is defined as those provisions of this
document by which the Company adopts a Plan pursuant to
Rule 12b-1 under the Act and authorizes payments as
described herein. The Agreement is defined as those
provisions of this document by which the Company
retains ISI to provide distribution services beyond
those required by the general Distribution Agreement
between the parties, as are described herein. The
Company may retain the Plan notwithstanding termination
of the Agreement. Termination of the Plan will
automatically terminate the Agreement. Each Fund is
hereby authorized to utilize its assets to finance
certain activities in connection with distribution of
its shares.
2. Subject to the supervision of the board of directors,
the Company hereby retains ISI to promote the
distribution of the shares of each of the Funds by
providing services and engaging in activities beyond
those specifically required by the Distribution
Agreement between the Company and ISI and to provide
related services. The activities and services to be
provided by ISI hereunder shall include one or more of
the following: (a) the payment of compensation
(including trail commissions and incentive
compensation) to investment advisers, securities
dealers, financial institutions and other organizations
which render account maintenance or distribution
services or marketing assistance in connection with the
distribution of the shares of each of the Funds; (b)
the payment of a service, support or similar fee to
investment advisers, securities dealers, financial
institutions and other organizations which render
ongoing account maintenance services in connection with
the distribution of the shares of each of the Funds;
(c) the printing and distribution of statements of
additional information, and prospectuses for the use of
potential investors in each Fund; (d) preparing,
printing and distributing sales literature; (e) the
providing of advertising and engaging in other
promotional activities, including direct mail
solicitation, and television, radio, newspaper and
other media advertisements; (f) the costs associated
with conducting educational conferences and
promotional meetings with representatives of investment
advisers, securities dealers, financial institutions
and other organizations at which marketing of the Fund
is discussed; and (g) such other services and
activities as may from time to time be agreed upon by
the board of directors of the Company. In addition,
prior to January 1, 1992, ISI paid a commission to
broker-dealers selling shares of the Equity, Income and
Flex Portfolios at the time of sale equal to 4% of the
total purchase price, and those Funds were authorized
under a Plan of Distribution adopted pursuant to the
provisions of Rule 12b-1 to make quarterly payments to
ISI to be applied to such advanced commission payments.
Payments from this Plan and Agreement may continue to
be used for this purpose. With respect to paragraphs
2(d), 2(e), and 2(f) above, ISI shall be entitled to
use Plan and Agreement payments to offset its overhead
expenses which involve the costs of ISI's personnel
whose primary responsibilities involve marketing of the
EBI Funds.
3. ISI hereby undertakes to use its best efforts to
promote sales of shares of each of the Funds to
investors by engaging in those activities specified in
paragraph (2) above as may be necessary and as it from
time to time believes will best further sales of such
shares.
4. Each Fund, except the Relative Return Bond Portfolio,
shall pay ISI out of its assets, on a monthly basis, an
amount computed at an annual rate of .75 of 1% of the
daily net assets of the Fund during the month, all of
which amount must, in the discretion of ISI, either be
used by ISI to provide the Funds with the marketing
activities and distribution services specified in
paragraph (2) above, including using such payments to
offset advanced commission payments that have been paid
to broker-dealers for sale of Fund shares, or returned
to the Fund. The Relative Return Bond Portfolio shall
pay ISI out if its assets, on a monthly basis, an
amount computed at an annual rate of .25 of 1% of the
daily net assets of the Fund during the month, all of
which amount must, in the discretion of ISI, either be
used by ISI to provide the Fund with the marketing
activities and distribution services specified in
paragraph (2) above, including using such payments to
offset advanced commission payments that have been paid
to broker-dealers for sale of Fund shares, or returned
to the Fund. In addition, each Fund shall pay ISI out
of its assets, on a monthly basis, an amount computed
at an annual rate of .25 of 1% of daily net assets of
the Fund during the month, all of which amount must, in
the discretion of ISI, either be used by ISI to pay the
service, support, or similar fee specified in paragraph
2(b) above, or returned to the Fund. No payments will
be made by a Fund hereunder after the date of
termination of the Plan and Agreement.
5. To the extent that expenditures made by ISI out of its
own resources to finance any activity primarily
intended to result in the sale of shares of a Fund,
pursuant to this Plan and Agreement or otherwise, may
be deemed to constitute the indirect use of Fund
assets, such indirect use of Fund assets is hereby
authorized in addition to any other payments authorized
under this Plan and Agreement.
6. ISI shall provide, and the board of directors of the
Company shall review, at least quarterly a written
report of all amounts expended pursuant to the Plan and
Agreement and the purposes for which such expenditures
were made. Upon request, but no less frequently than
annually, ISI shall provide to the board of directors
of the Company such information as may reasonably be
required for it to review the continuing appropriate-
ness of the Plan and Agreement.
7. This Plan and Agreement having been approved by a vote
of a majority of the outstanding voting securities of
the Fund as defined in the Act, shall each become
effective as of the date so written above, and shall
each continue in effect for a period of one year from
the date of such approval unless terminated as
provided below. Thereafter, the Plan and Agreement
shall continue in effect from year to year, provided
that the continuance of each is approved at least
annually by a vote of the board of directors of the
Company, including a majority of the Disinterested
Directors, cast in person at a meeting called for the
purpose of voting on such continuance. The Plan may be
terminated at any time as to any Fund, without penalty,
by the vote of a majority of the Disinterested
Directors or by the vote of a majority of the
outstanding voting securities of the Fund. ISI, or the
Company, by vote of a majority of the Disinterested
Directors or of the holders of a majority of the
outstanding voting securities of any Fund, may
terminate the Agreement under this Plan as to such
Fund, without penalty, upon 30 days' written notice to
the other party. In the event that neither ISI nor any
affiliate of ISI serves the Company as investment
adviser, the Agreement with ISI pursuant to this Plan
shall terminate at such time. The board of directors
may determine to approve a continuance of the Plan, but
not a continuance of the Agreement, hereunder.
8. So long as the Plan remains in effect, the selection
and nomination of persons to serve as directors of the
Company who are not "interested persons" of the Company
shall be committed to the discretion of the directors
then in office who are not "interested persons" of the
Company. However, nothing contained herein shall
prevent the participation of other persons in the
selection and nomination process; provided that a final
decision on any such selection or nomination is within
the discretion of, and approved by, a majority of the
directors of the Company then in office who are not
"interested persons" of the Company.
9. This Plan may not be amended to increase the amount to
be spent by any Fund hereunder without approval of
shareholders of such Fund. All material amendments to
the Plan and to the Agreement must be approved by the
vote of the board of directors of the Company,
including a majority of the Disinterested Directors,
cast in person at a meeting called for the purpose of
voting on such amendment.
10. To the extent that this Plan and Agreement constitutes
a Plan of Distribution adopted pursuant to Rule 12b-1
under the Act, it shall remain in effect as such, so as
to authorize the use by each Fund of its assets in the
amounts and for the purposes set forth herein,
notwithstanding the occurrence of an "assignment," as
defined by the Act and the rules thereunder. To the
extent it constitutes an Agreement with ISI pursuant
to a Plan it shall terminate automatically in the event
of such "assignment." Upon a termination of the
Agreement with ISI, the Funds may continue to make
payments pursuant to the Plan only upon the approval of
a new Agreement under this Plan and Agreement, which
may or may not be with ISI, or the adoption of other
arrangements regarding the use of the amounts
authorized to be paid by the Funds hereunder, by the
Company's board of directors in accordance with the
procedures set forth in paragraph 7 above.
11. The Company shall preserve copies of this Plan and
Agreement, together with minutes of all board of
directors' meetings at which the adoption, amendment or
continuance of the Plan were considered (describing the
factors considered and the basis for decision), for a
period of not less than six years from the date of this
Plan and Agreement, or for any such reports or minutes,
as the case may be, the first two years in an easily
accessible place.
12. This Plan and Agreement shall be construed in
accordance with the laws of the State of Georgia and
applicable provisions of the Act. To the extent the
applicable law of the State of Georgia, or any
provisions herein, conflict with the applicable
provisions of the Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Plan and Agreement on the day and year first above
written.
THE EBI FUNDS, INC.
ATTEST: By: /s/Hubert L. Harris, Jr.
President
/s/Penelope P. Alexander
Secretary
INVESCO SERVICES, INC.
ATTEST: By: /s/John P. Stewart
Vice President
/s/Tony D. Green
Secretary
EXHIBIT 16
THE EBI FUNDS, INC.
Total Return Performance Calculation
Single Period Calculation
P = Initial Investment = $25,000
N = Number of periods = 1
NAV at beginning of period (June 30, 1994) = $57.74
NAV at end of period (September 30, 1994) = $60.50
NAV on 09/28/94 (dividend date) = $60.72
Dividend per share = $0.112
# shares originally purchased = $25,000/$57.74 = 432.975 shares
# shares issued pursuant to dividend reinvestment = ($0.112 x
432.975)/$60.72 = 0.799 shares
ERV = Ending Redeemable Value = (432.975 + 0.799) x $60.50 =
$26,243.33
Calculation
-----------
N
P(1 + T) = ERV
1/N
T = (ERV) - 1
-----
P
(26,243.33) 1/1
T = ----------- - 1
25,000
T = 4.97%
NOTE: Performance is calculated in the same manner as above
for each of the EBI Equity, Income, Flex, MultiFlex,
Relative Return, International Value and Real Estate
Portfolios.
<PAGE>
Yield Calculation
YIELD = 2[((((A - B)/C * D) + 1)^6) - 1]
WHERE: A = DIVIDENDS + INTEREST
B = EXPENSES
C = AVERAGE SHARES OUTSTANDING
D = MAXIMUM PRICE ON LAST DAY
FOR CASH MANAGEMENT PORTFOLIO
A = 168,335.87
B = 46,833.23
C = 581,114.131
D = 45.33
CURRENT YIELD = 5.60%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000731273
<NAME> THE EBI FINDS, INC.
<SERIES>
<NUMBER> 1
<NAME> EQUITY
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 70,316,614
<INVESTMENTS-AT-VALUE> 76,812,831
<RECEIVABLES> 1,285,133
<ASSETS-OTHER> 185
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 78,098,149
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 169,462
<TOTAL-LIABILITIES> 169,462
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 71,397,100
<SHARES-COMMON-STOCK> 1,395,716
<SHARES-COMMON-PRIOR> 1,453,806
<ACCUMULATED-NII-CURRENT> 5,752
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 29,618
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,496,217
<NET-ASSETS> 77,928,687
<DIVIDEND-INCOME> 2,170,176
<INTEREST-INCOME> 94,700
<OTHER-INCOME> 0
<EXPENSES-NET> (1,784,930)
<NET-INVESTMENT-INCOME> 479,946
<REALIZED-GAINS-CURRENT> 6,360,957
<APPREC-INCREASE-CURRENT> (4,712,275)
<NET-CHANGE-FROM-OPS> 2,128,628
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (476,139)
<DISTRIBUTIONS-OF-GAINS> (6,484,023)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 265,696
<NUMBER-OF-SHARES-REDEEMED> (420,707)
<SHARES-REINVESTED> 96,921
<NET-CHANGE-IN-ASSETS> (8,730,308)
<ACCUMULATED-NII-PRIOR> 1,945
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 595,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,785,000
<AVERAGE-NET-ASSETS> 79,871,000
<PER-SHARE-NAV-BEGIN> 59.61
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 1.26
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> (5.04)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 55.83
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000731273
<NAME> THE EBI FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> FLEX
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 223,137,096
<INVESTMENTS-AT-VALUE> 239,340,412
<RECEIVABLES> 5,162,765
<ASSETS-OTHER> 10,435
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 244,513,612
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 665,619
<TOTAL-LIABILITIES> 665,619
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 227,788,007
<SHARES-COMMON-STOCK> 4,828,758
<SHARES-COMMON-PRIOR> 5,065,507
<ACCUMULATED-NII-CURRENT> 36,710
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (180,040)
<ACCUM-APPREC-OR-DEPREC> 16,203,316
<NET-ASSETS> 243,847,993
<DIVIDEND-INCOME> 5,711,118
<INTEREST-INCOME> 5,908,418
<OTHER-INCOME> 0
<EXPENSES-NET> (5,729,660)
<NET-INVESTMENT-INCOME> 5,889,876
<REALIZED-GAINS-CURRENT> 12,398,071
<APPREC-INCREASE-CURRENT> (16,818,380)
<NET-CHANGE-FROM-OPS> 1,469,567
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (5,846,696)
<DISTRIBUTIONS-OF-GAINS> (12,579,717)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 964,467
<NUMBER-OF-SHARES-REDEEMED> (1,507,311)
<SHARES-REINVESTED> 306,095
<NET-CHANGE-IN-ASSETS> (30,500,629)
<ACCUMULATED-NII-PRIOR> 1,530
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,910,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,730,000
<AVERAGE-NET-ASSETS> 255,283,000
<PER-SHARE-NAV-BEGIN> 54.16
<PER-SHARE-NII> 1.26
<PER-SHARE-GAIN-APPREC> (0.91)
<PER-SHARE-DIVIDEND> (1.25)
<PER-SHARE-DISTRIBUTIONS> (2.76)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 50.50
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000731273
<NAME> THE EBI FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> MULTIFLEX
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 120,241,992
<INVESTMENTS-AT-VALUE> 119,681,655
<RECEIVABLES> 1,144,358
<ASSETS-OTHER> 145,116
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 120,971,129
<PAYABLE-FOR-SECURITIES> 279,718
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 471,123
<TOTAL-LIABILITIES> 750,841
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 122,565,549
<SHARES-COMMON-STOCK> 3,072,064
<SHARES-COMMON-PRIOR> 304,827
<ACCUMULATED-NII-CURRENT> 804
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,785,728)
<ACCUM-APPREC-OR-DEPREC> (560,337)
<NET-ASSETS> 120,220,288
<DIVIDEND-INCOME> 2,225,317
<INTEREST-INCOME> 1,447,432
<OTHER-INCOME> 0
<EXPENSES-NET> (2,033,214)
<NET-INVESTMENT-INCOME> 1,639,535
<REALIZED-GAINS-CURRENT> (1,785,609)
<APPREC-INCREASE-CURRENT> (625,088)
<NET-CHANGE-FROM-OPS> (771,162)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,638,474)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,102,568
<NUMBER-OF-SHARES-REDEEMED> (371,608)
<SHARES-REINVESTED> 36,277
<NET-CHANGE-IN-ASSETS> 107,979,487
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (257)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 815,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,033,000
<AVERAGE-NET-ASSETS> 80,365,000
<PER-SHARE-NAV-BEGIN> 40.16
<PER-SHARE-NII> 0.62
<PER-SHARE-GAIN-APPREC> (1.03)
<PER-SHARE-DIVIDEND> (0.62)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 39.13
<EXPENSE-RATIO> 2.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000731273
<NAME> THE EBI FUNDS, INC.
<SERIES>
<NUMBER> 4
<NAME> INCOME
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 26,054,621
<INVESTMENTS-AT-VALUE> 24,992,045
<RECEIVABLES> 621,778
<ASSETS-OTHER> 381
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,614,204
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 147,190
<TOTAL-LIABILITIES> 147,190
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,544,537
<SHARES-COMMON-STOCK> 561,818
<SHARES-COMMON-PRIOR> 882,147
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (7,929)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (2,007,018)
<ACCUM-APPREC-OR-DEPREC> (1,062,576)
<NET-ASSETS> 25,467,014
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,367,440
<OTHER-INCOME> 0
<EXPENSES-NET> (729,307)
<NET-INVESTMENT-INCOME> 1,638,133
<REALIZED-GAINS-CURRENT> (1,092,593)
<APPREC-INCREASE-CURRENT> (1,271,405)
<NET-CHANGE-FROM-OPS> (725,865)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,627,655)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 145,083
<NUMBER-OF-SHARES-REDEEMED> (492,542)
<SHARES-REINVESTED> 27,130
<NET-CHANGE-IN-ASSETS> (17,405,010)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (18,407)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 243,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 729,000
<AVERAGE-NET-ASSETS> 32,609,000
<PER-SHARE-NAV-BEGIN> 48.60
<PER-SHARE-NII> 2.40
<PER-SHARE-GAIN-APPREC> (3.27)
<PER-SHARE-DIVIDEND> (2.40)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 45.35
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000731273
<NAME> THE EBI FUNDS, INC.
<SERIES>
<NUMBER> 5
<NAME> RELATIVE RETURN BOND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 3,228,651
<INVESTMENTS-AT-VALUE> 3,125,973
<RECEIVABLES> 45,929
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,171,902
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,026
<TOTAL-LIABILITIES> 4,026
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,325,452
<SHARES-COMMON-STOCK> 85,154
<SHARES-COMMON-PRIOR> 31,595
<ACCUMULATED-NII-CURRENT> 116
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (55,014)
<ACCUM-APPREC-OR-DEPREC> (102,678)
<NET-ASSETS> 3,167,876
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 144,882
<OTHER-INCOME> 0
<EXPENSES-NET> (33,993)
<NET-INVESTMENT-INCOME> 110,889
<REALIZED-GAINS-CURRENT> (54,981)
<APPREC-INCREASE-CURRENT> (96,893)
<NET-CHANGE-FROM-OPS> (40,985)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (110,981)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 68,611
<NUMBER-OF-SHARES-REDEEMED> (17,847)
<SHARES-REINVESTED> 2,795
<NET-CHANGE-IN-ASSETS> 1,910,479
<ACCUMULATED-NII-PRIOR> 208
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 11,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,000
<AVERAGE-NET-ASSETS> 2,249,000
<PER-SHARE-NAV-BEGIN> 39.80
<PER-SHARE-NII> 1.81
<PER-SHARE-GAIN-APPREC> (2.60)
<PER-SHARE-DIVIDEND> (1.81)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 37.20
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000731273
<NAME> THE EBI FUNDS, INC.
<SERIES>
<NUMBER> 6
<NAME> CASH MANAGEMENT
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 15,332,152
<INVESTMENTS-AT-VALUE> 15,332,152
<RECEIVABLES> 47,204
<ASSETS-OTHER> 674
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 15,380,030
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 168,517
<TOTAL-LIABILITIES> 168,517
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 15,211,722
<SHARES-COMMON-STOCK> 15,211,722
<SHARES-COMMON-PRIOR> 13,827,356
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (209)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 15,211,513
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 792,451
<OTHER-INCOME> 0
<EXPENSES-NET> (187,360)
<NET-INVESTMENT-INCOME> 605,091
<REALIZED-GAINS-CURRENT> (192)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 604,899
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (605,091)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,063,570
<NUMBER-OF-SHARES-REDEEMED> (35,072,549)
<SHARES-REINVESTED> 393,345
<NET-CHANGE-IN-ASSETS> 1,384,174
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 94,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 187,000
<AVERAGE-NET-ASSETS> 18,729,000
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
